Prepared by MERRILL CORPORATION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A30wBmNvC7cCHymNLFJQP2mSHDZoBxayo2mDtuHokF5CcpbaYXeOPGIL/W5OTPCX JW0b9F3hX9mfXjU23nKhDg== 0000912057-02-001094.txt : 20020413 0000912057-02-001094.hdr.sgml : 20020413 ACCESSION NUMBER: 0000912057-02-001094 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20011130 FILED AS OF DATE: 20020111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3COM CORP CENTRAL INDEX KEY: 0000738076 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 942605794 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12867 FILM NUMBER: 2507841 BUSINESS ADDRESS: STREET 1: 5400 BAYFRONT PLZ CITY: SANTA CLARA STATE: CA ZIP: 95052-8145 BUSINESS PHONE: 4087645000 MAIL ADDRESS: STREET 1: 5400 BAYFRONT PLAZA CITY: SANTA CLARA STATE: CA ZIP: 95052-8145 10-Q 1 a2067560z10-q.htm 10-Q Prepared by MERRILL CORPORATION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 2001 Commission File No. 0-12867
or
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

3Com Corporation
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		94-2605794 (I.R.S. Employer Identification No.)
5400 Bayfront Plaza Santa Clara, California		95052
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (408) 326-5000

Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes /x/ No / /

As of January 2, 2002, 352,148,291 shares of the Registrant's Common Stock were outstanding.

This report contains a total of 37 pages of which this page is number 1.

3Com Corporation

Table of Contents

			Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
		Condensed Consolidated Statements of Operations Three and Six Months Ended November 30, 2001 and December 1, 2000	3
		Condensed Consolidated Balance Sheets November 30, 2001 and June 1, 2001	4
		Condensed Consolidated Statements of Cash Flows Six Months Ended November 30, 2001 and December 1, 2000	5
		Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		33
Item 2.	Changes in Securities and Use of Proceeds		33
Item 3.	Defaults Upon Senior Securities		33
Item 4.	Submission of Matters to a Vote of Security Holders		33
Item 5.	Other Information		33
Item 6.	Exhibits and Reports on Form 8-K		34
Signatures			37

3Com, CommWorks, and Megahertz are registered trademarks of 3Com Corporation or its subsidiaries. Kerbango is a trademark of 3Com Corporation or its subsidiaries.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

3Com Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

				Three Months Ended						Six Months Ended
				November 30, 2001			December 1, 2000			November 30, 2001			December 1, 2000
Sales				$	393,854		$	789,498		$	783,443		$	1,723,262
Cost of sales					260,857			498,101			587,678			1,091,137

Gross margin					132,997			291,397			195,765			632,125

Operating expenses:
	Sales and marketing				82,995			218,115			189,219			454,430
	Research and development				73,220			139,439			159,101			285,267
	General and administrative				30,818			45,615			71,817			103,158
	Amortization and write down of intangibles				12,884			11,252			29,368			18,745
	Purchased in-process technology				—			8,258			—			37,664
	Merger-related credits, net				—			(113	)		—			(325	)
	Restructuring charges				31,536			9,695			89,051			19,596

		Total operating expenses			231,453			432,261			538,556			918,535

Operating loss					(98,456	)		(140,864	)		(342,791	)		(286,410	)
Gain on sale of land, net					—			174,369			—			174,369
Loss on investments, net					(4,620	)		(16,938	)		(7,270	)		(202	)
Litigation settlement					—			(250,000	)		—			(250,000	)
Interest and other income, net					26,640			43,558			45,798			89,188

Loss from continuing operations before income taxes and equity interests					(76,436	)		(189,875	)		(304,263	)		(273,055	)
Income tax provision (benefit)					27,238			(47,469	)		31,795			(68,264	)
Equity interest in loss of unconsolidated investee					—			—			—			1,352

Loss from continuing operations					(103,674	)		(142,406	)		(336,058	)		(206,143	)
Income from discontinued operations					—			—			—			4,537

Net loss				$	(103,674	)	$	(142,406	)	$	(336,058	)	$	(201,606	)

Net income (loss) per share:
		Basic:
			Continuing operations	$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.59	)
			Discontinued operations		—			—			—			0.01

				$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.58	)

		Diluted:
			Continuing operations	$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.59	)
			Discontinued operations		—			—			—			0.01

				$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.58	)

Shares used in computing per share amounts:
		Basic			346,703			345,656			345,508			349,716
		Diluted			346,703			345,656			345,508			349,716

See notes to condensed consolidated financial statements.

3Com Corporation

Condensed Consolidated Balance Sheets

(In thousands, except par value)

			November 30, 2001			June 1, 2001
			(Unaudited)
ASSETS
Current assets:
	Cash and equivalents		$	798,157		$	897,797
	Short-term investments			590,224			742,414
	Accounts receivable, net			182,692			286,813
	Inventories, net			92,575			200,146
	Investments and other			91,790			207,652

		Total current assets		1,755,438			2,334,822
Property and equipment, net				804,570			609,679
Deferred income taxes				149,808			163,349
Goodwill, intangibles, deposits and other assets				310,573			344,952

		Total assets	$	3,020,389		$	3,452,802

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	196,711		$	279,181
	Accrued and other liabilities			332,491			576,851
	Deferred income taxes			93,222			80,485
	Revolving line of credit			102,200			—
	Current portion of long-term debt			22,828			328

		Total current liabilities		747,452			936,845
Long-term debt				84,756			2,385
Other long-term obligations				5,775			8,151
Stockholders' equity:
	Preferred stock, $.01 par value, 10,000 shares authorized; none outstanding			—			—
	Common stock, $.01 par value, 990,000 shares authorized; shares issued: 365,629 and 365,711, respectively			2,127,483			2,127,803
	Treasury stock, at cost, 16,283 and 21,412 shares, respectively			(317,362	)		(373,661	)
	Notes receivable from sale of warrants			(21,052	)		(21,052	)
	Unamortized stock-based compensation			(8,600	)		(9,820	)
	Retained earnings			394,058			771,639
	Accumulated other comprehensive income			7,879			10,512

		Total stockholders' equity		2,182,406			2,505,421

		Total liabilities and stockholders' equity	$	3,020,389		$	3,452,802

See notes to condensed consolidated financial statements.

3Com Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

				Six Months Ended
				November 30, 2001			December 1, 2000
Cash flows from operating activities:
	Loss from continuing operations			$	(336,058	)	$	(206,143	)
	Adjustments to reconcile loss from continuing operations to cash used in operating activities:
		Depreciation and amortization			159,542			130,611
		(Gain) loss on disposal of fixed assets			16,633			(164,479	)
		Write downs of intangibles			3,473			5,815
		Loss on investments, net			7,270			202
		Deferred income taxes			24,625			1,043
		Merger-related credits, net			—			(325	)
		Purchased in-process technology			—			37,664
		Stock-based compensation			2,139			—
		Equity in loss of unconsolidated investee			—			1,352
		Changes in current assets and liabilities, net of effects of acquisitions:
			Accounts receivable		104,121			(73,560	)
			Inventories		100,023			18,858
			Other assets		41,121			(117,873	)
			Accounts payable		(82,470	)		86,793
			Accrued liabilities and other		(259,993	)		(126,705	)
			Income taxes payable		82,934			(136,576	)

Net cash used in operating activities					(136,640	)		(543,323	)

Cash flows from investing activities:
	Purchase of investments				(183,653	)		(693,921	)
	Proceeds from sales and maturities of investments				342,039			547,296
	Purchase of property and equipment				(336,951	)		(112,384	)
	Proceeds from sale of property and equipment				4,067			238,966
	Businesses acquired in purchase transactions, net of cash received				—			(74,603	)
	Other, net				—			4,304

Net cash used in investing activities					(174,498	)		(90,342	)

Cash flows from financing activities:
	Issuance of common stock				13,353			305,973
	Repurchase of common stock				(3,660	)		(449,522	)
	Proceeds from revolving line of credit				102,200			—
	Proceeds from term loan				105,000			—
	Repayments of long-term borrowings				(129	)		(24,349	)
	Other, net				(5,266	)		(268	)

Net cash provided by (used in) financing activities					211,498			(168,166	)

Net cash provided by discontinued operations					—			30,291
Decrease in cash and equivalents					(99,640	)		(771,540	)
Cash and equivalents, beginning of period					897,797			1,700,420

Cash and equivalents, end of period				$	798,157		$	928,880

See notes to condensed consolidated financial statements.

3Com Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by 3Com Corporation (3Com), pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of 3Com's financial position as of November 30, 2001, results of operations for the three and six months ended November 30, 2001 and December 1, 2000, and cash flows for the six months ended November 30, 2001 and December 1, 2000. Certain amounts from the prior period have been reclassified to conform to the current period presentation. Such reclassifications had no effect on net income as previously reported.

3Com uses a 52 or 53 week fiscal year ending on the Friday nearest to May 31. The results of operations for the three and six months ended November 30, 2001 may not be indicative of the results to be expected for the fiscal year ending May 31, 2002. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in 3Com's Annual Report on Form 10-K for the fiscal year ended June 1, 2001.

Revenue Recognition

3Com generally recognizes a sale when the product has been delivered and risk of loss has passed to the customer, collection of the resulting receivable is probable, persuasive evidence of an arrangement exists, and the fee is fixed or determinable. 3Com accrues related product return reserves, warranty, other post-contract support obligations, and royalty expenses at the time of sale. A limited warranty is provided on 3Com products for periods ranging from 90 days to the lifetime of the product, depending upon the product. Service and maintenance sales are recognized over the contract term. 3Com provides limited product return and price protection rights to certain distributors and resellers. Product return rights are generally limited to a percentage of sales over a one to three month period.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations" which addresses the financial accounting and reporting for business combinations and supersedes Accounting Principals Board (APB) Opinion 16, "Business Combinations," and SFAS 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS 141 requires that all business combinations be accounted for by a single method, the purchase method, modifies the criteria for recognizing intangible assets, and expands disclosure requirements. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. 3Com is in the process of determining the impact that the adoption of SFAS 141 will have on the consolidated financial statements.

their useful lives. SFAS 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. In addition, SFAS 142 expands the disclosure requirements about goodwill and other intangible assets in the years subsequent to their acquisition. SFAS 142 is effective for 3Com's fiscal year 2003. Impairment losses for goodwill and indefinite-life intangible assets that arise due to the initial application of SFAS 142 are to be reported as a change in accounting principle. However, goodwill and intangible assets acquired after June 30, 2001 will be subject immediately to provisions of SFAS 142. 3Com is in the process of determining the impact that the adoption of SFAS 142 will have on the consolidated financial statements.

In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," and the provisions of APB Opinion 30 (APB 30), "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" with regard to reporting the effects of a disposal of a segment of a business. SFAS 144 retains many of the provisions of SFAS 121, but significantly changes the criteria that would have to be met to classify an asset as held for disposal such that long-lived assets to be disposed of other than by sale are considered held and used until disposed of. In addition, SFAS 144 retains the basic provisions of APB 30 for presentation of discontinued operations in the statement of operations but broadens that presentation to a component of an entity. The Company is required to apply SFAS 144 no later than June 1, 2002. 3Com is in the process of determining the impact that the adoption of SFAS 144 will have on the consolidated financial statements.

2. Derivative Financial Instruments

Effective June 2, 2001, 3Com adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS 133 requires that all derivative financial instruments be recognized as either assets or liabilities on the balance sheet and carried at fair value. Changes in the fair value of derivative instruments are recognized periodically in earnings or stockholders' equity, depending on the intended use of the instrument. Valuation changes for derivatives designated as fair value hedges are recognized in earnings in the period of change, along with the change in value of the underlying hedged item. Gains or losses on derivatives designated as cash flow hedges are initially reported as a component of other comprehensive income and later reclassified into earnings in the period affected by the underlying hedged exposure. Changes in value of derivatives that are not designated as hedging instruments and the amount of any hedging instruments deemed to be ineffective are recorded in earnings in the period of change.

3Com enters into certain foreign exchange contracts, primarily forwards and purchased options, to hedge certain balance sheet exposures and intercompany balances against future movements in foreign exchange rates. Such contracts are considered to be effective economic hedges of the underlying assets and liabilities but are not designated as hedges under SFAS 133 and resultant changes in value are recorded currently in earnings. 3Com does not use derivative financial instruments for speculative or trading purposes.

3Com may also, from time to time, invest in warrants to purchase securities of other companies as strategic investments. These warrants are recognized as assets on the balance sheet and carried at fair value. Changes in the fair value are recognized periodically in earnings.

The adoption of SFAS 133 resulted in a cumulative pre-tax gain related to the value of warrants held as strategic investments. During the first half of fiscal 2002, a reduction in earnings was recorded related to the value of warrants held as strategic investments. The cumulative pre-tax gain and the reduction in earnings for first half of fiscal 2002 were recorded in other income and were not material to 3Com's results of operations, financial position or cash flows.

3. Restructuring Charges

Beginning in the fourth quarter of fiscal 2000, 3Com undertook several initiatives aimed at both changing business strategy as well as improving operational efficiencies. 3Com recorded restructuring charges of $89.1 million and $19.6 million in the six months ended November 30, 2001 and December 1, 2000, respectively.

Exit of the Analog-Only Modem and High-End LAN and WAN Chassis Product Lines

3Com realigned its strategy in the fourth quarter of fiscal 2000 to focus on high-growth markets, technologies, and products. Operations were restructured, and in support of this new strategy 3Com exited its analog-only modem and high-end Local Area Network (LAN) and Wide Area Network (WAN) chassis product lines and completed the separation of Palm. As of June 1, 2001, 3Com had $0.4 million accrued for severance and outplacement relating to these activities. During the first quarter of fiscal 2002, 3Com paid $0.2 million of this liability and recorded a net restructuring benefit of approximately $0.2 million relating to revisions of previous estimates of restructuring costs.

Actions Related to Reduction in Force and Cost Reduction Efforts

Beginning in the third quarter of fiscal 2001 and continuing through the six months ended November 30, 2001, 3Com restructured its operations to enhance the focus and cost effectiveness in serving its markets. Three independent businesses—Business Connectivity Company (BCC), Business Networks Company (BNC), and CommWorks Corporation (CommWorks)—were formed through this restructuring effort, with each business utilizing central shared corporate services. As part of this restructuring effort, 3Com implemented a reduction in workforce and cost reduction actions aimed at expense and asset reduction; exited its consumer Internet Appliance, cable modem, and digital subscriber line (DSL) modem product lines; and increased its outsourcing of the manufacturing of high volume server, desktop and mobile connectivity products in a contract manufacturing arrangement. Concurrent with such outsourcing, 3Com is consolidating its real estate portfolio and plans to sell certain facilities.

During the three months ended November 30, 2001, 3Com recorded a $31.5 million charge related to this restructuring effort. Components of accrued restructuring charges and changes in accrued amounts related to the restructuring efforts as of November 30, 2001 were as follows (in thousands):

	Severance and Outplacement			Long-term Asset Write-downs			Facilities- related Charges			Other Restructuring Costs			Total
Balance at June 1, 2001	$	39,902		$	—		$	—		$	1,782		$	41,684
Provision		20,694			6,860			26,772			3,335			57,661
Deductions		(37,293	)		(6,860	)		(22,405	)		(1,322	)		(67,880	)

Balance at August 31, 2001		23,303			—			4,367			3,795			31,465
Provision		6,863			307			23,672			694			31,536
Deductions		(22,225	)		(307	)		(24,431	)		(3,395	)		(50,358	)

Balance at November 30, 2001	$	7,941		$	—		$	3,608		$	1,094		$	12,643

The total reduction in workforce is planned to be approximately 4,600 positions including full-time regular employees and alternative workforce. Employee separation expenses are comprised of severance pay, outplacement services, medical and other related benefits. Affected employee groups include corporate services, manufacturing and logistics, product organizations, sales, customer support and

administrative positions. Since the inception of the restructuring through November 30, 2001, approximately 4,500 positions have been separated or were currently in the separation process. Remaining cash expenditures associated with employee separations are estimated to be approximately $7.9 million.

Long term asset write-downs include items identified as no longer needed to support ongoing operations. During the second quarter of fiscal 2002, 3Com recorded a charge of $0.3 million, primarily for disposal of hardware used by sales personnel.

Facilities-related charges include accelerated depreciation of buildings and lease terminations. In the second quarter of fiscal 2002, 3Com recorded $23.7 million in facilities-related charges, including a $22.8 million accelerated depreciation charge for its Mt. Prospect facility that is held for sale. Remaining cash expenditures associated with facilities as of November 30, 2001 are estimated to be approximately $2.2 million. As the consolidation of its manufacturing operations continues, 3Com expects to incur additional expenses related to facilities in fiscal 2002.

Other restructuring costs include payments to suppliers as well as for professional services. Remaining cash expenditures associated with other restructuring costs are estimated to be approximately $1.1 million.

4. Comprehensive Loss

The components of comprehensive loss, net of tax, are as follows (in thousands):

		Three Months Ended						Six Months Ended
		November 30, 2001			December 1, 2000			November 30, 2001			December 1, 2000
Net loss		$	(103,674	)	$	(142,406	)	$	(336,058	)	$	(201,606	)
Other comprehensive income (loss):
	Change in net unrealized gain on investments		(181	)		(238,546	)		(2,397	)		(178,370	)
	Change in accumulated translation adjustments		(380	)		74			(236	)		(269	)

Total comprehensive loss		$	(104,235	)	$	(380,878	)	$	(338,691	)	$	(380,245	)

5. Net Loss Per Share

The following table presents the calculation of basic and diluted loss per share (in thousands, except per share data):

		Three Months Ended						Six Months Ended
		November 30, 2001			December 1, 2000			November 30, 2001			December 1, 2000
Loss from continuing operations		$	(103,674	)	$	(142,406	)	$	(336,058	)	$	(206,143	)
Income from discontinued operations			—			—			—			4,537

		$	(103,674	)	$	(142,406	)	$	(336,058	)	$	(201,606	)

Weighted average shares-Basic			346,703			345,656			345,508			349,716
Effect of dilutive securities:
	Employee stock options		—			—			—			—
	Restricted stock		—			—			—			—

Weighted average shares-Diluted			346,703			345,656			345,508			349,716

Net income (loss) per share-Basic:
	Continuing operations	$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.59	)
	Discontinued operations		—			—			—			0.01

		$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.58	)

Net income (loss) per share-Diluted:
	Continuing operations	$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.59	)
	Discontinued operations		—			—			—			0.01

		$	(0.30	)	$	(0.41	)	$	(0.97	)	$	(0.58	)

Employee stock options and restricted stock totaling 4.2 million shares, 5.1 million shares, 27.0 million shares, and 50.6 million shares for the three and six months ended November 30, 2001, and the three and six months ended December 1, 2000, respectively, were not included in the diluted weighted average shares calculation as the effects of these securities were antidilutive.

6. Inventories

Inventories, net, consist of (in thousands):

	November 30, 2001		June 1, 2001
Finished goods	$	27,782	$	46,091
Work-in-process		30,190		64,319
Raw materials		34,603		89,736

Total inventory	$	92,575	$	200,146

7. Purchase Commitments

In conjunction with the sale of the Company's manufacturing and distribution operations to MSL on September 30, 2000, 3Com committed to purchase a minimum manufacturing volume, excluding the cost of materials, of $31 million per quarter during the first year of the agreement, and $30 million per

quarter during the second year of the agreement. Due to 3Com's announcement that it would exit its consumer product lines and the slowdown in the telecommunications industry in 2001, the Company did not expect to reach the minimum purchase commitments in the future. Based on management's best estimates, a charge was recorded to cost of goods sold in the fourth quarter of fiscal 2001 to accrue for estimated future purchase commitment shortfalls and expected contract termination costs. 3Com recorded an additional charge to cost of goods sold in the first quarter of fiscal 2002 as a result of the Company's renegotiation of the contract that was completed in the second quarter of fiscal 2002. The renegotiated contract eliminated the minimum volume commitments.

8. Financing Arrangements

On November 29, 2001, 3Com entered into new financing arrangements whereby the Company borrowed $105.0 million under a term loan and $102.2 million under a $105.0 million revolving line of credit. The Company applied the proceeds from these borrowings towards the purchase of land and buildings on its Santa Clara, California headquarters site and Marlborough, Massachusetts office complex that were previously subject to operating lease arrangements. In accordance with the lease terms, 3Com paid $316.7 million for the properties and terminated such leases.

Under the term loan, quarterly principal payments of $7.5 million are to be paid starting March 2002 through September 2004, with the balance due in November 2004. The revolving line of credit also expires in November 2004, at which time all outstanding amounts are due. Interest on each of the term and revolving facilities is due monthly, and bears interest, at 3Com's election, at either the lender's base rate or LIBOR rate, plus an applicable margin. As of November 30, 2001, the interest rate on the term loan was 6.25 percent, and the interest rate on the revolving line of credit was 6.0 percent.

The financing arrangements are secured by certain real properties and other assets of the Company, including accounts receivable, inventory, and plant and equipment. The credit agreement places limitations upon, among other things, certain types of mergers and asset dispositions. If 3Com's liquidity, consisting of its cash, cash equivalents, short term investments, and available borrowings under the revolving line of credit, falls below $650 million, the Company will be required to immediately pay the outstanding balance of the term loan. Under the terms of the agreement, the Company must maintain total liquidity of $400 million. The Company is also required to maintain minimum balances in specified accounts of $210 million, reduced by the amount of any term loan principal repayments. In an event of default, the Company will be subject to additional restrictive covenants.

9. Business Segment Information

The following tables display information on our reportable segments (in thousands):

		Three Months Ended						Six Months Ended
		November 30, 2001			December 1, 2000			November 30, 2001			December 1, 2000
Sales:
	Business Networks Company	$	194,298		$	292,635		$	386,267		$	591,324
	Business Connectivity Company		136,866			301,741			265,566			582,952
	CommWorks		64,106			95,361			123,461			262,604
	Exited Product Lines		(1,416	)		99,761			8,149			286,382

		$	393,854		$	789,498		$	783,443		$	1,723,262

Contribution Margin (Loss):
	Business Networks Company	$	(3,354	)	$	5,885		$	(26,970	)	$	11,744
	Business Connectivity Company		4,628			78,457			(28,633	)		151,501
	CommWorks		(6,473	)		(13,798	)		(35,733	)		17,336
	Exited Product Lines		350			(56,188	)		(21,781	)		(116,311	)

		$	(4,849	)	$	14,356		$	(113,117	)	$	64,270

A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements is set forth below (in thousands):

		Three Months Ended						Six Months Ended
		November 30, 2001			December 1, 2000			November 30, 2001			December 1, 2000
Total contribution margin (loss) from operating segments		$	(4,849	)	$	14,356		$	(113,117	)	$	64,270
	Indirect operating expenses(1)		62,071			137,380			140,623			293,745
	Purchased in-process technology		—			8,258			—			37,664
	Merger-related credits, net		—			(113	)		—			(325	)
	Restructuring charges		31,536			9,695			89,051			19,596

Total operating loss			(98,456	)		(140,864	)		(342,791	)		(286,410	)
	Gain on sale of land, net		—			174,369			—			174,369
	Loss on investments, net		(4,620	)		(16,938	)		(7,270	)		(202	)
	Litigation settlement		—			(250,000	)		—			(250,000	)
	Interest and other income, net		26,640			43,558			45,798			89,188

Loss from continuing operations before income taxes and equity interests		$	(76,436	)	$	(189,875	)	$	(304,263	)	$	(273,055	)

(1): Indirect operating expenses include expenses that are not directly attributable to an operating segment, such as corporate marketing and general and administrative expenses.

10. Litigation

3Com is a party to lawsuits in the normal course of its business. Litigation in general, and intellectual property and securities litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. 3Com believes that it has defenses in each of the cases set forth below and is vigorously contesting each of these matters. An unfavorable resolution of one or more of the following lawsuits could adversely affect its business, results of operations, or financial condition.

Securities Litigation

In November 2000, a shareholder derivative and class action lawsuit, captioned Shaev v. Claflin, et al., No. CV794039, was filed in California Superior Court. The complaint alleges that the 3Com's directors and officers made misrepresentations and/or omissions and breached their fiduciary duties to the Company in connection with the adjustment of employee and director stock options in connection with the separation of the Company and Palm, Inc. It is unclear whether the plaintiff is seeking recovery from 3Com or if the Company is named solely as a nominal defendant, against whom the plaintiff seeks no recovery. The Company and the individual defendants have removed this action to the United States District Court for the Northern District of California, where the action is captioned Shaev v. Claflin, et al., No. CV-01-0009-MJJ. The case was later remanded back to the California Superior Court. On November 29, 2001, the Court granted the defendants' demurrer with leave to amend.

Intellectual Property

On May 26, 2000, 3Com filed suit against Xircom, Inc. in the United States District Court for the District of Utah, Civil Action No. 2:00-CV-0436C alleging infringement of U.S. Patents Nos. 6,012,953, 5,532,898, 5,696,660 and 5,777,836, accusing Xircom of infringement of one or more of the claims of the patents-in-suit by reason of the manufacture, sale, and use of the Real Port and RealPort 2 families of PC Cards, as well as a number of Xircom's Type II PC Modem Cards. On November 14, 2000, 3Com amended its complaint to assert infringement of then-newly issued U.S. Patent No. 6,146,209, also asserted against Xircom's RealPort and RealPort2 families of products. Xircom has counter-claimed for a declaratory judgment that the asserted claims of the patents-in-suit are invalid and / or not infringed. This case is currently in the discovery phase. 3Com's motion for a preliminary injunction on the 6,146,209 patent is currently pending before the Court. The Company intends to vigorously pursue this action.

On September 21, 2000, Xircom, Inc. filed an action against 3Com Corporation in the United States District Court for the Central District of California, Case No.: 00-10198 MRP, accusing 3Com of infringement of U.S. Patents Nos. 5,773,332, 5,940,275, 6,115,257 and 6,095,851, accusing 3Com of infringement by reason of the manufacture, sale, and use of the 3COM 10/100 LAN+Modem CardBus Type III PC Card, the 3COM 10/100 LAN CardBus Type III PC Card, the 3COM Megahertz 10/100 LAN CardBus PC Card, the 3COM Megahertz 10/100 LAN+56K Global Modem CardBus PC Card and the 3COM Megahertz 56K Global GSM and Cellular Modem PC Card. On July 6, 2001, Xircom filed a second action against 3Com, Case No. 01-05902 GAF JTLX, also filed in the United States District Court for the Central District of California, alleging infringement of U.S. Patent No. 6,241,550. The 6,241,550 patent is asserted against the 3COM 10/100 LAN+Modem CardBus Type III PC Card, the 3COM 10/100 LAN CardBus Type III PC Card products. This second action asserting the 6,241,550 patent has been consolidated with the first action, with both cases being heard by the Honorable Mariana R. Pfaelzer. 3Com has counter-claimed for declaratory judgment that the asserted claims of the patents-in-suit are not infringed and/or invalid and that the claims of the 5,940,275 and 6,241,550 patents are unenforceable. This case is in the discovery phase. Xircom filed a motion for preliminary injunction seeking to enjoin 3Com from the continued manufacture and sale of its Type III PC card products. The motion was heard on March 26, 2001 and was denied by the Court. Xircom's motion for

preliminary injunction on the 6,241,550 patent is currently pending before the Court. The Company intends to vigorously pursue the defense of this action.

On April 28, 1997, Xerox Corporation (Xerox) filed suit against U.S. Robotics Corporation and U.S. Robotics Access Corp. in the United States District Court for the Western District of New York. The case is now captioned Xerox Corporation v. 3Com Corporation, U.S. Robotics Corporation, U.S. Robotics Access Corp., Palm Computing, Inc., and Palm, Inc. (Civil Action Number 97-CV-6182T). Xerox alleged willful infringement of United States Patent Number 5,596,656, entitled "Unistrokes for Computerized Interpretation of Handwriting." Xerox sought damages and to permanently enjoin the defendants from infringing the patent in the future. In 2000, the District Court dismissed the case, ruling that the patent is not infringed by the Graffiti handwriting recognition system used with Palm handheld computers. Xerox appealed the dismissal to the United States Court of Appeals for the Federal Circuit (CAFC). On October 5, 2001, the CAFC affirmed-in-part, reversed-in-part and remanded the case to the District Court for further proceedings. On December 20, 2001, the District Court granted Xerox's motion for summary judgment that the patent is valid, enforceable, and infringed. The defendants filed a Notice of Appeal on December 21, 2001. In connection with Palm, Inc.'s (Palm) separation from 3Com, pursuant to the terms of the Indemnification and Insurance Matters Agreement, dated February 26, 2000, between 3Com and Palm, Palm agreed to indemnify and hold 3Com harmless for any damages or losses which might arise out of the Xerox litigation.

3Com Corporation

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated condensed financial statements and the related notes that appear elsewhere in this document.

This report on Form 10-Q, including the following sections, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenues or other financial items; any statements of plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statement of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include particularly statements regarding the following: our timely development, production and acceptance of products and services; the challenge of managing asset levels, including inventory; the flow of products into third-party distribution channels; the difficulty of keeping expense growth at modest levels while maintaining or increasing revenues; our expectations regarding capital spending; our expectations about our products and services gross margins; our expectations relating to our future investments and expenses relating to research and development; statements regarding our liquidity and capital resources; our expectation that we may incur additional expenses related to restructuring efforts; our expectation that have substantially completed certain restructuring activities related to the global cost reduction to improve operational efficiencies; our expectation that gross margins will improve in future periods as a result of our restructuring efforts; our intention to reduce operating expenses in future periods; our intention to consolidate our real estate portfolio and liquidate certain facilities associated with our manufacturing facilities; our expectations that our acquisitions of businesses or product lines will decrease in comparison to historical levels; our expectation that international markets will continue to account for a significant percentage of our sales; our plans to make investments through 3Com Ventures and expectations related to payments that may be made over the next twelve months with respect to capital calls; our belief that our cash and equivalents, short term investments, and cash generated from operations will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months; our expectation that we will be able to comply with the financial covenants contained in our current Credit Facility; our expectations regarding future expenses associated with our ongoing restructuring activities; and our expectations regarding the continuing volatility of our stock price. These statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially. 3Com undertakes no obligation and does not intend to update these forward-looking statements after the date of this Form 10-Q. Other risks are described from time to time in 3Com's reports with the Securities and Exchange Commission, including but not limited to our annual report on form 10-K for the fiscal year ended June 1, 2001 and subsequently filed reports.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of total sales represented by the line items reflected in 3Com's condensed consolidated statements of operations:

			Three months ended				Six months ended
			November 30, 2001		December 1, 2000		November 30, 2001		December 1, 2000
Sales			100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales			66.2		63.1		75.0		63.3

Gross margin			33.8		36.9		25.0		36.7
Operating expenses:
	Sales and marketing		21.1		27.6		24.2		26.4
	Research and development		18.6		17.7		20.3		16.6
	General and administrative		7.8		5.8		9.2		6.0
	Amortization and write down of intangibles		3.3		1.4		3.7		1.1
	Purchased in-process technology		—		1.0		—		2.1
	Merger-related credits, net		—		—		—		—
	Restructuring charges		8.0		1.2		11.4		1.1

		Total operating expenses	58.8		54.7		68.8		53.3

Operating loss			(25.0	)	(17.8	)	(43.8	)	(16.6	)
Gain on sale of land, net			—		22.1		—		10.1
Loss on investments, net			(1.2	)	(2.2	)	(0.9	)	—
Litigation settlement			—		(31.7	)	—		(14.5	)
Interest and other income, net			6.8		5.5		5.9		5.2

Loss before income taxes			(19.4	)	(24.1	)	(38.8	)	(15.8	)
Income tax provision (benefit)			6.9		(6.1	)	4.1		(4.0	)
Equity interest in loss of unconsolidated investee			—		—		—		0.1

Loss from continuing operations			(26.3	)	(18.0	)	(42.9	)	(11.9	)
Income from discontinued operations			—		—		—		0.2

Net loss			(26.3	)%	(18.0	)%	(42.9	)%	(11.7	)%

Sales

Sales in the second quarter of fiscal 2002 totaled $393.9 million, a decrease of $395.6 million, or 50 percent, compared to the same quarter one year ago. Sales in the first half of fiscal 2002 were $783.4 million, a decrease of $939.8 million, or 55 percent, compared to the same period one year ago.

Business Networks Company. Sales of BNC products (switches, hubs, networked telephony, wireless LANs, and customer service and support) in the second quarter of fiscal 2002 were $194.3 million, a decrease of $98.3 million, or 34 percent, compared to the same quarter one year ago. Sales of BNC products in the first half of fiscal 2002 were $386.3 million, a decrease of $205.1 million, or 35 percent, compared to the first half of fiscal 2001. The decline in sales from the same periods one year ago was attributable to our stackable and small business switch and hub products and service maintenance contract revenue. The decrease in product sales was due to reduced demand stemming largely from weaker industry conditions, slower introduction of new products that led to loss of market share, and average selling price (ASP) erosion due to increased competition. Service revenue decreased due to fewer maintenance contract renewals. Slightly offsetting these decreases was an increase in sales of Gigabit Ethernet switches. Sales of BNC products in both the second quarter and first half of fiscal

2002 represented 49 percent of total sales, compared to 37 and 34 percent in the second quarter and first half of fiscal 2001, respectively.

Business Connectivity Company. Sales of BCC products (wired and wireless Network Interface Cards (NICs) and PC Cards, LAN On Motherboard (LOM), and Mini-PCI) in the second quarter of fiscal 2002 were $136.9 million, a decrease of $164.9 million, or 55 percent, compared to the same quarter one year ago. Sales of BCC products in the first half of fiscal 2002 were $265.6 million, a decrease of $317.4 million, or 54 percent, compared to the first half of fiscal 2001. The decline in sales from the same periods one year ago was due primarily to lower ASPs and a shrinking market due to the economic downturn that started after the first quarter of fiscal 2001. Factors that reduced ASPs were an increase in the proportion of sales to original equipment manufacturers (OEMs,) a shift in the market from wired LAN to the lower priced mini-PCI and LOM form factors, and pressure from increased competition. These declines were partially offset by increased sales of our Gigabit Ethernet products. Sales of BCC products in the second quarter of fiscal 2002 represented 35 percent of total sales compared to 38 percent in the second quarter of fiscal 2001. Sales of BCC products represented 34 percent of total sales for the first half of both fiscal 2002 and 2001.

CommWorks. Sales of CommWorks products (hardware platforms for wired and wireless access, softswitch elements that enable services to be delivered over these platforms, and customer services) in the second quarter of fiscal 2002 were $64.1 million, a decrease of $31.3 million, or 33 percent, compared to the same quarter one year ago. Sales of CommWorks products in the first half of fiscal 2002 were $123.5 million, a decrease of $139.1 million, or 53 percent, compared to the first half of fiscal 2001. The decline in sales compared to the same periods one year ago was due primarily to reduced capital expenditures by telecommunications carriers and service providers, which resulted in a significant decline in revenues of our remote access service (RAS) and wireless products. Sales of CommWorks products during the second quarter of fiscal 2002 represented 16 percent of total sales compared to 12 percent in the second quarter of fiscal 2001. Sales of CommWorks products represented 16 percent of total sales for the first half of fiscal 2002 and 15 percent of total sales for the first half of 2001.

Exited Product Lines. Sales of exited product lines (analog-only modems and high-end LAN and WAN chassis products, internet appliances, and consumer cable and DSL modem products) in the second quarter of fiscal 2002 were negligible compared to sales of $99.8 million for the same quarter one year ago. Sales of exited products for the first half of fiscal 2002 were $8.1 million, compared to $286.4 million for the same period one year ago. The substantial elimination of sales of exited product lines compared to the same periods one year ago was the result of our business restructuring and change in strategic focus. Sales of exited products in the second quarter of fiscal 2002 and 2001 were nil and 13 percent of total sales, respectively. Sales of exited products in the first half of fiscal 2002 and 2001 were one percent and 17 percent of total sales, respectively.

Geographic. In both the second quarter and first half of fiscal 2002, U.S. sales decreased 61 percent, while international sales for the second quarter and first half of fiscal 2001 decreased 41 percent and 48 percent, respectively. U.S. sales represented 36 percent of total sales in the second quarter of fiscal 2002, compared to 45 percent in the second quarter of fiscal 2001, and represented 41 percent of total sales in the first half of fiscal 2002, compared to 48 percent in the first half of fiscal 2001. The impact of exiting product lines and the effects of restructuring activities contributed to declines in all geographic locations. In addition, sales in the U.S. declined even further due to the deteriorating economic conditions. The decline in international sales from the prior year was primarily in Europe.

Gross Margin

Gross margin as a percentage of sales was 33.8 percent in the second quarter of fiscal 2002, compared to 36.9 percent in the second quarter of fiscal 2001. Gross margin declined due to higher post-sales

support and period costs, as a percentage of revenue, and underutilized capacity in our manufacturing plants. The primary driver for these gross margin declines was the inability to reduce fixed costs in conjunction with the decline in sales from the prior year.

Gross margin as a percentage of sales was 25.0 percent and 36.7 percent for the first six months of fiscal 2002 and fiscal 2001, respectively. Compared to the same period one year ago, gross margin declined four percentage points due to underutilized capacity in our manufacturing plants resulting from the 55 percent decline in sales from the prior year. Gross margin declined four percentage points resulting from higher provisions for excess, obsolete and rework inventory costs primarily due to reduced demand and product transition of certain BCC products. Gross margin declined two percentage points due to reductions in standard margin, primarily caused by a mix shift towards lower margin OEM products and price competition. Gross margin declined two percentage points due to higher post-sales support costs resulting from the decline in sales from the prior year.

Operating Expenses

Operating expenses in the second quarter of fiscal 2002 were $231.5 million, or 58.8 percent of sales, compared to $432.3 million, or 54.7 percent of sales, in the second quarter of fiscal 2001. Operating expenses in the second quarter of fiscal 2002 included amortization and write down of intangibles of $12.9 million, and restructuring charges of $31.5 million. Operating expenses in the second quarter of fiscal 2001 included amortization and write down of intangibles of $11.3 million, purchased in-process technology of $8.3 million, net merger-related credits of $0.1 million, and restructuring charges of $9.7 million. Excluding these items, operating expenses for the second quarter of fiscal 2002 were $187.0 million, or 47.5 percent of sales, compared to $403.2 million, or 51.1 percent of sales, in the second quarter of fiscal 2001.

Operating expenses in the first six months of fiscal 2002 were $538.6 million, or 68.8 percent of sales, compared to $918.5 million, or 53.3 percent of sales, in the first six months of fiscal 2001. Operating expenses in the first six months of fiscal 2002 included amortization and write down of intangibles of $29.4 million and restructuring charges of $89.1 million. Operating expenses in the first six months of fiscal 2001 included amortization and write down of intangibles of $18.7 million, purchased in-process technology of $37.7 million, net merger-related credits of $0.3 million, and restructuring charges of $19.6 million. Excluding these items, operating expenses for the first half of fiscal 2002 were $420.1 million, or 53.6 percent of sales, compared to $842.9 million, or 48.9 percent of sales, in the first half of fiscal 2001.

Sales and Marketing. Sales and marketing expenses in the second quarter of fiscal 2002 decreased $135.1 million, or 61.9 percent, compared to the second quarter of fiscal 2001, and decreased to 21.1 percent of total sales for the second quarter of fiscal 2002, compared to 27.6 percent of total sales for the second quarter of fiscal 2001. Sales and marketing expenses in the first half of fiscal 2002 decreased $265.2 million, or 58.4 percent, compared to the first half of fiscal 2001. The year-over-year decreases were primarily due to significantly lower sales force expenses in the first two quarters of fiscal 2002 resulting from headcount reductions, the decrease in sales, and the exit of product lines associated with our restructuring activities. In addition, the first half of fiscal 2001 had higher than normal spending for corporate branding programs.

Research and Development. Research and development expenses in the second quarter of fiscal 2002 decreased $66.2 million, or 47.5 percent, compared to the second quarter of fiscal 2001, and increased to 18.6 percent of total sales in the second quarter of fiscal 2002 compared to 17.7 percent of total sales in the second quarter of fiscal 2001. Research and development expenses in the first half of fiscal 2002 decreased $126.2 million, or 44.2 percent, compared to the first half of fiscal 2001. The decrease in research and development costs compared to the same periods one year ago was due mainly to headcount reductions, as well as the discontinuation of the analog modem and high-end LAN and

WAN chassis products, as announced in the fourth quarter of fiscal 2000, and the consumer product lines, as announced in fiscal 2001 and the first quarter of fiscal 2002.

General and Administrative. General and administrative expenses in the second quarter of fiscal 2002 decreased $14.8 million, or 32.4 percent, compared to the second quarter of fiscal 2001, and increased to 7.8 percent of total sales as compared to 5.8 percent of total sales in the second quarter of fiscal 2001. General and administrative expenses in the first six months of fiscal 2002 decreased $31.3 million, or 30.4 percent, compared to the first six months of fiscal 2001. The decrease in general and administrative expenses compared to the same periods one year ago was due primarily to headcount reductions and related costs. In addition, provisions for bad debts were significantly lower in fiscal 2002 due to the drop in sales volume.

Amortization and Write Down of Intangibles. Amortization and write down of intangibles in the second quarter of fiscal 2002 increased $1.6 million, or 14.5 percent, compared to the second quarter of fiscal 2001. Amortization and write down of intangibles in the first half of fiscal 2002 increased $10.6 million, or 56.7 percent, compared to the first half of fiscal 2001. The increase in the second quarter of fiscal 2002 as compared to the same period one year ago was due to the higher intangible asset balances that arose from the acquisitions of Nomadic Technologies, Inc. (Nomadic) and the Gigabit Ethernet NIC business of Alteon WebSystems (Alteon) that occurred during the second and third quarters of fiscal 2001, respectively. The increase in the first half of fiscal 2002 as compared to the same period one year ago was due to the higher intangible asset balances that arose from the acquisitions of Nomadic and Alteon, and a $3.4 million write down of developed product technology and related goodwill of LANSource Technologies, Inc. in the first quarter of fiscal 2002.

Purchased In-Process Technology. During the first half of fiscal 2001, we recorded charges of $37.7 million for purchased in-process technology. We recorded an $8.3 million charge related to the acquisition of Nomadic, in the second quarter of fiscal 2001 and a $29.4 million charge related to the acquisition of Kerbango, Inc., in the first quarter of fiscal 2001. These in-process projects were completed or terminated by the third quarter of fiscal 2001.

Merger-Related Credits, Net. In the second quarter and first half of fiscal 2001, we recorded net pre-tax credits of $0.1 million and $0.3 million, respectively. The amounts related to reductions in the estimates for the remaining accruals associated with the U.S. Robotics merger.

Restructuring Charges. Restructuring charges in the second quarter and first half of fiscal 2002 were $31.5 million and $89.1 million, respectively. Expenses for both periods were comprised primarily of charges for accelerated depreciation of facilities, severance and outplacement costs, and long-term asset write-downs. These charges were the result of both cost reduction actions we took to restructure our operations that were announced on December 21, 2000, as well as consolidation of our manufacturing facilities and the discontinuation of our consumer cable and DSL modem product lines as announced during June 2001. Restructuring charges incurred during the second quarter and first half of fiscal 2001 were $9.7 million and $19.6 million, respectively. Expenses in the second quarter of fiscal 2001 primarily related to an $11.7 million loss on the sale of our Mt. Prospect manufacturing and distribution operations, offset by reductions in estimates for other charges. Restructuring charges for the first half of fiscal 2001, in addition to the loss on sale of Mt. Prospect, primarily included long term asset write downs. Restructuring charges in the first six months of fiscal 2001 were due mainly to our exit of our analog-only modem and high-end LAN and WAN chassis product lines.

Gain on Sale of Land, Net

Net gain on sale of land in the second quarter of fiscal 2001 and the first six months of fiscal 2001 was $174.4 million for the sale of land to Palm.

Loss on Investments, Net

Net loss on investments in the second quarter of fiscal 2002 was $4.6 million, due primarily to sales of marketable equity securities and declines in the value of equity securities determined to be other-than-temporary. During the second quarter of fiscal 2001, net loss on investments was $16.9 million, due primarily to declines in the value of marketable equity securities determined to be other-than-temporary and investments in limited partnership venture capital funds, partially offset by gains on sales of marketable equity securities. Net loss on investments in the first half of fiscal 2002 was $7.3 million, due primarily to sales of marketable equity securities and declines in the value of equity securities determined to be other-than-temporary and in limited partnership venture capital funds. During the first half of fiscal 2001, net loss on investments was $0.2 million, due primarily to declines in the value of marketable equity securities determined to be other-than-temporary, mostly offset by gains on sale of marketable equity securities and increases in value of investments in limited partnership venture capital funds.

Litigation Settlement

During second quarter of fiscal 2001 we reached a settlement of the Reiver and Adler cases. We recorded a charge of $250.0 million for the settlement of these cases during the second quarter and the first six months of fiscal 2001.

Interest and Other Income, Net

Interest and other income, net, in the second quarter of fiscal 2002 decreased $16.9 million compared to the second quarter of fiscal 2001. In the first six months of fiscal 2002, interest and other income, net decreased $43.4 million compared to the first six months of fiscal 2002. The decrease in interest and other income, net, compared to the same period one year ago was due primarily to lower interest income as a result of lower cash and short-term investment balances as well as lower interest rates, partially offset by $12 million of interest income on a tax refund received in the second quarter of fiscal 2002.

Income Tax Provision (Benefit)

Our effective income tax rate was a 35.6 percent provision for the second quarter of fiscal 2002, compared to a 25.0 percent benefit for the second quarter of fiscal 2001, which brings our effective income tax rate to a 10.4 percent provision for the first six months of fiscal 2002, compared to a 25.0 percent benefit for the first six months of fiscal 2001. The tax rate in the second quarter of fiscal 2002 is the result of a write down of a deferred tax asset to reflect current market values on our real estate portfolio and providing for taxes in foreign and state jurisdictions.

Equity Interest in Loss of Unconsolidated Investee

In fiscal 2000, we invested $7.0 million in OmniSky Corporation (OmniSky,) and due to our ownership percentage we accounted for this investment using the equity method. We recorded a charge of $1.4 million in the first quarter of fiscal 2001 for our relative portion of OmniSky's losses. No losses were recorded subsequent to the first quarter of fiscal 2001 as our cumulative portion of OmniSky's losses surpassed our original investment.

Income from Discontinued Operations

Income from discontinued operations for the second quarter of fiscal 2002 was zero, due to our separation from Palm on July 27, 2000. Income from discontinued operations was $4.5 million, or $0.01 per share, in the first six months of fiscal 2001, and included the results of operations of Palm for the period from June 3, 2000 to the date of separation.

Liquidity and Capital Resources

Cash and equivalents and short-term investments at November 30, 2001 were $1.4 billion, a decrease of approximately $0.2 billion, or 15 percent, compared to the balance of $1.6 billion at June 1, 2001.

For the six months ended November 30, 2001, net cash used in operating activities was $136.6 million. Net cash used in operating activities for the six months ended November 30, 2001 was primarily the result of the net loss reduced by non-cash expenses. Accounts receivable as of November 30, 2001 decreased $104.1 million from June 1, 2001 to $182.7 million. Days sales outstanding in receivables decreased to 42 days at November 30, 2001, compared to 55 days at June 1, 2001, primarily due to improved collection efforts and improved sales linearity during the second quarter of fiscal 2002. Inventory levels at November 30, 2001 decreased $107.6 million from June 1, 2001 to $92.6 million. Annualized inventory turnover was 8.6 turns for the quarter ended November 30, 2001, compared to 10.7 turns for the quarter ended June 1, 2001. The decline in inventory was due to our move to outsourced manufacturing, higher reserves for excess and obsolete inventory, and improved supply chain cycle time. Investments and other assets at November 30, 2001 decreased $115.9 million from June 1, 2001 to $91.8 million, primarily due to the collection of a $93 million income tax receivable and other non-trade receivables. Accounts payable and accrued liabilities and other at November 30, 2001 decreased $326.8 million from June 1, 2001 to $529.2 million, primarily attributable to decreases in inventory purchases due to the outsourced manufacturing, and payments of manufacturing commitments and severance.

As of November 30, 2001, we had approximately $2.0 million in capital expenditure commitments outstanding primarily associated with building improvements necessitated by office consolidations. During the six months ended November 30, 2001, 3Com made $337.0 million in capital expenditures, primarily for the purchase of properties that were under operating lease arrangements, thereby terminating those leases. The purchase of these properties was partially financed through $207.2 million of borrowings under new financing arrangements. The financing arrangements include $102.2 million in borrowings on a revolving line of credit, and $105.0 million from a term loan, as discussed in Note 8 of the Condensed Consolidated Financial Statements.

During the six months ended November 30, 2001, we received net cash of $13.4 million from the sale of our common stock to employees through our employee stock purchase and option plans, and used $3.7 million to repurchase 1.1 million shares of our own common stock.

As part of our 3Com Ventures initiative, we selectively make strategic investments in the equity securities of privately held companies and limited partnership venture capital funds. We believe these investments will complement our business opportunities and research and development activities. Under 3Com Ventures, we have committed to make additional capital contributions to certain limited partnership venture capital funds totaling $46.1 million. We expect to pay $20.9 million over the next twelve months as capital calls are made. Under 3Com Ventures, we have made strategic investments of $6.0 million over the past six months.

There are no assurances that we can reduce losses from operations and negative cash flow or raise capital as needed to fund the operations of the Company. However, based on current plans and business conditions, but subject to the discussion in the Business Environment and Industry Trends, we believe that our existing cash and equivalents, short-term investments, revolving line of credit, and cash generated from operations will be sufficient to satisfy anticipated cash requirements for at least the next twelve months.

Effects of Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS 141, "Business Combinations" which addresses the financial accounting and reporting for business combinations and supersedes APB Opinion 16, "Business Combinations," and SFAS 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS 141 requires that all business combinations be accounted for by a single method, the purchase method, modifies the criteria for recognizing intangible assets, and expands disclosure requirements. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. We are in the process of determining the impact that the adoption of SFAS 141 will have on our consolidated financial statements.

In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets" which addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion 17, "Intangible Assets." SFAS 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition and after they have been initially recognized in the financial statements. SFAS 142 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but rather tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their useful lives. SFAS 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. In addition, SFAS 142 expands the disclosure requirements about goodwill and other intangible assets in the years subsequent to their acquisition. SFAS 142 is effective for our fiscal year 2003. Impairment losses for goodwill and indefinite-life intangible assets that arise due to the initial application of SFAS 142 are to be reported as resulting from a change in accounting principle. However, goodwill and intangible assets acquired after June 30, 2001 will be subject immediately to provisions of SFAS 142. We are in the process of determining the impact that the adoption of SFAS 142 will have on our consolidated financial statements.

In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," and the provisions of APB 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" with regard to reporting the effects of a disposal of a segment of a business. SFAS 144 retains many of the provisions of SFAS 121, but significantly changes the criteria that would have to be met to classify an asset as held for disposal such that long-lived assets to be disposed of other than by sale are considered held and used until disposed of. In addition, SFAS 144 retains the basic provisions of APB 30 for presentation of discontinued operations in the statement of operations but broadens that presentation to a component of an entity. We will be required to apply SFAS 144 no later than June 1, 2002. We are in the process of determining the impact that the adoption of SFAS 144 will have on our consolidated financial statements.

Business Environment and Industry Trends

Our future business and results of operations are subject to industry trends and specific risks in our business. Some of the factors that could cause future results to materially differ from past results or those described in forward-looking statements include those discussed below.

Our business has been adversely impacted by the worldwide economic slowdown and related uncertainties; political and social turmoil may further deteriorate general economic conditions and further disrupt markets in which we operate

Recessionary economic conditions worldwide, particularly in the U.S. and Europe, have contributed to the current technology industry slowdown and impacted our business resulting in:

•: reduced demand for most of our products;

•: increased risk of excess and obsolete inventories;
•: increased price competition for our products;
•: excess manufacturing capacity under current market conditions; and
•: higher overhead costs, as a percentage of revenues.

Recent political and social turmoil, such as terrorist and military actions, can be expected to put further pressure on economic conditions in the U.S. and worldwide. These political, social and economic conditions and uncertainties make it extremely difficult for 3Com, our customers and our vendors to accurately forecast and plan future business activities. This reduced predictability challenges our ability to operate profitably or to grow our business. In particular, it is difficult to develop and implement strategies, sustainable business models and efficient operations, and effectively manage contract manufacturing and supply chain relationships. If the economic or market conditions continue or further deteriorate, this will continue to have a material adverse impact on our financial position, results of operations and cash flow.

We have recently restructured to operate as three independent businesses

We have recently restructured our commercial networking and carrier systems operations to form three independent businesses—3Com Business Connectivity Company, 3Com Business Networks Company and CommWorks Corporation—with each business using certain centrally-shared corporate services. Each business has a dedicated management team focusing on developing and executing its own business strategies, assessing and meeting the needs of its customers and implementing sustainable efficient operations.

We previously operated as a single integrated company and, therefore, may lack experience or operational history in managing independently run businesses. There could be additional changes in the management teams, thereby causing disruption in both the specific business and our combined operations. Failure to properly manage any or all three independent business operations or failure of any or all the three businesses to sustain efficient operations or to successfully implement their business strategies and plans will likely cause further deterioration in revenues, significantly compromise our on-going business prospects and materially impair our overall financial performance.

Cost and expense reductions are critical to achieving positive cash flow from operations and profitability

We are continuing efforts to reduce our expense structure. In fiscal 2002, we have reduced fixed costs by completing our previously announced work force reductions, significantly increasing outsourcing of our manufacturing and substantially completing our exit from the broadband cable and DSL consumer modem businesses. We are also disposing of excess facilities and are simplifying our international legal entity structure by reducing the number of international subsidiaries and branch offices in different countries. We believe strict cost containment and expense reductions are essential to achieving positive cash flow from operations and profitability for 3Com, especially since we have experienced a decline in revenues over the past year and the outlook on future quarters is unclear, particularly in light of current general economic conditions and the recent terrorist actions. Additional measures to reduce expenses may be undertaken if revenues and market conditions do not improve. A number of factors could preclude us from successfully bringing costs and expenses in line with our revenues, such as our inability to accurately forecast business activities and further deterioration of our revenues. If we are not able to effectively reduce our costs and achieve an expense structure commensurate with our business activities and revenues, we may have inadequate levels of cash for operations or for capital requirements, which could significantly harm our ability to operate the business.

We face increased competition and our financial performance and future growth depend upon sustaining market positions in our existing markets and successfully targeting new markets

We face competitive challenges that are likely to arise from a number of factors, including:

•: industry volatility resulting from rapid development and maturation of technologies;
•: industry consolidation resulting in companies with greater financial, marketing and technical resources;
•: increasing price competition in the face of weakening economic conditions and excess inventories; and
•: continuing silicon integration of networking products.

We compete in three specific markets that serve enterprise and service provider customers. Our principal competitors in the enterprise networking market include: Avaya, Cisco, Enterasys (Cabletron), Hewlett-Packard, Lucent, and Nortel. In the connectivity market, our principal competitor is Intel; other competitors include Accton, Broadcom, D-Link and NetGear. Principal competitors in the telecommunications service provider market include: Cisco, Ericsson, Lucent, Nortel, Siemens and Sonus. Our competitors range from large, diversified telecommunications equipment and networking companies to smaller companies with a more specialized focus. As siliconization continues and networking functions become more embedded on the motherboard, we are increasingly facing competition from parties who are also our current suppliers of products. Our failure to compete successfully against current or future competitors could harm our business, operating results or financial condition. Likewise, integration of networking, communications, and computer processing functionality on a reduced number of semiconductor components may adversely affect our future sales growth and operating results.

We are investing a significant proportion of our resources in several emerging product lines. These emerging product lines include Gigabit Ethernet-Over-Copper technology, Voice over Internet Protocol (VoIP) and CDMA services, wireless networking products, Layer 3+ switching and Internet Protocol (IP) telephony. We expect these product lines to account for a higher percentage of our future sales over time, although the markets for these products and solutions are still emerging and may not develop to our expectations. Industry standards for some of these technologies are yet to be widely adopted and the market potential remains unproven. If these markets do not grow as we expect, if these technologies and products are not widely accepted or if product adoption is materially delayed, our financial results would be adversely affected and we might need to change our business strategy.

Also, in the markets in which we compete, products have short life cycles. Therefore, our success depends on our ability to identify new market and product opportunities, to develop and introduce new products in a timely manner, and to gain market acceptance of new products, particularly in our targeted emerging markets. Any delay in new product introductions, lower than anticipated demand for our new products or higher manufacturing costs could have an adverse affect on our operating results or financial condition, particularly in those product markets we have identified as emerging high-growth opportunities.

Our increased reliance on contract manufacturing and our excess manufacturing capacity may adversely impact our financial results and operations.

We have changed our manufacturing strategy so that more of our products will be sourced from contract manufacturers. We have sold or are in the process of selling manufacturing operations and facilities associated with those products sourced from contract manufacturers. Therefore, our ability to resume internal manufacturing operations for those products is severely limited. The cost, quality, performance and availability of contract manufacturing operations are and will be essential to the

successful production and sale of many of our products. The inability of any contract manufacturer to meet our cost, quality, performance and availability standards could adversely impact our financial condition or results of operations. We may not be able to provide contract manufacturers with product volumes that are high enough to achieve sufficient cost savings. Also, our ability to control the quality of products produced by contract manufacturers may be limited and quality issues may not be resolved in a timely manner which could adversely impact our financial condition or results of operations. The smooth transition from internal manufacturing to contract manufacturing by a third party is critical to our success. Failure to implement and manage a successful transition may cause severe disruptions in our supply chain that will affect cost, quality and availability of products.

Many factors may impact our ability to implement these changes, including our ability to manage the implementation internally, sustain the productivity of our workforce, and quickly respond to and recover from unforeseen events associated with these changes, such as the potential for a sustained economic downturn and reduced demand for our products.

Furthermore, because we have outsourced significant manufacturing operations to contract manufacturers and have exited a number of businesses, we now have excess manufacturing capacity in existing facilities. We are currently restructuring our operations and implementing cost reduction activities to eliminate this excess capacity, including the announced intention to consolidate our real estate portfolio and facilities associated with our former manufacturing operations such as the Mt. Prospect, Illinois and Marlborough, Massachusetts facilities and parts of the Santa Clara, California campus. We have transitioned our Singapore facility to become the Asia Pacific region distribution center and office location for sales management, information technology, training and customer service and support operations. Our ability to reduce our excess manufacturing capacity and to consolidate facilities may be made more difficult by further weakening of the networking industry and worsening of general economic conditions in the United States and globally. If we are unable to reduce our excess manufacturing capacity and facilities, this may negatively impact our operations, cost structure and financial performance.

Demand forecasting, increased contract manufacturing, delivery and logistics disruptions and historical component shortages continue to pose major supply chain risks

Current business conditions and operational challenges in managing our supply chain affect our business in a number of ways:

•: certain key components, in the recent past, have had limited availability;
•: there are a smaller number of suppliers and we have narrowed our supplier base;
•: our ability to accurately forecast demand is diminished, especially in light of general economic weakness and uncertainty following the recent terrorist events;
•: increased security of transportation systems, such as the temporary suspension of commercial air travel following terrorist attacks on the East Coast of the U.S., has resulted in and may continue to cause logistics and transportation delays of materials shipments and product deliveries;
•: our significantly increased reliance on third-party manufacturing places much of the supply chain process out of our direct control and heightens the need for accurate forecasting; and
•: our present supply capacities exceed our current needs.

Some key components of our products and some services that we rely on are currently available only from single or limited sources. In addition, some of our suppliers are also our competitors. We cannot be certain that in the future our suppliers will be able to meet our demand for components in a timely and cost-effective manner.

Increasingly, we have been sourcing a greater number of components from a smaller number of vendors. Also, there has recently been a trend toward consolidation of vendors of electronic components. This greater reliance on a smaller number of suppliers and the inability to quickly switch vendors increase the risk of logistics disruptions, unfavorable price fluctuations or disruptions in supply, particularly in a supply-constrained environment.

Operation of the supply chain requires accurate forecasting of demand, which may be more challenging due to weak industry conditions, emerging technologies, logistics disruptions and developing markets. If overall demand for our products, product mix and growth of these markets is significantly different from our forecasting and planning, we may face inadequate, or excess, component supply. This would result in a buildup of inventory that could not easily be sold, or orders for products that could not be manufactured timely. This would adversely affect our revenues, financial results and market share. If our demand forecasts are too high or our forecasts of product mix are inaccurate, we may experience excess and obsolete inventories and excess manufacturing capacity, which could adversely impact our financial results.

Future cash requirements or restrictions on cash could adversely impact our financial position; and an event of default under the Credit Facility may impair our ability to conduct business operations

We incurred net losses in fiscal 2001 and through the first half fiscal 2002. While we were cash flow positive from operations in the second quarter of fiscal 2002, our overall cash balance declined and we expect to continue incurring negative overall cash flow in the next few quarters. If cash flows do not continue to improve, our liquidity and ability to operate our business could be severely adversely impacted. Additionally, our ability to raise financial capital may be hindered due to our operational losses and weak cash flow position, reducing our operating flexibility.

The following items could require unexpected future cash payments, limit our ability to generate cash or restrict our use of cash:

•: triggering of certain payment obligations, default of covenants or acceleration of payment obligations under our new revolving and term loan facilities;
•: inability to dispose of real estate holdings in a timely manner or at our anticipated price; and
•: taxes due upon the transfer of cash held in foreign locations or pledged as collateral for financial instruments.

We recently entered into a $210,000,000 revolving and term loan facility with a syndication of financial institutions led by Bank of America (the "Credit Facility") and, contemporaneously, we retired all of our operating lease arrangements we had with respect to certain of our real properties. The Credit Facility has a term of three years and is secured by priority liens over certain assets (including inventory, accounts receivable, plant and equipment and certain real properties), but specifically excludes our cash, cash equivalents, short-term investments, equity investments and intellectual property. The primary financial covenant under the Credit Facility obligates us to maintain certain levels of available cash, cash equivalents and short-term investments. Falling below such levels would be an event of default and, among other things, (i) Bank of America may accelerate the payment of the complete facility, (ii) use of cash in certain bank accounts will be severely restricted, and (iii) significant operational constraints such as limitations on selling assets and funding certain operations, will automatically take effect. We also have the ability to prepay and terminate the Credit Facility at any time.

While we plan to adhere to the financial covenants of the Credit Facility and avoid an event of default, in the event that it appears we are unable to avoid an event of default, it may be necessary or advisable to retire and terminate the Credit Facility and pay off all remaining balances borrowed. Such a payoff of the Credit Facility would further limit our available cash and cash equivalents. Furthermore, we may

not be able to retire the Credit Facility if we do not have adequate resources available when necessary to avoid an event of default or if, as a result of a rapid decline in revenues and cash and cash equivalents, we do not have adequate time to retire the Credit Facility. The consequences of an event of default under the Credit Facility may prevent us from conducting normal business operations.

As we continue our efforts to consolidate our real estate portfolio and liquidate certain real estate holdings, we may enter into other financial arrangements, such as sale-leaseback or mortgage arrangements that may subject us to additional financial covenants and restrictions, thereby further reducing our operating flexibility.

We maintain certain cash deposits in foreign locations, portions of which may be subject to significant tax or tax withholding upon transfer or withdrawal.

The above cash requirements or restrictions could lead to an inadequate level of cash for operations or for capital requirements, which could have a material negative impact on our financial position and significantly harm our ability to operate the business.

Retaining key employees and management are critical to our success

Our success depends upon retaining and recruiting highly qualified employees and management personnel. This is especially important in the new structure of the three independent businesses since each management team must possess the skills, experience and talent to run its business on an independent basis. However, we face challenges in attracting and retaining such employees and management personnel. The significant downturn in our business environment has had a negative impact on our operations, and as a result, we have restructured our operations to reduce our workforce and implement other cost reduction activities. These actions could lead to disruptions in our business, reduced employee morale and productivity, increased attrition and problems with retaining existing employees and recruiting future employees and increased financial costs.

Recruiting and retaining skilled personnel, including engineers, sales representatives and product marketing managers, continues to be competitive. At certain locations where we operate, including the Silicon Valley area, the cost of living is extremely high and it may be difficult to attract and retain key employees and management personnel at a reasonable cost. If we cannot successfully recruit and retain such persons, our product introduction schedules, customer relationships, operating results and financial condition may become impaired and our overall ability to compete may be adversely affected.

A significant portion of our revenues is derived from sales to a small number of customers who may decide not to purchase our products in the future

We distribute many of our BCC and BNC products through two-tier distribution channels that include distributors, systems integrators and value-added resellers. We also sell to PC OEMs and telecommunications carriers and service providers. For BCC and BNC products, a significant portion of our sales is concentrated among few distributors and OEM customers. For CommWorks products, a significant portion of our sales is concentrated with the major telecom service providers and infrastructure companies. We cannot be certain that these customers will continue to purchase our products at current levels. Additionally, consolidation in our distribution channels and among PC OEMs, telecommunications service providers and telecom infrastructure customers is reducing the number of customers in the domestic and international markets. In an effort to streamline our operations, we may increase the focus of our distribution sales resources on selected distribution channel customers.

Our results of operations, financial condition, or market share could be adversely affected if our customers:

•: stop purchasing our products or focus more on buying or reselling our competitors' products;

•: reduce, delay, or cancel their orders; or
•: experience competitive, operational, or financial difficulties, impairing our ability to collect payments from them.

BCC and BNC depend on distributors whose reductions in our inventory could negatively impact our operations

Our distributors maintain inventories of our products. We work closely with our distributors to monitor channel inventory levels and ensure that appropriate levels of products are available to resellers and end users. Notwithstanding such efforts, as channel partners reduce their levels of inventory or if they do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.

Changes in sales channel mix to PC OEMs and product mix to lower margin network access products may negatively impact our revenues and margins

We sell our network access products to PC OEMs as well as to distributors who, in turn, sell to commercial enterprises. Sales to distributors typically generate higher ASPs and gross margins than sales to PC OEMs. The trend over the past several years has shifted sales for our BCC products from two-tier distribution to PC OEMs so that our revenue from PC OEM sales has increased as a percentage of our total revenues while our revenue from distribution sales has decreased as a percentage of our total revenues. This mix shift towards PC OEMs has lowered the ASPs for our products. If this trend continues and we cannot lower our costs of the products or transition customers to products with higher ASPs, then our margins will be reduced and our financial results will be adversely impacted.

We derive a significant portion of our network access sales from PC OEMs such as Dell Computer, Gateway, Hewlett Packard, and IBM, all of whom are manufacturers that incorporate our NICs, PC cards, Mini-PCI or LOM chipsets into their products. As Ethernet connectivity technology continues to mature, we are beginning to see the incorporation of NIC and PC card product features into lower-priced form factors such as LOM and Mini-PCI. For desktop computers, we are seeing a migration from the NIC form factor to LOM. For laptop computers, the transition is from PC cards to Mini-PCI and LOM. We expect that PC OEMs will increasingly purchase the lower-priced form factors of established technology products, as opposed to the higher-cost form factors unless we successfully add innovative features that justify premium prices. If this trend continues and we cannot lower our costs of the products or transition customers to products with higher ASPs, then our margins will be reduced and our financial results will be adversely impacted.

Continued slowdown of capital expenditures in the telecom industry may negatively impact CommWorks revenues

CommWorks customers in the telecom market include incumbent local exchange carriers (ILECs); interexchange carriers (IXCs); post, telephone and telegraph administrations (PTTs); Internet service providers (ISPs) and other alternative service providers. The recent economic and market slowdown, capital expenditure restrictions and excess capacity in the telecom industry has adversely impacted us, as most of our service provider customers have sharply reduced their spending levels. Also, certain segments of the telecom industry have been adversely impacted by large expenditures for wireless licenses. A continued slowdown in the telecom industry and in capital expenditures could have a material adverse effect on our sales and financial results.

Additionally, the recent economic and market slowdown has led to a number of smaller competitive local exchange carriers (CLECs) and ISPs going out of business or consolidating. This may adversely impact our financial performance due to increased competition and further concentration of the CommWorks customer base.

Sales of our CommWorks products have in the past fluctuated substantially. The timing of individual transactions has proven difficult to forecast due to the smaller number of customers, the relatively higher dollar amount of each sale and the relatively larger percentage of each sale represents to CommWorks overall revenues. Also, CommWorks sales arrangements typically contain product acceptance requirements that can impact the timing of the recognition of the sale. For these reasons, revenues in any particular quarter from our CommWorks products may be more prone to and adversely affected by operational decisions of individual customers.

Our current and future decisions to exit certain product lines may have unforeseen negative impacts to our business

We announced on June 7, 2001 and March 21, 2001, respectively, that we would be exiting our broadband cable and consumer DSL modem and consumer Internet Appliance businesses. The decision to exit these businesses may adversely impact our ongoing relationships with our channel partners and end customers since many of the channel partners and end customers for our on-going businesses also purchased the products that we have discontinued. These channel partners and customers may perceive our remaining products as not being part of a larger integrated or complementary solution. Also, they may question our commitment to their markets and therefore shift to products from alternative vendors. Customers and channel partners may also attempt to return products already purchased or cancel orders recently placed by them. We have experienced a certain level of such returns and cancellations and expect that they will continue in fiscal 2002. In certain cases, we continue to be subject to certain long-term contractual commitments for sale or maintenance of products. We may incur additional expenses in fiscal 2002 associated with resolving these contractual commitments.

Additionally, we may consider exiting other businesses that do not meet our goal of delivering appropriate financial returns in a reasonable amount of time. Our decision to exit future businesses could result in increased employee costs (such as severance, outplacement and other benefits), contract termination costs and asset impairments. We may also experience delays in the execution of our plan to exit a business that may create disruptions in our transactions with suppliers and customers.

The reduced role of acquisitions in our current business strategy may negatively impact our growth and increase our reliance on strategic relationships

We are currently focusing on achieving positive cash flow and profitability from our operations. Also, the price of our common stock is at a relatively low valuation, which makes stock-based acquisitions uneconomical. Accordingly, we expect that our acquisitions of businesses or product lines will decrease in comparison to historical levels. The networking business is highly competitive and our failure to pursue future acquisitions could hamper our ability to enhance existing products and introduce new products on a timely basis. Future consolidations in the networking industry may result in new companies with greater resources and stronger competitive positions and products than us. Furthermore, companies may be created that are able to respond more rapidly to market opportunities. Continued consolidation in our industry may adversely affect our operating results or financial condition.

We will continue to pursue strategic relationships to complement internal development of new technologies and enhancement of existing products and to exploit market potentials. These strategic relationships can present additional problems since, in most cases, we must compete in some business areas with companies with which we have strategic alliances and, at the same time, cooperate with the same companies in other business areas. If these companies fail to perform, or if these relationships fail to materialize as expected, we could suffer delays in product or market development or other operational difficulties. Furthermore, our results of operations or financial condition could be adversely impacted if we experience difficulties managing relationships with our partners or if projects with partners are unsuccessful. In addition, if our strategic partners are acquired by third parties or if our competitors enter into successful strategic relationships, we may face increased competition.

Certain of our international markets are risky and may negatively impact our operating results

We operate internationally and expect that international markets will continue to account for a significant percentage of our sales. The recent global economic slowdown has already had and is likely to continue to have a negative effect on various international markets in which we operate. This will cause us to simplify our international legal entity structure and reduce our presence in certain countries, which may negatively affect the overall level of business in such countries. Recent political and social turmoil may likely further exacerbate existing economic and political instability and currency fluctuations in certain international markets in which we participate and such conditions can adversely affect our operating results or financial condition. Unforeseen conditions and events will positively or negatively impact the level of international sales or our international operations in different regions. For example, the recent strength of the U.S. dollar relative to other countries' currencies has made our products more expensive than locally manufactured products, thereby negatively impacting demand for our products. Also, our contract manufacturers manufacture many of our products overseas, sometimes in politically or economically unstable countries. Should international regions experience economic or political instability, our results of operations may be adversely affected, our ability to forecast demand for our products may also be impeded and our supply of products may be interrupted.

Our reliance on industry standards, a favorable regulatory environment, technological change in the marketplace and new product initiatives may cause our revenues to fluctuate or decline

Our success also depends on:

•: the timely adoption and market acceptance of industry standards;
•: resolution of conflicting U.S. and international industry standards;
•: requirements created by the convergence of technology such as VoIP;
•: the timely introduction of new standards-compliant products; and
•: a favorable regulatory environment.

Slow market acceptance of new technologies and industry standards could adversely affect our results of operations or financial condition. In addition, if our technology is not included in an industry standard on a timely basis or if we fail to achieve timely certification of compliance to industry standards for our products, our sales of such products could be adversely affected. There are a number of new product initiatives, particularly in the area of wireless access, IP telephony, and broadband access that could be impacted by new or revised regulations, which in turn could adversely affect our results of operations or financial condition.

Our customer order fulfillment fluctuates and may negatively impact our operating results

The timing and amount of our sales depend on a number of factors that make estimating operating results uncertain. Throughout our business, we do not typically maintain a significant backlog and sales are partially dependent on our ability to appropriately forecast product demand. In addition, our customers historically request fulfillment of orders in a short period of time, resulting in limited visibility to sales trends and potential pricing pressures. Consequently, our operating results depend on the volume and timing of orders and our ability to fulfill orders in a timely manner. Historically, sales in the third month of the quarter have been higher than sales in each of the first two months of the quarter. Recently this pattern has become more pronounced, which may increase the risk of unforeseen events negatively impacting our financial results. Non-linear sales patterns make business planning difficult, and increase the risk that our quarterly results will fluctuate due to disruptions in functions such as manufacturing, order management, information systems, and shipping.

We may not always be able to adequately protect or maintain our intellectual property rights

Many of our competitors, such as telecommunications, networking and computer equipment manufacturers, have large intellectual property portfolios, including patents that may cover technologies that are relevant to our business. In addition, many smaller companies, universities, and individual inventors have obtained or applied for patents in areas of technology that may relate to our business. The industry is moving towards aggressive assertion, licensing, and litigation of patents and other intellectual property rights.

In the course of our business, we frequently receive claims of infringement or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties. We evaluate the validity and applicability of these intellectual property rights, and determine in each case whether we must negotiate licenses or cross-licenses to incorporate or use the proprietary technologies, protocols, or specifications in our products. If we are unable to obtain and maintain licenses on favorable terms for intellectual property rights required for the manufacture, sale, and use of our products, particularly those which must comply with industry standard protocols and specifications to be commercially viable, our results of operations or financial condition could be adversely impacted.

In addition to disputes relating to the validity or alleged infringement of other parties' rights, we may become involved in disputes relating to our assertion of our intellectual property rights. Whether we are defending the assertion of intellectual property rights against us or asserting our intellectual property rights against others, intellectual property litigation can be complex, costly, protracted, and highly disruptive to business operations by diverting the attention and energies of management and key technical personnel. Further, plaintiffs in intellectual property cases often seek injunctive relief and the measures of damages in intellectual property litigation are complex and often subjective or uncertain. Thus, the existence of or any adverse determinations in this litigation could subject us to significant liabilities and costs. In addition, if we are the alleged infringer, we could be required to seek licenses from others or be prevented from manufacturing or selling our products, which could cause disruptions to our operations or the markets in which we compete. If we are asserting our intellectual property rights, we could be prevented from stopping others from manufacturing or selling competitive products. Any one of these factors could adversely affect our product margins, results of operations or financial condition.

Our future quarterly operating results are subject to factors that can cause fluctuations in our stock price

Our quarterly operating results are difficult to predict and may fluctuate significantly. In addition to factors discussed above, we anticipate that the activities surrounding the restructuring of our business will contribute significantly to fluctuations in our quarterly operating results for the next several quarters. These factors, and accompanying fluctuations in periodic operating results, could have a significant adverse impact on our sales and financial results.

Accordingly, our stock price has historically experienced substantial price volatility and we expect that this will continue, particularly due to fluctuations in quarterly operating results, variations between our actual or anticipated financial results and the published analysts' expectations and as a result of announcements by our competitors. Our operating losses have caused a significant depletion in our cash balances. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many technology companies. These factors, as well as general economic and political conditions, may have a material adverse affect on the market price of our stock in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

3Com holds a portfolio of marketable equity securities that have a short trading history and are highly subject to market price volatility. Equity security price fluctuations of plus or minus 15 percent would have a $1.8 million impact on the value of these securities as of the end of the second quarter of fiscal 2002. Equity security price fluctuations of plus or minus 50 percent would have a $6.1 million impact on the value of these securities as of the end of the second quarter of fiscal 2002.

For interest rate sensitivity and foreign currency exchange risk, reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended June 1, 2001.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The material set forth in footnote 10 of Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

Item 2. Changes in Securities and Use of Proceeds

(a): None.
(b): None.
(c): None.
(d): None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

(a): The Annual Meeting of Shareholders was held on September 20, 2001.
(b): Each of the persons named in the Proxy Statement as a nominee for director was elected and the proposals listed below were approved. The following are the voting results of the proposals:

Proposal I	For	Withheld	Broker Non-Votes
Election of Directors:
Fred D. Anderson	304,635,782	7,839,525	0
Bruce L. Claflin	288,841,998	23,633,309	0
David D. Dorman	241,330,290	71,145,017	0
Paul G. Yovovich	304,548,284	7,927,023	0

Proposal II		For		Against		Abstain		Broker Non-Votes
To approve the Amended and Restated 1983 Employee Stock Option Plan:		97,939,800		76,543,415		2,117,129		0

Proposal III		For		Against		Abstain		Broker Non-Votes
To ratify the appointment of Deloitte & Touche LLP as the Company's independent public accountants for the fiscal year ending May 21, 2002:		285,668,042		26,220,660		586,605		0

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

Exhibit Number		Description
2.1		Master Separation and Distribution Agreement between the Registrant and Palm, Inc. effective as of December 13, 1999, as amended(8)
2.2		General Assignment and Assumption Agreement between the Registrant and Palm, Inc., as amended(8)
2.3		Master Technology Ownership and License Agreement between the Registrant and Palm, Inc.(8)
2.4		Master Patent Ownership and License Agreement between the Registrant and Palm, Inc.(8)
2.5		Master Trademark Ownership and License Agreement between the Registrant and Palm, Inc.(8)
2.6		Employee Matters Agreement between the Registrant and Palm, Inc.(8)
2.7		Tax Sharing Agreement between the Registrant and Palm, Inc.(8)
2.8		Master Transitional Services Agreement between the Registrant and Palm, Inc.(8)
2.9		Real Estate Matters Agreement between the Registrant and Palm, Inc.(8)
2.10		Master Confidential Disclosure Agreement between the Registrant and Palm, Inc.(8)
2.11		Indemnification and Insurance Matters Agreement between the Registrant and Palm, Inc.(8)
3.1		Certificate of Incorporation(5)
3.2		Certificate of Correction filed to Correct a Certain Error in the Certificate of Incorporation(5)
3.3		Certificate of Merger(5)
3.4		Corrected Certificate of Merger filed to correct an error in the Certificate of Merger(9)
3.5		Registrant's Bylaws, as Amended(8)
3.6		Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock(16)
4.1		Amended and Restated Rights Agreement dated December 31, 1994(3)
4.2		Second Amended and Restated Preferred Share Rights Agreement, dated as of March 8, 2001(13)
10.1		3Com Corporation 1983 Stock Option Plan, as amended *
10.2		Amended and Restated Incentive Stock Option Plan(2)*
10.3		License Agreement dated March 19, 1981(1)
10.4		3Com Corporation Amended and Restated 1984 Employee Stock Purchase Plan, as amended(12)*
10.5		3Com Corporation Director Stock Option Plan, as amended(16)*
10.6		3Com Corporation Restricted Stock Plan, as amended(16)*

10.7		3Com Corporation 1994 Stock Option Plan, as amended(14)*
10.8		Amended and Restated Agreement and Plan of Merger by and among the Registrant, TR Acquisitions Corporation, 3Com (Delaware) Corporation, and U.S. Robotics Corporation, dated as of February 26, 1997 and amended as of March 14, 1997(4)
10.9		Form of Management Retention Agreement, effective as of June 2, 1999, with attached list of parties(9)*
10.10		Form of Management Retention Agreement, with attached list of parties and effective dates(9)*
10.11		Agreement for Purchase and Sale of Land at Highway 237 and North First Street, San Jose, California entered into as of May 22, 2000 by and between the Registrant and Palm, Inc.(10)
10.12		Employment Agreement with Bruce Claflin, effective as of January 1, 2001(11)*
10.13		Summary of Severance Plan for Section 16b Officers(15)*
10.14		Credit Agreement dated as of November 28, 2001 between the Registrant, Bank of America, N.A., as Administrative Agent, Bank of America Securities, LLC, as Lead Arranger and Sole Book Manager, Foothill Capital Corporation, as Syndication Agent, and the Financial Institutions Named Herein, as Lenders
10.15		Credit Agreement dated as of November 28, 2001 between 3Com Technologies and 3com Europe Limited, Bank of America, N.A., as Administrative Agent, Bank of America Securities, LLC, as Lead Arranger and Sole Book Manager, Foothill Capital Corporation, as Syndication Agent, and the Financial Institutions Named Herein, as Lenders
10.16		Security Agreement dated as of November 28, 2001, between the Registrant and Bank of America, N.A., in its capacity as Agent for Lenders.
10.17		Continuing Guaranty dated as of November 28, 2001, made by the Registrant in favor of the Lenders and Bank of America, N.A., as Agent for the Lenders
10.18		Intercompany Subordination Agreement dated as of November 28, 2001, made among the Registrant and Bank of America, N.A., as Agent for itself and the Lenders
10.19		Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement dated November 28, 2001, between the Registrant, as Mortgagor, and Bank of America, N.A., as Agent, as Mortgagee, for the Mt. Prospect, IL, site
10.20		Deed of Trust, Assignment of Rents, Security Agreement and Fixture Financing dated November 28, 2001, between the Registrant, as Trustor, and First American Title Guaranty Company, as Trustee, and Bank of America, N.A., as Agent, for the Santa Clara, CA, Betsy Ross site
10.21		Deed of Trust, Assignment of Rents, Security Agreement and Fixture Financing dated November 28, 2001, between the Registrant, as Trustor, and First American Title Guaranty Company, as Trustee, and Bank of America, N.A., as Agent, for the Santa Clara, CA, West Campus

10.22		Deed of Trust, Assignment of Rents, Security Agreement and Fixture Financing dated November 28, 2001, between the Registrant, as Trustor, and First American Title Guaranty Company, as Trustee, and Bank of America, N.A., as Agent, for the Santa Clara, CA, East Campus
10.23		Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement dated November 28, 2001, between the Registrant, as Mortgagor, and Bank of America, N.A., as Agent, as Mortgagee, for the Rolling Meadows, IL site

*: Indicates a management contract or compensatory plan.
(1): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Registration Statement on Form S-1 filed on January 25, 1984 (File No. 2-89045)
(2): Incorporated by reference to the corresponding exhibit to Registrant's Registration Statement on Form S-4 filed on August 31, 1987 (File No. 33-16850)
(3): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on January 17, 1995 (File No. 000-12867)
(4): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Registration Statement on Form S-4 filed on March 17, 1997 (File No. 333-23465)
(5): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on October 14, 1997 (File No. 000-12867)
(6): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on January 11, 1999 (File No. 000-12867)
(7): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on October 8, 1999 (File No. 002-92053)
(8): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on April 4, 2000 (File No. 333-34726)
(9): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-K filed on August 17, 2000 (File No. 000-12867)
(10): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on October 13, 2000 (File No. 000-12867)
(11): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on January 16, 2001 (File No. 000-12867)
(12): Incorporated by reference to the corresponding exhibit to Registrant's Registration Statement on Form S-8 filed on April 25, 2001 (File No. 333-59504)
(13): Incorporated by reference to Registrant's Registration Statement on Form 8-A 12G/A filed on June 15, 2001 (File No. 333-34726)
(14): Incorporated by reference to the corresponding exhibit to Registrant's Registration Statement on Form S-8 filed on July 12, 2001 (File No. 333-64988)
(15): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-K filed on August 9, 2001 (File No. 000-12867)
(16): Incorporated by reference to the corresponding exhibit previously filed as an exhibit to Registrant's Form 10-Q filed on October 11, 2001 (File No. 000-12867)
(b): Reports on Form 8-K

None.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

				3COM CORPORATION (Registrant)
Dated:		January 11, 2002		By:		/s/ MICHAEL E. RESCOE Michael E. Rescoe Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer)

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3Com Corporation
Table of Contents
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

3Com Corporation Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
3Com Corporation Condensed Consolidated Balance Sheets (In thousands, except par value)
3Com Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
3Com Corporation Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

Signatures
EX-10.1 3 a2067560zex-10_1.htm EX 10.1 Prepared by MERRILL CORPORATION
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Exhibit 10.1

3COM CORPORATION

1983 STOCK OPTION PLAN

(Amendment and restatement, effective September 20, 2001)

1. Purposes of the Plan. The purposes of this 1983 Stock Option Plan are:

•: to attract and retain the best available personnel for positions of substantial responsibility,
•: to provide additional incentive to Employees, and
•: to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

(d) "Cause" means (i) an act of personal dishonesty taken by the Optionee in connection with his or her responsibilities as an employee and intended to result in substantial personal enrichment of the Optionee, (ii) Optionee being convicted of a felony, (iii) a willful act by the Optionee which constitutes gross misconduct and which is injurious to the Company, (iv) following delivery to the Optionee of a written demand for performance from the Company which describes the basis for the Company's reasonable belief that the Optionee has not substantially performed his or her duties, continued violations by the Optionee of the Optionee's obligations to the Company which are demonstrably willful and deliberate on the Optionee's part.

(e) "Code" means the Internal Revenue Code of 1986, as amended.

(f) "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

(g) "Common Stock" means the common stock of the Company.

(h) "Company" means 3Com Corporation.

(i) "Control Company" means the Participating Company whose stock is subject to this Option.

(j) "Director" means a member of the Board.

(k) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code.

(l) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st

day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company.

(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(n) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day occurring prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day occurring prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

(o) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(p) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option.

(q) "Notice of Grant" means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement.

(r) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(s) "Option" means a stock option granted pursuant to the Plan.

(t) "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(u) "Optioned Stock" means the Common Stock subject to an Option.

(v) "Optionee" means the holder of an outstanding Option granted under the Plan.

(w) "Ownership Change" means any of the following occurs with respect to the Control Company.

(i) the direct or indirect sale or exchange by the shareholders of the Control Company of all or substantially all of the stock of the Control Company;

(ii) a merger in which the Control Company is a party; or

(iii) the sale, exchange, or transfer of all or substantially all of the Control Company's assets (other than a sale, exchange, or transfer to one or more corporations where the shareholders of the Control Company before such sale, exchange, or transfer retain, directly

or indirectly, at least a majority of the beneficial interest in the voting stock of the corporation(s) to which the assets were transferred).

(x) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.

(y) "Participating Company" means (i) the Company and (ii) any present or future Parent and/or Subsidiary corporation while such corporation is a Parent or Subsidiary.

(z) "Plan" means this 3Com Corporation 1983 Stock Option Plan.

(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.

(cc) "Service Provider" means an Employee.

(dd) "Share" means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.

(ee) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.

(ff) "Transfer of Control" means an Ownership Change in which the stockholders of the Control Company before such Ownership Change do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the Control Company.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is One Hundred Six Million, Six Hundred and Fourteen Thousand Five Hundred and Forty Eight (106,614,548) Shares, as adjusted for stock splits, stock dividends and similar events. The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which Committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options may be granted hereunder;

(iii) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

(viii) to modify or amend each Option (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

(ix) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld (but in no event any more than the minimum amount). The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator;

(xi) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options.

5. Eligibility. Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Limitations.

(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the

Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

(b) Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause.

(i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than one million Shares.

(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional one million Shares, which shall not count against the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 12.

7. Term of Plan. Subject to Section 19 of the Plan, the amendment and restatement of the Plan shall become effective upon September 20, 2001. Thereafter, the Plan shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.

(b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.

(c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

(iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

(vi) any combination of the foregoing methods of payment; or

(vii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the

Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

11. Non-Transferability of Options. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate.

12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split,

stock dividend, combination or reclassification of the Common Stock, or any other like increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for a period of at least fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

13. Certain Terminations Within Twelve Months Following a Transfer of Control. In the event that, within twelve (12) months following a Transfer of Control an Optionee's employment with a Participating Company is terminated involuntarily by his or her employer other than for Cause, then such Optionee's Options shall have their vesting accelerated as to fifty percent (50%) of the unvested Shares of the date of such termination of employment.

14. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. For purposes of determining the Fair Market Value under Section 2(n) of the Plan, in the event that the date of grant is a market trading day, the grant shall be deemed to occur after the close of trading on the date of grant and the Fair Market Value shall be

determined using the trading data for the date of grant. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

16. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

17. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

18. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

19. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

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Exhibit 10.1

3COM CORPORATION 1983 STOCK OPTION PLAN (Amendment and restatement, effective September 20, 2001)
EX-10.14 4 a2067560zex-10_14.htm EX 10.14 Prepared by MERRILL CORPORATION
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Exhibit 10.14

CREDIT AGREEMENT

Dated as of November 28, 2001

Among

THE FINANCIAL INSTITUTIONS NAMED HEREIN

as the Lenders

and

BANK OF AMERICA, N.A.

as the Administrative Agent,

BANC OF AMERICA SECURITIES, LLC

as the Lead Arranger and Sole Book Manager,

FOOTHILL CAPITAL CORPORATION

as the Syndication Agent,

and

3COM CORPORATION

as the Borrower

TABLE OF CONTENTS

Section			Page
ARTICLE 1 LOANS AND LETTERS OF CREDIT			1
	1.1	Total Facility	1
	1.2	Revolving Loans.	1
	1.3	Term Loans.	4
	1.4	Letters of Credit.	5
	1.5	Bank Products	8
ARTICLE 2 INTEREST AND FEES			8
	2.1	Interest.	8
	2.2	Continuation and Conversion Elections.	9
	2.3	Maximum Interest Rate	9
	2.4	Closing Fee	10
	2.5	Unused Line Fee	10
	2.6	Letter of Credit Fee	10
ARTICLE 3 PAYMENTS AND PREPAYMENTS			10
	3.1	Revolving Loans	10
	3.2	Termination of Facility	11
	3.3	Repayment of the Term Loans	11
	3.4	Prepayments of the Term Loans.	11
	3.5	LIBOR Rate Loan Prepayments	12
	3.6	Payments by the Borrower.	12
	3.7	Payments as Revolving Loans	12
	3.8	Apportionment, Application and Reversal of Payments	12
	3.9	Indemnity for Returned Payments	13
	3.10	Agent's and Lenders' Books and Records; Monthly Statements	14
ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY			14
	4.1	Taxes.	14
	4.2	Illegality.	15
	4.3	Increased Costs and Reduction of Return.	16
	4.4	Funding Losses	16
	4.5	Inability to Determine Rates	16
	4.6	Certificates of Agent	17
	4.7	Obligation to Mitigate	17
	4.8	Survival	17
ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES			17
	5.1	Books and Records	17
	5.2	Financial Information	17
	5.3	Notices to the Lenders	20
ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS			21
	6.1	Authorization, Validity, and Enforceability of this Agreement and the Loan Documents	21
	6.2	Validity and Priority of Security Interest	22
	6.3	Organization and Qualification	22
	6.4	Corporate Name; Prior Transactions	22
	6.5	Subsidiaries and Affiliates	22
	6.6	Financial Statements and Projections.	22

	6.7	Capitalization	23
	6.8	Solvency	23
	6.9	Debt	23
	6.10	Distributions	23
	6.11	Real Estate; Leases	23
	6.12	Unrestricted Subsidiaries	23
	6.13	Trade Names	24
	6.14	Litigation	24
	6.15	Labor Disputes	24
	6.16	Environmental Laws	24
	6.17	No Violation of Law	25
	6.18	No Default	25
	6.19	ERISA Compliance	25
	6.20	Taxes	26
	6.21	Regulated Entities	26
	6.22	Use of Proceeds; Margin Regulations	26
	6.23	Proprietary Rights.	26
	6.24	No Material Adverse Change	26
	6.25	[Intentionally Deleted]	26
	6.26	[Intentionally Deleted]	26
	6.27	Bank Accounts	26
	6.28	Governmental Authorization	27
ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS			27
	7.1	Taxes and Other Obligations	27
	7.2	Legal Existence and Good Standing	27
	7.3	Compliance with Law and Agreements; Maintenance of Licenses	27
	7.4	Maintenance of Property; Inspection of Property.	27
	7.5	Insurance.	28
	7.6	Insurance and Condemnation Proceeds	28
	7.7	Environmental Laws.	29
	7.8	Compliance with ERISA	30
	7.9	Mergers, Consolidations or Sales	30
	7.10	Distributions; Capital Change; Investments	31
	7.11	[Intentionally Deleted]	31
	7.12	Guaranties	31
	7.13	Debt	31
	7.14	Prepayment	32
	7.15	Transactions with Affiliates	32
	7.16	Investment Banking and Finder's Fees	32
	7.17	[Intentionally Deleted]	32
	7.18	Liens	32
	7.19	Sale and Leaseback Transactions	32
	7.20	New Subsidiaries	32
	7.21	[Intentionally Deleted]	33
	7.22	[Intentionally Deleted]	33
	7.23	[Intentionally Deleted]	33
	7.24	[Intentionally Deleted]	33
	7.25	Minimum Liquidity	33
	7.26	[Intentionally Deleted]	33

	7.27	Use of Proceeds	33
	7.28	Further Assurances	33
ARTICLE 8 CONDITIONS OF LENDING			33
	8.1	Conditions Precedent to Making of Loans on the Initial Funding Date	33
	8.2	Conditions Precedent to Each Loan	35
ARTICLE 9 DEFAULT; REMEDIES			36
	9.1	Events of Default	36
	9.2	Remedies.	38
ARTICLE 10 TERM AND TERMINATION			39
	10.1	Term and Termination	39
ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS			40
	11.1	Amendments and Waivers.	40
	11.2	Assignments; Participations.	41
ARTICLE 12 THE AGENT			43
	12.1	Appointment and Authorization	43
	12.2	Delegation of Duties	43
	12.3	Liability of Agent	43
	12.4	Reliance by Agent	44
	12.5	Notice of Default	44
	12.6	Credit Decision	44
	12.7	Indemnification	45
	12.8	Agent in Individual Capacity	45
	12.9	Successor Agent	45
	12.10	Withholding Tax.	46
	12.11	Collateral Matters.	47
	12.12	Restrictions on Actions by Lenders; Sharing of Payments.	48
	12.13	Agency for Perfection	48
	12.14	Payments by Agent to Lenders	48
	12.15	Settlement.	49
	12.16	Letters of Credit; Intra-Lender Issues.	52
	12.17	Concerning the Collateral and the Related Loan Documents	53
	12.18	Field Audit and Examination Reports; Disclaimer by Lenders	54
	12.19	Relation Among Lenders	54
	12.20	Co-Agents	54
ARTICLE 13 MISCELLANEOUS			54
	13.1	No Waivers; Cumulative Remedies	54
	13.2	Severability	55
	13.3	Governing Law; Choice of Forum; Service of Process.	55
	13.4	WAIVER OF JURY TRIAL	56
	13.5	Survival of Representations and Warranties	57
	13.6	Other Security and Guaranties	57
	13.7	Fees and Expenses	57
	13.8	Notices	57
	13.9	Waiver of Notices	58
	13.10	Binding Effect	58
	13.11	Indemnity of the Agent and the Lenders by the Borrower.	59

iii

13.12	Limitation of Liability	59
13.13	Final Agreement	59
13.14	Counterparts	60
13.15	Captions	60
13.16	Right of Setoff	60
13.17	Confidentiality.	60
13.18	Conflicts with Other Loan Documents	61
13.19	Non-Public Information	61

ANNEXES, EXHIBITS AND SCHEDULES

ANNEX A	—	DEFINED TERMS
EXHIBIT A-1	—	FORM OF REVOLVING LOAN NOTE
EXHIBIT A-2	—	FORM OF TERM NOTE
EXHIBIT B	—	FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C	—	FINANCIAL STATEMENTS
EXHIBIT D	—	FORM OF NOTICE OF BORROWING
EXHIBIT E	—	FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F	—	FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 1.2	—	LENDERS' COMMITMENTS
SCHEDULE 3.4(b)	—	MORTGAGED REAL ESTATE
SCHEDULE 6.3	—	ORGANIZATION AND QUALIFICATIONS
SCHEDULE 6.5	—	SUBSIDIARIES AND AFFILIATES
SCHEDULE 6.7	—	CAPITALIZATION
SCHEDULE 6.9	—	DEBT
SCHEDULE 6.11	—	REAL ESTATE; LEASES
SCHEDULE 6.13	—	TRADE NAMES
SCHEDULE 6.14	—	LITIGATION
SCHEDULE 6.15	—	LABOR DISPUTES
SCHEDULE 6.16	—	ENVIRONMENTAL LAW
SCHEDULE 6.19	—	ERISA COMPLIANCE
SCHEDULE 6.21	—	REGULATED ENTITIES
SCHEDULE 6.27	—	BANK ACCOUNTS

CREDIT AGREEMENT

W I T N E S S E T H:

WHEREAS, the Borrower has requested the Lenders to make available to the Borrower a revolving line of credit for loans and letters of credit and to make term loans to the Borrower, which extensions of credit the Borrower will use for the purposes permitted hereunder;

WHEREAS, the International Borrowers (as defined in Annex A which is attached hereto and incorporated herein) have requested the Lenders to make available to the International Borrowers a revolving line of credit for loans and letters of credit and to make term loans to the International Borrowers, which extensions of credit the International Borrowers will use for the purposes permitted under the International Credit Agreement (as defined in Annex A);

WHEREAS, the Lenders have agreed to make available to the Borrower and the International Borrowers revolving credit facilities upon the terms and conditions set forth in this Agreement and in the International Credit Agreement, respectively, in an aggregate amount not to exceed $105,000,000, the Lenders have agreed to make term loans to the Borrower in the aggregate principal amount of $90,000,000 upon the terms and conditions set forth in this Agreement, and the Lenders have agreed to make term loans to the International Borrowers in the aggregate principal amount of $15,000,000 upon the terms and conditions set forth in the International Credit Agreement;

WHEREAS, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed thereto in Annex A; the rules of construction contained therein shall govern the interpretation of this Agreement, and all Annexes, Exhibits and Schedules attached hereto are incorporated herein by reference;

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lenders, the Agent, and the Borrower hereby agree as follows.

ARTICLE 1

LOANS AND LETTERS OF CREDIT

1.1 Total Facility. Subject to all of the terms and conditions of this Agreement, the Lenders agree to make available a total credit facility of up to $195,000,000 less any International Aggregate Revolver Outstandings (the "Total Facility") to the Borrower from time to time during the term of this Agreement. The Total Facility shall be composed of a revolving line of credit consisting of Revolving Loans and Letters of Credit and the Term Loans described herein.

1.2 Revolving Loans.

The Lenders, however, in their unanimous discretion, may elect to make Revolving Loans or issue or arrange to have issued Letters of Credit in excess of the Borrowing Base on one or more occasions, but if they do so, neither the Agent nor the Lenders shall be deemed thereby to have changed the limits of the Borrowing Base or to be obligated to exceed such limits on any other occasion. If any Borrowing would exceed Availability, the Lenders may refuse to make or may otherwise restrict the making of Revolving Loans as the Lenders determine until such excess has been eliminated, subject to the Agent's authority, in its sole discretion, to make Agent Advances pursuant to the terms of Section 1.2(i). The entire unpaid balance of the Revolving Loans and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Termination Date.

(ii) Revolving Loan Notes. At the request of any Lender, Borrower shall execute and deliver to such Lender a promissory note to evidence the Revolving Loans of that Lender. Each note shall be in the principal amount of the Lender's Pro Rata Share of the Revolving Loan Commitments, dated the date hereof and substantially in the form of Exhibit A-1 (such promissory note, together with any new note issued pursuant to Section 11.2 upon the assignment of any portion of such Lender's Loans and Commitment being hereinafter referred to as a "Revolving Loan Note" and, collectively with any other such notes, the "Revolving Loan Notes"). Each Revolving Loan Note shall represent the obligation of Borrower to pay the amount of such Lender's Pro Rata Share of the Revolving Loan Commitments, or, if less, such Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Loans to Borrower together with interest thereon as prescribed in Section 1.2.

(b) Procedure for Borrowing.

(1) Each Borrowing shall be made upon the Borrower's irrevocable written notice delivered to the Agent in the form of a notice of borrowing ("Notice of Borrowing"), which must be received by the Agent prior to (i) 12:00 noon (Los Angeles time) three Business Days prior to the requested Funding Date, in the case of LIBOR Rate Loans and (ii) 10:00 a.m. (Los Angeles time) on the requested Funding Date, in the case of Base Rate Loans, specifying:

(A) the amount of the Borrowing, which in the case of a LIBOR Rate Loan must equal or exceed $1,000,000 (and increments of $1,000,000 in excess of such amount);

(B) the requested Funding Date, which must be a Business Day;

(C) whether the Revolving Loans requested are to be Base Rate Revolving Loans or LIBOR Revolving Loans (and if not specified, it shall be deemed a request for a Base Rate Revolving Loan); and

(D) the duration of the Interest Period for LIBOR Revolving Loans (and if not specified, it shall be deemed a request for an Interest Period of one month);

provided, however, that with respect to the Borrowing to be made on the Initial Funding Date, such Borrowing will consist of Base Rate Loans only.

(2) In lieu of delivering a Notice of Borrowing, the Borrower may give the Agent telephonic notice of such request for advances to the Designated Account on or before the deadline set forth above. The Agent at all times shall be entitled to rely on such telephonic notice in making such Revolving Loans, regardless of whether any written confirmation is received.

(3) The Borrower shall have no right to request a LIBOR Rate Loan while a Default or Event of Default has occurred and is continuing.

(c) Reliance upon Authority. Prior to the Closing Date, the Borrower shall deliver to the Agent, a notice setting forth the account of the Borrower ("Designated Account") to which the Agent is authorized to transfer the proceeds of the Revolving Loans requested hereunder. The Borrower may designate a replacement account from time to time by written notice by at least two Responsible Officers. All such Designated Accounts must be reasonably satisfactory to the Agent. The Agent is entitled to rely conclusively on any person's request for Revolving Loans on behalf of the Borrower, so long as the proceeds thereof are to be transferred to the Designated Account. The Agent has no duty to verify the identity of any individual representing himself or herself as a person authorized by the Borrower to make such requests on its behalf.

(d) No Liability. The Agent shall not incur any liability to the Borrower as a result of acting upon any notice referred to in Sections 1.2(b) and (c), which the Agent believes in good faith to have been given by an officer or other person duly authorized by the Borrower to request Revolving Loans on its behalf. The crediting of Revolving Loans to the Designated Account conclusively establishes the obligation of the Borrower to repay such Revolving Loans as provided herein.

(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in lieu thereof) made pursuant to Section 1.2(b) shall be irrevocable, and the Borrower shall be bound to borrow the funds requested therein in accordance therewith; provided, however, that the Borrower may cancel a Notice of Borrowing prior to funding provided that the Borrower reimburses Agent and the Lenders for any expenses actually incurred as a result of such cancellation.

(f) Agent's Election. Promptly after receipt of a Notice of Borrowing (or telephonic notice in lieu thereof), the Agent shall elect to have the terms of Section 1.2(g) or the terms of Section 1.2(h) apply to such requested Borrowing. If the Bank declines in its sole discretion to make a Non-Ratable Loan pursuant to Section 1.2(h), the terms of Section 1.2(g) shall apply to the requested Borrowing.

(g) Making of Revolving Loans. If Agent elects to have the terms of this Section 1.2(g) apply to a requested Borrowing, then promptly after receipt of a Notice of Borrowing or telephonic notice in lieu thereof, but in any event no later than 11:00 a.m. (Los Angeles time) the Agent shall notify the Lenders by telecopy, telephone or e-mail of the requested Borrowing. Each Lender shall transfer its Pro Rata Share of the requested Borrowing available to the Agent in immediately available funds, to the account from time to time designated by Agent, not later than 1:00 p.m. (Los Angeles time) on the applicable Funding Date. After the Agent's receipt of all proceeds of such Revolving Loans, the Agent shall make the proceeds of such Revolving Loans available to the Borrower on the applicable Funding Date by transferring same day funds to the Designated Account, or with respect to Revolving Loans made on the Initial Funding Date, as Borrower shall otherwise instruct in writing; provided, however, that the amount of Revolving Loans so made on any date shall not exceed the Availability on such date.

(h) Making of Non-Ratable Loans.

Bank to make any Non-Ratable Loan if (1) the Agent has received written notice from any Lender that one or more of the applicable conditions precedent set forth in Article 8 will not be satisfied on the requested Funding Date for the applicable Borrowing, or (2) the requested Borrowing would exceed Availability on that Funding Date.

(B) The Non-Ratable Loans shall be secured by the Agent's Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder.

(i) Agent Advances.

(A) Subject to the limitations set forth below, the Agent is authorized by the Borrower and the Lenders, from time to time in the Agent's sole discretion, (y) during the continuance of a Default or an Event of Default, or (z) at any time that any of the other conditions precedent set forth in Article 8 have not been satisfied, to make Base Rate Revolving Loans to the Borrower on behalf of the Lenders in an aggregate amount outstanding at any time not to exceed the lesser of (w) $5,000,000, or (x) 10% of the Borrowing Base which the Agent, in its reasonable business judgment, deems necessary or desirable (1) to preserve or protect the Collateral, or any portion thereof, (2) during the continuance of a Default or an Event of Default, to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (3) to pay any other amount chargeable to the Borrower pursuant to the terms of this Agreement, including costs, fees and expenses as described in Section 13.7 (any of such advances are herein referred to as "Agent Advances"); provided, however, that (y) in no event shall Agent make Agent Advances which would cause the Aggregate Revolver Outstandings at any time to exceed the Maximum Revolver Amount; and (z) the Majority Lenders may at any time revoke the Agent's authorization to make Agent Advances. Any such revocation must be in writing and shall become effective prospectively upon the Agent's receipt thereof.

(B) The Agent Advances shall be secured by the Agent's Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder.

1.3 Term Loans.

(a) Amounts of Term Loans. Each Lender severally agrees to make a term loan (any such term loan being referred to as a "Term Loan" and such term loans being referred to collectively as the "Term Loans") to the Borrower on the Initial Funding Date, upon the satisfaction of the conditions precedent set forth in Article 8, in an amount equal to such Lender's Pro Rata Share of $90,000,000. The Term Loans shall initially be Base Rate Term Loans; but Borrower may elect, on the Initial Funding Date, to convert such Term Loans to LIBOR Term Loans pursuant to Section 2.2.

(b) Making of Term Loans. Each Lender shall make the amount of such Lender's Term Loan available to the Agent in same day funds, to Agent's designated account, not later than 12:00 noon (Los Angeles time) on the Initial Funding Date. After the Agent's receipt of the proceeds of such Term Loans, upon satisfaction of the conditions precedent set forth in Article 8, the Agent shall make the proceeds of such Term Loans available to the Borrower on such Funding Date by transferring same day funds equal to the proceeds of such Term Loans received by the Agent to the Designated Account or as the Borrower shall otherwise instruct in writing.

(c) Term Loan Notes. The Borrower shall execute and deliver to the Agent on behalf of each Lender, on the Closing Date, a promissory note, substantially in the form of Exhibit A-2 attached hereto and made a part hereof (such promissory notes, together with any new notes issued pursuant to Section 11.2 upon the assignment of any portion of any Lender's Term Loan, being hereinafter referred to collectively as the "Term Loan Notes" and each of such promissory

notes being hereinafter referred to individually as a "Term Loan Note"). The Term Loan Notes shall evidence each Lender's Term Loan, in an original principal amount equal to that Lender's Pro Rata Share of $90,000,000 together with interest thereon as prescribed in Section 2.1.

1.4 Letters of Credit.

(a) Agreement to Issue or Cause To Issue. Subject to the terms and conditions of this Agreement, the Agent agrees (i) to cause the Letter of Credit Issuer to issue for the account of the Borrower one or more commercial/documentary and standby letters of credit ("Letter of Credit") and/or (ii) to provide credit support or other enhancement to a Letter of Credit Issuer acceptable to Agent, which issues a Letter of Credit for the account of the Borrower (any such credit support or enhancement being herein referred to as a "Credit Support") from time to time during the term of this Agreement.

(b) Amounts; Outside Expiration Date. The Agent shall not have any obligation to issue or cause to be issued any Letter of Credit or to provide Credit Support for any Letter of Credit at any time if: (i) the maximum face amount of the requested Letter of Credit is greater than the Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn amount of the requested Letter of Credit and all commissions, fees, and charges due from the Borrower in connection with the opening thereof would exceed Availability at such time; or (iii) such Letter of Credit has an expiration date less than 30 days prior to the Stated Termination Date or more than 12 months from the date of issuance for standby letters of credit and 270 days for documentary letters of credit. With respect to any Letter of Credit which contains any "evergreen" or automatic renewal provision, each Lender shall be deemed to have consented to any such extension or renewal unless any such Lender shall have provided to the Agent, written notice that it declines to consent to any such extension or renewal at least thirty (30) days prior to the date on which the Letter of Credit Issuer is entitled to decline to extend or renew the Letter of Credit. If all of the requirements of this Section 1.4 are met and no Default or Event of Default has occurred and is continuing, no Lender shall decline to consent to any such extension or renewal.

(c) Other Conditions. In addition to conditions precedent contained in Article 8, the obligation of the Agent to issue or to cause to be issued any Letter of Credit or to provide Credit Support for any Letter of Credit is subject to the following conditions precedent having been satisfied in a manner reasonably satisfactory to the Agent:

(1) The Borrower shall have delivered to the Letter of Credit Issuer, at such times and in such manner as such Letter of Credit Issuer may prescribe, an application in form and substance satisfactory to such Letter of Credit Issuer and reasonably satisfactory to the Agent for the issuance of the Letter of Credit and such other documents as may be required pursuant to the terms thereof, and the form, terms and purpose of the proposed Letter of Credit shall be reasonably satisfactory to the Agent and the Letter of Credit Issuer; and

(2) As of the date of issuance, no order of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed Letter of Credit Issuer refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit.

(d) Issuance of Letters of Credit.

(1) Request for Issuance. Borrower must notify the Agent of a requested Letter of Credit at least three (3) Business Days prior to the proposed issuance date. Such notice shall

be irrevocable (provided, however, that the Borrower may cancel a request for a Letter of Credit prior to issuance provided that the Borrower reimburses Agent, the Lenders and the Issuing Bank for any expenses actually incurred as a result of such cancellation) and must specify the original face amount of the Letter of Credit requested, the Business Day of issuance of such requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the Business Day on which the requested Letter of Credit is to expire, the purpose for which such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit. The Borrower shall attach to such notice the proposed form of the Letter of Credit.

(2) Responsibilities of the Agent; Issuance. As of the Business Day immediately preceding the requested issuance date of the Letter of Credit, the Agent shall determine the amount of the applicable Unused Letter of Credit Subfacility and Availability. If (i) the face amount of the requested Letter of Credit is less than the Unused Letter of Credit Subfacility and (ii) the amount of such requested Letter of Credit and all commissions, fees, and charges due from the Borrower in connection with the opening thereof would not exceed Availability, the Agent shall cause the Letter of Credit Issuer to issue the requested Letter of Credit on the requested issuance date so long as the other conditions hereof are met.

(3) No Extensions or Amendment. The Agent shall not be obligated to cause the Letter of Credit Issuer to extend or amend any Letter of Credit issued pursuant hereto unless the requirements of this Section 1.4 are met as though a new Letter of Credit were being requested and issued.

(e) Payments Pursuant to Letters of Credit. The Borrower agrees to reimburse immediately the Letter of Credit Issuer for any draw under any Letter of Credit and the Agent for the account of the Lenders upon any payment pursuant to any Credit Support, and to pay the Letter of Credit Issuer the amount of all other charges and fees payable to the Letter of Credit Issuer in connection with any Letter of Credit immediately when due, irrespective of any claim, setoff, defense or other right which the Borrower may have at any time against the Letter of Credit Issuer or any other Person. Each drawing under any Letter of Credit shall constitute a request by the Borrower to the Agent for a Borrowing of a Base Rate Revolving Loan in the amount of such drawing. The Funding Date with respect to such borrowing shall be the date of such drawing.

(f) Indemnification; Exoneration; Etc.

(1) Indemnification. In addition to amounts payable as elsewhere provided in this Section 1.4, the Borrower agrees to protect, indemnify, pay and save the Lenders and the Agent harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which any Lender or the Agent (other than a Lender in its capacity as Letter of Credit Issuer) may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit or the provision of any Credit Support or enhancement in connection therewith; provided, however, that the Borrower shall have no liability to any indemnified party for any claims, demands, liabilities, damages, losses, costs, charges and expenses that are finally determined by a court of competent jurisdiction to have arisen primarily from such indemnified party's gross negligence or willful misconduct. The Borrower's obligations under this Section shall survive payment of all other Obligations.

(2) Assumption of Risk by the Borrower. As among the Borrower, the Lenders, and the Agent, the Borrower assumes all risks of the acts and omissions of, or misuse of any of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Lenders and the Agent shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document

submitted by any Person in connection with the application for and issuance of and presentation of drafts with respect to any of the Letters of Credit, even if it should prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) the failure of the beneficiary of any Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; (H) any consequences arising from causes beyond the control of the Lenders or the Agent, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority or (I) the Letter of Credit Issuer's honor of a draw for which the draw or any certificate fails to comply in any respect with the terms of the Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any rights or powers of the Agent or any Lender under this Section 1.4(f).

(3) Exoneration. Without limiting the foregoing, no action or omission whatsoever by Agent or any Lender (excluding any Lender in its capacity as a Letter of Credit Issuer) shall result in any liability of Agent or any Lender to the Borrower, or relieve the Borrower of any of its obligations hereunder to any such Person.

(4) Rights Against Letter of Credit Issuer. Nothing contained in this Agreement is intended to limit the Borrower's rights, if any, with respect to the Letter of Credit Issuer which arise as a result of the letter of credit application and related documents executed by and between the Borrower and the Letter of Credit Issuer.

(5) Account Party. The Borrower hereby authorizes and directs any Letter of Credit Issuer to name the Borrower as the "Account Party" therein and to deliver to the Agent all instruments, documents and other writings and property received by the Letter of Credit Issuer pursuant to the Letter of Credit, and to accept and rely upon the Agent's instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the application therefor.

(g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the provisions of Section 1.4(b) and Section 10.1, any Letter of Credit or Credit Support is outstanding upon the termination of this Agreement, then upon such termination the Borrower shall deposit with the Agent, for the ratable benefit of the Agent and the Lenders, with respect to each Letter of Credit or Credit Support then outstanding, cash ("Cash Collateral") or a standby letter of credit (a "Supporting Letter of Credit") in form and substance satisfactory to the Agent, issued by an issuer satisfactory to the Agent, in each case in an amount equal to the greatest amount for which such Letter of Credit or such Credit Support may be drawn plus any fees and expenses associated with such Letter of Credit or such Credit Support, under which Supporting Letter of Credit the Agent is entitled to draw amounts necessary to reimburse the Agent and the Lenders for payments to be made by the Agent and the Lenders under such Letter of Credit or Credit Support and any fees and expenses associated with such Letter of Credit or Credit Support. Such Cash Collateral or Supporting Letter of Credit shall be held by the Agent, for the ratable benefit of the Agent and the Lenders, as security for, and to provide for the payment of, the aggregate undrawn amount of such Letters of Credit or such Credit Support remaining outstanding.

1.5 Bank Products. The Borrower may request and the Agent may, in its sole and absolute discretion, arrange for the Borrower to obtain from the Bank or the Bank's Affiliates Bank Products although the Borrower is not required to do so. If Bank Products are provided by an Affiliate of the Bank, the Borrower agrees to indemnify and hold the Agent, the Bank and the Lenders harmless from any and all costs and obligations now or hereafter incurred by the Agent, the Bank or any of the Lenders which arise from any indemnity given by the Agent to its Affiliates related to such Bank Products; provided, however, nothing contained herein is intended to limit the Borrower's rights, with respect to the Bank or its Affiliates, if any, which arise as a result of the execution of documents by and between the Borrower and the Bank which relate to Bank Products. The agreement contained in this Section shall survive termination of this Agreement. The Borrower acknowledges and agrees that the obtaining of Bank Products from the Bank or the Bank's Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank's Affiliates, and (b) is subject to all rules and regulations of the Bank or the Bank's Affiliates.

ARTICLE 2

INTEREST AND FEES

2.1 Interest.

(a) Interest Rates. All outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate determined by reference to the Base Rate or the LIBOR Rate plus the Applicable Margins as set forth below, but not to exceed the Maximum Rate. If at any time Loans are outstanding with respect to which the Borrower has not delivered to the Agent a notice specifying the basis for determining the interest rate applicable thereto in accordance herewith, those Loans shall bear interest at a rate determined by reference to the Base Rate until notice to the contrary has been given to the Agent in accordance with this Agreement and such notice has become effective. Except as otherwise provided herein, the outstanding Obligations shall bear interest as follows:

(i) For all Base Rate Term Loans at a fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;

(ii) For all Base Rate Revolving Loans and other Obligations (other than Base Rate Term Loans and LIBOR Rate Loans) at a fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;

(iii) For all LIBOR Term Loans at a per annum rate equal to the applicable LIBOR Rate plus the Applicable Margin; and

(iv) For all LIBOR Revolving Loans at a per annum rate equal to the applicable LIBOR Rate plus the Applicable Margin.

Each change in the Base Rate shall be reflected in the interest rate applicable to Base Rate Loans as of the effective date of such change. All interest charges shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). The Borrower shall pay to the Agent, for the ratable benefit of Lenders, interest accrued on all Loans in arrears on the first day of each month hereafter and on the Termination Date.

(b) Default Rate. If any Event of Default occurs and is continuing and the Agent or the Required Lenders in their discretion so elect, then, while such Event of Default is continuing, all of the Obligations shall bear interest at the Default Rate applicable thereto.

2.2 Continuation and Conversion Elections.

(a) The Borrower may:

(i) elect, as of any Business Day, in the case of Base Rate Loans to convert any Base Rate Loans (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into LIBOR Rate Loans; or

(ii) elect, as of the last day of the applicable Interest Period, to continue any LIBOR Rate Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $1,000,000 in excess thereof);

provided, that if at any time the aggregate amount of LIBOR Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $1,000,000, such LIBOR Rate Loans shall automatically convert into Base Rate Loans; provided further that if the notice shall fail to specify the duration of the Interest Period, such Interest Period shall be one month.

(b) The Borrower shall deliver a notice of continuation/conversion ("Notice of Continuation/Conversion") to the Agent not later than 12:00 noon (Los Angeles time) at least three (3) Business Days in advance of the Continuation/Conversion Date, if the Loans are to be converted into or continued as LIBOR Rate Loans and specifying:

(i) the proposed Continuation/Conversion Date;

(ii) the aggregate amount of Loans to be converted or renewed;

(iii) the type of Loans resulting from the proposed conversion or continuation; and

(iv) the duration of the requested Interest Period, provided, however, the Borrower may not select an Interest Period that ends after the Stated Termination Date.

(c) If upon the expiration of any Interest Period applicable to LIBOR Rate Loans, the Borrower has failed to select timely a new Interest Period to be applicable to LIBOR Rate Loans or if any Default or Event of Default then exists, the Borrower shall be deemed to have elected to convert such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.

(d) The Agent will promptly notify each Lender of its receipt of a Notice of Continuation/Conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Lender.

(e) There may not be more than fifteen (15) different LIBOR Rate Loans in effect in the aggregate hereunder and under the International Credit Agreement at any time.

shall, to the extent permitted by applicable law, pay the Agent, for the account of the Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement. If a court of competent jurisdiction determines that the Agent and/or any Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations other than interest, in the inverse order of maturity, and if there are no Obligations outstanding, the Agent and/or such Lender shall refund to the Borrower such excess.

2.4 Closing Fee. The Borrower agrees to pay Agent on the Closing Date a closing fee (the "Closing Fee") as set forth in an Agent Fee Letter.

2.5 Unused Line Fee. On the first day of each month and on the Termination Date the Borrower agrees to pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, an unused line fee (the "Unused Line Fee") equal to 0.25% per annum times the amount by which (a) $105,000,000 exceeded (b) the sum of (i) the average daily outstanding amount of Revolving Loans and International Revolving Loans, plus (ii) the average daily undrawn face amount of outstanding Letters of Credit and International Letters of Credit, in each case during the immediately preceding month or shorter period if calculated for the first month hereafter or on the Termination Date. The Unused Line Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed. All principal payments received by the Agent shall be deemed to be credited to the Borrower's Loan Account immediately upon receipt for purposes of calculating the Unused Line Fee pursuant to this Section 2.5. The Borrowers' obligation under this Section 2.5 shall be pro tanto reduced by any amount paid by the International Borrowers under Section 2.5 of the International Credit Agreement.

2.6 Letter of Credit Fee. The Borrower agrees to pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, for each Letter of Credit, a fee (the "Letter of Credit Fee") equal to 2.75% per annum and to Agent for the benefit of the Letter of Credit Issuer a fronting fee of 0.5% per annum of the undrawn face amount of each Letter of Credit, and to the Letter of Credit Issuer, all out-of-pocket costs, fees and expenses incurred by the Letter of Credit Issuer in connection with the application for, processing of, issuance of, or amendment to any Letter of Credit, which costs, fees and expenses shall include a "fronting fee" payable to the Letter of Credit Issuer. The Letter of Credit Fee shall be payable monthly in arrears on the first day of each month following any month in which a Letter of Credit is outstanding and on the Termination Date. The Letter of Credit Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.

ARTICLE 3

PAYMENTS AND PREPAYMENTS

3.1 Revolving Loans. The Borrower shall repay the outstanding principal balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on the Termination Date. The Borrower may prepay Revolving Loans at any time, and reborrow subject to the terms of this Agreement. In addition, and without limiting the generality of the foregoing, upon demand (which demand may be subject to the provisions of Section 9.2(a)) the Borrower shall pay to the Agent, for account of the Lenders, the amount, without duplication, by which the Aggregate Revolver Outstandings exceeds (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolver Amount, minus (b) Reserves other than Reserves deducted in the calculation of Borrowing Base; such payment to be made within one (1) Business Day of any such demand.

3.2 Termination of Facility. The Borrower may terminate this Agreement upon at least ten (10) Business Days' notice to the Agent and the Lenders, upon (a) the payment in full of all outstanding Revolving Loans, together with accrued interest thereon, and the cancellation and return of all outstanding Letters of Credit (or the provision of Cash Collateral or a Supporting Letter of Credit in accordance with Section 1.4(g)), (b) the prepayment in full of the Term Loans, together with accrued and unpaid interest thereon, (c) the payment of the early termination fee set forth below, (d) the payment in full in cash of all reimbursable expenses and other Obligations, (e) with respect to any LIBOR Rate Loans prepaid, payment of the amounts due under Section 4.4, if any, and (f) the concurrent termination of the International Credit Agreement and the repayment of the International Loans pursuant to Section 3.2 of the International Credit Agreement. If this Agreement is terminated at any time prior to the Stated Termination Date, whether pursuant to this Section or pursuant to Section 9.2, the Borrower shall pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, an early termination fee determined in accordance with the following table:

Period during which early termination occurs		Early Termination Fee
On or prior to the first Anniversary Date		$1,050,000 (less any early termination fee concurrently paid under Section 3.2 of the International Credit Agreement)
After the first Anniversary Date but on or prior to the second Anniversary Date		$525,000 (less any early termination fee concurrently paid under Section 3.2 of the International Credit Agreement)
After the second Anniversary Date but prior to the Stated Termination Date		$0

provided, however, that the early termination fee described in this Section 3.2 shall not be payable in the event that Borrower repays the Obligations (and the International Loan Obligations) utilizing the proceeds of a credit facility provided or agented by another lending department of the Bank or any of its Affiliates.

3.3 Repayment of the Term Loans. The Term Loans shall amortize in equal installments of $6,428,571.43 each, payable on the first day of each March, June, September, and December during the term of this Agreement, commencing on the first day of March 2002 and continuing through and including the first day of September 2004. The outstanding principal balance of the Term Loans shall be payable in full on the Termination Date. Each payment of the Term Loans shall be made to the Agent for the Pro Rata benefit of each Lender. Amounts paid in respect of the Term Loans may not be reborrowed.

3.4 Prepayments of the Term Loans.

(a) The Borrower may prepay the principal of the Term Loans in whole or in part, without premium or penalty, at any time and from time to time upon at least 5 Business Days' prior written notice to the Agent and the Lenders. All voluntary prepayments of the principal of the Term Loans shall be accompanied by the payment of all accrued but unpaid interest on the Term Loans to the date of prepayment. Any voluntary prepayment of less than all of the outstanding principal of the Term Loans shall be applied: (i) 25% of such amount to the installments of principal of the Term Loans in the inverse order of maturity, and (ii) 75% of such amount to the installments of principal of the Term Loans in the order of maturity.

(b) Immediately upon any sale or disposition of Borrower's fee interest in, or any refinance of, Real Estate identified on Schedule 3.4(b) as having a Minimum Price, Borrower shall prepay the outstanding Term Loans, without premium or penalty, in an amount equal to such Minimum Price (in the case of a sale or disposition) or equal to the greater of the Minimum Price or the net cash proceeds received by Borrower (in the case of a refinancing).

(c) In the event that the amount of Liquidity drops below $650,000,000, Borrower shall prepay the outstanding Term Loans, without premium or penalty, by the lesser of (i) a pro rata share (based on the ratio of (x) the Term Loans to (y) the sum of (1) the International Term Loans plus (2) the Term Loans) of $100,000,000 or (ii) the outstanding principal balance of the Term Loans (in either such case, exclusive of any other mandatory prepayments of the Term Loans then due under this Agreement).

(d) Mandatory prepayments of the Term Loans in accordance with Sections 3.4(b) and (c) shall be applied as follows: first, to accrued interest with respect to the Term Loans, second, to scheduled installments of the Term Loans in inverse order of maturity.

(e) No provision contained in this Section 3.4 shall constitute a consent to an asset disposition that is otherwise not permitted by the terms of this Agreement or the other Loan Documents.

(f) Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.

(g) Upon repayment in full of the Term Loans, and so long as no Default or Event of Default has occurred and is continuing, Agent's Lien on the Collateral consisting of Real Estate shall be released, and all Mortgages promptly released or reconveyed, as appropriate.

3.5 LIBOR Rate Loan Prepayments. In connection with any prepayment, if any LIBOR Rate Loans are prepaid prior to the expiration date of the Interest Period applicable thereto, the Borrower shall pay to the Lenders the amounts described in Section 4.4.

3.6 Payments by the Borrower.

(a) All payments to be made by the Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Borrower shall be made to the Agent for the account of the Lenders, at the account designated by the Agent and shall be made in Dollars and in immediately available funds, no later than 12:00 noon (Los Angeles time) on the date specified herein. Any payment received by the Agent after such time shall be deemed (for purposes of calculating interest only) to have been received on the following Business Day and any applicable interest shall continue to accrue.

(b) Subject to the provisions set forth in the definition of "Interest Period", whenever any payment is due on a day other than a Business Day, such payment shall be due on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

3.7 Payments as Revolving Loans. At the election of Agent, all payments of principal, interest, reimbursement obligations in connection with Letters of Credit and Credit Support for Letters of Credit, fees, premiums, reimbursable expenses and other sums payable hereunder, may be paid from the proceeds of Revolving Loans made hereunder. The Borrower hereby irrevocably authorizes the Agent to charge the Loan Account for the purpose of paying all amounts from time to time due hereunder and agrees that all such amounts charged shall constitute Revolving Loans (including Non-Ratable Loans and Agent Advances).

solely to Agent and the Letter of Credit Issuer and except as provided in Section 11.1(b), shall be apportioned among the Lenders as may be provided in the separate fee letters between Agent and individual Lenders. All payments shall be remitted to the Agent and all such payments not relating to principal or interest of specific Loans, or not constituting payment of specific fees, and all proceeds of Accounts or other Collateral received by the Agent, shall, except to the extent such payments constitute voluntary prepayments of the Term Loans (as to which the terms of Section 3.4(a) shall apply) or such payments constitute a mandatory repayment or prepayment of the Term Loans as provided in Section 3.4(b) or (c) (as to which the terms of Section 3.4(d) shall apply), be applied, ratably, subject to the provisions of this Agreement, first, to pay any fees, indemnities or expense reimbursements other than any amounts relating to Bank Products then due to the Agent or the Lenders from the Borrower; second, to pay any fees or expense reimbursements then due to the Lenders from the Borrower, other than any amounts relating to Bank Products; third, to pay interest due in respect of all Loans, including Non-Ratable Loans and Agent Advances; fourth, to pay or prepay principal of the Non-Ratable Loans and Agent Advances; fifth, to pay or prepay principal of the Revolving Loans (other than Non-Ratable Loans and Agent Advances) and unpaid reimbursement obligations in respect of Letters of Credit; sixth, to pay or prepay principal of the Term Loans; seventh, to pay an amount to Agent equal to all outstanding Letter of Credit Obligations to be held as cash collateral for such Obligations; eighth, to the payment of any outstanding obligations of Borrower under the International Guaranty; ninth, if an Event of Default has occurred and is continuing, to be held as cash collateral for any contingent obligations of Borrower under the International Guaranty; and tenth, to the payment of any other Obligation including any amounts relating to Bank Products due to the Agent or any Lender by the Borrower. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or unless an Event of Default has occurred and is continuing, neither the Agent nor any Lender shall apply any payments which it receives (i) to any LIBOR Rate Term Loan, except (a) on the expiration date of the Interest Period applicable to any such LIBOR Rate Term Loan, or (b) in the event, and only to the extent, that there are no outstanding Base Rate Term Loans or (ii) to any LIBOR Rate Revolving Loan, except (c) on the expiration date of the Interest Period applicable to any such LIBOR Rate Revolving Loan, or (d) in the event, and only to the extent, that there are no outstanding Base Rate Revolving Loans, and, in any event, the Borrower shall pay LIBOR breakage losses in accordance with Section 4.4; provided, however, that in the case of any necessary repayments of LIBOR Rate Loans Agent and Lenders will, prior to the occurrence and continuance of an Event of Default, apply such payments so as to minimize the amount of any payments required to be made pursuant to Section 4.4. The Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

3.9 Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Agent, any Lender, the Bank or any Affiliate of the Bank is for any reason (other than an action by a Governmental Authority against such Person for reasons unrelated to Borrower, its Subsidiaries, the Collateral, or the Loans) compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Agent, any such Lender, the Bank, or any such Affiliate of the Bank, and the Borrower shall be liable to pay to the Agent and the Lenders, and hereby does indemnify the Agent and the Lenders and hold the Agent and the Lenders harmless for the amount of such payment or proceeds surrendered. The provisions of this Section 3.9 shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent, any such Lender, the Bank, or any such Affiliate of the Bank, in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Agent's

and the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 3.9 shall survive the termination of this Agreement.

3.10 Agent's and Lenders' Books and Records; Monthly Statements. The Agent shall record the principal amount of the Loans owing to each Lender, the undrawn face amount of all outstanding Letters of Credit and the aggregate amount of unpaid reimbursement obligations outstanding with respect to the Letters of Credit from time to time on its books. In addition, each Lender may note the date and amount of each payment or prepayment of principal of such Lender's Loans in its books and records. Failure by Agent or any Lender to make such notation shall not affect the obligations of the Borrower with respect to the Loans or the Letters of Credit. The Borrower agrees that the Agent's and each Lender's books and records showing the Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be admissible in any action or proceeding arising therefrom, and shall constitute rebuttably presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a promissory note or other instrument. The Agent will provide to the Borrower a monthly statement of Loans, payments, and other transactions pursuant to this Agreement. Such statement shall be deemed correct, accurate, and binding on the Borrower and an account stated (except for reversals and reapplications of payments made as provided in Section 3.8), unless the Borrower notifies the Agent in writing to the contrary within thirty (30) days after such statement is rendered. In the event a timely written notice of objections is given by the Borrower, only the items to which exception is expressly made will be considered to be disputed by the Borrower.

ARTICLE 4

TAXES, YIELD PROTECTION AND ILLEGALITY

4.1 Taxes.

(a) Any and all payments by the Borrower to each Lender or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, the Borrower shall pay all Other Taxes.

(b) The Borrower agrees to indemnify and hold harmless each Lender and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by any Lender or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date such Lender or the Agent makes written demand therefor.

(c) Each Lender (i) represents and warrants to the Agent and the Borrower that under applicable law and treaties in effect on the Closing Date no tax will be required to be withheld by the Agent or Borrower with respect to any payments to be made to such Lender hereunder, (ii) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (wherein such Lender claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and Form W-9 and agrees to provide new Forms W-8ECI or W-8BEN and Form W-9 upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by such Lender, and (iii) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

(d) If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, then:

(i) the sum payable shall be increased as necessary so that after making all required payments, deductions and withholdings (including payments, deductions and withholdings applicable to additional sums payable under this Section) such Lender or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; provided, however, that the Borrower shall not be required to pay any additional amount to any Lender under this Section 4.1(d)(i) if such Lender shall have failed to deliver the forms, certificates, or other evidence referred to in Section 4.1(c), or to notify Agent and the Borrower of the inability to deliver any such forms, certificates or other evidence, as the case may be;

(ii) the Borrower shall make such payments, deductions and withholdings;

(iii) the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv) the Borrower shall also pay to each Lender or the Agent for the account of such Lender, at the time interest is paid, all additional amounts which the respective Lender specifies as necessary to preserve the after-tax yield such Lender would have received if such Taxes or Other Taxes had not been imposed.

(e) At the Agent's request, within 30 days after the date of any payment by the Borrower of Taxes or Other Taxes, the Borrower shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent.

4.2 Illegality.

(a) If any Lender reasonably determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make LIBOR Rate Loans, then, on notice thereof by that Lender to the Borrower through the Agent, any obligation of that Lender to make LIBOR Rate Loans shall be suspended until that Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist.

(b) If a Lender reasonably determines that it is unlawful to maintain any LIBOR Rate Loan, the Borrower shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Agent), prepay in full such LIBOR Rate Loans of that Lender then outstanding, together with interest accrued thereon and amounts required under Section 4.4, either on the last day of the Interest Period thereof, if that Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if that Lender may not lawfully continue to maintain such LIBOR Rate Loans. If the Borrower is required to so prepay any LIBOR Rate Loans, then concurrently with such prepayment, the Borrower shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan.

(c) If any Lender's obligation to make LIBOR Rate Loans is suspended pursuant to sub-section (a) of this Section, or if the Borrower is required to prepay any amounts to any Lender pursuant to sub-section (b) of this Section, then such Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such illegality.

4.3 Increased Costs and Reduction of Return.

(a) If any Lender reasonably determines that due to either (i) the introduction of any Requirement of Law, or any change in any Requirement of Law, or any change in the interpretation of any Requirement of Law, or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then the Borrower shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs; provided, however, that Borrower shall not be liable for any amount attributable to any period before 240 days prior to the date Agent notifies Borrower of such increased costs. Lenders covenant and agree that they will allocate any such increased costs ratably among their respective customers or borrowers similarly affected reasonably and in good faith.

(b) If any Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by such Lender or any corporation or other entity controlling such Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation or other entity controlling such Lender and (taking into consideration such Lender's or such corporation's or other entity's policies with respect to capital adequacy and such Lender's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon demand of such Lender to the Borrower through the Agent, the Borrower shall pay to such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such increase.

4.4 Funding Losses. The Borrower shall reimburse each Lender and hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of:

(a) the failure of the Borrower to make on a timely basis any payment of principal of any LIBOR Rate Loan;

(b) the failure of the Borrower to borrow, continue or convert a Loan after the Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Continuation/Conversion; or

(c) the prepayment or other payment (including after acceleration thereof) of any LIBOR Rate Loans on a day that is not the last day of the relevant Interest Period;

including any such loss of interest income for the unexpired portion of the LIBOR Interest Period resulting from relending of the affected funds. Borrower shall also pay any customary administrative fees charged by any Lender in connection with the foregoing.

4.5 Inability to Determine Rates. If the Agent reasonably determines that for any reason adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan, the Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Borrower may revoke any Notice of Borrowing or Notice of Continuation/Conversion then submitted by it. If the Borrower does not revoke such Notice, the Lenders shall make, convert or continue the Loans, as proposed by the Borrower, in the amount specified in the applicable

notice submitted by the Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Rate Loans.

4.6 Certificates of Agent. If any Lender claims reimbursement or compensation under this Article 4, Agent shall determine the amount thereof and shall deliver to the Borrower (with a copy to the affected Lender) a certificate setting forth in reasonable detail the amount payable to the affected Lender, and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error.

4.7 Obligation to Mitigate. Each Lender agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments under Section 4.1, 4.2 or 4.3, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, (i) use reasonable efforts to make, issue, fund or maintain its applicable Commitments or Loans through another office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 4.1, 4.2 or 4.3 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments, Loans or Letters of Credit through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitments, Loans or Letters of Credit or be disadvantageous to the interests of such Lender.

4.8 Survival. The agreements and obligations of the Borrower in this Article 4 shall survive the payment of all other Obligations.

ARTICLE 5

BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

5.1 Books and Records. The Borrower shall, and shall cause each of its Restricted Subsidiaries to, maintain, at all times, correct and complete books, records and accounts in which complete, correct and timely entries are made of its transactions in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a). The Borrower shall, and shall cause each of its Restricted Subsidiaries to, by means of appropriate entries, reflect in such accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper provision for depreciation and amortization of property and bad debts, all in accordance with GAAP. The Borrower shall maintain at all times books and records pertaining to the Collateral in such detail, form and scope as the Agent or any Lender shall reasonably require, including, but not limited to, records of (a) all payments received and all credits and extensions granted with respect to the Accounts; and (b) the return (including rejection, repossession, and stoppage in transit), loss, damage, or destruction of any Inventory.

5.2 Financial Information. The Borrower shall, and shall cause each of its Restricted Subsidiaries to, promptly furnish to each Lender, all such financial information as the Agent or any Lender shall reasonably request. Without limiting the foregoing, the Borrower will furnish to the Agent, in sufficient copies for distribution by the Agent to each Lender, in such detail as the Agent or the Lenders shall request, the following:

(a) As soon as available, but in any event not later than ninety one (91) days after the close of each Fiscal Year, (i) consolidated audited and consolidating unaudited balance sheets, and (ii) consolidated income statements, cash flow statements and changes in stockholders' equity for the Borrower and its Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting forth in each case in comparative form figures for the previous Fiscal Year, all as filed with the SEC and in reasonable detail, fairly presenting the financial position and the results of operations

of the Borrower and its consolidated Subsidiaries as at the date thereof and for the Fiscal Year then ended, and prepared in accordance with GAAP. Such statements shall be examined in accordance with generally accepted auditing standards by and, in the case of such statements performed on a consolidated basis, accompanied by a report thereon unqualified in any respect of independent certified public accountants selected by the Borrower and reasonably satisfactory to the Agent.

(b) As soon as available, but in any event not later than thirty (30) days after the end of each Fiscal Month that is not the end of a Fiscal Quarter or forty six (46) days after the end of any Fiscal Quarter: (i) consolidated and consolidating unaudited balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such month, (ii) consolidated and consolidating unaudited income statements and (iii) consolidated cash flow statements for the Borrower together with its consolidated Subsidiaries for such month and for the period from the beginning of the Fiscal Year to the end of such month, all in reasonable detail, fairly presenting the financial position and results of operations of the Borrower and its consolidated Subsidiaries as at the date thereof and for such periods, and, for the income statements and balance sheets, in comparable form, figures for the corresponding period in the prior Fiscal Year and (for financial statements delivered in months ending a Fiscal Quarter) figures for such period in the Borrower's budget (as the same is updated by the Borrower after the end of each Fiscal Quarter), and prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a). The Borrower shall certify by a certificate signed by a Responsible Officer that all such statements have been prepared in accordance with GAAP and present fairly the Borrower's financial position as at the dates thereof and its results of operations for the periods then ended, subject to normal year-end adjustments.

(c) Within thirty (30) days after the end of each Fiscal Month that is not the end of a Fiscal Quarter, a certificate of a Responsible Officer of the Borrower stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date which shall have been true and correct as of such date, (B) the Borrower is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, and (C) no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such month. With advance written notice to Agent, Borrower may revise the contents of future certificates to reflect changes in Borrower's accounting procedures, so long as such revised procedures are consistent with GAAP. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Borrower has taken or proposes to take with respect thereto.

(d) Within forty six (46) days after the end of each Fiscal Quarter that is not the end of a Fiscal Year and within ninety-one (91) days after the end of each Fiscal Quarter ending a Fiscal Year, a certificate of a Responsible Officer of the Borrower stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date which shall have been true and correct as of such date, (B) the Borrower is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, (C) to the best of Borrower's knowledge, no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such period, (D) describing and analyzing in

reasonable detail, consistent with the disclosures of Borrower in its Form 10-Q or 10-K, as applicable, all material trends, changes, and developments in each and all Financial Statements; and (E) explaining the variances of the figures in the prior Fiscal Year financial statements, consistent with the disclosures of Borrower in its Form 10-Q or 10-K, as applicable. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Borrower has taken or proposes to take with respect thereto.

(e) As soon as approved by Borrower's Board of Directors, but in no event later than sixty (60) days after the beginning of each Fiscal Year, annual consolidated forecasts (to include forecasted consolidated balance sheets, income statements and cash flow statements) for the Borrower and its Subsidiaries as at the end of and for each Fiscal Quarter of such Fiscal Year. In addition, as soon as practicable after their preparation, Borrower's quarterly updates of its forecasts for its balance sheet and income statement.

(f) Promptly after filing with the PBGC and the IRS, upon the request of Agent, a copy of each annual report or other filing filed with respect to each Plan of the Borrower and its Restricted Subsidiaries.

(g) As soon as practicable after the filing thereof, copies of all reports, if any, to or other documents filed by the Borrower with the Securities and Exchange Commission under the Exchange Act, and all reports, notices, or statements sent by the Borrower to the holders of any equity interests of the Borrower or of any Debt of the Borrower registered under the Securities Act or to or from the trustee under any indenture under which the same is issued.

(h) As soon as available, but in any event not later than 15 days after the Borrower's receipt thereof, a copy of all management letters in connection with Borrower's annual audit prepared for the Borrower by any independent certified public accountants of the Borrower.

(i) As soon as practicable after their preparation, copies of any and all proxy statements, financial statements, and reports which the Borrower makes available to its shareholders. Borrower's notification to the Agent of the posting of such information on its website shall constitute compliance with this provision.

(j) If requested by the Agent, promptly after filing with the IRS, a copy of each tax return filed by the Borrower or by any of its Subsidiaries.

(k) No later than Tuesday of each week, (i) a Borrowing Base Certificate and all supporting information in accordance with Section 9 of the Security Agreement as of the end of the preceding week, and (ii) a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail Liquidity and the calculations required to establish that the Borrower was in compliance with the covenant set forth in Section 7.25 as of the end of the prior week; provided, however, that at any time that Aggregate Revolver Outstandings are zero, the requirement under clause (k)(i) to the extent of weekly reporting of sales, credits, and collections in the Borrowing Base Certificate shall be changed to reporting on a monthly basis (with reports for each month delivered by the 15^th of the following month). In the event that following a change to monthly reporting Borrower desires to request a Revolving Loan or a Letter of Credit, Borrower must resume its weekly reporting of sales, credits, and collections in the Borrowing Base Certificate at least 5 days prior to the requested Funding Date of such Revolving Loan or the requested issuance date of such Letter of Credit.

(l) Such additional information as the Agent and/or any Lender may from time to time reasonably request regarding the financial and business affairs of the Borrower or any Subsidiary.

5.3 Notices to the Lenders. The Borrower shall notify the Agent and the Lenders in writing of the following matters at the following times:

(a) Immediately after becoming aware of any Default or Event of Default;

(b) Immediately after becoming aware of the assertion by the holder of any Debt of the Borrower or any Restricted Subsidiary in a face amount in excess of $5,000,000 that a default exists with respect thereto or that the Borrower or such Restricted Subsidiary is not in compliance with the terms thereof, which default or lack of compliance gives rise to a right to immediately accelerate such Debt, or the commencement by such holder of any enforcement action because of such asserted default or non-compliance;

(c) Immediately after becoming aware of any event or circumstance (other than general economic trends) which could reasonably be expected to have a Material Adverse Effect;

(d) Immediately after becoming aware of any pending or threatened action, suit, or proceeding, by any Person, or any pending or threatened investigation by a Governmental Authority, which could reasonably be expected to have a Material Adverse Effect or result in a Default under Section 9.1(o);

(e) Immediately after becoming aware of any pending or threatened strike, work stoppage, unfair labor practice claim, or other labor dispute affecting the Borrower or any of its Subsidiaries in a manner which could reasonably be expected to have a Material Adverse Effect;

(f) Immediately after becoming aware of any violation of any law, statute, regulation, or ordinance of a Governmental Authority affecting the Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect;

(g) Immediately after receipt of any notice of any violation by the Borrower or any of its Subsidiaries of any Environmental Law which could reasonably be expected to have a Material Adverse Effect or that any Governmental Authority has asserted in writing that the Borrower or any Subsidiary is not in compliance with any Environmental Law or is investigating the Borrower's or such Subsidiary's compliance therewith which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(h) Immediately after receipt of any written notice that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant or that the Borrower or any Subsidiary is subject to investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to the Release or threatened Release of any Contaminant, in either case which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(i) Immediately after receipt of any written notice of the imposition of any Environmental Lien against any property of the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(j) Any change in the Borrower's name as it appears in the state of its incorporation or other organization, state of incorporation or organization, type of entity, organizational identification number, locations of any material portion of the Collateral, or form of organization, trade names under which the Borrower will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, in each case within thirty (30) days thereof;

(k) Within ten (10) Business Days after the Borrower or any ERISA Affiliate knows or has reason to know, that an ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any action taken or threatened by the IRS, the DOL or the PBGC with respect thereto;

(l) Upon request, or, in the event that such filing reflects a significant change with respect to the matters covered thereby, within three (3) Business Days after the filing thereof with the PBGC, the DOL or the IRS, as applicable, copies of the following: (i) each annual report (form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL or the IRS with respect to each Plan, (ii) a copy of each funding waiver request filed with the PBGC, the DOL or the IRS with respect to any Plan and all communications received by the Borrower or any ERISA Affiliate from the PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of each other filing or notice filed with the PBGC, the DOL or the IRS, with respect to each Plan by either the Borrower or any ERISA Affiliate;

(m) Upon request, copies of each actuarial report for any Plan or Multi-employer Plan and annual report for any Multi-employer Plan; and within three (3) Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of the following: (i) any notices of the PBGC's intention to terminate a Plan or to have a trustee appointed to administer such Plan; (ii) any favorable or unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the Code; or (iii) any notice from a Multi-employer Plan regarding the imposition of withdrawal liability;

(n) Within three (3) Business Days after the occurrence thereof: (i) any changes in the benefits of any existing Plan which increase the Borrower's annual costs with respect thereto by an amount in excess of $5,000,000 or the establishment of any new Plan or the commencement of contributions to any Plan to which the Borrower or any ERISA Affiliate was not previously contributing; or (ii) any failure by the Borrower or any ERISA Affiliate to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; or

(o) Within three (3) Business Days after the Borrower or any ERISA Affiliate knows or has reason to know that any of the following events has or will occur: (i) a Multi-employer Plan has been or will be terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.

Each notice given under this Section shall describe the subject matter thereof in reasonable detail, and shall set forth the action that the Borrower, its Subsidiary, or any ERISA Affiliate, as applicable, has taken or proposes to take with respect thereto.

ARTICLE 6

GENERAL WARRANTIES AND REPRESENTATIONS

The Borrower warrants and represents to the Agent and the Lenders that except as hereafter disclosed to and accepted by the Agent and the Required Lenders in writing:

6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents. The Borrower has the power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, to incur the Obligations, and to grant to the Agent Liens upon and security interests in the Collateral. The Borrower has taken all necessary action (including obtaining approval of its stockholders if necessary) to authorize its execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party. This Agreement and the other Loan Documents to which it is a party have been duly executed and delivered by the Borrower, and

constitute the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The Borrower's execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation or breach of, or result in the imposition of any Lien upon the property of the Borrower or any of its Restricted Subsidiaries, by reason of the terms of (a) any contract, mortgage, lease, agreement, indenture, or instrument to which the Borrower or any of its Restricted Subsidiaries is a party or which is binding upon it, (b) any Requirement of Law applicable to the Borrower or any of its Restricted Subsidiaries, or (c) the certificate or articles of incorporation or by-laws or the limited liability company or limited partnership agreement of the Borrower or any of its Restricted Subsidiaries.

6.2 Validity and Priority of Security Interest. The provisions of this Agreement, the Mortgages, and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Agent, for the ratable benefit of the Agent and the Lenders, and such Liens when properly filed and, where applicable, recorded or when adequate steps have been taken to obtain control over or possession of the property subject to such Liens, as applicable, shall constitute perfected and continuing Liens on all the Collateral, having priority over all other Liens on the Collateral, except for Permitted Liens, securing all the Obligations, and enforceable against the Borrower and all third parties except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

6.3 Organization and Qualification. The Borrower (a) is duly organized or incorporated and validly existing in good standing under the laws of the state of Delaware, (b) is qualified to do business and is in good standing in the jurisdictions set forth on Schedule 6.3 which are the only jurisdictions in which qualification is material to the conduct of its business, and (c) has all requisite power and authority to conduct its business and to own its property.

6.4 Corporate Name; Prior Transactions. Except as set forth on Schedule 6.4 (as amended from time to time by Borrower upon written notice to Agent), the Borrower has not, during the past five (5) years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business.

6.5 Subsidiaries and Affiliates. Schedule 6.5 (as amended from time to time by Borrower upon written notice to Agent) is a correct and complete list of the name and relationship to the Borrower of each and all of the Borrower's Subsidiaries. Each Restricted Subsidiary is (a) duly incorporated or organized and validly existing in good standing under the laws of its jurisdiction of incorporation or organization set forth on Schedule 6.5, and (b) qualified to do business and in good standing in each jurisdiction in which the failure to so qualify or be in good standing could reasonably be expected to have a Material Adverse Effect and (c) has all requisite power and authority to conduct its business and own its property.

6.6 Financial Statements and Projections.

(a) The Borrower has delivered to the Agent and the Lenders the audited balance sheet and related statements of income, retained earnings, cash flows, and changes in stockholders equity for the Borrower and its consolidated Subsidiaries as of June 1, 2001, and for the Fiscal Year then ended, accompanied by the report thereon of the Borrower's independent certified public accountants, Deloitte & Touche, LLP. The Borrower has also delivered to the Agent and the Lenders the unaudited balance sheet and related statements of income and cash flows for the Borrower and its consolidated Subsidiaries as of August 31, 2001. Such financial statements are attached hereto as Exhibit C. All such financial statements have been prepared in accordance with

GAAP and present accurately and fairly in all material respects the financial position of the Borrower and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods then ended.

(b) The Latest Projections when submitted to the Lenders as required herein represent the Borrower's good faith and reasonable estimate of the future financial performance of the Borrower and its consolidated Subsidiaries for the periods set forth therein. The Latest Projections constitute forward-looking statements that are by their nature subject to risks and uncertainties that could cause actual results to vary materially from those estimated. These risks and uncertainties are discussed in greater detail in the Borrower's periodic filings with the SEC. The Latest Projections have been prepared based on the good faith assumptions set forth therein, which the Borrower believes are fair and reasonable in light of current and reasonably foreseeable business conditions at the time submitted to the Lenders. The Latest Projections delivered to the Agent and the Lenders on or before the Closing Date were not reviewed or approved by Borrower's executive management, Board of Directors, or auditors.

6.7 Capitalization. Schedule 6.7 sets forth, as of the Closing Date, the capitalization of Borrower and its Restricted Subsidiaries and all of the authorized and issued Capital Stock of each such Person. All outstanding Capital Stock has been validly issued, and is fully paid and non-assessable. All of the Capital Stock of Restricted Subsidiaries is owned, beneficially and of record, by the Person set forth on such Schedule 6.7.

6.8 Solvency. The Borrower is Solvent prior to and after giving effect to the Borrowings to be made on the Initial Funding Date and the issuance of the Letters of Credit to be issued on the Initial Funding Date, and shall remain Solvent during the term of this Agreement.

6.9 Debt. As of the Closing Date, the Borrower and its Restricted Subsidiaries have no Debt, except (a) the Obligations, and (b) Debt described on Schedule 6.9.

6.10 Distributions. Since June 1, 2001, no Distribution has been declared, paid, or made upon or in respect of any Capital Stock or other securities of the Borrower except as identified on Schedule 6.10 and as permitted by Section 7.10.

6.11 Real Estate; Leases. Schedule 6.11 sets forth, as of the Closing Date, a correct and complete list of all Real Estate owned by the Borrower and all Real Estate owned by any of its Restricted Subsidiaries, all leases and subleases of real or personal property held by the Borrower as lessee or sublessee (other than leases of personal property as to which the Borrower is lessee or sublessee for which the value of such personal property is less than $2,000,000), and all leases and subleases of real or personal property held by the Borrower as lessor, or sublessor (other than leases of personal property as to which the Borrower is lessor or sublessor for which the value of such personal property is less than $2,000,000). Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and, to the best of Borrower's knowledge, no default by any party to any such lease or sublease exists. The Borrower has good and marketable title in fee simple to the Real Estate identified on Schedule 6.11 as owned by the Borrower, or valid leasehold interests in all Real Estate designated therein as "leased" by the Borrower and the Borrower has good, indefeasible, and merchantable title to all of its other property reflected on the most recent Financial Statements delivered to the Agent and the Lenders, except as permitted by Section 7.9 since the date thereof, free of all Liens except Permitted Liens.

6.12 Unrestricted Subsidiaries. None of the Unrestricted Subsidiaries conducts any material business other than acting as a local sales office for Borrower and its Restricted Subsidiaries, and none of the Unrestricted Subsidiaries owns any material tangible assets.

6.13 Trade Names. All trade names or styles under which the Borrower will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, are listed on Schedule 6.13 as amended from time to time by Borrower upon written notice to Agent.

6.14 Litigation. Except as set forth on Schedule 6.14, or, after the Closing Date as set forth on Borrower's Form 10-K or 10-Q, there is no pending, or to the best of the Borrower's knowledge threatened, action, suit, proceeding, or counterclaim by any Person, or to the best of the Borrower's knowledge, investigation by any Governmental Authority, or any basis for any of the foregoing, which could reasonably be expected to have a Material Adverse Effect.

6.15 Labor Disputes. Except as set forth on Schedule 6.15, as of the Closing Date (a) there is no collective bargaining agreement or other labor contract covering employees of the Borrower or any of its Subsidiaries, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of the Borrower or any of its Subsidiaries or for any similar purpose, and (d) there is no pending or (to the best of the Borrower's knowledge) threatened, strike, work stoppage, material unfair labor practice claim, or other material labor dispute against or affecting the Borrower or its Restricted Subsidiaries or their employees.

6.16 Environmental Laws. Except as otherwise disclosed on Schedule 6.16:

(a) The Borrower and its Subsidiaries have complied in all material respects with all Environmental Laws and neither the Borrower nor any Subsidiary nor any of its presently owned real property or presently conducted operations, nor to the best of Borrower's knowledge, its previously owned real property or prior operations, is subject to any enforcement order from or liability agreement with any Governmental Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any potential liabilities and costs or remedial action arising from the Release or threatened Release of a Contaminant.

(b) The Borrower and its Subsidiaries have obtained all permits necessary for their current operations under Environmental Laws, and all such permits are in good standing, except where failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect, and the Borrower and its Subsidiaries are in compliance with all terms and conditions of such permits, except for any such non-compliance as could not reasonably be expected to have a Material Adverse Effect.

(c) Neither the Borrower nor any of its Subsidiaries, nor, to the best of the Borrower's knowledge, any of its predecessors in interest, has in violation of applicable law stored, treated or disposed of any hazardous waste, except for any such violation as could not reasonably be expected to have a Material Adverse Effect.

(d) Neither the Borrower nor any of its Subsidiaries has received any summons, complaint, order or similar written notice indicating that it is not currently in compliance with, or that any Governmental Authority is investigating its compliance with, any Environmental Laws or that it is or may be liable to any other Person as a result of a Release or threatened Release of a Contaminant that could reasonably be expected to have a Material Adverse Effect.

(e) To the best of the Borrower's knowledge, none of the present or past operations of the Borrower and its Restricted Subsidiaries is the subject of any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a Release or threatened Release of a Contaminant.

(f) There is not now, nor to the best of the Borrower's knowledge has there ever been on or in the Real Estate owned by the Borrower:

(1) any underground storage tanks or surface impoundments other than those maintained and/or closed in compliance in all material respects with applicable laws or surface impoundments,

(2) any asbestos-containing material, except such as has been removed in compliance in all material respects with Environmental Laws, or

(3) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers or other equipment, other than those maintained in compliance in all material respects with Environmental Laws.

(g) Neither the Borrower nor any of its Restricted Subsidiaries has filed any notice under any requirement of Environmental Law reporting a spill or accidental and unpermitted Release or discharge of a Contaminant into the environment that could reasonably be expected to cause a Material Adverse Effect.

(h) Neither the Borrower nor any of its Restricted Subsidiaries has entered into any negotiations or settlement agreements with any Person (including the prior owner of its property) imposing material obligations or liabilities on the Borrower or any of its Restricted Subsidiaries with respect to any remedial action in response to the Release of a Contaminant or environmentally related claim that could reasonably be expected to cause a Material Adverse Effect.

(i) None of the products manufactured, distributed or sold by the Borrower or any of its Restricted Subsidiaries contain asbestos containing material.

(j) No Environmental Lien has attached to Real Estate subject to a Mortgage, or to any other Real Estate that could reasonably be expected to cause a Material Adverse Effect.

6.17 No Violation of Law. Neither the Borrower nor any of its Subsidiaries is in violation of any law, statute, regulation, ordinance, judgment, order, or decree applicable to it which violation could reasonably be expected to have a Material Adverse Effect.

6.18 No Default. Neither the Borrower nor any of its Subsidiaries is in default with respect to any note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which the Borrower or such Subsidiary is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect.

6.19 ERISA Compliance. Except as specifically disclosed in Schedule 6.19:

(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Borrower, nothing has occurred which would cause the loss of such qualification. The Borrower and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

6.20 Taxes. The Borrower and its Restricted Subsidiaries have filed all federal and other tax returns and reports required to be filed, and have paid or made adequate provision for the payment of all federal and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable unless such unpaid taxes and assessments would constitute a Permitted Lien.

6.21 Regulated Entities. Except as set forth on Schedule 6.21, none of the Borrower, any Person controlling the Borrower, or any Restricted Subsidiary, is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any other federal or state statute or regulation to the extent that the foregoing would limit its ability to incur the Obligations or grant the Liens to Agent or the Lenders under the Loan Documents. w

6.22 Use of Proceeds; Margin Regulations. On and after the Initial Funding Date, the proceeds of the Loans are to be used solely for (i) repayment of Borrower's synthetic lease obligations, (ii) certain transactional fees and costs, and (iii) working capital purposes and other corporate purposes including capital expenditures. Neither the Borrower nor any Restricted Subsidiary is engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

6.23 Proprietary Rights. Except as disclosed in Borrower's publicly filed documents (including filings on Forms 10-K and 10-Q) or otherwise set forth in Schedule 6.14,

(i) to the Borrower's knowledge, the Borrower and its Restricted Subsidiaries own or are licensed or otherwise have sufficient rights or access to Proprietary Rights that are reasonably necessary for the operation of the business of the Borrower and its Restricted Subsidiaries, taken as a whole, except as would reasonably be expected not to have a Material Adverse Effect; and

(ii) no claim or litigation regarding any of the Proprietary Rights is pending or, to the Borrower's knowledge, threatened which would reasonably be expected to have a Material Adverse Effect, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is, to the Borrower's knowledge, pending or proposed, which in either case would reasonably be expected to have a Material Adverse Effect.

6.24 No Material Adverse Change. No Material Adverse Effect has occurred since the latest date of the Financial Statements delivered to the Lenders.

6.25 [Intentionally Deleted]

6.26 [Intentionally Deleted]

6.27 Bank Accounts. Schedule 6.27 contains as of the Closing Date a complete and accurate list of all bank accounts maintained by the Borrower with any bank or other financial institution.

6.28 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower or any of its Restricted Subsidiaries of this Agreement or any other Loan Document.

ARTICLE 7

AFFIRMATIVE AND NEGATIVE COVENANTS

The Borrower covenants to the Agent and each Lender that so long as any of the Obligations remain outstanding or this Agreement is in effect:

7.1 Taxes and Other Obligations. The Borrower shall, and shall cause each of its Restricted Subsidiaries to, (a) file when due all tax returns and other reports which it is required to file; (b) pay, or provide for the payment, when due, of all taxes, fees, assessments and other governmental charges against it or upon its property, income and franchises, make all required withholding and other tax deposits, and establish adequate reserves for the payment of all such items, and provide to the Agent and the Lenders, upon request, satisfactory evidence of its timely compliance with the foregoing; and (c) pay when due all Debt owed by it and all claims of materialmen, mechanics, carriers, warehousemen, landlords, processors and other like Persons, and all other indebtedness owed by it and perform and discharge in a timely manner all other obligations undertaken by it; provided, however, neither the Borrower nor any of its Restricted Subsidiaries need pay any such claim, tax, fee, assessment, or governmental charge (i) it is contesting in good faith by appropriate proceedings diligently pursued, (ii) as to which the Borrower or its Restricted Subsidiary, as the case may be, has established proper reserves as required under GAAP, and (iii) the nonpayment of which does not result in the imposition of a Lien (other than a Permitted Lien).

7.2 Legal Existence and Good Standing. The Borrower shall, and shall cause each of its Subsidiaries to, maintain its legal existence and its qualification and good standing in all jurisdictions in which the failure to maintain such existence and qualification or good standing could reasonably be expected to have a Material Adverse Effect.

7.3 Compliance with Law and Agreements; Maintenance of Licenses. The Borrower shall comply, and shall cause each Restricted Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act and all Environmental Laws). The Borrower shall, and shall cause each of its Subsidiaries to, obtain and maintain all licenses, permits, franchises, and governmental authorizations necessary to own its property and to conduct its business as conducted on the Closing Date, except where the failure to obtain such licenses, permits, franchises and authorizations could not reasonably be expected to have a Material Adverse Effect. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, modify, amend or alter its certificate or articles of incorporation, or its limited liability company operating agreement, limited partnership agreement, or other organizational documents as applicable, other than in a manner which does not materially and adversely affect the rights of the Lenders or the Agent.

7.4 Maintenance of Property; Inspection of Property.

(a) The Borrower shall, and shall cause each of its Restricted Subsidiaries to, maintain all of the Collateral necessary and useful in the conduct of its business, in good operating condition and repair, ordinary wear and tear excepted, except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) The Borrower shall permit representatives and independent contractors of the Agent (at the expense of the Borrower not to exceed four (4) times per year unless an Event of Default has occurred and is continuing) to visit and inspect any of its properties, to examine its corporate,

financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its officers, at such reasonable times during normal business hours and as soon as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, when an Event of Default exists, the Agent or any Lender may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

7.5 Insurance.

(a) The Borrower shall maintain, and shall maintain for its Restricted Subsidiaries or cause each of its Restricted Subsidiaries to maintain, with financially sound and reputable insurers having a rating of at least A- or better by Best Rating Guide, insurance against loss or damage by fire with extended coverage; theft, burglary, pilferage and loss in transit; public liability and third party property damage; larceny, embezzlement or other criminal liability; business interruption; public liability and third party property damage; and such other hazards or of such other types as is customary for Persons engaged in the same or similar business, as determined by Borrower. The Agent, in its discretion, or acting at the direction of the Required Lenders, shall retain the right to require that the Borrower obtain and maintain additional insurance coverage in order to protect Agent's and the Lenders' interests hereunder and under the International Facility. Such additional insurance coverage shall be reasonable as compared with the Collateral and the collateral for the International Facility and insurance coverage in effect on the Closing Date. Without limiting the foregoing, in the event that any improved Real Estate covered by the Mortgages is determined to be located within an area that has been identified by the Director of the Federal Emergency Management Agency as a Special Flood Hazard Area ("SFHA"), the Borrower shall purchase and maintain flood insurance on the improved Real Estate and any Equipment and Inventory located on such Real Estate that is in the SFHA. The amount of said flood insurance will be reasonably determined by the Agent, and shall, at a minimum, comply with applicable federal regulations as required by the Flood Disaster Protection Act of 1973, as amended. The Borrower shall also maintain flood insurance for its Inventory and Equipment which is, in material amounts, at any time located in a SFHA.

(b) The Borrower shall cause the Agent, for the ratable benefit of the Agent and the Lenders, to be named as secured party or mortgagee and sole loss payee or additional insured as their interest may appear on insurance policies related to Collateral and any collateral for the International Facility, in a manner acceptable to the Agent. Each policy of property insurance shall contain a clause or endorsement requiring the insurer to give not less than thirty (30) days' prior written notice to the Agent in the event of cancellation of the policy for any reason whatsoever and a clause or endorsement stating that the interest of the Agent shall not be impaired or invalidated by any act or neglect of the Borrower or any of its Subsidiaries or the owner of any Real Estate for purposes more hazardous than are permitted by such policy. All premiums for such insurance shall be paid by the Borrower when due, and certificates of insurance and, if requested by the Agent or any Lender, photocopies of the policies, shall be delivered to the Agent, in each case in sufficient quantity for distribution by the Agent to each of the Lenders. If the Borrower fails to procure such insurance or to pay the premiums therefor when due, the Agent may, and at the direction of the Required Lenders shall, do so from the proceeds of Revolving Loans.

7.6 Insurance and Condemnation Proceeds. The Borrower shall as soon as practicable notify the Agent and the Lenders of any loss, damage, or destruction to the Collateral, whether or not covered by insurance. The Agent is hereby authorized to collect all insurance and condemnation proceeds in respect of Collateral directly and shall apply or remit them as follows:

(i) With respect to insurance and condemnation proceeds relating to Collateral other than Fixed Assets, after deducting from such proceeds the reasonable expenses, if any, incurred by the

Agent in the collection or handling thereof, the Agent shall apply such proceeds, ratably, to the reduction of the Revolving Loans and, if an Event of Default has occurred and is continuing, to the reduction of the other Obligations in the order provided for in Section 3.8. Any remaining proceeds after application as provided in the preceding sentence shall be returned to the Borrower.

(ii) With respect to insurance and condemnation proceeds relating to Collateral consisting of Fixed Assets, the Agent shall permit or require the Borrower to use such proceeds, or any part thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction so long as (1) no Default or Event of Default has occurred and is continuing, (2) the aggregate proceeds do not exceed $3,000,000 per incident and (3) the Borrower first (i) provides the Agent and the Required Lenders with plans and specifications for any such repair or restoration which shall be reasonably satisfactory to the Agent and the Required Lenders and (ii) demonstrates to the reasonable satisfaction of the Agent and the Required Lenders that the funds available to it will be sufficient to complete such project in the manner provided therein. In all other circumstances, the Agent shall apply such insurance and condemnation proceeds, ratably, to the reduction of the Term Loans in the order provided in Section 3.4(b), and thereafter to the reduction of the Obligations in the order provided for in Section 3.8.

7.7 Environmental Laws.

(a) The Borrower shall, and shall cause each of its Restricted Subsidiaries to, conduct its business in compliance in all material respects with all Environmental Laws applicable to it, including those relating to the generation, handling, use, storage, and disposal of any Contaminant. The Borrower shall, and shall cause each of its Restricted Subsidiaries to, take prompt and appropriate action to respond to any such non-compliance with Environmental Laws and shall regularly report to the Agent on such response.

(b) Without limiting the generality of the foregoing, the Borrower shall submit to the Agent and the Lenders annually, commencing on the first Anniversary Date, and on each Anniversary Date thereafter, an update of the status of each environmental compliance or liability issue that could reasonably be expected to have a Material Adverse Effect, or that is required to be reported under Section 5.3. The Agent or any Lender may request copies of technical reports prepared by the Borrower or any of its Restricted Subsidiaries and its communications with any Governmental Authority to determine whether the Borrower or any of its Restricted Subsidiaries is proceeding reasonably to correct, cure or contest in good faith any such alleged non-compliance or environmental liability. In the event that Borrower cannot provide any such technical reports to the Agent because they are subject to an attorney-client privilege, then Borrower shall so advise Agent of such fact and Agent may commission its own environmental technical reports at the Borrower's expense. The Borrower shall, at the Agent's or the Required Lenders' request and at the Borrower's expense, (i) retain an independent environmental engineer acceptable to the Agent to evaluate the site, including tests if appropriate, where the non-compliance or alleged non-compliance with Environmental Laws has occurred that could reasonably be expected to have a Material Adverse Effect, and prepare and deliver to the Agent, in sufficient quantity for distribution by the Agent to the Lenders, a report setting forth the results of such evaluation, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof, and (ii) provide to the Agent and the Lenders a supplemental report of such engineer whenever the scope of the environmental problems, or the response thereto or the estimated costs thereof, shall increase in any material respect.

(c) The Agent and its representatives will have the right at any reasonable time to enter and visit the Real Estate and any other place where any property of the Borrower is located, so long as such location is under the control of Borrower or the Borrower is permitted to enter such premises, for the purposes of observing the Real Estate, taking and removing soil or groundwater samples, and conducting tests on any part of the Real Estate. The Agent is under no duty, however, to visit or observe the Real Estate or to conduct tests, and any such acts by the Agent will be solely for the purposes of protecting the Agent's Liens and preserving the Agent and the Lenders' rights under the Loan Documents. No site visit, observation or testing by the Agent and the Lenders will result in a waiver of any default of the Borrower or impose any liability on the Agent or the Lenders. In no event will any site visit, observation or testing by the Agent be a representation that hazardous substances are or are not present in, on or under the Real Estate, or that there has been or will be compliance with any Environmental Law. Neither the Borrower nor any other party is entitled to rely on any site visit, observation or testing by the Agent. The Agent and the Lenders owe no duty of care to protect the Borrower or any other party against, or to inform the Borrower or any other party of, any hazardous substances or any other adverse condition affecting the Real Estate. The Agent may in its discretion disclose to the Borrower or to any other party if so required by law any report or findings made as a result of, or in connection with, any site visit, observation or testing by the Agent. The Borrower understands and agrees that the Agent makes no warranty or representation to the Borrower or any other party regarding the truth, accuracy or completeness of any such report or findings that may be disclosed. The Borrower also understands that depending on the results of any site visit, observation or testing by the Agent and disclosed to the Borrower, the Borrower may have a legal obligation to notify one or more environmental agencies of the results, that such reporting requirements are site-specific, and are to be evaluated by the Borrower without advice or assistance from the Agent. In each instance, the Agent will give the Borrower reasonable notice before entering the Real Estate or any other place the Agent is permitted to enter under this Section 7.7(c). The Agent will make reasonable efforts to avoid interfering with the Borrower's use of the Real Estate or any other property in exercising any rights provided hereunder.

7.8 Compliance with ERISA. The Borrower shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) make all required contributions to any Plan subject to Section 412 of the Code; (d) not engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan; and (e) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

7.9 Mergers, Consolidations or Sales. Neither the Borrower nor any of its Subsidiaries shall:

(a) enter into any transaction of merger, reorganization, or consolidation,

(b) transfer, sell, assign, lease, or otherwise dispose of all or any part of its property, or

Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, only the following are prohibited by the preceding sentence:

(i) mergers or consolidations of Borrower where the Borrower is not the surviving entity or any of the Liens of Agent and the Lenders would be impaired;

(ii) any reorganization, wind up, liquidation or dissolution of Borrower;

(iii) any transfer, sale, assignment, lease, or other disposal of any Accounts or Inventory, other than (y) a sale of Inventory in the ordinary course of business or (z) where the amount

of all Loans advanced against or Letters of Credit collateralized by such Accounts and/or Inventory (as determined by Agent in its sole discretion) are repaid in full contemporaneously with such sale or disposition;

(iv) any transfer, sale, assignment, or other disposal of any Real Estate that is the subject of a Mortgage, except for a sale of such Real Estate for a sales price of at least the Minimum Price set forth on Schedule 3.4 (b), and so long as the Term Loans are repaid contemporaneously with such sale as required under Section 3.4 (b); and

(v) any transaction which would result in the breach of Section 7.25.

7.10 Distributions; Capital Change; Investments. Neither the Borrower nor any of its Subsidiaries shall: (a) directly or indirectly declare or make, or incur any liability to make, any Distribution, except Distributions to the Borrower by its Subsidiaries, and Distributions by any Subsidiary of Borrower to another Subsidiary of Borrower which is its parent; (b) make any change in its capital structure which could have a Material Adverse Effect; or (c) make any Investment.

Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, only the following are prohibited by the preceding sentence:

(i) Distributions by Borrower, other than: (y) purchases by Borrower on the open market or under Hedge Agreements of its Capital Stock, provided that after completing any such purchase Borrower's Liquidity would be at least $650,000,000, and so long as an Event of Default does not exist prior to such purchase and would not exist after giving effect to such purchase; and (z) Distributions not otherwise permitted under this Agreement in an amount not to exceed $30,000,000 in the aggregate;

(ii) an Investment by Borrower or a Restricted Subsidiary in an Unrestricted Subsidiary which is not (x) in the ordinary course of Borrower's or such Restricted Subsidiary's business, and (y) used for the ordinary operating costs of such Unrestricted Subsidiary; or

(iii) a Distribution or an Investment that would result in the breach of Section 7.25.

7.11 [Intentionally Deleted]

7.12 Guaranties. Neither the Borrower nor any of its Restricted Subsidiaries shall make, issue, or become liable on any Guaranty, except: (i) the International Guaranty; (ii) Guaranties of the obligations of the International Borrowers under the International Credit Agreement; and (iii) Guaranties of the Obligations. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, Guaranties shall not be prohibited by the preceding sentence, and any such Guaranties permitted to be made shall be permitted to continue to exist following a Liquidity Trigger Event.

7.13 Debt. Neither the Borrower nor any of its Restricted Subsidiaries shall incur or maintain any Debt, other than:

(i) the Obligations;

(ii) Debt existing on the Closing Date described on Schedule 6.9 that is not to be repaid with the proceeds of Loans made on the Initial Funding Date; and

(iii) Obligations under any Hedge Agreements.

Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, Debt shall not be prohibited by the preceding sentence, and any such Debt shall be permitted to remain in effect following the occurrence of a Liquidity Trigger Event.

7.14 Prepayment. After the occurrence and during the continuance of a Liquidity Trigger Event, neither the Borrower nor any of its Restricted Subsidiaries shall voluntarily prepay any Debt, except the Obligations in accordance with the terms of this Agreement or the International Obligations in accordance with the terms of the International Credit Agreement.

7.15 Transactions with Affiliates. Except as set forth below in this Section 7.15, neither the Borrower nor any of its Restricted Subsidiaries shall sell, transfer, distribute, or pay any money or property, including, but not limited to, any fees or expenses of any nature (including, but not limited to, any fees or expenses for management services), to any Affiliate (other than to Borrower or a Restricted Subsidiary), or, lend or advance money or property to any Affiliate (other than to Borrower or a Restricted Subsidiary), or invest in (by capital contribution or otherwise) or purchase or repurchase any Capital Stock or indebtedness, or any property, of any Affiliate (other than of Borrower or a Restricted Subsidiary), or, become liable on any Guaranty of the indebtedness, dividends, or other obligations of any Affiliate unless such obligations are to the Borrower or to a Restricted Subsidiary. Notwithstanding the foregoing, while no Liquidity Trigger Event has occurred and is continuing, the Borrower and its Restricted Subsidiaries may make Investments in Unrestricted Subsidiaries as permitted in Section 7.10(ii), and may engage in transactions with Unrestricted Subsidiaries and Affiliates other than Borrower or Restricted Subsidiaries, if such transactions are in the ordinary course of business, and no less favorable to the Borrower and its Restricted Subsidiaries than would be obtained in a comparable arm's-length transaction with a third party who is not an Affiliate.

7.16 Investment Banking and Finder's Fees. Neither the Borrower nor any of its Subsidiaries shall pay or agree to pay, or reimburse any other party with respect to, any investment banking or similar or related fee, underwriter's fee, finder's fee, or broker's fee to any Person in connection with this Agreement. The Borrower shall defend and indemnify the Agent and the Lenders against and hold them harmless from all claims of any Person that the Borrower is obligated to pay for any such fees, and all costs and expenses (including attorneys' fees) incurred by the Agent and/or any Lender in connection therewith.

7.17 [Intentionally Deleted]

7.18 Liens. Neither the Borrower nor any of its Restricted Subsidiaries shall create, incur, assume, or permit to exist any Lien on any property now owned or hereafter acquired by any of them, except Permitted Liens.

7.19 Sale and Leaseback Transactions. Neither the Borrower nor any of its Subsidiaries shall, directly or indirectly, enter into any arrangement with any Person providing for the Borrower or such Subsidiary to lease or rent property that the Borrower or such Subsidiary has sold or will sell or otherwise transfer to such Person. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, sale and leaseback transactions shall not be prohibited by the preceding sentence, and any such sale and leaseback transactions permitted to be consummated shall be permitted to remain in effect following the occurrence of a Liquidity Trigger Event.

7.20 New Subsidiaries. The Borrower shall not, directly or indirectly, organize, create, acquire or permit to exist any Subsidiary other than those listed on Schedule 6.5. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event and on at least thirty (30) days advance written notice to Agent:

(i) Borrower may create or acquire one or more new Restricted Subsidiaries or Unrestricted Subsidiaries that are owned by Borrower or another Restricted Subsidiary, so long as (1) upon such creation or acquisition of a Restricted Subsidiary, (y) such new Restricted Subsidiary enters into a continuing guaranty of the International Credit Agreement Obligations and, if such new Restricted Subsidiary is a domestic organization, the Obligations, and (z) Agent is granted a Lien by Borrower or such other Restricted Subsidiary on 100% (or 65% if such new Restricted Subsidiary is owned by Borrower and is a foreign organization) of the Capital Stock of such new Restricted Subsidiary, such shares are delivered to Agent and

all other necessary steps are taken to perfect Agent's Lien therein; provided, however, that Agent's Lien on the shares of any new Restricted Subsidiary that is owned by a foreign Restricted Subsidiary shall only secure International Loan Obligations and not Obligations hereunder, and (2) upon such creation or acquisition of an Unrestricted Subsidiary, the Borrower certifies that such new Unrestricted Subsidiary complies with the provisions of Section 6.12. Any such new Subsidiary permitted to be organized, created, or acquired shall be permitted to remain a Subsidiary following the occurrence of a Liquidity Trigger Event; and

(ii) Borrower may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary, so long as each of the conditions set forth in clauses (i) (y) and (z) of this Section 7.20 is met. In the event that a foreign Unrestricted Subsidiary being redesignated as a Restricted Subsidiary is not permitted (due to local regulatory restrictions) to guarantee the International Obligations, or to have its Capital Stock pledged to Agent, such Unrestricted Subsidiary may nevertheless be redesignated as a Restricted Subsidiary (for the purposes of this Section 7.20 a "Qualified Restricted Subsidiary") so long as each other condition is met. Notwithstanding any other definitions or provisions of this Agreement or the Loan Documents to the contrary, there may not exist at any one time more than $20,000,000 of Investments in the aggregate in all Qualified Restricted Subsidiaries by Borrower or the other Restricted Subsidiaries.

7.21 [Intentionally Deleted]

7.22 [Intentionally Deleted]

7.23 [Intentionally Deleted]

7.24 [Intentionally Deleted]

7.25 Minimum Liquidity. Borrower shall maintain, at all times, Liquidity of not less than $500,000,000, provided, however, that, after the Term Loans and the International Term Loans have been repaid in full, Borrower shall only be required to maintain Liquidity of not less than $400,000,000. Borrower and 3Com Technologies shall maintain Qualified Cash Management Investments in the Qualified Custodial Accounts at all times of not less than $210,000,000 (reduced by the amount of any Term Loan or International Term Loan repayments), in the aggregate, of which not less than $105,000,000 shall be maintained by Borrower at all times in its Qualified Custodial Account. Amounts in the Qualified Custodial Accounts shall count towards Liquidity.

7.26 [Intentionally Deleted]

7.27 Use of Proceeds. The Borrower shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Borrower or others incurred to purchase or carry Margin Stock, or (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock.

7.28 Further Assurances. The Borrower shall execute and deliver, or cause to be executed and delivered, to the Agent and/or the Lenders such documents and agreements, and shall take or cause to be taken such actions, as the Agent or any Lender may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents.

ARTICLE 8

CONDITIONS OF LENDING

8.1 Conditions Precedent to Making of Loans on the Initial Funding Date. The obligation of the Lenders to make the initial Revolving Loans and the Term Loans on the Initial Funding Date, and the obligation of the Agent to cause the Letter of Credit Issuer to issue any Letter of Credit on the

Closing Date, are subject to the following conditions precedent having been satisfied in a manner satisfactory to the Agent and each Lender:

(a) This Agreement and the other Loan Documents shall have been executed by each party thereto and the Borrower shall have performed and complied in all material respects with all covenants, agreements and conditions contained herein and the other Loan Documents which are required to be performed or complied with by the Borrower before or on such Closing Date.

(b) Upon making the Term Loans and the Revolving Loans (including such Revolving Loans made to finance the Closing Fee or otherwise as reimbursement for fees, costs and expenses then payable under this Agreement and the Agent Fee Letter) the Borrower and its Subsidiaries shall have Liquidity on a consolidated basis (less, the amount of any accounts payable that are over 30 days past due) of at least $1,000,000,000.

(c) All representations and warranties made hereunder and in the other Loan Documents shall be true and correct as if made on such date.

(d) No Default or Event of Default shall have occurred and be continuing after giving effect to the Loans to be made and the Letters of Credit to be issued on the Initial Funding Date.

(e) The Agent and the Lenders shall have received such opinions of counsel for the Borrower and its Subsidiaries and local counsel for Borrower and/or Agent in the United Kingdom, the Cayman Islands, Ireland, and such other jurisdictions as Agent or Lenders may require, as the Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Agent, the Lenders, and their respective counsel.

(f) The Agent shall have received ALTA title policies, in form and substance and in amounts and with such endorsements acceptable to Agent, with respect to the Mortgages.

(g) The Agent shall have received:

(i) acknowledgment copies of proper financing statements, duly filed on or before the Closing Date under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the Agent's Liens;

(ii) duly executed UCC-3 Termination Statements and such other instruments, in form and substance satisfactory to the Agent, as shall be necessary to terminate and satisfy all Liens on the Property of the Borrower and its Subsidiaries except Permitted Liens; and

(iii) certificates for all Capital Stock of Restricted Subsidiaries (and, to the extent Borrower can (using its best efforts) locate them, certificates for all Capital Stock of its domestic Unrestricted Subsidiaries) pledged pursuant to the Pledge Agreement, together with undated stock powers duly endorsed in blank; and

(iv) Blocked Account Agreements with Bank, and a control agreement respecting each of the Qualified Custodial Accounts.

(h) The Borrower shall have paid all fees and expenses of the Agent and the Attorney Costs incurred in connection with any of the Loan Documents and the transactions contemplated thereby to the extent invoiced.

(i) Borrower shall have paid all fees due and owing to the Agent and the Lenders on the Closing Date (including the Closing Fee and all other fees under the Agent Fee Letters).

(j) Agent and the Lenders shall be satisfied with all environmental aspects relating to Borrower and its business, including all environmental reports as may be required by Agent and the Lenders.

(k) The Total Facility and the International Facility each shall have been successfully syndicated on the terms set forth herein and in the International Credit Agreement, to the

satisfaction of the Agent, and all Lenders shall ratably fund the Loans and the International Loans on the Initial Funding Date.

(l) All conditions precedent to the funding of the initial loans and letters of credit under the International Credit Agreement shall have been satisfied.

(m) The Agent shall have received evidence, in form, scope, and substance, reasonably satisfactory to the Agent, of all insurance coverage as required by this Agreement.

(n) The Agent and the Lenders shall have had an opportunity, if they so choose, to examine the books of account and other records and files of the Borrower and its Subsidiaries and to make copies thereof, and to conduct a pre-closing audit which shall include, without limitation, verification of Inventory, Accounts, and the Borrowing Base, and the results of such examination and audit shall have been satisfactory to the Agent and the Lenders in all respects.

(o) All proceedings taken in connection with the execution of this Agreement, the Notes, all other Loan Documents and all documents and papers relating thereto shall be satisfactory in form, scope, and substance to the Agent and the Lenders.

(p) Without limiting the generality of the items described above, the Borrower and each Person guarantying or securing payment of the Obligations shall have delivered or caused to be delivered to the Agent (in form and substance reasonably satisfactory to the Agent), the financial statements, instruments, resolutions, documents, agreements, certificates, opinions and other items set forth on the "Closing Checklist" delivered by the Agent to the Borrower prior to the Closing Date.

The acceptance by the Borrower of any Loans made or Letters of Credit issued on the Initial Funding Date shall be deemed to be a representation and warranty made by the Borrower to the effect that all of the conditions precedent to the making of such Loans or the issuance of such Letters of Credit have been satisfied, with the same effect as delivery to the Agent and the Lenders of a certificate signed by a Responsible Officer of the Borrower, dated the Initial Funding Date, to such effect.

Execution and delivery to the Agent by a Lender of a counterpart of this Agreement shall be deemed confirmation by such Lender that (i) all conditions precedent in this Section 8.1 have been fulfilled to the satisfaction of such Lender, (ii) the decision of such Lender to execute and deliver to the Agent an executed counterpart of this Agreement was made by such Lender independently and without reliance on the Agent or any other Lender as to the satisfaction of any condition precedent set forth in this Section 8.1, and (iii) all documents sent to such Lender for approval consent, or satisfaction were acceptable to such Lender.

8.2 Conditions Precedent to Each Loan. The obligation of the Lenders to make each Loan, including the initial Revolving Loans on the Initial Funding Date and the Term Loans, and the obligation of the Agent to cause the Letter of Credit Issuer to issue any Letter of Credit shall be subject to the further conditions precedent that on and as of the date of any such extension of credit:

(a) The following statements shall be true, and the acceptance by the Borrower of any extension of credit shall be deemed to be a statement to the effect set forth in clauses (i), (ii) and (iii) with the same effect as the delivery to the Agent and the Lenders of a certificate signed by a Responsible Officer, dated the date of such extension of credit, stating that:

(i) The representations and warranties contained in this Agreement and the other Loan Documents are correct in all material respects on and as of the date of such extension of credit as though made on and as of such date, other than any such representation or warranty which relates to a specified prior date and except to the extent the Agent and the Lenders have been notified in writing by the Borrower that any representation or warranty is not correct and the Required Lenders have explicitly waived in writing compliance with such representation or warranty; and

(ii) No event has occurred and is continuing, or would result from such extension of credit, which constitutes a Default or an Event of Default; and

(iii) No event has occurred and is continuing, or would result from such extension of credit, which has had or would have a Material Adverse Effect.

(b) No such Borrowing shall exceed Availability, provided, however, that the foregoing conditions precedent are not conditions to each Lender participating in or reimbursing the Bank or the Agent for such Lenders' Pro Rata Share of any Non-Ratable Loan or Agent Advance made in accordance with the provisions of Sections 1.2(h) and (i).

ARTICLE 9

DEFAULT; REMEDIES

9.1 Events of Default. It shall constitute an event of default ("Event of Default") if any one or more of the following shall occur for any reason:

(a) any failure by the Borrower to pay (i) the principal amount of any Obligations when due, whether upon demand or otherwise, (ii) interest or premium on any of the Obligations within three (3) Business Days of when due, whether upon demand or otherwise, or (iii) any fee or other amount owing hereunder within ten (10) Business Days of when due, whether upon demand or otherwise;

(b) any representation or warranty made or deemed made by the Borrower in this Agreement or by the Borrower or any of its Subsidiaries in any of the other Loan Documents, any Financial Statement, or any certificate furnished by the Borrower or any of its Subsidiaries at any time to the Agent or any Lender shall prove to be untrue in any material respect as of the date on which made, deemed made, or furnished;

(c) (i) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 5.2(k), 7.2, 7.5, 7.9-7.27, or Section 11 of the Security Agreement, (ii) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 5.2 (other than 5.2(k)) or 5.3 and such default shall continue for ten (10) days or more; or (iii) any default shall occur in the observance or performance of any of the other covenants or agreements contained in any other Section of this Agreement or any other Loan Document, any other Loan Documents, or any other agreement entered into at any time to which the Borrower or any Subsidiary and the Agent or any Lender are party (including in respect of any Bank Products) and such default shall continue for thirty (30) days or more;

(d) any (i) Event of Default shall have occurred and be continuing under the International Credit Agreement; (ii) default shall occur with respect to any Debt (other than the Obligations or the International Loan Obligations) of the Borrower or any of its Restricted Subsidiaries in an outstanding principal amount which exceeds $5,000,000 in the aggregate at any one time, or under any agreement or instrument under or pursuant to which any such Debt may have been issued, created, assumed, or guaranteed by the Borrower or any of its Restricted Subsidiaries, and such default shall continue for more than the period of grace, if any, therein specified, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate, or to permit the holders of any such Debt to accelerate, the maturity of any such Debt; or (iii) any such Debt shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;

(e) the Borrower or any of its Restricted Subsidiaries shall (i) file a voluntary petition in bankruptcy or file a voluntary petition or an answer or otherwise commence any action or proceeding seeking reorganization, arrangement or readjustment of its debts or for any other relief under the federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law of the United States, any foreign country, or any political subdivision of the foregoing, now

or hereafter existing, or consent to, approve of, or acquiesce in, any such petition, action or proceeding; (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for it or for all or any part of its property; (iii) make an assignment for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;

(f) an involuntary petition shall be filed or an action or proceeding otherwise commenced seeking reorganization, arrangement, consolidation or readjustment of the debts of the Borrower or any of its Restricted Subsidiaries or for any other relief under the Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law of the United States, any foreign country, or any political subdivision of the foregoing, now or hereafter existing and such petition or proceeding shall not be dismissed within thirty (30) days after the filing or commencement thereof or an order of relief shall be entered with respect thereto;

(g) a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for the Borrower or any of its Restricted Subsidiaries or for all or any part of its property shall be appointed or a warrant of attachment, execution or similar process shall be issued against any part of the property of the Borrower or any of its Restricted Subsidiaries;

(h) except as specifically permitted by Section 7.9, the Borrower or any of its Restricted Subsidiaries shall file a certificate of dissolution under applicable state law or shall be liquidated, dissolved or wound-up or shall commence or have commenced against it any action or proceeding for dissolution, winding-up or liquidation, or shall take any corporate action in furtherance thereof;

(i) all or any material part of the property of the Borrower or any of its Restricted Subsidiaries shall be nationalized, expropriated or condemned, seized or otherwise appropriated, or custody or control of such property or of the Borrower or such Restricted Subsidiary shall be assumed by any Governmental Authority or any court of competent jurisdiction at the instance of any Governmental Authority, except where contested in good faith by proper proceedings diligently pursued where a stay of enforcement is in effect;

(j) any Loan Document shall be terminated, revoked or declared void or invalid or unenforceable or challenged by the Borrower or any other obligor;

(k) one or more judgments, orders, decrees or arbitration awards is entered against the Borrower involving in the aggregate liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage or by an indemnity of a third Person (other than Borrower or any of its Affiliates) that Agent in its good faith judgment determines is acceptable as to which such indemnitor has not disputed liability) as to any single or related or unrelated series of transactions, incidents or conditions, of $7,500,000 or more, and the same shall remain unsatisfied, unvacated or unstayed pending appeal for a period of sixty (60) days after the entry thereof. For the purposes of clarity, a judgment shall be deemed satisfied if Borrower has entered into a stipulation or agreement with the adverse party to pay such judgment;

(l) any loss, theft, damage or destruction of any item or items of Collateral or other property of the Borrower or any Subsidiary occurs which could reasonably be expected to cause a Material Adverse Effect and is not adequately covered by insurance;

(m) there is filed against the Borrower or any of its Restricted Subsidiaries any action, suit or proceeding under any federal or state racketeering statute (including the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (i) is not dismissed within one hundred twenty (120) days, and (ii) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral;

(n) for any reason other than the failure of the Agent to take any action available to it to maintain perfection of the Agent's Liens, pursuant to the Loan Documents, any Loan Document ceases to be in full force and effect or any Lien with respect to any material portion of the

Collateral intended to be secured thereby ceases to be, or is not, valid, perfected and prior to all other Liens (other than Permitted Liens) or is terminated, revoked or declared void;

(o) (i) an ERISA Event shall occur with respect to a Pension Plan or Multi-employer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multi-employer Plan or the PBGC in an aggregate amount in excess of $5,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $5,000,000; or (iii) the Borrower or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multi-employer Plan in an aggregate amount in excess of $5,000,000; or

(p) there occurs an event having a Material Adverse Effect.

9.2 Remedies.

(a) If a Default or an Event of Default exists, the Agent may, in its discretion, and shall, at the direction of the Required Lenders, do one or more of the following at any time or times and in any order, without notice to or demand on the Borrower: (i) reduce the Maximum Revolver Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory used in computing the Borrowing Base, or reduce one or more of the other elements used in computing the Borrowing Base; (ii) restrict the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to provide Letters of Credit or Credit Support; provided, however, that in the event that Agent takes any action under clause (i) of this sentence during a Default and as a result the Aggregate Revolver Outstandings exceed the Borrowing Base, then, notwithstanding anything to the contrary contained in Section 3.1, Borrower shall not be obligated to repay such excess until the earlier of (y) ten (10) days after such overadvance is created or (z) the occurrence of an Event of Default. If an Event of Default exists, the Agent shall, at the direction of the Required Lenders, do one or more of the following, in addition to the actions described in the preceding sentence, at any time or times and in any order, without notice to or demand on the Borrower: (A) terminate the Commitments and this Agreement; (B) declare any or all Obligations to be immediately due and payable; provided, however, that upon the occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g) , or 9.1(h), the Commitments shall automatically and immediately expire and all Obligations shall automatically become immediately due and payable without notice or demand of any kind; (C) require the Borrower to cash collateralize all outstanding Letter of Credit Obligations; and (D) pursue its other rights and remedies under the Loan Documents and applicable law.

(b) If an Event of Default has occurred and is continuing: (i) the Agent shall have for the benefit of the Lenders, in addition to all other rights of the Agent and the Lenders, the rights and remedies of a secured party under the Loan Documents and the UCC; (ii) the Agent may, at any time, take possession of the Collateral and keep it on the Borrower's premises, at no cost to the Agent or any Lender, or remove any part of it to such other place or places as the Agent may desire, or the Borrower shall, upon the Agent's demand, at the Borrower's cost, assemble the Collateral and make it available to the Agent at a place reasonably convenient to the Agent; and (iii) the Agent may sell and deliver any Collateral at public or private sales, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion, and may, if the Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale without giving a new notice of sale. Without in any way requiring notice to be given in the following manner, the Borrower agrees that any notice by the Agent of sale, disposition or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, shall constitute reasonable notice to the Borrower if such notice is mailed by registered or certified mail, return receipt requested, postage prepaid, or is delivered personally against receipt, at least

ten (10) Business Days prior to such action to the Borrower's address specified in or pursuant to Section 13.8. If any Collateral is sold on terms other than payment in full at the time of sale, no credit shall be given against the Obligations until the Agent or the Lenders receive payment, and if the buyer defaults in payment, the Agent may resell the Collateral without further notice to the Borrower. In the event the Agent seeks to take possession of all or any portion of the Collateral by judicial process, the Borrower irrevocably waives: (A) the posting of any bond, surety or security with respect thereto which might otherwise be required; (B) any demand for possession prior to the commencement of any suit or action to recover the Collateral; and (C) any requirement that the Agent retain possession and not dispose of any Collateral until after trial or final judgment. The Borrower agrees that the Agent has no obligation to preserve rights to the Collateral or marshal any Collateral for the benefit of any Person. The Agent is hereby granted a non-exclusive license or other right to use, without charge, the Borrower's labels, patents, copyrights, name, trade secrets, trade names, trademarks, and advertising matter, or any similar property, in completing production of, advertising or selling any Collateral, and the Borrower's rights under all licenses and all franchise agreements shall inure to the Agent's benefit for such purpose. The proceeds of sale shall be applied first to all expenses of sale, including attorneys' fees, and then to the Obligations. The Agent will return any excess to the Borrower and the Borrower shall remain liable for any deficiency.

(c) If an Event of Default exists, the Borrower hereby waives all rights to notice and hearing prior to the exercise by the Agent of the Agent's rights to repossess the Collateral without judicial process or to reply, attach or levy upon the Collateral without notice or hearing.

ARTICLE 10

TERM AND TERMINATION

10.1 Term and Termination. The term of this Agreement shall end on the Stated Termination Date unless sooner terminated in accordance with the terms hereof. The Agent upon direction from the Required Lenders may terminate this Agreement without notice upon the occurrence of an Event of Default. Upon the effective date of termination of this Agreement for any reason whatsoever, all Obligations (including all unpaid principal, accrued and unpaid interest and any accrued and unpaid fees) shall become immediately due and payable and the Borrower shall immediately arrange for the cancellation and return of Letters of Credit then outstanding. Notwithstanding the termination of this Agreement, until all Obligations are indefeasibly paid and performed in full in cash, the Borrower shall remain bound by the terms of this Agreement and shall not be relieved of any of its Obligations hereunder or under any other Loan Document, and the Agent and the Lenders shall retain all their rights and remedies hereunder (including the Agent's Liens in and all rights and remedies with respect to all then existing and after-arising Collateral).

ARTICLE 11

AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

11.1 Amendments and Waivers.

(a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent at the written request of the Required Lenders) and the Borrower and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Borrower and acknowledged by the Agent, do any of the following:

(i) increase or extend the Commitment of any Lender;

(ii) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document;

(iii) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder or under any other Loan Document;

(iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Lenders or any of them to take any action hereunder;

(v) increase any of the percentages set forth in the definition of the Borrowing Base;

(vi) amend this Section or any provision of this Agreement providing for consent or other action by all Lenders;

(vii) release any guarantors of the Obligation from their guaranties, or release or contractually subordinate Agent's Liens on any Collateral other than as permitted by Section 12.11;

(viii) change the definitions of "Liquidity," "Liquidity Trigger Event," "Majority Lenders," "Required Lenders," or "Qualified Cash Management Investments," or "Qualified Custodial Accounts";

(ix) increase the Dollar amounts or any of the percentages set forth in the definitions of Maximum Revolver Amount, the Maximum Inventory Loan Amount, and Unused Letter of Credit Subfacility;

(x) amend to make less restrictive, or waive compliance with, Section 7.25;

(xi) amend the order of payments set forth in the second sentence of Section 3.8; or

(xii) amend the definitions of "Eligible Accounts" or "Eligible Inventory" such that eligibility criteria becomes less restrictive;

provided, however, the Agent may, in its sole discretion and notwithstanding the limitations contained in clauses (v) and (ix) above and any other terms of this Agreement, make Agent Advances in accordance with Section 1.2(i) and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent, affect the rights or duties of the Agent under this Agreement or any other Loan Document and provided further, that Schedule 1.2 hereto (Commitments) may be amended from time to time by Agent alone to reflect assignments of Commitments in accordance herewith.

(b) [Intentionally Deleted]

(i) requiring the consent of all Lenders, the consent of Required Lenders is obtained, but the consent of other Lenders is not obtained (any such Lender whose consent is not obtained as described in this clause (i) and in clause (ii) below being referred to as a "Non-Consenting Lender"), or

(ii) requiring the consent of Required Lenders, the consent of Majority Lenders is obtained,

then, so long as the Agent is not a Non-Consenting Lender, at the Borrower's request, the Agent or an Eligible Assignee shall have the right (but not the obligation) with the Agent's approval, to purchase from the Non-Consenting Lenders, and the Non-Consenting Lenders agree that they shall sell, all the Non-Consenting Lenders' Commitments (together with all of such Lender's International Loans and International Loan Commitments) for an amount equal to the principal balances thereof and all accrued interest and fees with respect thereto through the date of sale pursuant to Assignment and Acceptance Agreement(s), without premium or discount.

11.2 Assignments; Participations.

(a) Any Lender may, with the written consent of the Agent (which consent shall not be unreasonably withheld), assign and delegate to one or more Eligible Assignees (provided that no consent of the Agent shall be required in connection with any assignment and delegation by a Lender to an Affiliate of such Lender or if such Lender merges, consolidates, or sells or transfers substantially all of its loan portfolio) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Lender hereunder, in a minimum amount (in the aggregate with assignments of International Loans and International Commitments) of $10,000,000 (provided that, unless an assignor Lender has assigned and delegated all of its Loans and Commitments, no such assignment and/or delegation shall be permitted unless, after giving effect thereto, such assignor Lender retains a Commitment in a minimum amount (in the aggregate with its International Commitment) of $10,000,000); provided, however, that the Borrower and the Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrower and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Borrower and the Agent an Assignment and Acceptance in the form of Exhibit F ("Assignment and Acceptance") together with any note or notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $3,500. The Borrower agrees to promptly execute and deliver new promissory notes and replacement promissory notes as reasonably requested by the Agent to evidence assignments of the Loans and Commitments in accordance herewith.

(b) From and after the date that the Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations, including, but not limited to, the obligation to participate in Letters of Credit and Credit Support have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and 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 Lender shall cease to be a party hereto).

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto or the attachment, perfection, or priority of any Lien granted by the Borrower to the Agent or any Lender in the Collateral; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or the performance or observance by the Borrower of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto; (iii) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon the Agent, such assigning Lender 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 this Agreement; (v) such Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers, including the discretionary rights and incidental power, as are reasonably incidental thereto; and (vi) such Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(d) Immediately upon satisfaction of the requirements of Section 11.2(a), this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

(e) Any Lender may at any time sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of the Borrower (a "Participant") participating interests in any Loans, the Commitment of that Lender and the other interests of that Lender (the "originating Lender") hereunder and under the other Loan Documents; provided, however, that (i) the originating Lender's obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Borrower and the Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document except the matters set forth in Section 11.1(a) (i), (ii) and (iii), and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, 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 set-off in respect of its participating interest in amounts owing under this Agreement to the same extent and subject to the same limitation as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.

(f) Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

(g) Notwithstanding anything to the contrary contained in this Agreement, no assignment of a Lender's interest in its Loans or Commitment, and no sale of any participation interest in any Lender's interest in its Loans or Commitment, may be made without such Lender simultaneously assigning (in the case of an assignment) or selling a participation (in the case of a participation) to the same assignee or participant (as applicable), a proportional interest in such assigning or selling Lender's International Loans and International Commitments, in either case pursuant to the relevant assignment and participation provisions in the International Credit Agreement.

ARTICLE 12

THE AGENT

12.1 Appointment and Authorization. Each Lender hereby designates and appoints Bank as its Agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. The Agent agrees to act as such on the express conditions contained in this Article 12. The provisions of this Article 12 are solely for the benefit of the Agent and the Lenders and the Borrower shall have no rights as a third party beneficiary of any of the provisions contained herein. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Agreement, the Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Agent is expressly entitled to take or assert under this Agreement and the other Loan Documents, including (a) the determination of the applicability of ineligibility criteria with respect to the calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to Section 1.2(i), and (c) the exercise of remedies pursuant to Section 9.2, and any action so taken or not taken shall be deemed consented to by the Lenders.

12.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects as long as such selection was made without gross negligence or willful misconduct.

misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Borrower or any Subsidiary or Affiliate of the Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall 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 other Loan Document, or to inspect the properties, books or records of the Borrower or any of the Borrower's Subsidiaries or Affiliates.

12.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement 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 counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, 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 Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or all Lenders if so required by Section 11.1) and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

12.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, however, that unless and until the Agent has received any such request, the 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. If any Lender shall obtain actual knowledge of any Event of Default, such Lender shall promptly notify Agent.

12.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower and its Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and its Affiliates, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person 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 and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property,

financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of any of the Agent-Related Persons.

12.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), in accordance with their Pro Rata Shares, from and against any and all Indemnified Liabilities as such term is defined in Section 13.11; provided, however, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its Pro Rata Share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

12.8 Agent in Individual Capacity. The Bank and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its Subsidiaries and Affiliates as though the Bank were not the Agent hereunder and without notice to or consent of the Lenders. The Bank or its Affiliates may receive information regarding the Borrower, its Affiliates and Account Debtors (including information that may be subject to confidentiality obligations in favor of the Borrower or such Subsidiary) and acknowledge that the Agent and the Bank shall be under no obligation to provide such information to them. With respect to its Loans, the Bank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" include the Bank in its individual capacity.

12.9 Successor Agent. The Agent may resign as Agent upon at least 30 days' prior notice to the Lenders and the Borrower, such resignation to be effective upon the acceptance of a successor agent to its appointment as Agent. In the event the Bank sells all of its Commitment and Revolving Loans as part of a sale, transfer or other disposition by the Bank of substantially all of its loan portfolio, the Bank shall resign as Agent and such purchaser or transferee shall become the successor Agent hereunder. Subject to the foregoing, if the Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article 12 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

12.10 Withholding Tax.

(a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code such Lender agrees with and in favor of the Agent, to deliver to the Agent:

(i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States of America tax treaty, properly completed IRS Forms W-8BEN and W-8ECI before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement;

(ii) if such Lender claims that interest paid under this Agreement is exempt from United States of America withholding tax because it is effectively connected with a United States of America trade or business of such Lender, two properly completed and executed copies of IRS Form W-8ECI before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W-9; and

(iii) such other form or forms as may be required under the Code or other laws of the United States of America as a condition to exemption from, or reduction of, United States of America withholding tax.

Such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(b) If any Lender claims exemption from, or reduction of, withholding tax under a United States of America tax treaty by providing IRS Form FW-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Borrower to such Lender. To the extent of such percentage amount, the Agent will treat such Lender's IRS Form W-8BEN as no longer valid.

(c) If any Lender claiming exemption from United States of America withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

(d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(e) If the IRS or any other Governmental Authority of the United States of America or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

12.11 Collateral Matters.

(a) The Lenders hereby irrevocably authorize the Agent, at its option and in its sole discretion, to release any Agent's Liens upon any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrower of all Loans and reimbursement obligations in respect of Letters of Credit and Credit Support, and the termination of all outstanding Letters of Credit (whether or not any of such obligations are due) and all other Obligations; (ii) constituting property being sold or disposed of if the Borrower certifies to the Agent that the sale or disposition is made in compliance with Section 7.9 and in conjunction with any paydown required by such Section, Section 3.4, or otherwise under this Agreement (and the Agent may rely conclusively on any such certificate, without further inquiry); (iii) constituting Real Estate being refinanced if Borrower certifies to the Agent that the refinancing is in compliance with Section 7.13 and in conjunction with any paydown required by such Section, Section 3.4 or otherwise under this Agreement (and the Agent may rely conclusively on any such certificate, without further inquiry); (iv) constituting property in which the Borrower owned no interest at the time the Lien was granted or at any time thereafter; (v) constituting property leased to the Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement; or (vi) constituting Real Property once the Term Loans have been repaid in full. Except as provided above, the Agent will not release any of the Agent's Liens without the prior written authorization of the Lenders; provided that the Agent may, in its discretion, release the Agent's Liens on Collateral (other than Collateral in the Qualified Custodial Accounts following attachment of Agent's Lien thereon) valued in the aggregate not in excess of $500,000 during each Fiscal Year without the prior written authorization of the Lenders and the Agent may release the Agent's Liens on Collateral (other than Collateral in the Qualified Custodial Accounts following attachment of Agent's Lien thereon) valued in the aggregate not in excess of $1,000,000 during each Fiscal Year with the prior written authorization of Required Lenders. Upon request by the Agent or the Borrower at any time, the Lenders will confirm in writing the Agent's authority to release any Agent's Liens upon particular types or items of Collateral pursuant to this Section 12.11.

(b) Upon receipt by the Agent of any authorization required pursuant to Section 12.11(a) from the Lenders of the Agent's authority to release Agent's Liens upon particular types or items of Collateral, and upon at least five (5) Business Days prior written request by the Borrower, the Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Agent's Liens upon such Collateral; provided, however, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Borrower in respect of) all interests retained by the Borrower, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(c) The Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by the Borrower or is cared for, protected or insured or has been encumbered, or that the Agent's Liens have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion given the Agent's own interest in the Collateral in its capacity as one of the

Lenders and that the Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing.

12.12 Restrictions on Actions by Lenders; Sharing of Payments.

(a) Each of the Lenders agrees that it shall not, without the express consent of all Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon the request of all Lenders, set off against the Obligations, any amounts owing by such Lender to the Borrower or any accounts of the Borrower now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by the Agent, take or cause to be taken any action to enforce its rights under this Agreement or against the Borrower, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral. Each Lender further agrees that it will undertake no "action" within the meaning of California Code of Civil Procedure Section 726, and the cases interpreting the meaning of same (a "Cal Action").

(b) If at any time or times any Lender shall receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any payments with respect to the Obligations of the Borrower to such Lender arising under, or relating to, this Agreement or the other Loan Documents, except for any such proceeds or payments received by such Lender from the Agent pursuant to the terms of this Agreement, or (ii) payments from the Agent in excess of such Lender's Pro Rata portion of all such distributions by the Agent, such Lender shall promptly (1) turn the same over to the Agent, in kind, and with such endorsements as may be required to negotiate the same to the Agent, or in same day funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

(c) Each Lender agrees to defend, indemnify and hold the Agent-Related Persons and each other Lender and each of their respective officers, directors, employees, counsel, representatives, agents and attorneys-in-fact (each, an "Action Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of the committing of a Cal Action.

12.13 Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting the Lenders' security interest in assets which, in accordance with Article 9 of the UCC can be perfected by possession. Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agent's request therefor shall deliver such Collateral to the Agent or in accordance with the Agent's instructions.

Funding Date (or if such Lender is an Assignee, on the applicable Assignment and Acceptance), or pursuant to such other wire transfer instructions as each party may designate for itself by written notice to the Agent. Concurrently with each such payment, the Agent shall identify whether such payment (or any portion thereof) represents principal, premium or interest on the Revolving Loans, Term Loans or otherwise. Unless the Agent receives notice from the Borrower prior to the date on which any payment is due to the Lenders that the Borrower will not make such payment in full as and when required, the Agent may assume that the Borrower has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid.

12.15 Settlement.

(a) (i) Each Lender's funded portion of the Revolving Loans is intended by the Lenders to be equal at all times to such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding such agreement, the Agent, the Bank, and the other Lenders agree (which agreement shall not be for the benefit of or enforceable by the Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them as to the Revolving Loans, the Non-Ratable Loans and the Agent Advances shall take place on a periodic basis in accordance with the following provisions:

(ii) The Agent shall request settlement ("Settlement") with the Lenders on at least a weekly basis, or on a more frequent basis at Agent's election, (A) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, (B) for itself, with respect to each Agent Advance, and (C) with respect to collections received, in each case, by notifying the Lenders of such requested Settlement by telecopy, telephone or other similar form of transmission, of such requested Settlement, no later than 11:00 a.m. (Los Angeles time) on the date of such requested Settlement (the "Settlement Date"). Each Lender (other than the Bank, in the case of Non-Ratable Loans and the Agent in the case of Agent Advances) shall transfer the amount of such Lender's Pro Rata Share of the outstanding principal amount of the Non-Ratable Loans and Agent Advances with respect to each Settlement to the Agent, to Agent's account, not later than 1:00 p.m. (Los Angeles time), on the Settlement Date applicable thereto. Settlements may occur during the continuation of a Default or an Event of Default and whether or not the applicable conditions precedent set forth in Article 8 have then been satisfied. Such amounts made available to the Agent shall be applied against the amounts of the applicable Non-Ratable Loan or Agent Advance and, together with the portion of such Non-Ratable Loan or Agent Advance representing the Bank's Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders. If any such amount is not transferred to the Agent by any Lender on the Settlement Date applicable thereto, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after the Settlement Date and thereafter at the Interest Rate then applicable to the Revolving Loans (A) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, and (B) for itself, with respect to each Agent Advance.

recourse or warranty, an undivided interest and participation in such Non-Ratable Loan or Agent Advance equal to such Lender's Pro Rata Share of such Non-Ratable Loan or Agent Advance and (B) if Settlement has not previously occurred with respect to such Non-Ratable Loans or Agent Advances, upon demand by Bank or Agent, as applicable, shall pay to Bank or Agent, as applicable, as the purchase price of such participation an amount equal to one-hundred percent (100%) of such Lender's Pro Rata Share of such Non-Ratable Loans or Agent Advances. If such amount is not in fact made available to the Agent by any Lender, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after such demand and thereafter at the Interest Rate then applicable to Base Rate Revolving Loans.

(iv) From and after the date, if any, on which any Lender purchases an undivided interest and participation in any Non-Ratable Loan or Agent Advance pursuant to clause (iii) above, the Agent shall promptly distribute to such Lender, such Lender's Pro Rata Share of all payments of principal and interest and all proceeds of Collateral received by the Agent in respect of such Non-Ratable Loan or Agent Advance.

(v) Between Settlement Dates, the Agent, to the extent no Agent Advances are outstanding, may pay over to the Bank any payments received by the Agent, which in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to the Bank's Revolving Loans including Non-Ratable Loans. If, as of any Settlement Date, collections received since the then immediately preceding Settlement Date have been applied to the Bank's Revolving Loans (other than to Non-Ratable Loans or Agent Advances in which such Lender has not yet funded its purchase of a participation pursuant to clause (iii) above), as provided for in the previous sentence, the Bank shall pay to the Agent for the accounts of the Lenders, to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Revolving Loans. During the period between Settlement Dates, the Bank with respect to Non-Ratable Loans, the Agent with respect to Agent Advances, and each Lender with respect to the Revolving Loans other than Non-Ratable Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the actual average daily amount of funds employed by the Bank, the Agent and the other Lenders.

(vi) Unless the Agent has received written notice from Borrower or a Lender to the contrary, the Agent may assume that the applicable conditions precedent set forth in Article 8 have been satisfied and the requested Borrowing will not exceed Availability on any Funding Date for a Revolving Loan or Non-Ratable Loan.

(b) Lenders' Failure to Perform. All Revolving Loans (other than Non-Ratable Loans and Agent Advances) shall be made by the Lenders simultaneously and in accordance with their Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Revolving Loans hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligation to make any Revolving Loans hereunder, (ii) no failure by any Lender to perform its obligation to make any Revolving Loans hereunder shall excuse any other Lender from its obligation to make any Revolving Loans hereunder, and (iii) the obligations of each Lender hereunder shall be several, not joint and several.

may assume that each Lender has made such amount available to the Agent in immediately available funds on the Funding Date. Furthermore, the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If any Lender has not transferred its full Pro Rata Share to the Agent in immediately available funds and the Agent has transferred corresponding amount to the Borrower on the Business Day following such Funding Date that Lender shall make such amount available to the Agent, together with interest at the Federal Funds Rate for that day. A notice by the Agent submitted to any Lender with respect to amounts owing shall be conclusive, absent manifest error. If each Lender's full Pro Rata Share is transferred to the Agent as required, the amount transferred to the Agent shall constitute that Lender's Revolving Loan for all purposes of this Agreement. If that amount is not transferred to the Agent on the Business Day following the Funding Date, the Agent will notify the Borrower of such failure to fund and, upon demand by the Agent, the Borrower shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the Interest Rate applicable at the time to the Revolving Loans comprising that particular Borrowing. The failure of any Lender to make any Revolving Loan on any Funding Date (any such Lender, prior to the cure of such failure, being hereinafter referred to as a "Defaulting Lender") shall not relieve any other Lender of its obligation hereunder to make a Revolving Loan on that Funding Date. No Lender shall be responsible for any other Lender's failure to advance such other Lenders' Pro Rata Share of any Borrowing.

(d) Retention of Defaulting Lender's Payments. The Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrower to the Agent for the Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall instead be paid to or retained by the Agent. In its discretion, the Agent may loan Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. Any amounts so loaned to the Borrower shall bear interest at the rate applicable to Base Rate Revolving Loans and for all other purposes of this Agreement shall be treated as if they were Revolving Loans, provided, however, that for purposes of voting or consenting to matters with respect to the Loan Documents and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender". Until a Defaulting Lender cures its failure to fund its Pro Rata Share of any Borrowing (A) such Defaulting Lender shall not be entitled to any portion of the Unused Line Fee and (B) the Unused Line Fee shall accrue in favor of the Lenders which have funded their respective Pro Rata Shares of such requested Borrowing and shall be allocated among such performing Lenders ratably based upon their relative Commitments. This Section shall remain effective with respect to such Lender until such time as the Defaulting Lender shall no longer be in default of any of its obligations under this Agreement. The terms of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by the Borrower of its duties and obligations hereunder.

(e) Removal of Defaulting Lender. At the Borrower's request, the Agent or an Eligible Assignee reasonably acceptable to the Agent and the Borrower shall have the right (but not the obligation) to purchase from any Defaulting Lender, and each Defaulting Lender shall, upon such request, sell and assign to the Agent or such Eligible Assignee, all of the Defaulting Lender's outstanding Commitments hereunder. Such sale shall be consummated promptly after Agent has arranged for a purchase by Agent or an Eligible Assignee pursuant to an Assignment and Acceptance, and at a price equal to the outstanding principal balance of the Defaulting Lender's Loans, plus accrued interest and fees, without premium or discount, and shall be subject to the provisions of Section 11.2(g).

12.16 Letters of Credit; Intra-Lender Issues.

(a) Notice of Letter of Credit Balance. On each Settlement Date the Agent shall notify each Lender of the issuance of all Letters of Credit since the prior Settlement Date.

(b) Participations in Letters of Credit.

(i) Purchase of Participations. Immediately upon issuance of any Letter of Credit in accordance with Section 1.4(d), each Lender shall be deemed to have irrevocably and unconditionally purchased and received without recourse or warranty, an undivided interest and participation equal to such Lender's Pro Rata Share of the face amount of such Letter of Credit or the Credit Support provided through the Agent to the Letter of Credit Issuer, if not the Bank, in connection with the issuance of such Letter of Credit (including all obligations of the Borrower with respect thereto, and any security therefor or guaranty pertaining thereto).

(ii) Sharing of Reimbursement Obligation Payments. Whenever the Agent receives a payment from the Borrower on account of reimbursement obligations in respect of a Letter of Credit or Credit Support as to which the Agent has previously received for the account of the Letter of Credit Issuer thereof payment from a Lender, the Agent shall promptly pay to such Lender such Lender's Pro Rata Share of such payment from the Borrower. Each such payment shall be made by the Agent on the next Settlement Date.

(iii) Documentation. Upon the request of any Lender, the Agent shall furnish to such Lender copies of any Letter of Credit, Credit Support for any Letter of Credit, reimbursement agreements executed in connection therewith, applications for any Letter of Credit, and such other documentation as may reasonably be requested by such Lender.

(iv) Obligations Irrevocable. The obligations of each Lender to make payments to the Agent with respect to any Letter of Credit or with respect to their participation therein or with respect to any Credit Support for any Letter of Credit or with respect to the Revolving Loans made as a result of a drawing under a Letter of Credit and the obligations of the Borrower for whose account the Letter of Credit or Credit Support was issued to make payments to the Agent, for the account of the Lenders, shall be irrevocable and shall not be subject to any qualification or exception whatsoever, including any of the following circumstances:

(1) any lack of validity or enforceability of this Agreement or any of the other Loan Documents;

(2) the existence of any claim, setoff, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Lender, the Agent, the issuer of such Letter of Credit, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Borrower or any other Person and the beneficiary named in any Letter of Credit);

(3) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(4) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents;

(5) the occurrence of any Default or Event of Default; or

(6) the failure of the Borrower to satisfy the applicable conditions precedent set forth in Article 8.

(c) Recovery or Avoidance of Payments; Refund of Payments In Error. In the event any payment by or on behalf of the Borrower received by the Agent with respect to any Letter of Credit or Credit Support provided for any Letter of Credit and distributed by the Agent to the Lenders on account of their respective participations therein is thereafter set aside, avoided or recovered from the Agent in connection with any receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent their respective Pro Rata Shares of such amount set aside, avoided or recovered, together with interest at the rate required to be paid by the Agent upon the amount required to be repaid by it. Unless the Agent receives notice from the Borrower prior to the date on which any payment is due to the Lenders that the Borrower will not make such payment in full as and when required, the Agent may assume that the Borrower has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid.

(d) Indemnification by Lenders. To the extent not reimbursed by the Borrower and without limiting the obligations of the Borrower hereunder, the Lenders agree to indemnify the Letter of Credit Issuer ratably in accordance with their respective Pro Rata Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Letter of Credit Issuer in any way relating to or arising out of any Letter of Credit or the transactions contemplated thereby or any action taken or omitted by the Letter of Credit Issuer under any Letter of Credit or any Loan Document in connection therewith; provided that no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Letter of Credit Issuer promptly upon demand for its Pro Rata Share of any costs or expenses payable by the Borrower to the Letter of Credit Issuer, to the extent that the Letter of Credit Issuer is not promptly reimbursed for such costs and expenses by the Borrower. The agreement contained in this Section shall survive payment in full of all other Obligations.

12.17 Concerning the Collateral and the Related Loan Documents. Each Lender authorizes and directs the Agent to enter into the other Loan Documents, for the ratable benefit and obligation of the Agent and the Lenders. Each Lender agrees that any action taken by the Agent, Majority Lenders or Required Lenders, as applicable, in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Agent, the Majority Lenders, or the Required Lenders, as applicable, of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. The Lenders acknowledge that the Revolving Loans, Term Loans, Agent Advances, Non-Ratable Loans, International Guaranty, Bank Products and all interest, fees and expenses hereunder constitute one Debt, secured pari passu by all of the Collateral.

12.18 Field Audit and Examination Reports; Disclaimer by Lenders. By signing this Agreement, each Lender:

(a) is deemed to have requested that the Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report (each a "Report" and collectively, "Reports") prepared by or on behalf of the Agent;

(b) expressly agrees and acknowledges that neither the Bank nor the Agent (i) makes any representation or warranty as to the accuracy of any Report, or (ii) shall be liable for any information contained in any Report;

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agent or the Bank or other party performing any audit or examination will inspect only specific information regarding the Borrower and will rely significantly upon the Borrower's books and records, as well as on representations of the Borrower's personnel;

(d) agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except to its participants, or use any Report in any other manner; and

(e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of the Borrower; and (ii) to pay and protect, and indemnify, defend and hold the Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses and other amounts (including Attorney Costs) incurred by the Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

12.19 Relation Among Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Lender.

12.20 Co-Agents. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a "lead arranger," "sole book manager," or "syndication agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders or other Persons as such. Without limiting the foregoing, none of the Lenders so identified as a "lead arranger," "sole book manager," or "syndication agent" shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Person so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

ARTICLE 13

MISCELLANEOUS

13.1 No Waivers; Cumulative Remedies. No failure by the Agent or any Lender to exercise any right, remedy, or option under this Agreement or any present or future supplement thereto, or in any other agreement between or among the Borrower and the Agent and/or any Lender, or delay by the Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by the Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by the Agent or the Lenders on any occasion shall affect or diminish the Agent's and each Lender's rights thereafter to require strict performance by the Borrower of any provision of this

Agreement. The Agent and the Lenders may proceed directly to collect the Obligations without any prior recourse to the Collateral. The Agent's and each Lender's rights under this Agreement will be cumulative and not exclusive of any other right or remedy which the Agent or any Lender may have.

13.2 Severability. The illegality or unenforceability of any provision of this Agreement or any Loan Document or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

13.3 Governing Law; Choice of Forum; Service of Process.

(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT ISSUES WITH RESPECT TO CREATION, PERFECTION, AND ENFORCEMENT OF LIENS UNDER ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN

DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Notwithstanding the provisions of (d) above, no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or related to an obligation to the Lenders which is secured by real estate property collateral (exclusive of real estate space lease assignments). If all the parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in Section 13.3(f).

(f) At the request of either party a controversy or claim which is not submitted to arbitration as provided and limited in Section 13.3(d) and (e) shall be determined by judicial reference. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced.

(g) No provision of Sections (d) through (g) shall limit the right of the Agent or the Lenders to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

13.4 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION 13.3(d), THE BORROWER, THE LENDERS AND THE AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY

SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

13.5 Survival of Representations and Warranties. All of the Borrower's representations and warranties contained in this Agreement shall survive the execution, delivery, and acceptance thereof by the parties, notwithstanding any investigation by the Agent or the Lenders or their respective agents.

13.6 Other Security and Guaranties. The Agent, may, without notice or demand and without affecting the Borrower's obligations hereunder, from time to time: (a) take from any Person and hold collateral (other than the Collateral) for the payment of all or any part of the Obligations and exchange, enforce or release such collateral or any part thereof; and (b) accept and hold any endorsement or guaranty of payment of all or any part of the Obligations and release or substitute any such endorser or guarantor, or any Person who has given any Lien in any other collateral as security for the payment of all or any part of the Obligations, or any other Person in any way obligated to pay all or any part of the Obligations.

13.7 Fees and Expenses. The Borrower agrees to pay to the Agent, for its benefit, on demand, all costs and expenses that Agent pays or incurs in connection with the negotiation, preparation, syndication, consummation, administration, enforcement, and termination of this Agreement or any of the other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses (including reasonable attorneys' and paralegals' fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection with the Loan Documents and the transactions contemplated thereby; (c) costs and expenses of lien and title searches and title insurance; (d) taxes, fees and other charges for recording the Mortgages, filing financing statements and continuations, and other actions to perfect, protect, and continue the Agent's Liens (including costs and expenses paid or incurred by the Agent in connection with the consummation of Agreement); (e) sums paid or incurred to pay any amount or take any action required of the Borrower under the Loan Documents that the Borrower fails to pay or take; (f) costs of appraisals, inspections, and verifications of the Collateral, including travel, lodging, and meals for inspections of the Collateral and the Borrower's operations by the Agent plus the Agent's then customary charge for field examinations and audits and the preparation of reports thereof (such charge is currently $750 per day (or portion thereof) for each Person retained or employed by the Agent with respect to each field examination or audit); and (g) costs and expenses of forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining Payment Accounts and lock boxes, and costs and expenses of preserving and protecting the Collateral. In addition, the Borrower agrees to pay costs and expenses incurred by the Agent (including Attorneys' Costs) to the Agent, for its benefit, on demand, and to the other Lenders for their benefit, on demand, and all reasonable fees, expenses and disbursements incurred by such other Lenders for one law firm retained by such other Lenders, in each case, paid or incurred to obtain payment of the Obligations, enforce the Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the provisions of the Loan Documents, or to defend any claims made or threatened against the Agent or any Lender arising out of the transactions contemplated hereby (including preparations for and consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of the Loan Documents regarding costs and expenses to be paid by the Borrower. All of the foregoing costs and expenses shall be charged to the Borrower's Loan Account as Revolving Loans as described in Section 3.7.

13.8 Notices. Except as otherwise provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registered, with

postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows:

If to the Agent or to the Bank:

Bank of America, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attention: Stephen King
Telecopy No.: (626) 578-6143

with copies to:

Buchalter, Nemer, Fields & Younger
601 South Figueroa, Suite 2400
Los Angeles, California 90017-5704
Attention: Robert Davidson
Telecopy No.: (213) 896-0400

If to the Borrower:

3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: Chief Financial Officer
Telecopy No.: (408) 326-6857

with a copy to the attention of the General Counsel
Telecopy No.: (408) 326-6434

with a copy to:

Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Attention: Craig Tighe, Esq.
Telecopy No.: (650) 833-2001

or to such other address as each party may designate for itself by like notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall not adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.

13.9 Waiver of Notices. Unless otherwise expressly provided herein, the Borrower waives presentment, and notice of demand or dishonor and protest as to any instrument, notice of intent to accelerate the Obligations and notice of acceleration of the Obligations, as well as any and all other notices to which it might otherwise be entitled. No notice to or demand on the Borrower which the Agent or any Lender may elect to give shall entitle the Borrower to any or further notice or demand in the same, similar or other circumstances.

13.10 Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein may be assigned by the Borrower without prior written consent of the Agent and each Lender. The rights and benefits of the Agent and the Lenders hereunder shall, if such Persons so agree, inure to any party acquiring any interest in the Obligations or any part thereof.

13.11 Indemnity of the Agent and the Lenders by the Borrower.

(a) The Borrower agrees to defend, indemnify and hold the Agent-Related Persons, and each Lender and each of its respective officers, directors, employees, counsel, representatives, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement, any other Loan Document, or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Borrower shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities finally determined by a court of competent jurisdiction to result primarily from the willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

(b) The Borrower agrees to indemnify, defend and hold harmless the Agent and the Lenders from any loss or liability directly or indirectly arising out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance relating to the Borrower's or any of its Subsidiaries' operations, business or property. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's or any of its Subsidiaries' property or operations or property leased to the Borrower or any of its Subsidiaries. The indemnity includes but is not limited to Attorneys Costs. The indemnity extends to the Agent and the Lenders, their parents, affiliates, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. "Hazardous substances" means any substance, material or waste that is or becomes designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or regulation under any federal, state or local law (whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including petroleum or natural gas. This indemnity will survive repayment of all other Obligations.

13.12 Limitation of Liability. NO CLAIM MAY BE MADE BY THE BORROWER, ANY LENDER OR OTHER PERSON AGAINST THE AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER AND EACH LENDER HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

13.13 Final Agreement. This Agreement and the other Loan Documents are intended by the Borrower, the Agent and the Lenders to be the final, complete, and exclusive expression of the agreement between them. This Agreement supersedes any and all prior oral or written agreements relating to the subject matter hereof except for the Agent Fee Letter. No modification, rescission, waiver, release, or amendment of any provision of this Agreement or any other Loan Document shall

be made, except by a written agreement signed by the Borrower and a duly authorized officer of each of the Agent and the requisite Lenders.

13.14 Counterparts. This Agreement may be executed in any number of counterparts, and by the Agent, each Lender and the Borrower in separate counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

13.15 Captions. The captions contained in this Agreement are for convenience of reference only, are without substantive meaning and should not be construed to modify, enlarge, or restrict any provision.

13.16 Right of Setoff. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists or the Loans have been accelerated, each Lender is authorized at any time and from time to time, without prior notice to the Borrower, any such notice being waived by the Borrower to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender or any Affiliate of such Lender to or for the credit or the account of the Borrower against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF THE BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.

13.17 Confidentiality.

(a) The Borrower hereby consents that the Agent and each Lender may issue and disseminate to the public general information describing the credit accommodation entered into pursuant to this Agreement, including, subject to the Borrower's prior written approval, the name and address of the Borrower and a general description of the Borrower's business and may use the Borrower's name in advertising and other promotional material.

(b) Agent and each Lender severally agree to maintain the confidentiality of all information identified as "confidential" or "secret" by the Borrower and provided to the Agent or such Lender by or on behalf of the Borrower, under this Agreement or any other Loan Document, except to the extent that such information (i) was or becomes generally available to the public other than as a result of disclosure by the Agent or such Lender, or (ii) was or becomes available on a nonconfidential basis from a source other than the Borrower, provided that such source is not bound by a confidentiality agreement with the Borrower known to the Agent or such Lender; provided, however, that the Agent and any Lender may disclose such information (1) at the request or pursuant to any requirement of any Governmental Authority to which the Agent or such Lender is subject or in connection with an examination of the Agent or such Lender by any such Governmental Authority; (2) pursuant to subpoena or other court process; (3) when required to do so in accordance with the provisions of any applicable Requirement of Law; (4) to the extent reasonably required in connection with any litigation or proceeding (including, but not limited to, any bankruptcy proceeding) to which the Agent, any Lender or their respective Affiliates may be party; (5) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (6) to the Agent's or such Lender's independent auditors, accountants, attorneys and other professional advisors; (7) to any prospective Participant

or Assignee under any Assignment and Acceptance, actual or potential, provided that such prospective Participant or Assignee agrees to keep such information confidential to the same extent required of the Agent and the Lenders hereunder; (8) as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Borrower is party or is deemed party with the Agent or such Lender, and (9) to its Affiliates provided such Affiliates are subject to a confidentiality agreement substantially identical to this Section 13.17(b).

13.18 Conflicts with Other Loan Documents. Unless otherwise expressly provided in this Agreement (or in another Loan Document by specific reference to the applicable provision contained in this Agreement), if any provision contained in this Agreement conflicts with any provision of any other Loan Document, the provision contained in this Agreement shall govern and control.

13.19 Non-Public Information. Agent and Lenders acknowledge that information provided by the Borrower in connection herewith contains material, non-public information concerning the Borrower. Agent and Lenders agree not to use any non-public information provided herein or in connection herewith in violation of applicable restrictions imposed by United States securities laws on the purchase and sale of securities by any person who has received material, non-public information from the issuer of such securities and on the communication of such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information.

[Signatures on following pages]

IN WITNESS WHEREOF, the parties have entered into this Agreement on the date first above written.

		"BORROWER"
		3COM CORPORATION
		By:	Title: ______________
		"AGENT"
		BANK OF AMERICA, N.A., as the Agent
		By:	, Vice President
		"LENDERS"
		BANK OF AMERICA, N.A., as a Lender
		By:	, Vice President
		FOOTHILL CAPITAL CORPORATION, as a Lender
		By:	, Vice President
		GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender
		By:	Duly Authorized Signatory
		CONGRESS FINANCIAL CORPORATION (WESTERN), as a Lender
		By:	, Vice President

		THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender
		By:	, Vice President
		PNC BANK, NATIONAL ASSOCIATION, as a Lender
		By:	, Vice President

ANNEX A
to
Credit Agreement

Definitions

1. Capitalized terms used in the Loan Documents shall have the following respective meanings (unless otherwise defined therein), and all section references in the following definitions shall refer to sections of the Agreement:

"Accounts" means, as to any Person, all of such Person's now owned or hereafter acquired or arising accounts, as defined in the UCC, including any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance.

"Account Debtor" means each Person obligated in any way on or in connection with an Account, Chattel Paper or General Intangibles (including a payment intangible).

"ACH Transactions" means any cash management or related services including the automatic clearing house transfer of funds by the Bank for the account of the Borrower pursuant to agreement or overdrafts.

"Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, five percent (5%) or more of the outstanding equity interest of such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.

"Agent" means the Bank, solely in its capacity as agent for the Lenders, and any successor agent.

"Agent Advances" has the meaning specified in Section 1.2(i).

"Agent Fee Letters" means those certain fee letters, of even date herewith, between Agent and Borrower.

"Agent's Liens" means the Liens in the Collateral granted to the Agent, for the benefit of the Lenders, Bank, and Agent pursuant to this Agreement and the other Loan Documents.

"Agent-Related Persons" means the Agent, together with its Affiliates, and the officers, directors, employees, counsel, representatives, agents and attorneys-in-fact of the Agent and such Affiliates.

"Aggregate Revolver Outstandings" means, at any date of determination: the sum of (a) the unpaid balance of Revolving Loans, (b) the aggregate amount of Pending Revolving Loans, (c) one hundred percent (100%) of the aggregate undrawn face amount of all outstanding Letters of Credit, and (d) the aggregate amount of any unpaid reimbursement obligations in respect of Letters of Credit.

"Agreement" means the Credit Agreement to which this Annex A is attached, as from time to time amended, supplemented, modified or restated.

"Anniversary Date" means each anniversary of the Closing Date.

"Applicable Margin" means

(i) with respect to Base Rate Revolving Loans and all other Obligations (other than Base Rate Term Loans and LIBOR Rate Loans), 1.00%;

(ii) with respect to Base Rate Term Loans, 1.25%;

(iii) with respect to LIBOR Revolving Loans, 2.75%; and

(iv) with respect to LIBOR Term Loans, 3.00%.

EXHIBIT A–1

"Assignee" has the meaning specified in Section 11.2(a).

"Assignment and Acceptance" has the meaning specified in Section 11.2(a).

"Attorney Costs" means and includes all reasonable fees, expenses and disbursements of any law firm or other counsel engaged by the Agent.

"Availability" means, at any time (a) the lesser of (i) the Maximum Revolver Amount or (ii) the Borrowing Base, minus (b) Reserves other than Reserves deducted in the calculation of the Borrowing Base, minus (c) the Aggregate Revolver Outstandings.

"Bank" means Bank of America, N.A., a national banking association, or any successor entity thereto.

"Bank Products" means any one or more of the following types of services or facilities extended to the Borrower or its Subsidiaries by the Bank or any affiliate of the Bank in reliance on the Bank's agreement to indemnify such affiliate: (i) credit cards; (ii) ACH Transactions; (iii) cash management, including controlled disbursement services; (iv) Hedge Agreements; and (v) guaranties for the benefit of Borrower or its Subsidiaries.

"Bank Product Reserves" means all reserves which the Agent from time to time establishes in its reasonable discretion for the Bank Products then provided or outstanding.

"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. § 101 et seq.).

"Base Rate" means, for any day, the rate of interest in effect for such day as publicly announced from time to time by the Bank in Charlotte, North Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank based upon various factors including the Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate). Any change in the prime rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. Each Interest Rate based upon the Base Rate shall be adjusted simultaneously with any change in the Base Rate.

"Base Rate Loans" means, collectively, the Base Rate Revolving Loans and the Base Rate Term Loans.

"Base Rate Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the Base Rate.

"Base Rate Term Loan" means any portion of a Term Loan during any period in which such portion bears interest based on the Base Rate.

"Blocked Account Agreement" means an agreement among the Borrower, the Agent and a Clearing Bank, in form and substance reasonably satisfactory to the Agent, concerning the collection of payments which represent the proceeds of Accounts or of any other Collateral.

"Borrowing" means a borrowing hereunder consisting of Revolving Loans or Term Loans made on the same day by the Lenders to the Borrower or by Bank in the case of a Borrowing funded by Non-Ratable Loans or by the Agent in the case of a Borrowing consisting of an Agent Advance, or the issuance of Letters of Credit hereunder.

"Borrowing Base" means, at any time, an amount equal to the sum of: (a) 85% of the Net Amount of Eligible Accounts; plus (b) the least of (i) the Maximum Inventory Loan Amount, (ii) 35% of Eligible Inventory valued at the lower of cost (on a first-in, first-out basis) or market and excluding any intercompany profit, or (iii) 80% of the net recovery value of appraised Eligible Inventory; minus (c) Reserves from time to time established by the Agent in its reasonable credit judgment.

EXHIBIT A–2

"Borrowing Base Certificate" means a certificate by a Responsible Officer of the Borrower, substantially in the form of Exhibit B (or another form acceptable to the Agent) setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in such detail as shall be reasonably satisfactory to the Agent. All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall originally be made by the Borrower and certified to the Agent; provided, that the Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment, any such calculation (1) to reflect its reasonable estimate of declines in value of any of the Collateral described therein, and (2) to the extent that such calculation is not in accordance with this Agreement.

"Business Day" means (a) any day that is not a Saturday, Sunday, or a day on which banks in Los Angeles, California or Charlotte, North Carolina are required or permitted to be closed, and (b) with respect to all notices, determinations, fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any day that is a Business Day pursuant to clause (a) above and that is also a day on which trading in Dollars is carried on by and between banks in the London interbank market.

"Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

"Capital Lease" of a Person means any lease of property by such Person which, in accordance with GAAP, should be reflected as a capital lease on the balance sheet of such Person.

"Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock or other equity interests, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights, options to purchase or other rights to acquire any of the foregoing.

"Cash Collateral" has the meaning set forth in Section 1.4 (g).

"Cash Equivalents" means highly liquid debt investments acquired with a remaining maturity of three months or less.

"Cash Management Investments" means, for any Person, such Person's (a) cash and Cash Equivalents, (b) deposit accounts, (c) Investment Property, and (d) Short Term Investments.

"Chattel Paper" means as to any Person, all of such Person's now owned or hereafter acquired chattel paper, as defined in the UCC, including electronic chattel paper.

"Clearing Bank" means the Bank or any other banking institution with whom a Payment Account has been established pursuant to a Blocked Account Agreement.

"Closing Date" means the date of this Agreement.

"Closing Fee" has the meaning specified in Section 2.4.

"Code" means the Internal Revenue Code of 1986.

"Collateral" means all of the Borrower's real and personal property and all other assets of any Person from time to time subject to Agent's Liens securing payment or performance of the Obligations.

"Commitment" means, at any time with respect to a Lender, the principal amount set forth beside such Lender's name under the heading "Commitment" on Schedule 1.2 attached to the Agreement or on the signature page of the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 11.2, as such Commitment may be adjusted from time to time in accordance with the provisions of Section 11.2, and "Commitments" means, collectively, the aggregate amount of the commitments of all of the Lenders.

EXHIBIT A–3

"Contaminant" means any waste, pollutant, hazardous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, asbestos in any form or condition, polychlorinated biphenyls ("PCBs"), or any constituent of any such substance or waste.

"Continuation/Conversion Date" means the date on which a Loan is converted into or continued as a LIBOR Rate Loan.

"Credit Support" has the meaning specified in Section 1.4(a).

"Debt" means, with respect to any Person and without duplication, all liabilities, obligations and indebtedness of such Person to any other Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, consisting of indebtedness for borrowed money or the deferred purchase price of property, excluding trade payables or credit memoranda, but including (a) all Obligations; (b) all obligations and liabilities of any other Person secured by any Lien on the such Person's property, even though such Person shall not have assumed or become liable for the payment thereof; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of such Person prepared in accordance with GAAP; (c) all obligations or liabilities created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by such Person, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of such Person prepared in accordance with GAAP; (d) all obligations and liabilities under Guaranties and (e) the present value (discounted at the Base Rate) of lease payments due under synthetic leases.

"Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured, waived, or otherwise remedied during such time) constitute an Event of Default.

"Default Rate" means a fluctuating per annum interest rate at all times equal to the sum of (a) the otherwise applicable Interest Rate plus (b) 2 percentage points per annum. Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate. In addition, the Default Rate shall result in an increase in the Letter of Credit Fee by 2 percentage points per annum.

"Defaulting Lender" has the meaning specified in Section 12.15(c).

"Deferred Revenue Reserve" means any reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for the potential offset against the Borrower's Accounts arising from deferred revenue obligations that are accrued by the Borrower.

"Designated Account" has the meaning specified in Section 1.2(c).

"Dilution" means, for Borrower (as determined by the Agent in its sole discretion), based upon the experience of the immediately prior three months, the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, returns, rebates, promotional allowances, credits, or other dilutive items with respect to the Accounts of Borrower, by (b) the aggregate amount of cash collections from Borrower's Accounts plus the amount in clause (a) for such period.

"Dilution Reserve" means a reserve that the Agent may from time to time establish (in its sole discretion) equal to (a) the total Dollar amount of Eligible Accounts of Borrower times one tenth of one percentage point for each one tenth of one percentage point by which Dilution is in excess of 5%.

EXHIBIT A–4

By way of example, Dilution of 9.6% would require a Dilution Reserve of 4.6% of the amount of Borrower's Eligible Accounts.

"Distribution" means, in respect of any Person: (a) the payment or making of any dividend or other distribution of property in respect of Capital Stock of such Person, other than distributions in Capital Stock of the same class; or (b) the redemption or other acquisition by such Person of its Capital Stock.

"Documents" means, as to any Person, all documents as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of title, now owned or hereafter acquired by such Person.

"DOL" means the United States Department of Labor or any successor department or agency.

"Dollar" and "$" means dollars in the lawful currency of the United States. Unless otherwise specified, all payments under the Loan Documents shall be made in Dollars.

"Eligible Accounts" means the Accounts of Borrower which the Agent in the exercise of its reasonable commercial discretion determines to be Eligible Accounts. Without limiting the discretion of the Agent to establish other criteria of ineligibility, Eligible Accounts shall not, unless the Agent in its sole discretion elects, include any Account:

(a) with respect to which more than 90 days have elapsed since the date of the original invoice therefor or which is more than 60 days past due;

(b) with respect to which any of the representations, warranties, covenants, and agreements contained in the Security Agreement are incorrect or have been breached;

(c) with respect to which Account (or any other Account due from such Account Debtor), in whole or in part, a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason;

(d) which represents a progress billing (as hereinafter defined) or as to which the Borrower has extended the time for payment without the consent of the Agent; for the purposes hereof, "progress billing" means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon the Borrower's completion of any further performance under the contract or agreement;

(e) with respect to which any one or more of the following events has occurred to the Account Debtor on such Account: death or judicial declaration of incompetency of an Account Debtor who is an individual; the filing by or against the Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or similar laws of the United States, any state or territory thereof, or any foreign jurisdiction, now or hereafter in effect; the making of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a receiver or trustee for the Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a "custodian," as defined in the Federal Bankruptcy Code; the institution by or against the Account Debtor of any other type of insolvency proceeding (under the bankruptcy laws of the United States or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of all or any material part of the assets of the Account Debtor; the nonpayment generally by the Account Debtor of its debts as they become due; or the cessation of the business of the Account Debtor as a going concern;

(f) if 50% or more of the aggregate Dollar amount of outstanding Accounts owed at such time by the Account Debtor thereon is classified as ineligible under clause (a) above;

EXHIBIT A–5

(g) owed by an Account Debtor which: (i) does not maintain its chief executive office in the United States of America or Canada (other than the Province of Newfoundland); or (ii) is not organized under the laws of the United States of America or Canada or any state or province thereof; or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof; except to the extent that such Account is either: (y) owed by an Account Debtor that is the foreign subsidiary of IBM, Hewlett Packard, Ingram Micro, Siemens, Solectron, Tech Data, Unysis, or any other corporation approved by Agent in its sole discretion, or (z) secured or payable by a letter of credit satisfactory to the Agent in its discretion;

(h) owed by an Account Debtor which is an Affiliate or employee of the Borrower;

(i) except as provided in clause (k) below, with respect to which either the perfection, enforceability, or validity of the Agent's Liens in such Account, or the Agent's right or ability to obtain direct payment to the Agent of the proceeds of such Account, is governed by any federal, state, or local statutory requirements other than those of the UCC;

(j) owed by an Account Debtor to which the Borrower or any of its Subsidiaries, is indebted in any way, or which is subject to any right of setoff or recoupment by the Account Debtor, unless the Account Debtor has entered into an agreement acceptable to the Agent to waive setoff rights; or if the Account Debtor thereon has disputed liability or made any claim with respect to any other Account due from such Account Debtor; but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim;

(k) owed by the government of the United States of America, or any department, agency, public corporation, or other instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.), and any other steps necessary or desirable to perfect the Agent's Liens therein, have been complied with to the Agent's satisfaction with respect to such Account;

(l) owed by any state, municipality, or other political subdivision of the United States of America, or any department, agency, public corporation, or other instrumentality thereof and as to which the Agent determines that its Lien therein is not or cannot be perfected;

(m) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis;

(n) which is evidenced by a promissory note or other instrument or by chattel paper;

(o) if the Agent believes, in the exercise of its reasonable judgment, that the prospect of collection of such Account is impaired or that the Account may not be paid by reason of the Account Debtor's financial inability to pay;

(p) with respect to which the Account Debtor is located in any state requiring the filing of a Notice of Business Activities Report or similar report in order to permit the Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year;

(q) which arises out of a sale not made in the ordinary course of the Borrower's business;

(r) with respect to which the goods giving rise to such Account have not been shipped and delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been performed by the Borrower (including advance billings of maintenance contracts), and, if applicable, accepted by the Account Debtor, or the Account Debtor revokes its acceptance of such goods or services, or for which a debit memo or chargeback exists;

EXHIBIT A–6

(s) owed by an Account Debtor which, together with its affiliates, is obligated to the Borrower respecting Accounts the aggregate unpaid balance of which exceeds 20% of the aggregate unpaid balance of all Accounts owed to the Borrower at such time by all of the Borrower's Account Debtors, but only to the extent of such excess;

(t) which is not subject to a first priority and perfected security interest in favor of the Agent for the benefit of the Lenders.

If any Account at any time ceases to be an Eligible Account, then such Account shall promptly be excluded from the calculation of Eligible Accounts.

"Eligible Assignee" means (a) a commercial bank, commercial finance company or other asset based lender, having total assets in excess of $1,000,000,000; (b) any Lender listed on the signature page of this Agreement; (c) any Affiliate of any Lender; and (d) if an Event of Default has occurred and is continuing, any Person reasonably acceptable to the Agent. In each case such entity must be exempt from withholding taxes on any payments made by Borrower or Agent under this Agreement.

"Eligible Inventory" means Inventory of Borrower, which the Agent, in its reasonable commercial discretion, determines to be Eligible Inventory. Without limiting the discretion of the Agent to establish other criteria of ineligibility, Eligible Inventory shall not, unless the Agent in its sole discretion elects, include any Inventory:

(a) that is not owned by the Borrower;

(b) that is not subject to the Agent's Liens, which are perfected as to such Inventory, or that are subject to any other Lien whatsoever (other than the Liens described in clause (d) of the definition of Permitted Liens provided that such Permitted Liens (i) are junior in priority to the Agent's Liens or subject to Reserves and (ii) do not impair directly or indirectly the ability of the Agent to realize on or obtain the full benefit of the Collateral);

(d) that consists of work-in-process (including raw materials or finished goods categorized as "manufacturing line" by Borrower), chemicals, samples, prototypes, supplies, or packing and shipping materials;

(e) that is not in good condition, is damaged or defective, is unmerchantable, or does not meet all standards imposed by any Governmental Authority having regulatory authority over such goods, their use or sale;

(f) that is not currently either usable or salable, at prices approximating at least cost, in the normal course of the Borrower's business, or that is slow moving or stale;

(g) that is obsolete or returned or repossessed or used goods taken in trade;

(h) that is located outside the United States of America (or that is in-transit from vendors or suppliers);

(i) that is located in a public warehouse or in possession of a bailee or in a facility leased by the Borrower, if (y) Borrower's customers have direct access to such Inventory, or (z) the warehouseman, or the bailee, or the lessor has not delivered to the Agent, if requested by the Agent, a warehouse letter, subordination agreement or landlord waiver in form and substance satisfactory to the Agent or if a Reserve for rents or storage charges has not been established for Inventory at that location;

(j) that contains or bears any Proprietary Rights licensed to a Borrower by any Person, if the Agent is not satisfied that it may sell or otherwise dispose of such Inventory in accordance with the terms of the Security Agreement and Section 9.2 without infringing the rights of the licensor of such Proprietary Rights or violating any contract with such licensor (and without payment of any

EXHIBIT A–7

royalties other than any royalties due with respect to the sale or disposition of such Inventory pursuant to the existing license agreement), and, as to which the Borrower has not delivered to the Agent a consent or sublicense agreement from such licensor in form and substance acceptable to the Agent if requested;

(k) that is not reflected in the details of a current perpetual inventory report; or

(l) that is Inventory placed on consignment.

If any Inventory at any time ceases to be Eligible Inventory, such Inventory shall promptly be excluded from the calculation of Eligible Inventory.

"Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for a Release or injury to the environment.

"Environmental Compliance Reserve" means any reserve which the Agent establishes in its reasonable discretion after prior written notice to the Borrower from time to time for amounts that are reasonably likely to be expended by the Borrower or any of its Subsidiaries in order for such Person and its operations and property (a) to comply with any notice from a Governmental Authority asserting material non-compliance with Environmental Laws, or (b) to correct any such material non-compliance identified in a report delivered to the Agent and the Lenders pursuant to Section 7.7.

"Environmental Laws" means all federal, state or local laws, statutes, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters.

"Environmental Lien" means a Lien in favor of any Governmental Authority for (a) any liability under Environmental Laws, or (b) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment.

"Equipment" means, as to any Person, all of such Person's now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (except Inventory), including embedded software, motor vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs, molds and office equipment, as well as all of such types of property leased by such Person and all of such Person's rights and interests with respect thereto under such leases (including, without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

"ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder.

"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan, (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan is in reorganization, (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of

EXHIBIT A–8

ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multi-employer Plan, (e) the occurrence of an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multi-employer Plan, or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

"Event of Default" has the meaning specified in Section 9.1.

"Exchange Act" means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.

"FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions.

"Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Bank on such day on such transactions as determined by the Agent.

"Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereto.

"Financial Statements" means, according to the context in which it is used, the financial statements referred to in Sections 5.2 and 6.6 or any other financial statements required to be given to Agent or the Lenders pursuant to this Agreement.

"Fiscal Month" means the Borrower's fiscal month for financial accounting purposes.

"Fiscal Quarter" means the Borrower's fiscal quarter for financial accounting purposes.

"Fiscal Year" means the Borrower's fiscal year for financial accounting purposes. The current Fiscal Year of the Borrower will end on May 31, 2002.

"Fixed Assets" means, as to any Person, the Equipment and Real Estate of such Person.

"Funding Date" means the date on which a Borrowing occurs.

"GAAP" means generally accepted accounting principles and practices set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession).

EXHIBIT A–9

against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which such Person is beneficiary, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged equity interests or Investment Property and any letter of credit, guarantee, claim, security interest or other security held by or granted to such Person.

"Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

"Guaranty" means, with respect to any Person, all obligations of such Person which in any manner directly or indirectly guarantee or assure, or in effect guarantee or assure, the payment or performance of any indebtedness, dividend or other obligations of any other Person (the "guaranteed obligations"), or assure or in effect assure the holder of the guaranteed obligations against loss in respect thereof, including any such obligations incurred through an agreement, contingent or otherwise: (a) to purchase the guaranteed obligations or any property constituting security therefor; (b) to advance or supply funds for the purchase or payment of the guaranteed obligations or to maintain a working capital or other balance sheet condition; or (c) to lease property or to purchase any debt or equity securities or other property or services.

"Hedge Agreement" means, with respect to any Person, any and all transactions, agreements or documents now existing or hereafter entered into, which provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging such Person's exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

"Initial Funding Date" means the date of the funding of the Term Loans and the initial Revolving Loans hereunder.

"Instruments" means, as to any Person, all instruments as such term is defined in the UCC, now owned or hereafter acquired by such Person.

"Intercompany Subordination Agreement" means that certain Intercompany Subordination Agreement of even date herewith, among Agent, Borrower, International Borrowers and the other Restricted Subsidiaries.

"Interest Period" means, as to any LIBOR Rate Loan, the period commencing on the Funding Date of such Loan or on the Continuation/Conversion Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and ending on the date one, two, or three months thereafter as selected by the Borrower in its Notice of Borrowing, in the form attached hereto as Exhibit D, or Notice of Continuation/Conversion, in the form attached hereto as Exhibit E, provided that:

(a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following 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 preceding Business Day;

(b) any Interest Period pertaining to a LIBOR Rate Loan 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 the calendar month at the end of such Interest Period; and

EXHIBIT A–10

"Interest Rate" means each or any of the interest rates, including the Default Rate, set forth in Section 2.1.

"International Aggregate Revolver Outstandings" means, as of any date of measurement, the "Aggregate Revolver Outstandings" (as that term is defined in the International Credit Agreement).

"International Borrowers" means, collectively, 3Com Technologies and 3Com Europe.

"International Commitments" means, with respect to any Lender, such Lender's "Commitments" (as that term is defined in the International Credit Agreement").

"International Credit Agreement" means that certain Credit Agreement, of even date herewith, among Agent, Lenders, and International Borrowers."

"International Facility" means, collectively, the revolving and term loan facilities in favor of the International Borrowers, making up the "Total Facility" (as that term is defined in the International Credit Agreement).

"International Guaranty" means that certain Continuing Guaranty, of even date herewith, by Borrower in favor of Agent and the Lenders, respecting the International Loan Obligations.

"International Letters of Credit" means "Letters of Credit" (as that term is defined in the International Credit Agreement) issued for the benefit of one or more of the International Borrowers.

"International Loans" means, with respect to any Lender, such Lender's "Loans" (as that term is defined in the International Credit Agreement).

"International Loan Obligations" means, as of any date of measurement, the then outstanding "Obligations" (as that term is defined in the International Credit Agreement) of International Borrowers.

"International Term Loans" means the "Term Loans" (as that term is defined in the International Credit Agreement).

"Inventory" means, as to any Person, all of such Person's now owned and hereafter acquired inventory, goods and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded software), other materials and supplies of any kind, nature or description which are used or consumed in such Person's business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise, and all documents of title or other Documents representing them.

"Investment" means, as to any Person, any acquisition of property by such Person in exchange for cash or other property, whether in the form of an acquisition of stock, debt, or other indebtedness or obligation, or the purchase or acquisition by such Person of any other property, or a loan, advance, capital contribution, or subscription by such Person, except the following:

(a) acquisitions of Equipment to be used in the business of such Person;

(b) acquisitions of Inventory in the ordinary course of business of such Person;

(d) Hedge Agreements.

"Investment Property" means, as to any Person, all of such Person's right title and interest in and to any and all: (a) securities whether certificated or uncertificated; (b) securities entitlements; (c) securities accounts; (d) commodity contracts; or (e) commodity accounts.

EXHIBIT A–11

"IRS" means the Internal Revenue Service and any Governmental Authority succeeding to any of its principal functions under the Code.

"Latest Projections" means: (a) on the Closing Date and thereafter until the Agent receives new projections pursuant to Section 5.2(e), the projections of the Borrower's financial condition, results of operations, and cash flows, for the period commencing on September 1, 2001 and ending on May 31, 2003 and delivered to the Agent prior to the Closing Date; and (b) thereafter, the projections most recently received by the Agent pursuant to Section 5.2(e).

"Lender" and "Lenders" have the meanings specified in the introductory paragraph hereof and shall include the Agent to the extent of any Agent Advance outstanding and the Bank to the extent of any Non-Ratable Loan outstanding; provided that no such Agent Advance or Non-Ratable Loan shall be taken into account in determining any Lender's Pro Rata Share.

"Letter of Credit" has the meaning specified in Section 1.4(a).

"Letter of Credit Fee" has the meaning specified in Section 2.6.

"Letter of Credit Issuer" means the Bank, any affiliate of the Bank or any other financial institution that issues any Letter of Credit pursuant to this Agreement.

"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate Loans, the rate of interest per annum determined pursuant to the following formula:

LIBOR Rate =

Offshore Base Rate

1.00 - Eurodollar Reserve Percentage

Where,

"Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100^th of 1%) in effect on such day applicable to member banks under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Offshore Base Rate for each outstanding LIBOR Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.

"Offshore Base Rate" means the rate per annum appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. If for any reason none of the foregoing rates is available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum determined by Agent as the rate of interest at which dollar deposits in the approximate amount of the LIBOR Rate Loan comprising part of such Borrowing would be offered by the Bank's London Branch to major banks in the offshore dollar market at their request at or about 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period.

EXHIBIT A–12

"LIBOR Rate Loans" means, collectively, the LIBOR Revolving Loans and the LIBOR Term Loans.

"LIBOR Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the LIBOR Rate.

"LIBOR Term Loan" means any portion of a Term Loan during any period in which such portion bears interest based on the LIBOR Rate.

"Lien" means: (a) any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, charge, claim, or lien arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; (b) to the extent not included under clause (a), any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, lease or other title exception or encumbrance affecting property; and (c) any contingent or other agreement to provide any of the foregoing.

"Liquidity" means, at any time of measurement, the sum of: (a) the lesser of (y) $105,000,000 and (z) aggregate Availability hereunder and under the International Credit Agreement, plus (b) the amount of Qualified Cash Management Investments, valued at current market values and as most recently reported to Agent in accordance with Section 5.2(k).

"Liquidity Trigger Event" means the first to occur of (1) an Event of Default (y) arising out of a breach of Section 7.25 or (z) under Section 9.1 (a), or (2) acceleration of the Loans pursuant to Section 9.2 (a)(B).

"Loan Account" means the loan account of the Borrower, which account shall be maintained by the Agent.

"Loan Documents" means this Agreement, the Notes, the Security Agreement, the Mortgages, the International Guaranty, the Pledge Agreement, the Intercompany Subordination Agreement, any Hedge Agreements entered into by Borrower or its Subsidiaries with Bank, and any other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise relating to the Obligations, the Collateral, or any other aspect of the transactions contemplated by this Agreement.

"Loans" means, collectively, all loans and advances provided for in Article 1.

"Majority Lenders" means at any date of determination Lenders whose Pro Rata Shares aggregate more than 50%, but in any event no fewer than two (2) Lenders if there exist at least two (2) Lenders at such time.

"Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the Federal Reserve Board.

"Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries (taken as a whole), or the Collateral (taken as a whole); (b) a material impairment of the ability of the Borrower or any Restricted Subsidiary to perform under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower of any Loan Document to which it is a party.

"Maximum Inventory Loan Amount" means, as of any date of measurement (a) $50,000,000, less (b) the International Aggregate Revolver Outstandings advanced against Eligible Inventory of the International Borrowers.

EXHIBIT A–13

"Maximum Revolver Amount" means, as of any date of measurement (a) $105,000,000, less (b) the International Aggregate Revolver Outstandings.

"Minimum Price" for any parcel of Real Estate, has the meaning set forth on Schedule 3.4(b).

"Mortgages" means and includes any and all of the mortgages, deeds of trust, deeds to secure debt, assignments and other instruments executed and delivered by the Borrower to or for the benefit of the Agent by which the Agent, on behalf of the Lenders, acquires a Lien on the Real Estate of Borrower or a collateral assignment of the Borrower's interest under leases of Real Estate, and all amendments, modifications and supplements thereto.

"Multi-employer Plan" means a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by the Borrower or any ERISA Affiliate.

"Net Amount of Eligible Accounts" means, at any time, the gross amount of Eligible Accounts, calculated in Dollars, less sales, excise or similar taxes, and less returns, discounts, claims, credits, and allowances, accrued rebates, offsets, deductions, unapplied cash, counterclaims, disputes and other defenses of any nature at any time issued, owing, granted, outstanding, available or claimed.

"Net Proceeds" has the meaning specified in Section 3.4(b).

"Non-Ratable Loan" and "Non-Ratable Loans" have the meanings specified in Section 1.2(h).

"Notes" means, collectively, the Revolving Loan Notes and Term Loan Notes.

"Notice of Borrowing" has the meaning specified in Section 1.2(b).

"Notice of Continuation/Conversion" has the meaning specified in Section 2.2(b).

"Obligations" means all present and future loans, advances, liabilities, obligations, covenants, duties, and debts owing by the Borrower to the Agent and/or any Lender, arising under or pursuant to this Agreement or any of the other Loan Documents, whether or not evidenced by any note, or other instrument or document, whether arising from an extension of credit, opening of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, as principal or guarantor, and including all principal, interest (including any interest which accrues after the filing of a proceeding under the Bankruptcy Code or which would have accrued but for such filing), charges, expenses, fees, attorneys' fees, filing fees and any other sums chargeable to the Borrower hereunder or under any of the other Loan Documents. "Obligations" includes, without limitation, (a) all debts, liabilities, and obligations now or hereafter arising from or in connection with the Letters of Credit and (b) all debts, liabilities and obligations now or hereafter arising from or in connection with Bank Products.

"Other Taxes" means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.

"Participant" means any Person who shall have been granted the right by any Lender to participate in the financing provided by such Lender under this Agreement, and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.

"Payment Account" means each bank account established pursuant to the Security Agreement, to which the proceeds of Accounts and other Collateral are deposited or credited, and which is maintained in the name of the Borrower, as the Agent may determine, on terms acceptable to the Agent.

EXHIBIT A–14

"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental Authority succeeding to the functions thereof.

"Pending Revolving Loans" means, at any time, the aggregate principal amount of all Revolving Loans requested in any Notice of Borrowing received by the Agent which have not yet been advanced.

"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multi-employer Plan has made contributions at any time during the immediately preceding five (5) plan years.

"Permitted Liens" means:

(a) Liens for taxes not delinquent or statutory Liens for taxes in an amount not to exceed $5,000,000 provided that the payment of such taxes which are due and payable is being contested in good faith and by appropriate proceedings diligently pursued and as to which adequate financial reserves have been established on Borrower's books and records and a stay of enforcement of any such Lien is in effect;

(b) the Agent's Liens;

(c) Liens consisting of deposits made in the ordinary course of business in connection with, or to secure payment of, obligations under worker's compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of Debt) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of Debt) or to secure statutory obligations (other than liens arising under ERISA or Environmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds;

(d) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, provided that if any such Lien arises from the nonpayment of such claims or demand when due, such claims or demands do not exceed $1,000,000 in the aggregate;

(e) Liens constituting encumbrances in the nature of reservations, exceptions, encroachments, easements, rights of way, covenants running with the land, and other similar title exceptions or encumbrances affecting any Real Estate; provided that they do not in the aggregate materially detract from the value of the Real Estate or materially interfere with its use in the ordinary conduct of the Borrower's business;

(f) Liens arising from judgments and attachments in connection with court proceedings provided that the attachment or enforcement of such Liens would not result in an Event of Default hereunder and such Liens are being contested in good faith by appropriate proceedings, adequate reserves have been set aside and no material Property is subject to a material risk of loss or forfeiture and the claims in respect of such Liens are fully covered by insurance (subject to ordinary and customary deductibles) and a stay of execution pending appeal or proceeding for review is in effect;

(g) Liens in favor of Agent or Lenders securing the International Loan Obligations;

(h) Interests of lessors under operating leases;

(i) Liens on assets of the Unrestricted Subsidiaries, as long as the holder of such Lien has no recourse to Borrower or any Restricted Subsidiaries or their assets;

(j) Liens securing purchase money secured Debt incurred to finance the purchase of Equipment and the payment of related software and installation, delivery and tax expenses

EXHIBIT A–15

provided that Liens securing the same attach only to the Equipment acquired by the incurrence of such Debt and the proceeds thereof, and (ii) such Debt is incurred no later than 180 days following the purchase of such Equipment and related property; and

(k) other Liens securing Debt not in excess of $10,000,000 in the aggregate at any time outstanding;

(l) Liens in connection with synthetic leases;

(m) Liens consisting of leases or subleases and licenses and sublicenses granted to others not interfering in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole, and any interest or title of a lessor or licensor under any lease or license;

(n) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(o) Liens on cash collateral securing reimbursement obligations to issuing banks under letters of credit;

(p) Liens on Proprietary Rights to the extent such Liens do not secure Debt for borrowed money and are not in favor of a financial institution;

(q) Liens on assets acquired in any Investment not prohibited hereunder to the extent such Liens were in existence at the time of acquisition;

(r) Liens on earnest money deposits required under a letter of intent or purchase agreement not prohibited hereunder;

(s) Liens on property representing part of the proceeds of a sale or other disposition of property, to secure post-closing obligations to the buyer in connection with such sale or other disposition; and

(t) Liens on cash representing proceeds from the issuance of Debt for the purpose of making interest payments in connection with such Debt.

"Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, Governmental Authority, or any other entity.

"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Borrower sponsors or maintains or to which the Borrower makes, is making, or is obligated to make contributions and includes any Pension Plan.

"Pledge Agreement" means that certain Stock Pledge Agreement, of even date herewith, by Borrower in favor of Agent.

"Priority Payable Reserve" means any reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for Eligible Inventory located in a jurisdiction where (y) unpaid suppliers are entitled to a Lien, claim, or trust against such Inventory that would be prior to or pari passu with, Agent's Lien thereon, which reserve shall be in an amount determined by the Agent to be sufficient to repay any amounts payable to such supplier to release such supplier's claim with respect to such Inventory, or (z) such Inventory is subject to prior claims for value added taxes, amounts payable to inland revenue, social security, occupational and state pension schemes, or unpaid employee salaries.

"Proprietary Rights" means, as to any Person, all of such Person's now owned and hereafter arising or acquired: licenses, franchises, permits, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent, trademark and

EXHIBIT A–16

service mark applications, and all licenses and rights related to any of the foregoing, and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing.

"Pro Rata Share" means, with respect to a Lender, a fraction (expressed as a percentage), the numerator of which is the amount of such Lender's Commitment and the denominator of which is the sum of the amounts of all of the Lenders' Commitments, or if no Commitments are outstanding, a fraction (expressed as a percentage), the numerator of which is the amount of Obligations owed to such Lender and the denominator of which is the aggregate amount of the Obligations owed to the Lenders, in each case giving effect to a Lender's participation in Non-Ratable Loans and Agent Advances.

"Qualified Cash Management Investments" means, at any time of measurement, the aggregate Cash Management Investments that are: (a) owned by Borrower or its Subsidiaries, (b) in conformity with the investment policy approved by the audit committee of Borrower's Board of Directors, (c) unencumbered by any Lien (other than any Lien in favor of Agent or in favor of any depositary institution or financial intermediary on whose books the Cash Management Investment is carried, and in the latter case only to secure fees and costs arising out of carrying such Cash Management Investment), and (d) if owned by Restricted Subsidiaries, immediately distributable to Borrower without restriction (including any legal restrictions of any relevant jurisdiction on such Subsidiary's distributable assets) and without the need to obtain the consent of any third Person or the approval of any Governmental Authority. Not more than $50,000,000 at any one time of Cash Management Investments owned by Unrestricted Subsidiaries may be considered Qualified Cash Management Investments.

"Qualified Custodial Account" means any of Borrower's or 3Com Technologies' custodial or other investment accounts designated by Borrower that meet the following criteria: (i) such account is a securities account (as defined in Section 8501 of the UCC); (ii) such account is maintained by a securities intermediary whose jurisdiction (as defined in Section 8110 of the UCC) is in the United States; (iii) such securities intermediary has entered into a control agreement with Agent, on terms satisfactory to Agent, which among other things is sufficient to give Agent, for the benefit of the Lenders, control (as defined in Section 8106 of the UCC) over the securities account, any security entitlements therein, and any securities therein. As of the Closing Date, the following accounts are Qualified Custodial Accounts: Custodial Accounts No. CMVF 1000002 and CMYF 2000002 maintained at Mellon Bank, N.A..

"Real Estate" means, as to any Person, all of such Person's now or hereafter owned or leased estates in real property, including, without limitation, all fees, leaseholds and future interests, together with all of such Person's now or hereafter owned or leased interests in the improvements thereon, the fixtures attached thereto and the easements appurtenant thereto.

"Release" means a release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment or into or out of any Real Estate or other property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Real Estate or other property.

"Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC.

"Required Lenders" means at any time Lenders whose Pro Rata Shares aggregate more than 66²/3%, but, in any event no fewer than two (2) Lenders if there exist at least two (2) Lenders at such time.

EXHIBIT A–17

"Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.

(a) Bank Product Reserves;

(b) a reserve for accrued, unpaid interest on the Obligations;

(c) reserves for not less than three months rent at leased locations subject to statutory or contractual landlord liens or where Agent has not received an acceptable agreement from the landlord;

(d) Inventory shrinkage;

(e) Environmental Compliance Reserves;

(f) Royalty Reserves;

(g) customs charges;

(h) Priority Payable Reserves;

(i) Deferred Revenue Reserves;

(j) Warranty / Technical Support Reserves

(k) Dilution Reserves; and

(l) warehousemen's or bailees' charges.

"Responsible Officer" means the chief executive officer or the president of the Borrower, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, designation of any replacement accounts to the Designated Accounts pursuant to Section 1.2(c) and the preparation of the Borrowing Base Certificate, the chief financial officer, the treasurer, the assistant treasurer, and corporate controller of the Borrower, or any other officer having substantially the same authority and responsibility.

"Restricted Subsidiary" means: International Borrowers; 3Com Holdings Limited; 3Com Asia Pacific Rim Pte. Limited; 3Com UK Holdings Ltd.; 3Com IFSC (Ireland); and 3Com Ventures, Inc.; and any Subsidiary acquired or created after the Closing Date and designated to the Agent as a Restricted Subsidiary by Borrower.

"Revolving Loans" has the meaning specified in Section 1.2 and includes each Agent Advance and Non-Ratable Loan.

"Revolving Loan Note" and "Revolving Loan Notes" have the meanings specified in Section 1.2(a)(ii).

"Royalty Reserve" means any reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for Inventory subject to license agreements with third parties, in an amount determined by the Agent to be sufficient to make any required royalty payments owing by Borrower with respect to such Inventory.

EXHIBIT A–18

"Securities Act" means the Securities Act of 1933 and the rules and regulations promulgated thereunder.

"Security Agreement" means the Security Agreement of even date herewith between Borrower and Agent for the benefit of Agent and other Lenders.

"Settlement" and "Settlement Date" have the meanings specified in Section 12.15(a)(ii).

"Short-term Investments" means investments with maturities exceeding three months but less than three years.

"Solvent" means, when used with respect to any Person, that at the time of determination:

(a) the assets of such Person, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities); and

(b) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and

(c) it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and

(d) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.

"Stated Termination Date" means November 28, 2004.

"Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Borrower.

"3Com Europe" means 3Com Europe Limited, a company incorporated in England and Wales with registered NUMBER 2600346.

"3Com Technologies" means 3Com Technologies, an exempted limited liability company incorporated in the Cayman Islands.

"Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents, or arising out of the transactions evidenced hereunder or thereunder, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by the Agent's or each Lender's net income in any the jurisdiction (whether federal, state or local and including any political subdivision thereof) under the laws of which such Lender or the Agent, as the case may be, is organized or maintains a lending office.

"Term Loan" and "Term Loans" have the meanings specified in Section 1.3(a).

"Term Loan Note" and "Term Loan Notes" have the meanings specified in Section 1.3(c).

"Termination Date" means the earliest to occur of (i) the Stated Termination Date, (ii) the date the Total Facility is terminated either by the Borrower pursuant to Section 3.2 or by the Required Lenders

EXHIBIT A–19

pursuant to Section 9.2, and (iii) the date this Agreement is otherwise terminated for any reason whatsoever pursuant to the terms of this Agreement.

"Total Facility" has the meaning specified in Section 1.1.

"UCC" means the Uniform Commercial Code, as in effect from time to time, of the State of California or of any other state the laws of which are required as a result thereof to be applied in connection with the issues of perfection, continuation, or enforcement of security interests; provided, that to the extent that the UCC is used to define any term herein or in any other documents and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern.

"Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

"Unrestricted Subsidiary" means any Subsidiary of Borrower other than a Restricted Subsidiary.

"Unused Letter of Credit Subfacility" means an amount equal to (a) $25,000,000 minus (b) the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit and International Letters of Credit plus, without duplication, (ii) the aggregate unpaid reimbursement obligations with respect to all Letters of Credit and International Letters of Credit.

"Unused Line Fee" has the meaning specified in Section 2.5.

"Warranty/Technical Support Reserve" means the reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for the potential offset against the Borrower's Accounts arising from obligations the Borrower may have to an Account Debtor for warranty and technical support services.

2. Accounting Terms. Any accounting term used in the Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations in the Agreement shall be computed, unless otherwise specifically provided therein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the Financial Statements.

3. Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b) The words "hereof," "herein," "hereunder" and similar words refer to the Agreement as a whole and not to any particular provision of the Agreement; and Subsection, Section, Schedule and Exhibit references are to the Agreement unless otherwise specified.

(c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

(ii) The term "including" is not limiting and means "including without limitation."

(iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including."

(iv) The word "or" is not exclusive.

(d) Unless otherwise expressly provided herein, (i) references to agreements (including the Agreement) and other contractual instruments shall be deemed to include all subsequent

EXHIBIT A–20

amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

(e) The captions and headings of the Agreement and other Loan Documents are for convenience of reference only and shall not affect the interpretation of the Agreement.

(f) The Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(g) For purposes of Section 9.1, a breach of a financial covenant contained in Section 7.25 shall be deemed to have occurred as of any date of determination thereof by the Agent or as of the last day of any specified measuring period, regardless of when the Financial Statements or other certificates reflecting such breach are delivered to the Agent.

(h) The Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Borrower and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely because of the Agent's or Lenders' involvement in their preparation.

EXHIBIT A–21

EXHIBIT A-1

FORM OF REVOLVING LOAN NOTE

Exhibit A–1

EXHIBIT A-2

FORM OF TERM LOAN NOTE

Exhibit A–2

EXHIBIT B

FORM OF BORROWING BASE CERTIFICATE

EXHIBIT B

EXHIBIT C

FINANCIAL STATEMENTS

EXHIBIT C

EXHIBIT D

NOTICE OF BORROWING

Date: , 200

To:

Bank of America, N.A. as Agent for the Lenders who are parties to the Credit Agreement dated as of November 28, 2001 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among 3Com Corporation, certain Lenders which are signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

The undersigned, 3Com Corporation (the "Borrower"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably of the Borrowing specified below:

1.: The Business Day of the proposed Borrowing is , 200 .
2.: The aggregate amount of the proposed Borrowing is $ .
3.: The Borrowing is to be comprised of $ of Base Rate and $ of LIBOR Rate Loans.
4.: The duration of the Interest Period for the LIBOR Rate Loans, if any, included in the Borrowing shall be months.

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom:

(a) The representations and warranties of the Borrower contained in the Credit Agreement are true and correct as though made on and as of such date;

(b) No Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; and

(c) The proposed Borrowing will not cause the Aggregate Revolver Outstandings to exceed (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolver Amount, less (b) Reserves.

		*[NAME OF BORROWER]*
		By:
		Title:

EXHIBIT D–1

EXHIBIT E

NOTICE OF CONTINUATION/CONVERSION

Date: , 200

To:

Bank of America, N.A. as Agent for the Lenders to the Credit Agreement dated as of November 28, 2001 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among 3Com Corporation, certain Lenders which are signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

1.: The Continuation/Conversion Date is , 200 .
2.: The aggregate amount of the Loans to be [converted] [continued] is $ .
3.: The Loans are to be [converted into] [continued as] [LIBOR Rate] [Base Rate] Loans.
4.: The duration of the Interest Period for the LIBOR Rate Loans included in the [conversion] [continuation] shall be months.

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the proposed Continuation/Conversion Date, before and after giving effect thereto and to the application of the proceeds therefrom:

(a) The representations and warranties of the Borrower contained in the Credit Agreement are true and correct as though made on and as of such date;

(b) Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion][continuation]; and

(c) The proposed conversion-continuation will not cause the Aggregate Revolver Outstandings to exceed (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolver Amount, less (b) Reserves.

		*[NAME OF BORROWER]*
		By:
		Title:

EXHIBIT E–1

EXHIBIT F

[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of , 200 is made between (the "Assignor") and (the "Assignee").

RECITALS

WHEREAS, the Assignor is party to that certain Credit Agreement dated as of November 28, 2001 (as amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement") among 3COM Corporation, a Delaware corporation (the "Borrower"), the several financial institutions from time to time party thereto (including the Assignor, the "Lenders"), and Bank of America, N. A., as agent for the Lenders (the "Agent"). Any terms defined in the Credit Agreement and not defined in this Assignment and Acceptance are used herein as defined in the Credit Agreement;

WHEREAS, as provided under the Credit Agreement, the Assignor has committed to making Loans (the "Committed Loans") to the Borrower in an aggregate amount not to exceed $ (the "Commitment");

WHEREAS, the Assignor has made Committed Loans in the aggregate principal amount of $ to the Borrower

WHEREAS, [the Assignor has acquired a participation in its pro rata share of the Lenders' liabilities under Letters of Credit in an aggregate principal amount of $ (the "L/C Obligations")] [no Letters of Credit are outstanding under the Credit Agreement]; and

WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, together with a corresponding portion of each of its outstanding Committed Loans and L/C Obligations, in an amount equal to $ (the "Assigned Amount") on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Assignment and Acceptance.

(a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) % (the "Assignee's Percentage Share") of (A) the Commitment, the Committed Loans and the L/C Obligations of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Credit Agreement and the Loan Documents.

(b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Lender under the Credit Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount

EXHIBIT F–1

and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under Sections and of the Credit Agreement to the extent such rights relate to the time prior to the Effective Date.

(c) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee's Commitment will be $ .

(d) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor's Commitment will be $ .

2. Payments.

(a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $ , representing the Assignee's Pro Rata Share of the principal amount of all Committed Loans.

(b) The Assignee further agrees to pay to the Agent a processing fee in the amount specified in Section 11.2(a) of the Credit Agreement.

3. Reallocation of Payments.

Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment, and Committed Loans and L/C Obligations shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt.

4. Independent Credit Decision.

The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of the Borrower, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the 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 and legal decisions in taking or not taking action under the Credit Agreement.

5. Effective Date; Notices.

(a) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be , 200 (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date:

(i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee;

[(ii) the consent of the Agent required for an effective assignment of the Assigned Amount by the Assignor to the Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date;]

(iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance;

EXHIBIT F–2

[(iv) the Assignee shall have complied with Section 11.2 of the Credit Agreement (if applicable);]

(v) the processing fee referred to in Section 2(b) hereof and in Section 11.2(a) of the Credit Agreement shall have been paid to the Agent; and

(b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Borrower and the Agent for acknowledgment by the Agent, a Notice of Assignment in the form attached hereto as Schedule 1.

6. [Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]

(a) The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the Lenders pursuant to the terms of the Credit Agreement.

(b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent under the Credit Agreement.]

7. Withholding Tax.

The Assignee (a) represents and warrants to the Lender, the Agent and the Borrower that under applicable law and treaties no tax will be required to be withheld by the Lender with respect to any payments to be made to the Assignee hereunder, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new Forms W-8ECI or W-8BEN upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

8. Representations and Warranties.

(a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles.

EXHIBIT F–3

Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Borrower, or the performance or observance by the Borrower, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith.

(c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; [and (iv) it is an Eligible Assignee.]

9. Further Assurances.

The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to the Borrower or the Agent, which may be required in connection with the assignment and assumption contemplated hereby.

10. Miscellaneous.

(a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof.

(b) All payments made hereunder shall be made without any set-off or counterclaim.

(c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance.

(d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF [Note: confirm choice of law] . The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in [ ] over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such [ ] State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding.

EXHIBIT F–4

(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

NOTE: ASSIGNMENTS HEREUNDER MAY ONLY BE EFFECTED IN CONJUNCTION WITH A PROPORTIONAL ASSIGNMENT OF ASSIGNOR'S INTERNATIONAL LOANS AND INTERNATIONAL COMMITMENTS AS SET FORTH IN SECTION 11.2(g) OF THE CREDIT AGREEMENT.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written.

		[ASSIGNOR]
		By:
		Title:
		Address:
		[ASSIGNEE]
		By:
		Title:
		Address:

EXHIBIT F–5

SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE

NOTICE OF ASSIGNMENT AND ACCEPTANCE

, 200

Bank of America, N.A
55 South Lake Avenue, Suite 900
Pasadena, California 91101
Attn: _____________________

Re: [Name and Address of Borrower]

Ladies and Gentlemen:

We refer to the Credit Agreement dated as of November 28, 2001 (as amended, amended and restated, modified, supplemented or renewed from time to time the "Credit Agreement") among 3COM Corporation (the "Borrower"), the Lenders referred to therein and Bank of America, N. A., as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein as therein defined.

1. We hereby give you notice of, and request your consent to, the assignment by (the "Assignor") to (the "Assignee") of % of the right, title and interest of the Assignor in and to the Credit Agreement (including the right, title and interest of the Assignor in and to the Commitments of the Assignor, all outstanding Loans made by the Assignor and the Assignor's participation in the Letters of Credit pursuant to the Assignment and Acceptance Agreement attached hereto (the "Assignment and Acceptance"). We understand and agree that the Assignor's Commitment, as of , 200 , is $ , the aggregate amount of its outstanding Loans is $ , and its participation in L/C Obligations is $ .

2. The Assignee agrees that, upon receiving the consent of the Agent and, if applicable, the Borrower to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest in the Credit Agreement.

3. The following administrative details apply to the Assignee:

(A)	Notice Address:
	Assignee name:
	Address:


	Attention:
	Telephone: (	)
	Telecopier: (	)
	Telex (Answerback	):
(B)	Payment Instructions:
	Account No.:
	At:


	Reference:
	Attention:

4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance.

SCHEDULE 1–1

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned.

		Very truly yours,
		*[NAME OF ASSIGNOR]*
		By:
		Title:
		*[NAME OF ASSIGNEE]*
		By:
		Title:

ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO:
Bank of America, N. A., as Agent
By:
Title:

SCHEDULE 1–2

SCHEDULE 1.2

LENDERS' COMMITMENTS

Lender	Revolving Loan Commitment	Term Loan Commitment	Pro Rata Share
Bank of America, N.A.	$25,000,000	$21,428,571.43	23.81%
Foothill Capital Corporation	$25,000,000	$21,428,571.43	23.81%
Congress Financial Corporation (Western)	$15,000,000	$12,857,142.86	14.29%
The CIT Group/Business Credit, Inc.	$15,000,000	$12,857,142.86	14.29%
General Electric Capital Corporation	$12,500,000	$10,714,285.71	11.90%
PNC Bank, National Association	$12,500,000	$10,714,285.71	11.90%

SCHEDULE 1.2

SCHEDULE 3.4(B)

MINIMUM PRICE OF REAL ESTATE SALES

REAL PROPERTY ADDRESS		MINIMUM PRICE (U.S. $)
5400 Bayfront Plaza Santa Clara, California		$65,125,000.00
5450 Great America Parkway Santa Clara, California		$22,400,000.00
5303, 5353 & 5403 Betsy Ross Drive Santa Clara, California		$9,300,000.00
3800 Golf Road Rolling Meadows, Illinois		$17,250,000.00
1800 Central Road Mount Prospect, Illinois		$7,450,000.00

SCHEDULE 3.4 (B)

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Exhibit 10.14

TABLE OF CONTENTS
ANNEXES, EXHIBITS AND SCHEDULES
CREDIT AGREEMENT
W I T N E S S E T H
ARTICLE 1 LOANS AND LETTERS OF CREDIT
ARTICLE 2 INTEREST AND FEES
ARTICLE 3 PAYMENTS AND PREPAYMENTS
ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY
ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS
ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS
ARTICLE 8 CONDITIONS OF LENDING
ARTICLE 9 DEFAULT; REMEDIES
ARTICLE 10 TERM AND TERMINATION
ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
ARTICLE 12 THE AGENT
ARTICLE 13 MISCELLANEOUS
ANNEX A to Credit Agreement Definitions
EXHIBIT A-1 FORM OF REVOLVING LOAN NOTE
EXHIBIT A-2 FORM OF TERM LOAN NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FINANCIAL STATEMENTS
EXHIBIT D NOTICE OF BORROWING
EXHIBIT E NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F
RECITALS
SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE NOTICE OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE 1.2 LENDERS' COMMITMENTS
SCHEDULE 3.4(B) MINIMUM PRICE OF REAL ESTATE SALES
EX-10.15 5 a2067560zex-10_15.htm EX 10.15 Prepared by MERRILL CORPORATION
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Exhibit 10.15

CREDIT AGREEMENT

Dated as of November 28, 2001

Among

THE FINANCIAL INSTITUTIONS NAMED HEREIN

as the Lenders

and

BANK OF AMERICA, N.A.

as Bank, the Administrative Agent and the Security Trustee

and

BANC OF AMERICA SECURITIES, LLC,
as the Lead Arranger and Sole Book Manager

FOOTHILL CAPITAL CORPORATION,
as the Syndication Agent

and

3COM TECHNOLOGIES

and

3COM EUROPE LIMITED

as Borrowers

TABLE OF CONTENTS

Section			Page
ARTICLE 1 LOANS AND LETTERS OF CREDIT			1
	1.1	Total Facility	1
	1.2	Revolving Loans.	2
	1.3	Term Loans.	4
	1.4	Letters of Credit.	5
	1.5	Bank Products	8
ARTICLE 2 INTEREST AND FEES			9
	2.1	Interest.	9
	2.2	Continuation and Conversion Elections.	9
	2.3	Maximum Interest Rate	10
	2.4	[Intentionally Deleted]	10
	2.5	Unused Line Fee	10
	2.6	Letter of Credit Fee	11
ARTICLE 3 PAYMENTS AND PREPAYMENTS			11
	3.1	Revolving Loans	11
	3.2	Termination of Facility	11
	3.3	Repayment of the Term Loans	12
	3.4	Prepayments of the Term Loans.	12
	3.5	LIBOR Rate Loan Prepayments	13
	3.6	Payments by the Borrowers.	13
	3.7	Payments as Revolving Loans	13
	3.8	Apportionment, Application and Reversal of Payments	13
	3.9	Indemnity for Returned Payments	14
	3.10	Agent's and Lenders' Books and Records; Monthly Statements	14
ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY			15
	4.1	Taxes.	15
	4.2	Illegality.	16
	4.3	Increased Costs and Reduction of Return.	16
	4.4	Funding Losses	17
	4.5	Inability to Determine Rates	17
	4.6	Certificates of Agent	17
	4.7	Obligation to Mitigate	17
	4.8	Survival	17
ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES; COLLATERAL REPORTING			18
	5.1	Books and Records	18
	5.2	Financial Information	18
	5.3	Notices to the Lenders	19
	5.4	Collateral Reporting	20
	5.5	Inventory; Perpetual Inventory.	20
ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS			21
	6.1	Authorization, Validity, and Enforceability of this Agreement and the Loan Documents	21
	6.2	Validity and Priority of Security Interest	22
	6.3	Organization and Qualification	22

	6.4	Corporate Name; Prior Transactions	22
	6.5	Subsidiaries and Affiliates	22
	6.6	[Intentionally Deleted].	22
	6.7	Capitalization	22
	6.8	Solvency	22
	6.9	Debt	22
	6.10	Distributions	22
	6.11	Real Estate; Leases	22
	6.12	Unrestricted Subsidiaries	23
	6.13	Trade Names	23
	6.14	Litigation	23
	6.15	Labor Disputes	23
	6.16	Environmental Laws	23
	6.17	No Violation of Law	24
	6.18	No Default	24
	6.19	Intentionally Omitted.	24
	6.20	Taxes	25
	6.21	Regulated Entities	25
	6.22	Use of Proceeds; Margin Regulations	25
	6.23	Proprietary Rights	25
	6.24	No Material Adverse Change	25
	6.25	[Intentionally Deleted]	25
	6.26	[Intentionally Deleted]	25
	6.27	Bank Accounts	25
	6.28	Governmental Authorization	25
	6.29	Accounts.	25
ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS			27
	7.1	Taxes and Other Obligations	27
	7.2	Legal Existence and Good Standing	27
	7.3	Compliance with Law and Agreements; Maintenance of Licenses	27
	7.4	Maintenance of Property; Inspection of Property.	27
	7.5	[Intentionally Deleted]	28
	7.6	Insurance and Condemnation Proceeds	28
	7.7	Environmental Laws.	28
	7.8	[Intentionally Deleted]	29
	7.9	Mergers, Consolidations or Sales	29
	7.10	Distributions; Capital Change; Investments	30
	7.11	[Intentionally Deleted]	30
	7.12	Guaranties	30
	7.13	Debt	30
	7.14	Prepayment	30
	7.15	Transactions with Affiliates	30
	7.16	Investment Banking and Finder's Fees	31
	7.17	[Intentionally Deleted]	31
	7.18	Liens	31
	7.19	Sale and Leaseback Transactions	31
	7.20	New Subsidiaries	31
	7.21	[Intentionally Deleted]	32
	7.22	[Intentionally Deleted]	32

	7.23	[Intentionally Deleted]	32
	7.24	[Intentionally Deleted]	32
	7.25	Minimum Liquidity	32
	7.26	[Intentionally Deleted]	32
	7.27	Use of Proceeds	32
	7.28	Further Assurances	32
	7.29	No More Restrictive Covenants	32
ARTICLE 8 CONDITIONS OF LENDING			32
	8.1	Conditions Precedent to Making of Loans on the Initial Funding Date	32
	8.2	Conditions Precedent to Each Loan	34
ARTICLE 9 DEFAULT; REMEDIES			35
	9.1	Events of Default	35
	9.2	Remedies.	37
ARTICLE 10 TERM AND TERMINATION			38
	10.1	Term and Termination	38
ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS			39
	11.1	Amendments and Waivers.	39
	11.2	Assignments; Participations.	40
ARTICLE 12 THE AGENT AND THE SECURITY TRUSTEE			42
	12.1	Appointment and Authorization	42
	12.2	Delegation of Duties	42
	12.3	Liability of Agent	42
	12.4	Reliance by Agent	43
	12.5	Notice of Default	43
	12.6	Credit Decision	43
	12.7	Indemnification	44
	12.8	Agent in Individual Capacity	44
	12.9	Successor Agent	44
	12.10	Withholding Tax.	44
	12.11	Collateral Matters.	45
	12.12	Restrictions on Actions by Lenders; Sharing of Payments.	46
	12.13	Agency for Perfection	47
	12.14	Payments by Agent to Lenders	47
	12.15	Settlement.	47
	12.16	Letters of Credit; Intra-Lender Issues.	50
	12.17	Concerning the Collateral and the Related Loan Documents	52
	12.18	Field Audit and Examination Reports; Disclaimer by Lenders	52
	12.19	Relation Among Lenders	53
	12.20	Co-Agents	53
	12.21	Security Trustee	53
	12.22	Successor Security Trustee	53
	12.23	Protection of Security Trustee	54
ARTICLE 13 JOINT AND SEVERAL LIABILITY OF BORROWERS			54
	13.1	Joint and Several Liability of Borrowers	54
	13.2	Contribution and Indemnification among the Borrowers	55
	13.3	Waiver	56

iii

	13.4	Independent Investigation.	57
	13.5	Stay of Acceleration	57
	13.6	Subrogation	58
	13.7	Cumulative Remedies	58
	13.8	Additional Waivers	58
	13.9	Survival of Obligations	58
ARTICLE 14 MISCELLANEOUS			58
	14.1	No Waivers; Cumulative Remedies	58
	14.2	Severability	58
	14.3	Governing Law; Choice of Forum; Service of Process.	59
	14.4	WAIVER OF JURY TRIAL	60
	14.5	Survival of Representations and Warranties	60
	14.6	Other Security and Guaranties	61
	14.7	Fees and Expenses	61
	14.8	Notices	62
	14.9	Waiver of Notices	63
	14.10	Binding Effect	63
	14.11	Indemnity of the Agent, the Security Trustee and the Lenders by the Borrowers.	63
	14.12	Limitation of Liability	63
	14.13	Final Agreement	64
	14.14	Counterparts	64
	14.15	Captions	64
	14.16	Right of Setoff	64
	14.17	Confidentiality.	64
	14.18	Conflicts with Other Loan Documents	65
	14.19	Non-Public Information	65
	14.20	Designation of 3Com Europe as Agent of Borrowers	65

ANNEXES, EXHIBITS AND SCHEDULES

ANNEX A	—	DEFINED TERMS
EXHIBIT A-1	—	FORM OF REVOLVING LOAN NOTE
EXHIBIT A-2	—	FORM OF TERM NOTE
EXHIBIT B	—	FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C	—	FINANCIAL STATEMENTS
EXHIBIT D	—	FORM OF NOTICE OF BORROWING
EXHIBIT E	—	FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F	—	FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 1.2	—	LENDERS' COMMITMENTS (ANNEX A—DEFINED TERMS)
SCHEDULE 3.4(b)	—	MINIMUM PRICE FOR MORTGAGE REAL ESTATE SALE
SCHEDULE 6.3	—	ORGANIZATION AND QUALIFICATIONS
SCHEDULE 6.4	—	CORPORATE NAMES/PRIOR TRANACTIONS
SCHEDULE 6.5	—	SUBSIDIARIES AND AFFILIATES
SCHEDULE 6.7	—	CAPITLIZATION
SCHEDULE 6.9	—	DEBT
SCHEDULE 6.10	—	DISTRIBUTIONS
SCHEDULE 6.11	—	REAL ESTATE; LEASES
SCHEDULE 6.13	—	TRADE NAMES
SCHEDULE 6.14	—	LITIGATION
SCHEDULE 6.15	—	LABOR DISPUTES
SCHEDULE 6.16	—	ENVIRONMENTAL LAW
SCHEDULE 6.19	—	ERISA COMPLIANCE
SCHEDULE 6.27	—	BANK ACCOUNTS

CREDIT AGREEMENT

This Credit Agreement, dated as of November 28, 2001, (this "Agreement") among the financial institutions from time to time parties hereto (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. with an office at 55 South Lake Avenue, Suite 900, Pasadena, California 91101, as Bank and as administrative agent and security trustee for the Lenders (in its capacity as administrative agent, the "Agent" and/or security trustee, the "Security Trustee," as the case may be), FOOTHILL CAPITAL CORPORATION, as the Syndication Agent, 3COM TECHNOLOGIES, an exempted limited liability company incorporated in the Cayman Islands ("3Com Tech"), with offices at Ballycoolin Business Park, Blanchardstown, Dublin 15, Ireland, and 3COM EUROPE LIMITED., a company incorporated in England and Wales with registered number 2600346 ("3Com Europe"), with offices at Boundary Way, Hemel Hempstead HP2 7YU, England (each of 3Com Tech and 3Com Europe individually, a "Borrower" and collectively, the "Borrowers").

W I T N E S S E T H:

WHEREAS, the Borrowers have requested the Lenders to make available to the Borrowers a revolving line of credit for loans and letters of credit and to make term loans to the Borrowers, which extensions of credit the Borrowers will use for the purposes permitted hereunder;

WHEREAS, Parent (as defined below) has requested the Lenders to make available to Parent a revolving line of credit for loans and letters of credit and to make term loans to Parent, which extensions of credit Parent will use for the purposes permitted under the U.S. Credit Agreement (as defined in Annex A);

WHEREAS, the Lenders have agreed to make available to the Borrowers and Parent revolving credit facilities upon the terms and conditions set forth in this Agreement and in the U.S. Credit Agreement, respectively, in an aggregate amount not to exceed $105,000,000, the Lenders have agreed to make term loans to Parent in the aggregate principal amount of $90,000,000 upon the terms and conditions set forth in the U.S. Credit Agreement, and the Lenders have agreed to make term loans to the Borrowers in the aggregate principal amount of $15,000,000 upon the terms and conditions set forth in this Agreement;

WHEREAS, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed thereto in Annex A which is attached hereto and incorporated herein; the rules of construction contained therein shall govern the interpretation of this Agreement, and all Annexes, Exhibits and Schedules attached hereto are incorporated herein by reference;

WHEREAS, 3Com Tech and 3Com Europe and their respective Subsidiaries are indirect Subsidiaries of 3Com Corporation, a Delaware corporation ("Parent"), and Borrowers are engaged in an inter-related business enterprise with an identity of interests, and accordingly the financing provided hereunder will directly and indirectly benefit each of the Borrowers;

ARTICLE 1
LOANS AND LETTERS OF CREDIT

1.1 Total Facility. Subject to all of the terms and conditions of this Agreement, the Lenders agree to make available a total credit facility of up to $120,000,000 less any U.S. Aggregate Revolver Outstandings (the "Total Facility") to the Borrowers from time to time during the term of this

Agreement. The Total Facility shall be composed of a revolving line of credit consisting of Revolving Loans and Letters of Credit and the Term Loans described herein.

1.2 Revolving Loans.

(a) (i) Amounts. Subject to the satisfaction of the conditions precedent set forth in Article 8, and except for Non-Ratable Loans and Agent Advances, each Lender severally, but not jointly, agrees, upon Administrative Borrower's request from time to time on any Business Day during the period from the Closing Date to the Termination Date, to make revolving loans (the "Revolving Loans") to the applicable Borrower in aggregate amounts not to exceed such Lender's Pro Rata Share of the Availability. The Lenders, however, in their unanimous discretion, may elect to make Revolving Loans to, or issue or arrange to have issued Letters of Credit in excess of the Borrowing Base on one or more occasions, but if they do so, neither the Agent nor the Lenders shall be deemed thereby to have changed the limits of the Borrowing Base or to be obligated to exceed such limits on any other occasion. If any Borrowing would exceed Availability, the Lenders may refuse to make or may otherwise restrict the making of Revolving Loans to Borrowers, as the Lenders determine until such excess has been eliminated, subject to the Agent's authority, in its sole discretion, to make Agent Advances pursuant to the terms of Section 1.2(i). The entire unpaid balance of the Revolving Loans and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Termination Date.

(ii) Revolving Loan Notes. At the request of any Lender, Borrowers shall execute and deliver to such Lender a promissory note to evidence the Revolving Loans of that Lender. Each note shall be in the principal amount of the Lender's Pro Rata Share of the Revolving Loan Commitments, dated the date hereof and substantially in the form of Exhibit A-1 (such promissory note, together with any new note issued pursuant to Section 11.2 upon the assignment of any portion of such Lender's Loans and Commitment being hereinafter referred to as a "Revolving Loan Note" and, collectively with any other such notes, the "Revolving Loan Notes"). Each Revolving Loan Note shall represent the obligation of each Borrower to pay the amount of such Lender's Pro Rata Share of the Revolving Loan Commitments, or, if less, such Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Loans to Borrowers, together with interest thereon as prescribed in Section 2.1.

(b) Procedure for Borrowing.

(1) Each Borrowing shall be made upon Administrative Borrower's irrevocable written notice delivered to the Agent's London office, in the form of a notice of borrowing ("Notice of Borrowing"), which must be received by the Agent's London office prior to (A) 12:00 noon (Los Angeles time) three Business Days prior to the requested Funding Date, in the case of LIBOR Rate Loans and (B) 10:00 a.m. (Los Angeles time) on the requested Funding Date, in the case of Base Rate Loans, specifying:

(A) the amount of the Borrowing, which in the case of a LIBOR Rate Loan must equal or exceed $1,000,000 (and increments of $1,000,000 in excess of such amount);

(B) the requested Funding Date, which must be a Business Day;

(C) whether the Revolving Loans requested are to be Base Rate Revolving Loans or LIBOR Revolving Loans (and if not specified, it shall be deemed a request for a Base Rate Revolving Loan); and

(D) the duration of the Interest Period for LIBOR Revolving Loans (and if not specified, it shall be deemed a request for an Interest Period of one month);

provided, however, that with respect to the Borrowing to be made on the Initial Funding Date, such Borrowing will consist of Base Rate Loans only.

(2) In lieu of delivering a Notice of Borrowing, Administrative Borrower may give the Agent's London office telephonic notice of such request for advances to the Designated Account on or before the deadline set forth above. The Agent at all times shall be entitled to rely on such telephonic notice in making such Revolving Loans, regardless of whether any written confirmation is received.

(3) Borrowers shall have no right to request a LIBOR Rate Loan while a Default or Event of Default has occurred and is continuing.

(c) Reliance upon Authority. Prior to the Closing Date, Borrowers shall deliver to the Agent, a notice setting forth the account of such Borrowers (the "Designated Account") to which Agent is authorized to transfer the proceeds of the Revolving Loans requested hereunder by Administrative Borrower. The Borrowers may designate a replacement account from time to time by written notice by at least two Responsible Officers. All such Designated Accounts must be reasonably satisfactory to the Agent. The Agent is entitled to rely conclusively on any person's request for Revolving Loans on behalf of any Borrower, so long as the proceeds thereof are to be transferred to the Designated Account. The Agent has no duty to verify the identity of any individual representing himself or herself as a person authorized by any Borrower to make such requests on behalf such Borrower.

(d) No Liability. The Agent shall not incur any liability to any Borrower as a result of acting upon any notice referred to in Sections 1.2(b) and (c), which the Agent believes in good faith to have been given by an officer or other person duly authorized by Administrative Borrower to request Revolving Loans on behalf of any Borrower. The crediting of Revolving Loans to Designated Account conclusively establishes the obligation of Borrowers to repay such Revolving Loans as provided herein.

(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in lieu thereof) made pursuant to Section 1.2(b) shall be irrevocable, and the applicable Borrower shall be bound to borrow the funds requested therein in accordance therewith; provided, however, that the Administrative Borrower may cancel a Notice of Borrowing prior to funding provided that the Borrowers reimburse Agent and the Lenders for any expenses actually incurred as a result of such cancellation.

(g) Making of Revolving Loans. If Agent elects to have the terms of this Section 1.2(g) apply to a requested Borrowing, then promptly after receipt of a Notice of Borrowing or telephonic notice in lieu thereof, but in any event no later than 11:00 a.m. (Los Angeles time), the Agent shall notify the Lenders by telecopy, telephone or e-mail of the requested Borrowing. Each Lender shall transfer its Pro Rata Share of the requested Borrowing available to the Agent in immediately available funds, to the account from time to time designated by Agent, not later than 1:00 p.m. (Los Angeles time) on the applicable Funding Date. After the Agent's receipt of all proceeds of such Revolving Loans, the Agent shall make the proceeds of such Revolving Loans available to the applicable Borrower on the applicable Funding Date by transferring same day funds to the Designated Account, or with respect to Revolving Loans made on the Initial Funding Date, as Administrative Borrower shall otherwise instruct in writing; provided, however, that the amount of Revolving Loans so made to any Borrower on any date shall not exceed the Availability on such date.

(h) Making of Non-Ratable Loans.

(A) If Agent elects, with the consent of the Bank, to have the terms of this Section 1.2(h) apply to a requested Borrowing, the Bank shall make a Revolving Loan in the amount of that Borrowing available to the applicable Borrower on the applicable Funding Date by transferring same day funds to Borrowers' Designated Account. Each Revolving Loan made solely by the Bank pursuant to this Section is herein referred to as a "Non-Ratable Loan", and such Revolving Loans are collectively referred to as the "Non-Ratable Loans." Each Non-Ratable Loan shall be subject to all the terms and conditions applicable to other Revolving Loans except that all payments thereon shall be payable to the Bank solely for its own account. The aggregate amount of Non-Ratable Loans outstanding at any time shall not exceed $10,000,000. The Agent shall not request the Bank to make any Non-Ratable Loan if (1) the Agent has received written notice from any Lender that one or more of the applicable conditions precedent set forth in Article 8 will not be satisfied on the requested Funding Date for the applicable Borrowing, or (2) the requested Borrowing by a Borrower would exceed Availability on that Funding Date.

(B) The Non-Ratable Loans shall be secured by the Lenders' Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder.

(i) Agent Advances.

(A) Subject to the limitations set forth below, the Agent is authorized by each Borrower and the Lenders, from time to time in the Agent's sole discretion, (y) during the continuation of a Default or an Event of Default, or (z) at any time that any of the other conditions precedent set forth in Article 8 have not been satisfied, to make Base Rate Revolving Loans to one or more Borrowers on behalf of the Lenders in an aggregate amount outstanding at any time for all Borrowers not to exceed the lesser of (w) $5,000,000, or (x) 10% of the Borrowing Base which the Agent, in its reasonable business judgment, deems necessary or desirable (1) to preserve or protect the Collateral, or any portion thereof, (2) during the continuance of a Default or an Event of Default, to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (3) to pay any other amount chargeable to any Borrower pursuant to the terms of this Agreement, including costs, fees and expenses as described in Section 13.7 (any of such advances are herein referred to as "Agent Advances"); provided, however, that (y) in no event shall Agent make Agent Advances which would cause the Aggregate Revolver Outstandings at any time to exceed the Maximum Revolver Amount and (z) the Majority Lenders may at any time revoke the Agent's authorization to make Agent Advances. Any such revocation must be in writing and shall become effective prospectively upon the Agent's receipt thereof.

(B) The Agent Advances shall be secured by the Lenders' Liens in and to the Collateral and shall constitute Base Rate Revolving Loans and Obligations hereunder.

1.3 Term Loans.

(a) Amounts of Term Loans. Each Lender severally agrees to make a term loan (any such term loan being referred to as a "Term Loan" and such term loans being referred to collectively as the "Term Loans") to Borrowers on the Initial Funding Date, upon the satisfaction of the conditions precedent set forth in Article 8, in an amount equal to such Lender's Pro Rata Share of $15,000,000. The Term Loans shall initially be Base Rate Term Loans; but Borrowers may elect, on the Initial Funding Date, to convert such Term Loans to LIBOR Term Loans pursuant to Section 2.2.

(b) Making of Term Loans. Each Lender shall make the amount of such Lender's Term Loan available to the Agent in same day funds, to Agent's designated account, not later than 3:00 p.m. (Los Angeles time) on the Initial Funding Date. After the Agent's receipt of the proceeds of such Term Loans, upon satisfaction of the conditions precedent set forth in Article 8, the Agent, through its London branch, shall make the proceeds of such Term Loans available to the Borrowers on such Funding Date by transferring same day funds equal to the proceeds of such Term Loans received by the Agent to Borrowers' Designated Account or as Borrowers shall otherwise instruct in writing.

(c) Term Loan Notes. Borrowers shall execute and deliver to the Agent on behalf of each Lender, on the Closing Date, a promissory note, substantially in the form of Exhibit A-2 attached hereto and made a part hereof (such promissory notes, together with any new notes issued pursuant to Section 11.2 upon the assignment of any portion of any Lender's Term Loan, being hereinafter referred to collectively as the "Term Loan Notes" and each of such promissory notes being hereinafter referred to individually as a "Term Loan Note"). The Term Loan Notes shall evidence each Lender's Term Loan, in an original principal amount equal to that Lender's Pro Rata Share of $15,000,000 together with interest thereon as prescribed in Section 2.1.

1.4 Letters of Credit.

(a) Agreement to Issue or Cause To Issue. Subject to the terms and conditions of this Agreement, the Agent agrees (i) to cause the Letter of Credit Issuer to issue for the account of any Borrower one or more commercial/documentary and standby letters of credit ("Letter of Credit") and/or (ii) to provide credit support or other enhancement to a Letter of Credit Issuer acceptable to Agent, which issues a Letter of Credit for the account of any Borrower (any such credit support or enhancement being herein referred to as a "Credit Support") from time to time during the term of this Agreement.

(b) Amounts; Outside Expiration Date. The Agent shall not have any obligation to issue or cause to be issued any Letter of Credit or to provide Credit Support for any Letter of Credit at any time if: (i) the maximum face amount of the requested Letter of Credit is greater than the Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn amount of the requested Letter of Credit and all commissions, fees, and charges due from the relevant Borrower in connection with the opening thereof would exceed Availability at such time; or (iii) such Letter of Credit has an expiration date less than 30 days prior to the Stated Termination Date or more than 12 months from the date of issuance for standby letters of credit and 270 days for documentary letters of credit. With respect to any Letter of Credit which contains any "evergreen" or automatic renewal provision, each Lender shall be deemed to have consented to any such extension or renewal unless any such Lender shall have provided to the Agent, written notice that it declines to consent to any such extension or renewal at least thirty (30) days prior to the date on which the Letter of Credit Issuer is entitled to decline to extend or renew the Letter of Credit. If all of the requirements of this Section 1.4 are met and no Default or Event of Default has occurred and is continuing, no Lender shall decline to consent to any such extension or renewal.

(1) Such Borrower shall have delivered to the Letter of Credit Issuer, at such times and in such manner as such Letter of Credit Issuer may prescribe, an application in form and substance satisfactory to such Letter of Credit Issuer and reasonably satisfactory to the Agent for the issuance of the Letter of Credit and such other documents as may be required

pursuant to the terms thereof, and the form, terms and purpose of the proposed Letter of Credit shall be reasonably satisfactory to the Agent and the Letter of Credit Issuer; and

(d) Issuance of Letters of Credit.

(1) Request for Issuance. Administrative Borrower must notify the Agent of a requested Letter of Credit at least three (3) Business Days prior to the proposed issuance date. Such notice shall be irrevocable (provided, however, that the Administrative Borrower may cancel a request for a Letter of Credit prior to issuance provided that the Borrowers reimburse Agent, the Lenders and the Issuing Bank for any expenses actually incurred as a result of such cancellation) and must specify the original face amount of the Letter of Credit requested, the Business Day of issuance of such requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the Business Day on which the requested Letter of Credit is to expire, the purpose for which such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit. Administrative Borrower shall attach to such notice the proposed form of the Letter of Credit.

(2) Responsibilities of the Agent; Issuance. As of the Business Day immediately preceding the requested issuance date of the Letter of Credit, the Agent shall determine the amount of the applicable Unused Letter of Credit Subfacility and Availability. If (i) the face amount of the requested Letter of Credit is less than the Unused Letter of Credit Subfacility and (ii) the amount of such requested Letter of Credit and all commissions, fees, and charges due from the relevant Borrower in connection with the opening thereof would not exceed Availability, the Agent shall cause the Letter of Credit Issuer to issue the requested Letter of Credit on the requested issuance date so long as the other conditions hereof are met.

(3) No Extensions or Amendment. The Agent shall not be obligated to cause the Letter of Credit Issuer to extend or amend any Letter of Credit issued pursuant hereto unless the requirements of this Section 1.4 are met as though a new Letter of Credit were being requested and issued.

(e) Payments Pursuant to Letters of Credit. Each Borrower agrees to reimburse immediately the Letter of Credit Issuer for any drawing under any Letter of Credit and the Agent for the account of the Lenders upon any payment pursuant to any Credit Support, and to pay the Letter of Credit Issuer the amount of all other charges and fees payable to the Letter of Credit Issuer in connection with any Letter of Credit immediately when due, irrespective of any claim, setoff, defense or other right which such Borrower may have at any time against the Letter of Credit Issuer or any other Person. Each drawing under any Letter of Credit shall constitute a request by the applicable Borrower to the Agent for a Borrowing of a Base Rate Revolving Loan in the amount of such drawing. The Funding Date with respect to such borrowing shall be the date of such drawing.

(f) Indemnification; Exoneration; Etc.

(1) Indemnification. In addition to amounts payable as elsewhere provided in this Section 1.4, each Borrower agrees to protect, indemnify, pay and save the Lenders and the

Agent harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which any Lender or the Agent (other than a Lender in its capacity as Letter of Credit Issuer) may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit or the provision of any Credit Support or enhancement in connection therewith; provided, however, that the Borrowers shall have no liability to any indemnified party for any claims, demands, liabilities, damages, losses, costs, charges and expenses that are finally determined by a court of competent jurisdiction to have arisen primarily from such indemnified party's gross negligence or willful misconduct. Each Borrower's obligations under this Section shall survive payment of all other Obligations.

(2) Assumption of Risk by the Borrowers. As among the Borrowers, the Lenders, and the Agent, each Borrower assumes all risks of the acts and omissions of, or misuse of any of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Lenders and the Agent shall not be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any Person in connection with the application for and issuance of and presentation of drafts with respect to any of the Letters of Credit, even if it should prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) the failure of the beneficiary of any Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; (H) any consequences arising from causes beyond the control of the Lenders or the Agent, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority or (I) the Letter of Credit Issuer's honor of a draw for which the draw or any certificate fails to comply in any respect with the terms of the Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any rights or powers of the Agent or any Lender under this Section 1.4(f).

(3) Exoneration. Without limiting the foregoing, no action or omission whatsoever by Agent or any Lender (excluding any Lender in its capacity as a Letter of Credit Issuer) shall result in any liability of Agent or any Lender to any Borrower, or relieve any Borrower of any of its obligations hereunder to any such Person.

(4) Rights Against Letter of Credit Issuer. Nothing contained in this Agreement is intended to limit any Borrower's rights, if any, with respect to the Letter of Credit Issuer which arise as a result of the letter of credit application and related documents executed by and between such Borrower and the Letter of Credit Issuer.

(5) Account Party. Each Borrower hereby authorizes and directs any Letter of Credit Issuer to name such Borrower as the "Account Party" therein and to deliver to the Agent all instruments, documents and other writings and property received by the Letter of Credit Issuer pursuant to the Letter of Credit, and to accept and rely upon the Agent's instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the application therefor.

(g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the provisions of Section 1.4(b) and Section 10.1, any Letter of Credit or Credit Support is outstanding upon the termination of this Agreement, then upon such termination, Borrowers shall deposit with the Agent, for the ratable benefit of the Agent and the Lenders, with respect to each Letter of Credit or Credit Support then outstanding, cash ("Cash Collateral") or a standby letter of credit (a "Supporting Letter of Credit") in form and substance satisfactory to the Agent, issued by an issuer satisfactory to the Agent, in each case in an amount equal to the greatest amount for which such Letter of Credit or such Credit Support may be drawn plus any fees and expenses associated with such Letter of Credit or such Credit Support, under which Supporting Letter of Credit the Agent is entitled to draw amounts necessary to reimburse the Agent and the Lenders for payments to be made by the Agent and the Lenders under such Letter of Credit or Credit Support and any fees and expenses associated with such Letter of Credit or Credit Support. Such Cash Collateral or Supporting Letter of Credit shall be held by the Agent, for the ratable benefit of the Agent and the Lenders, as security for, and to provide for the payment of, the aggregate undrawn amount of such Letters of Credit or such Credit Support remaining outstanding.

1.5 Bank Products. Any Borrower may request and the Agent may, in its sole and absolute discretion, arrange for such Borrower to obtain from the Bank or the Bank's Affiliates Bank Products although no Borrower is required to do so. If Bank Products are provided by an Affiliate of the Bank, each Borrower agrees to indemnify and hold the Agent, the Bank and the Lenders harmless from any and all costs and obligations now or hereafter incurred by the Agent, the Bank or any of the Lenders which arise from any indemnity given by the Agent to its Affiliates related to such Bank Products; provided, however, nothing contained herein is intended to limit such Borrower's rights, with respect to the Bank or its Affiliates, if any, which arise as a result of the execution of documents by and between such Borrower and the Bank which relate to Bank Products. The agreement contained in this Section shall survive termination of this Agreement. Each Borrower acknowledges and agrees that the obtaining of Bank Products from the Bank or the Bank's Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank's Affiliates, and (b) is subject to all rules and regulations of the Bank or the Bank's Affiliates.

ARTICLE 2
INTEREST AND FEES

2.1 Interest.

(a) Interest Rates. All outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate determined by reference to the Base Rate or the LIBOR Rate plus the Applicable Margins as set forth below, but not to exceed the Maximum Rate. If at any time, Loans are outstanding with respect to which any Borrower has not delivered to the Agent a notice specifying the basis for determining the interest rate applicable thereto in accordance herewith, those Loans shall bear interest at a rate determined by reference to the Base Rate until notice to the contrary has been given to the Agent in accordance with this Agreement and such notice has become effective. Except as otherwise provided herein, the outstanding Obligations shall bear interest as follows:

(i) For all Base Rate Term Loans at a fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;

(ii) For all Base Rate Revolving Loans and other Obligations (other than Base Rate Term Loans and LIBOR Rate Loans) at a fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;

(iii) For all LIBOR Term Loans at a per annum rate equal to the applicable LIBOR Rate plus the Applicable Margin; and

(iv) For all LIBOR Revolving Loans at a per annum rate equal to the applicable LIBOR Rate plus the Applicable Margin.

Each change in the Base Rate shall be reflected in the interest rate applicable to Base Rate Loans as of the effective date of such change. All interest charges shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Each Borrower shall pay to the Agent, for the ratable benefit of Lenders, interest accrued on all Loans in arrears on the first day of each month hereafter and on the Termination Date.

2.2 Continuation and Conversion Elections.

(a) Any Borrower may:

(b) Administrative Borrower shall deliver a notice of continuation/conversion ("Notice of Continuation/Conversion") to the Agent not later than 12:00 noon (London time) at least three (3) Business Days in advance of the Continuation/Conversion Date, if the Loans are to be converted into or continued as LIBOR Rate Loans and specifying:

(i) the proposed Continuation/Conversion Date;

(ii) the aggregate amount of Loans to be converted or renewed;

(iii) the type of Loans resulting from the proposed conversion or continuation; and

(iv) the duration of the requested Interest Period, provided, however, no Borrower may select an Interest Period that ends after the Stated Termination Date.

(c) If upon the expiration of any Interest Period applicable to LIBOR Rate Loans, a Borrower has failed to select timely a new Interest Period to be applicable to LIBOR Rate Loans or if any Default or Event of Default then exists, the applicable Borrower(s) shall be deemed to have elected to convert such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.

(e) There may not be more than fifteen (15) different LIBOR Rate Loans in effect in the aggregate hereunder and under the U.S. Credit Agreement at any time.

2.3 Maximum Interest Rate. In no event shall any interest rate provided for hereunder exceed the maximum rate legally chargeable by any Lender under applicable law for such Lender with respect to loans of the type provided for hereunder (the "Maximum Rate"). If, in any month, any interest rate, absent such limitation, would have exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section 2.3, have been paid or accrued if the interest rate otherwise set forth in this Agreement had at all times been in effect, then Borrowers shall, to the extent permitted by applicable law, pay the Agent, for the account of the Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement. If a court of competent jurisdiction determines that the Agent and/or any Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations other than interest, in the inverse order of maturity, and if there are no Obligations outstanding, the Agent and/or such Lender shall refund to the applicable Borrower such excess.

2.4 [Intentionally Deleted]

2.5 Unused Line Fee. On the first day of each month and on the Termination Date, the Borrowers, jointly and severally, agree to pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, an unused line fee (the "Unused Line Fee") equal to 0.25% per annum times the amount by which (a) $105,000,000 exceeded (b) the sum of (i) the average

daily outstanding amount of Revolving Loans and U.S. Revolving Loans, plus (ii) the average daily undrawn face amount of outstanding Letters of Credit and U.S. Letters of Credit, in each case, during the immediately preceding month or shorter period if calculated for the first month hereafter or on the Termination Date. The Unused Line Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed. All principal payments received by the Agent shall be deemed to be credited to the Borrowers' Loan Account immediately upon receipt for purposes of calculating the Unused Line Fee pursuant to this Section 2.5. The Borrowers' obligation under this Section 2.5 shall be pro tanto reduced by any amount paid by the U.S. Borrower under Section 2.5 of the U.S. Credit Agreement.

2.6 Letter of Credit Fee. Each Borrower agrees to pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, for each Letter of Credit, a fee (the "Letter of Credit Fee") equal to 2.75% per annum and to Agent for the benefit of the Letter of Credit Issuer a fronting fee of 0.5% per annum of the undrawn face amount of each Letter of Credit, and to the Letter of Credit Issuer, all out-of-pocket costs, fees and expenses incurred by the Letter of Credit Issuer in connection with the application for, processing of, issuance of, or amendment to any Letter of Credit, which costs, fees and expenses shall include a "fronting fee" payable to the Letter of Credit Issuer. The Letter of Credit Fee shall be payable monthly in arrears on the first day of each month following any month in which a Letter of Credit is outstanding and on the Termination Date. The Letter of Credit Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.

ARTICLE 3
PAYMENTS AND PREPAYMENTS

3.1 Revolving Loans. Each Borrower shall repay the outstanding principal balance of the Revolving Loans made to it, plus all accrued but unpaid interest thereon, on the Termination Date. Each Borrower may prepay Revolving Loans at any time, and reborrow subject to the terms of this Agreement. In addition, and without limiting the generality of the foregoing, upon demand (which demand may be subject to the provisions of Section 9.2(a)), the Borrowers shall pay to the Agent, for account of the Lenders, the amount, without duplication, by which the Aggregate Revolver Outstandings exceeds (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolver Amount, minus (b) Reserves other than Reserves deducted in the calculation of Borrowing Base, such payment to be made within one (1) Business Day of any such demand.

3.2 Termination of Facility. The Borrowers, acting jointly, may terminate this Agreement upon at least ten (10) Business Days' notice to the Agent and the Lenders, upon (a) the payment in full of all outstanding Revolving Loans, together with accrued interest thereon, and the cancellation and return of all outstanding Letters of Credit (or the provision of Cash Collateral or a Supporting Letter of Credit in accordance with Section 1.4(g)), (b) the prepayment in full of the Term Loans, together with accrued and unpaid interest thereon, (c) the payment of the early termination fee set forth below, (d) the payment in full in cash of all reimbursable expenses and other Obligations, (e) with respect to any LIBOR Rate Loans prepaid, payment of the amounts due under Section 4.4, if any, and (f) the concurrent termination of the U.S. Credit Agreement and the repayment of the U.S. Loans pursuant to Section 3.2 of the U.S. Credit Agreement. If this Agreement is terminated at any time prior to the Stated Termination Date, whether pursuant to this Section or pursuant to Section 9.2, the Borrowers

shall, jointly and severally, pay to the Agent, for the account of the Lenders, in accordance with their respective Pro Rata Shares, an early termination fee determined in accordance with the following table:

Period during which early termination occurs		Early Termination Fee
On or prior to the first Anniversary Date		$1,050,000 (less any early termination fee concurrently paid under Section 3.2 of the U.S. Credit Agreement)
After the first Anniversary Date but on or prior to the second Anniversary Date		$525,000 (less any early termination fee concurrently paid under Section 3.2 of the U.S. Credit Agreement)
After the second Anniversary Date but prior to the Stated Termination Date		$0

provided, however, that the early termination fee described in this Section 3.2 shall not be payable in the event that Borrower repays the Obligations (and the U.S. Loan Obligations) utilizing the proceeds of a credit facility provided or agented by another lending department of the Bank or any of its Affiliates.

3.3 Repayment of the Term Loans. Term Loans shall amortize in equal installments of $1,071,428.57 each, payable on the first day of each March, June, September, and December during the term of this Agreement, commencing on the first day of March 2002 and continuing through and including the first day of September 2004. The outstanding principal balance of the Term Loans shall be payable in full on the Termination Date. Each payment of the Term Loans shall be made to the Agent for the Pro Rata benefit of each Lender. Amounts paid in respect of the Term Loans may not be reborrowed.

3.4 Prepayments of the Term Loans.

(a) The Borrowers may prepay the principal of the Term Loans in whole or in part, without premium or penalty, at any time and from time to time upon at least 5 Business Days' prior written notice to the Agent and the Lenders. All voluntary prepayments of the principal of the Term Loans shall be accompanied by the payment of all accrued but unpaid interest on the Term Loans to the date of prepayment. Any voluntary prepayment of less than all of the outstanding principal of the Term Loans shall be applied: (i) 25% of such amount to the installments of principal of the Term Loans in the inverse order of maturity, and (ii) 75% of such amount to the installments of principal of the Term Loans in the order of maturity.

(b) Immediately upon any sale or disposition of any Borrower's fee interest in, or any refinance of, Real Estate identified on Schedule 3.4(b) as having a Minimum Price, Borrower shall prepay the outstanding Term Loans, without premium or penalty, in an amount equal to such Minimum Price (in the case of a sale or disposition) or equal to the greater of the Minimum Price or the net cash proceeds received by Borrower (in the case of a refinancing).

(c) In the event that the amount of Liquidity drops below $650,000,000, Borrowers shall prepay the outstanding Term Loans, without premium or penalty, by the lesser of (i) a pro rata share (based on the ratio of (x) the Term Loans to (y) the sum of (1) the U.S. Term Loans and (2) the Term Loans) of $100,000,000 or (ii) the outstanding principal balance of the Term Loans (in either such case, exclusive of any other mandatory prepayments of the Term Loans then due under this Agreement).

(d) (d) Mandatory prepayments of the Term Loans in accordance with Sections 3.4(b) and (c) shall be applied as follows: first, to accrued interest with respect to the Term Loans, second, to scheduled installments of the Term Loans in inverse order of maturity.

(e) No provision contained in this Section 3.4 shall constitute a consent to an asset disposition that is otherwise not permitted by the terms of this Agreement or the other Loan Documents.

(f) Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.

(g) Upon repayment in full of the Term Loans, and so long as no Default or Event of Default has occurred and is continuing, Lenders' Lien on the Collateral consisting of Real Estate shall be released, and all Mortgages promptly released or reconveyed, as appropriate.

3.5 LIBOR Rate Loan Prepayments. In connection with any prepayment, if any LIBOR Rate Loans are prepaid prior to the expiration date of the Interest Period applicable thereto, such Borrower shall pay to the Lenders the amounts described in Section 4.4.

3.6 Payments by the Borrowers.

(a) All payments to be made by any Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by each Borrower shall be made to the Agent for the account of the Lenders, at the account designated by the Agent and shall be made in Dollars and in immediately available funds, no later than 12:00 noon (London time) on the date specified herein. Any payment received by the Agent after such time shall be deemed (for purposes of calculating interest only) to have been received on the following Business Day and any applicable interest shall continue to accrue.

3.7 Payments as Revolving Loans. At the election of Agent, all payments of principal, interest, reimbursement obligations in connection with Letters of Credit and Credit Support for Letters of Credit, fees, premiums, reimbursable expenses and other sums payable hereunder, may be paid from the proceeds of Revolving Loans made hereunder. Each Borrower hereby irrevocably authorizes the Agent to charge the Loan Account for the purpose of paying all amounts from time to time due hereunder and agrees that all such amounts charged shall constitute Revolving Loans (including Non-Ratable Loans and Agent Advances).

3.8 Apportionment, Application and Reversal of Payments. Principal and interest payments shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Loans to which such payments relate held by each Lender), and payments of the fees, except for fees payable solely to Agent and the Letter of Credit Issuer and except as provided in Section 11.1(b), shall be apportioned among the Lenders as may be provided in the separate fee letters between Agent and individual Lenders. All payments shall be remitted to the Agent and all such payments not relating to principal or interest of specific Loans, or not constituting payment of specific fees, and all proceeds of Accounts or other Collateral received by the Agent or the Security Trustee, shall, except to the extent such payments constitute voluntary prepayments of the Term Loans (as to which the terms of Section 3.4(a) shall apply) or such payments constitute a mandatory repayment or prepayment of the Term Loans as provided in Section 3.4(b) or (c) (as to which the terms of Section 3.4(d) shall apply), be applied, ratably, subject to the provisions of this Agreement, first, to pay any fees, indemnities or expense reimbursements other than any amounts relating to Bank Products then due to the Agent, the Security Trustee or Lenders from Borrowers; second, to pay any fees or expense reimbursements then due to the Lenders from Borrowers, other than any amounts relating to Bank Products; third, to pay interest due in respect of all Loans, including Non-Ratable Loans and Agent Advances; fourth, to pay or prepay principal of the Non-Ratable Loans and Agent Advances; fifth, to pay or prepay principal of the Revolving Loans (other than Non-Ratable Loans and Agent Advances) and unpaid reimbursement obligations in respect of Letters of Credit; sixth, to pay or prepay principal of the Term Loans; seventh,

to pay an amount to Agent equal to all outstanding Letter of Credit Obligations to be held as cash collateral for such Obligations; and eighth, to the payment of any other Obligation including any amounts relating to Bank Products due to the Agent or any Lender from Borrowers. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by a Borrower, or unless an Event of Default has occurred and is continuing, neither the Agent nor any Lender shall apply any payments which it receives (i) to any LIBOR Rate Term Loan, except (a) on the expiration date of the Interest Period applicable to any such LIBOR Rate Term Loan, or (b) in the event, and only to the extent, that there are no outstanding Base Rate Term Loans or (ii) to any LIBOR Rate Revolving Loan, except (c) on the expiration date of the Interest Period applicable to any such LIBOR Rate Revolving Loan, or (d) in the event, and only to the extent, that there are no outstanding Base Rate Revolving Loans, and, in any event, the Borrower shall pay LIBOR breakage losses in accordance with Section 4.4; provided, however, that in the case of any necessary repayments of LIBOR Rate Loans Agent and Lenders will, prior to the occurrence and continuance of an Event of Default, apply such payments so as to minimize the amount of any payments required to be made pursuant to Section 4.4. The Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

3.9 Indemnity for Returned Payments. If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Agent, the Security Trustee, any Lender, the Bank or any Affiliate of the Bank is for any reason (other than an action by a Governmental Authority against such Person for reasons unrelated to Borrower, its Subsidiaries, the Collateral, or the Loans) compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Agent, the Security Trustee or any such Lender, the Bank or any Affiliate of the Bank and Borrowers shall be liable to pay to the Agent, the Security Trustee and the Lenders, and hereby do indemnify the Agent, the Security Trustee and the Lenders and hold the Agent and the Lenders harmless for the amount of such payment or proceeds surrendered. The provisions of this Section 3.9 shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent, the Security Trustee, any such Lender, the Bank or any such Affiliate of the Bank in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Agent's, the Security Trustee's and the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable. The provisions of this Section 3.9 shall survive the termination of this Agreement.

3.10 Agent's and Lenders' Books and Records; Monthly Statements. The Agent shall record the principal amount of the Loans owing to each Lender, the undrawn face amount of all outstanding Letters of Credit and the aggregate amount of unpaid reimbursement obligations outstanding with respect to the Letters of Credit from time to time on its books. In addition, each Lender may note the date and amount of each payment or prepayment of principal of such Lender's Loans in its books and records. Failure by Agent or any Lender to make such notation shall not affect the obligations of the relevant Borrower with respect to the Loans or the Letters of Credit. Each Borrower agrees that the Agent's and each Lender's books and records showing the Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be admissible in any action or proceeding arising therefrom, and shall constitute rebuttably presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a promissory note or other instrument. The Agent will provide to the Borrowers a monthly statement of Loans, payments, and other transactions pursuant to this Agreement. Such statement shall be deemed correct, accurate, and binding on each Borrower and an account stated (except for reversals and reapplications of payments made as provided in Section 3.8, unless such Borrower notifies the Agent in writing to the contrary within thirty (30) days after such statement is

rendered. In the event a timely written notice of objections is given by a Borrower, only the items to which exception is expressly made will be considered to be disputed by such Borrower.

ARTICLE 4
TAXES, YIELD PROTECTION AND ILLEGALITY

4.1 Taxes.

(a) Any and all payments by each Borrower to each Lender or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, each Borrower shall pay all Other Taxes.

(b) The Borrowers agree, jointly and severally, to indemnify and hold harmless each Lender and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by any Lender or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date such Lender or the Agent makes written demand therefor.

(c) Each Lender either (i) represents and warrants to the Agent and the Borrower that under applicable law and treaties in effect on the Closing Date no tax will be required to be withheld by the Agent or Borrower with respect to any payments to be made to such Lender hereunder, or (ii) agrees to use its best efforts to either (A) fund its Pro Rata Share of each Borrowing through such Lender's London branch, office, agency or affiliate, and to book all interest and fee income in such London branch, office, agency or affiliate, or (B) as soon as reasonably practicable, cooperate with Agent and/or Borrowers in completing and processing all forms, including Form FD 13, necessary to allow Borrowers to obtain exemption from withholding taxes from the United Kingdom tax authorities.

(d) If any Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, then:

(i) the sum payable shall be increased as necessary so that after making all required payments, deductions and withholdings (including payments, deductions and withholdings applicable to additional sums payable under this Section) such Lender or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; provided, however, that such Borrower shall not be required to pay any additional amount to any Lender under this Section 4.1(d)(i) if such Lender shall have failed to deliver the forms, certificates, or other evidence referred to in Section 4.1(c), or to notify Agent and such Borrower of the inability to deliver any such forms, certificates or other evidence, as the case may be;

(ii) such Borrower shall make such payments, deductions and withholdings;

(iii) such Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv) such Borrower shall also pay to each Lender or the Agent for the account of such Lender, at the time interest is paid, all additional amounts which the respective Lender specifies as necessary to preserve the after-tax yield such Lender would have received if such Taxes or Other Taxes had not been imposed.

(e) At the Agent's request, within 30 days after the date of any payment by any Borrower of Taxes or Other Taxes, such Borrower shall furnish the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent.

4.2 Illegality.

(a) If any Lender reasonably determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make LIBOR Rate Loans, then, on notice thereof by that Lender to any Borrower through the Agent, any obligation of that Lender to make LIBOR Rate Loans shall be suspended until that Lender notifies the Agent and such Borrower that the circumstances giving rise to such determination no longer exist.

(b) If a Lender reasonably determines that it is unlawful to maintain any LIBOR Rate Loan to a Borrower, such Borrower shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Agent), prepay in full such LIBOR Rate Loans of that Lender then outstanding, together with interest accrued thereon and amounts required under Section 4.4, either on the last day of the Interest Period thereof, if that Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if that Lender may not lawfully continue to maintain such LIBOR Rate Loans. If a Borrower is required to so prepay any LIBOR Rate Loans, then concurrently with such prepayment, such Borrower shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan.

(c) If any Lender's obligation to make LIBOR Rate Loans is suspended pursuant to sub-section (a) of this Section, or if Borrowers are required to prepay any amounts to any Lender pursuant to sub-section (b) of this Section, then such Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such illegality.

4.3 Increased Costs and Reduction of Return.

(a) If any Lender reasonably determines that due to either (i) the introduction of Requirement of Law, or any change in any Requirement of Law, or any change in the interpretation of any Requirement of Law, or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any LIBOR Rate Loans, then such Borrower shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs; provided, however, that Borrowers shall not be liable for any amount attributable to any period before 240 days prior to the date Agent notifies Borrowers of such increased costs. Lenders covenant and agree that they will allocate any such increased costs ratably among their respective customers or borrowers similarly affected reasonably and in good faith.

the Agent, the Borrowers shall pay to such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender for such increase.

4.4 Funding Losses. Each Borrower shall reimburse each Lender and hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of:

(a) the failure of the such Borrower to make on a timely basis any payment of principal of any LIBOR Rate Loan;

(b) the failure of the such Borrower to borrow, continue or convert a Loan after such Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Continuation/Conversion; or

(c) the prepayment or other payment (including after acceleration thereof) of any LIBOR Rate Loans on a day that is not the last day of the relevant Interest Period;

including any such loss of interest income for the unexpired portion of the LIBOR Interest Period resulting from relending of the affected funds. Such Borrower shall also pay any customary administrative fees charged by any Lender in connection with the foregoing.

4.5 Inability to Determine Rates. If the Agent reasonably determines that for any reason adequate and reasonable means do not exist for determining the LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR Rate Loan, the Agent will promptly so notify the Borrowers and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, any Borrower may revoke any Notice of Borrowing or Notice of Continuation/Conversion then submitted by it. If a Borrower does not revoke such Notice, the Lenders shall make, convert or continue the Loans, as proposed by such Borrower, in the amount specified in the applicable notice submitted by such Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Rate Loans.

4.6 Certificates of Agent. If any Lender claims reimbursement or compensation under this Article 4, Agent shall determine the amount thereof and shall deliver to the relevant Borrowers(s) (with a copy to the affected Lender) a certificate setting forth in reasonable detail the amount payable to the affected Lender, and such certificate shall be conclusive and binding on the Borrowers in the absence of manifest error.

4.8 Survival. The agreements and obligations of the Borrowers in this Article 4 shall survive the payment of all other Obligations.

ARTICLE 5
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES;
COLLATERAL REPORTING

5.1 Books and Records. Each Borrower shall, and shall cause its Restricted Subsidiaries to, maintain, at all times, correct and complete books, records and accounts in which complete, correct and timely entries are made of its transactions in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a). Each Borrower shall, and shall cause its Restricted Subsidiaries to, by means of appropriate entries, reflect in such accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper provision for depreciation and amortization of property and bad debts, all in accordance with GAAP. Each Borrower shall maintain at all times books and records pertaining to the Collateral in such detail, form and scope as the Agent or any Lender shall reasonably require, including, but not limited to, records of (a) all payments received and all credits and extensions granted with respect to the Accounts; and (b) the return, (including rejection, repossession, and stoppage in transit), loss, damage, or destruction of any Inventory.

5.2 Financial Information. Each Borrower shall, and shall cause its Restricted Subsidiaries to, promptly furnish to each Lender, all such financial information as the Agent or any Lender shall reasonably request. Without limiting the foregoing, each Borrower will furnish to the Agent, in sufficient copies for distribution by the Agent to each Lender, in such detail as the Agent or the Lenders shall request, the following:

(a) Within thirty (30) days after the end of each Fiscal Month that is not the end of a Fiscal Quarter, a certificate of a Responsible Officer of each Borrower stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of such Borrower contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date, which shall have been true and correct as of such date, (B) such Borrower is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, and (C) no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such month. With advance written notice to Agent, such Borrower may revise the contents of future certificates to reflect changes in such Borrower's accounting procedures, so long as such revised procedures are consistent with GAAP. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action such Borrower has taken or proposes to take with respect thereto.

(b) Within forty six (46) days after the end of each Fiscal Quarter that is not the end of a Fiscal Year and within ninety-one (91) days after the end of each Fiscal Quarter ending a Fiscal Year, a certificate of a Responsible Officer of such Borrower stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of such Borrower contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date which shall have been true and correct as of such date, (B) such Borrower is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, and (C) to the best of each Borrower's knowledge, no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such period. If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not

been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action such Borrower has taken or proposes to take with respect thereto.

(c) If requested by the Agent, promptly after filing with the appropriate tax authorities in the United Kingdom, a copy of each tax return filed by such Borrower or by any of its Subsidiaries.

(d) No later than Tuesday of each week, (i) a Borrowing Base Certificate and all supporting information in accordance with Section 5.4 as of the end of the preceding week, and (ii) a certificate of a Responsible Officer of Administrative Borrower setting forth in reasonable detail Liquidity and the calculations required to establish that Borrowers were in compliance with the covenant set forth in Section 7.25 as of the end of the prior week; provided, however, that at any time that Aggregate Revolver Outstandings are zero, the requirement under clause (d)(i) to the extent of weekly reporting of sales, credits, and collections in the Borrowing Base Certificate shall be changed to reporting on a monthly basis (with reports for each month delivered by the 15th of the following month). In the event that following a change to monthly reporting a Borrower desires to request a Revolving Loan or a Letter of Credit, Administrative Borrower must resume its weekly reporting of sales, credits, and collections in the Borrowing Base Certificate at least 5 days prior to the requested Funding Date of such Revolving Loan or the requested issuance date of such Letter of Credit.

(e) Such additional information as the Agent and/or any Lender may from time to time reasonably request regarding the financial and business affairs of such Borrower or any Subsidiary.

5.3 Notices to the Lenders. Each Borrower shall notify the Agent and the Lenders in writing of the following matters at the following times; provided, that, only to the extent duplicative, delivery of timely notice by U.S. Borrower pursuant to the U.S. Credit Agreement with respect to the matters described below shall be deemed to satisfy Borrowers' obligations in this Section 5.3:

(a) Immediately after becoming aware of any Default or Event of Default;

(b) Immediately after becoming aware of the assertion by the holder of any Debt of such Borrower or any Restricted Subsidiary in a face amount in excess of $5,000,000 that a default exists with respect thereto or that such Borrower or such Restricted Subsidiary is not in compliance with the terms thereof, which default or lack of compliance gives rise to a right to immediately accelerate such Debt, or the commencement by such holder of any enforcement action because of such asserted default or non-compliance;

(c) Immediately after becoming aware of any event or circumstance (other than general economic trends) which could reasonably be expected to have a Material Adverse Effect;

(e) Immediately after becoming aware of any pending or threatened strike, work stoppage, unfair labor practice claim, or other labor dispute affecting such Borrower or any of its Subsidiaries in a manner which could reasonably be expected to have a Material Adverse Effect;

(f) Immediately after becoming aware of any violation of any law, statute, regulation, or ordinance of a Governmental Authority affecting such Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect;

(g) Immediately after receipt of any notice of any violation by such Borrower or any of its Subsidiaries of any Environmental Law which could reasonably be expected to have a Material Adverse Effect or that any Governmental Authority has asserted in writing that such Borrower or

any Subsidiary is not in compliance with any Environmental Law or is investigating such Borrower's or such Subsidiary's compliance therewith which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(h) Immediately after receipt of any written notice that such Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant or that such Borrower or any Subsidiary is subject to investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to the Release or threatened Release of any Contaminant, in either case which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(i) Immediately after receipt of any written notice of the imposition of any Environmental Lien against any property of such Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which materially affects the value of any parcel of Real Property subject to a Mortgage;

(j) Any change in such Borrower's name as it appears in the jurisdiction of its incorporation or other organization, jurisdiction of incorporation or organization, type of entity, organizational identification number, locations of any material portion of the Collateral, or form of organization, trade names under which such Borrower will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, in each case.

5.4 Collateral Reporting. Each Borrower shall provide the Agent with the following documents at the following times in form satisfactory to the Agent: (a) at the times specified in Section 5.2(d), or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time, a schedule of such Borrower's Accounts created, credits given, cash collected and other adjustments to Accounts since the last such schedule and a Borrowing Base Certificate; (b) on a monthly basis, by the 15th day of the following month, a reconciliation to the corresponding Borrowing Base and to such Borrower's general ledger; (c) on a monthly basis by the 15^th day of the following month, or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time, an aging of such Borrower's Accounts and an aging of such Borrower's accounts payable; (d) on a monthly basis by the 15th of the following month (or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time), a detailed calculation of Eligible Accounts and Eligible Inventory; (e) on a monthly basis by the 15^th day of the following month (or more frequently if requested by the Agent and if Liquidity is less than $650,000,000), Inventory reports by category, product line, and location, together with a reconciliation to the corresponding Borrowing Base and to such Borrower's general ledger; (f) upon request, copies of invoices in connection with such Borrower's Accounts, customer statements, credit memos, remittance advices and reports, deposit slips, shipping and delivery documents in connection with such Borrower's Accounts and for Inventory and Equipment acquired by such Borrower, purchase orders and invoices; (g) upon request, a statement of the balance of each of the intercompany accounts; (h) such other reports as to the Collateral of such Borrower as the Agent shall reasonably request from time to time; and (i) with the delivery of each of the foregoing, a certificate of such Borrower executed by an officer thereof certifying as to the accuracy and completeness of the foregoing. If any of such Borrower's records or reports of the Collateral are prepared by an accounting service or other agent, such Borrower hereby authorizes such service or agent to deliver such records, reports, and related documents to the Agent, for distribution to the Lenders.

5.5 Inventory; Perpetual Inventory.

(a) Each Borrower represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that all of the Inventory owned by such Borrower is and will be held

for sale or lease, or to be furnished in connection with the rendition of services, in the ordinary course of such Borrower's business, and is and will be fit for such purposes. Each Borrower will keep its Inventory in good and marketable condition, except for damaged or defective goods arising in the ordinary course of such Borrower's business. Each Borrower will not, without prior written notice to Agent, acquire or accept any Inventory on consignment or approval. Each Borrower agrees that all Inventory produced by such Borrower in the United States of America will be produced in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations, and orders thereunder. Each Borrower will conduct a physical count of the Inventory at least once per Fiscal Year, and after and during the continuation of an Event of Default, at such other times as the Agent requests, provided, however, that so long as an Event of Default does not exist, in lieu of an annual physical inventory, each Borrower may conduct cycle counts that are in compliance with such Borrower's internal audit procedures as approved by such Borrower's independent certified public accountants. Each Borrower will maintain a perpetual inventory reporting system at all times. If Revolving Loans are outstanding, Each Borrower will not, without prior written notice to Agent, sell any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis except in conformity with such Borrower's business practices as of the Closing Date.

(b) In connection with all Inventory financed by Letters of Credit, each Borrower will, at the Agent's request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, Documents or Instruments in which the Agent holds a security interest to deliver them to the Agent and/or subject to the Agent's order, and if they shall come into such Borrower's possession, to deliver them, upon request, to the Agent in their original form. Each Borrower shall also, at the Agent's request, designate the Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

ARTICLE 6
GENERAL WARRANTIES AND REPRESENTATIONS

Each Borrower warrants and represents to the Agent and the Lenders that except as hereafter disclosed to and accepted by the Agent and the Required Lenders in writing:

6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents. Such Borrower has the power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, to incur the Obligations, and to grant to the Agent Liens upon and security interests in the Collateral. Such Borrower has taken all necessary action (including obtaining approval of its shareholders if necessary) to authorize its execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party. This Agreement and the other Loan Documents to which it is a party have been duly executed and delivered by such Borrower, and constitute the legal, valid and binding obligations of such Borrower, enforceable against it in accordance with their respective terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. Such Borrower's execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation or breach of, or result in the imposition of any Lien upon the property of such Borrower or any of its Restricted Subsidiaries, by reason of the terms of (a) any contract, mortgage, charge, lease, agreement, indenture, or instrument to which such Borrower or any of its Restricted Subsidiaries is a party or which is binding upon it, (b) any Requirement of Law applicable to such Borrower or any of its Restricted Subsidiaries, or (c) the certificate or articles of incorporation or memorandum and articles of association or by-laws or the limited liability company or limited partnership agreement of such Borrower or any of its Restricted Subsidiaries.

6.2 Validity and Priority of Security Interest. The provisions of this Agreement, the Mortgage(s), and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Agent and/or the Security Trustee, for the ratable benefit of the Agent and the Lenders, and such Liens when properly filed and, where applicable, recorded or when adequate steps have been taken to obtain control over or possession of the property subject to such Liens, as applicable, shall constitute perfected and continuing Liens on all the Collateral, having priority over all other Liens on the Collateral, except for Permitted Liens, securing all the Obligations, and enforceable against such Borrower and all third parties except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

6.3 Organization and Qualification. Such Borrower (a) is duly organized or incorporated and validly existing in good standing under the laws of the jurisdiction of its organization or incorporation, (b) is qualified to do business and is in good standing in the jurisdictions set forth on Schedule 6.3 which are the only jurisdictions in which qualification is material to the conduct of its business, and (c) has all requisite power and authority to conduct its business and to own its property.

6.4 Corporate Name; Prior Transactions. Except as set forth on Schedule 6.4 (as amended from time to time by Borrowers upon written notice to Agent), such Borrower has not, during the past five (5) years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business.

6.5 Subsidiaries and Affiliates. Schedule 6.5 (as amended from time to time by Borrowers upon written notice to Agent) is a correct and complete list of the name and relationship to such Borrower of each and all of its Subsidiaries. Each Restricted Subsidiary is (a) duly incorporated or organized and validly existing in good standing under the laws of its jurisdiction of incorporation or organization set forth on Schedule 6.5, and (b) qualified to do business and in good standing in each jurisdiction in which the failure to so qualify or be in good standing could reasonably be expected to have a Material Adverse Effect and (c) has all requisite power and authority to conduct its business and own its property.

6.6 [Intentionally Deleted].

6.7 Capitalization. Schedule 6.7 sets forth, as of the Closing Date, the capitalization of such Borrower and its Restricted Subsidiaries and all of the authorized and issued Capital Stock of each such Person. All outstanding Capital Stock has been validly issued, and is fully paid and non-assessable. All of the Capital Stock of Restricted Subsidiaries is owned, beneficially and of record, by the Person set forth on such Schedule 6.7.

6.8 Solvency. Such Borrower is Solvent prior to and after giving effect to the Borrowings to be made on the Initial Funding Date and the issuance of the Letters of Credit to be issued on the Initial Funding Date, and shall remain Solvent during the term of this Agreement.

6.9 Debt. As of the Closing Date, such Borrower and its Restricted Subsidiaries has no Debt, except (a) the Obligations, and (b) Debt described on Schedule 6.9.

6.10 Distributions. Since June 1, 2001, no Distribution has been declared, paid, or made upon or in respect of any Capital Stock or other securities of such Borrower except as identified on Schedule 6.10 and as permitted by Section 7.10.

6.11 Real Estate; Leases. Schedule 6.11 sets forth, as of the Closing Date, a correct and complete list of all Real Estate owned by such Borrower and all Real Estate owned by any of its Restricted Subsidiaries, all leases and subleases of real or personal property held by such Borrower as lessee or sublessee (other than leases of personal property as to which such Borrower is lessee or sublessee for which the value of such personal property is less than $2,000,000), and all leases and subleases of real

or personal property held by such Borrower as lessor, or sublessor (other than leases of personal property as to which such Borrower is lessor or sublessor for which the value of such personal property is less than $2,000,000). Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and, to the best of such Borrower's knowledge, no default by any party to any such lease or sublease exists. Such Borrower has good and marketable title in fee simple to the Real Estate identified on Schedule 6.11 as owned by such Borrower, or valid leasehold interests in all Real Estate designated therein as "leased" by such Borrower and such Borrower has good, indefeasible, and merchantable title to all of its other property reflected on the most recent Financial Statements delivered to the Agent and the Lenders, except as permitted by Section 7.9 since the date thereof, free of all Liens except Permitted Liens.

6.12 Unrestricted Subsidiaries. None of the Unrestricted Subsidiaries conducts any material business other than acting as a local sales office for such Borrower and its Restricted Subsidiaries, and none of the Unrestricted Subsidiaries owns any material tangible assets.

6.13 Trade Names. All trade names or styles under which such Borrower will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, are listed on Schedule 6.13 as amended from time to time by such Borrower upon written notice to Agent.

6.14 Litigation. Except as set forth on Schedule 6.14, or, after the Closing Date as set forth on Parent's Form 10-K or 10-Q, there is no pending, or to the best of such Borrower's knowledge threatened, action, suit, proceeding, or counterclaim by any Person, or to the best of such Borrower's knowledge, investigation by any Governmental Authority, or any basis for any of the foregoing, which could reasonably be expected to have a Material Adverse Effect.

6.15 Labor Disputes. Except as set forth on Schedule 6.15, as of the Closing Date (a) there is no collective bargaining agreement or other labor contract covering employees of such Borrower or any of its Subsidiaries, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of such Borrower or any of its Subsidiaries or for any similar purpose, and (d) there is no pending or (to the best of such Borrower's knowledge) threatened, strike, work stoppage, material unfair labor practice claim, or other material labor dispute against or affecting such Borrower or any of its Restricted Subsidiaries or their employees.

6.16 Environmental Laws. Except as otherwise disclosed on Schedule 6.16:

(a) Such Borrower and its Subsidiaries have complied in all material respects with all Environmental Laws and neither such Borrower nor any Subsidiary thereof nor any of its presently owned real property or presently conducted operations, nor, to the best of such Borrower's knowledge, its previously owned real property or prior operations, is subject to any enforcement order from or liability agreement with any Governmental Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any potential liabilities and costs or remedial action arising from the Release or threatened Release of a Contaminant.

(b) Such Borrower and its Subsidiaries have obtained all permits necessary for their current operations under Environmental Laws, and all such permits are in good standing, except where failure to obtain such permits could not reasonably be expected to have a Material Adverse Effect, and such Borrower and its Subsidiaries are in compliance with all terms and conditions of such permits, except for any such non-compliance as could not reasonably be expected to have a Material Adverse Effect.

(c) Neither such Borrower nor any of its Subsidiaries, nor, to the best of such Borrower's knowledge, any of its predecessors in interest, has in violation of applicable law stored, treated or

disposed of any hazardous waste, except for any such violation as could not reasonably be expected to have a Material Adverse Effect.

(d) Neither such Borrower nor any of its Subsidiaries has received any summons, complaint, order or similar written notice indicating that it is not currently in compliance with, or that any Governmental Authority is investigating its compliance with, any Environmental Laws or that it is or may be liable to any other Person as a result of a Release or threatened Release of a Contaminant that could reasonably be expected to have a Material Adverse Effect.

(e) To the best of such Borrower's knowledge, none of the present or past operations of such Borrower and its Restricted Subsidiaries is the subject of any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a Release or threatened Release of a Contaminant.

(f) There is not now, nor to the best of such Borrower's knowledge has there ever been on or in the Real Estate owned by such Borrower:

(1) any underground storage tanks or surface impoundments, other than those maintained and/or closed in compliance in all material respects with applicable laws or surface impoundments,

(2) any asbestos-containing material, except such as has been removed in compliance in all material respects with Environmental Laws, or

(g) Neither such Borrower nor any of its Restricted Subsidiaries has filed any notice under any requirement of Environmental Law reporting a spill or accidental and unpermitted Release or discharge of a Contaminant into the environment that could reasonably be expected to cause a Material Adverse Effect.

(h) Neither such Borrower nor any of its Restricted Subsidiaries has entered into any negotiations or settlement agreements with any Person (including the prior owner of its property) imposing material obligations or liabilities on such Borrower or any of its Restricted Subsidiaries with respect to any remedial action in response to the Release of a Contaminant or environmentally related claim that could reasonably be expected to cause a Material Adverse Effect.

(i) None of the products manufactured, distributed or sold by such Borrower or any of its Restricted Subsidiaries contain asbestos containing material.

(j) No Environmental Lien has attached to Real Estate subject to a Mortgage, or to any other Real Estate that could reasonably be expected to cause a Material Adverse Effect.

6.17 No Violation of Law. Neither such Borrower nor any of its Subsidiaries is in violation of any law, statute, regulation, ordinance, judgment, order, or decree applicable to it which violation could reasonably be expected to have a Material Adverse Effect.

6.18 No Default. Neither such Borrower nor any of its Subsidiaries is in default with respect to any note, indenture, loan agreement, mortgage, charge, lease, deed, or other agreement to which such Borrower or any of its Subsidiaries is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect.

6.19 Intentionally Omitted.

6.20 Taxes. Such Borrower and its Restricted Subsidiaries have filed all tax returns and reports required to be filed, and have paid or made adequate provisions for the payment of all federal and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable unless such unpaid taxes and assessments would constitute a Permitted Lien.

6.21 Regulated Entities. Except as set forth on Schedule 6.21, neither such Borrower, nor any Person controlling such Borrower, nor any Restricted Subsidiary of such Borrower, is an "Investment Company" within the meaning of the Investment Company Act of 1940. Neither such Borrower nor any Subsidiary is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any public utilities code or law, or any other statute or regulation to the extent that the foregoing would limit its ability to incur the Obligations or grant the Liens to Agent or the Lenders under the Loan Documents.

6.22 Use of Proceeds; Margin Regulations. On and after the Initial Funding Date, the proceeds of the Loans are to be used solely for (i) repayment of such Borrower's synthetic lease obligations, if any, (ii) certain transactional fees and costs, and (iii) working capital purposes and other corporate purposes including capital expenditures. Neither such Borrower nor any of its Restricted Subsidiaries is engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

6.23 Proprietary Rights. Except as disclosed in Parent's publicly filed documents (including filings on Forms 10-K and 10-Q) or otherwise set forth in Schedule 6.14,

(i) to such Borrower's knowledge, such Borrower and its Restricted Subsidiaries own or are licensed or otherwise have sufficient rights or access to Proprietary Rights that are reasonably necessary for the operation of the business of such Borrower and its Restricted Subsidiaries, taken as a whole, except as would reasonably be expected not to have a Material Adverse Effect; and

(ii) no claim or litigation regarding any of the Proprietary Rights is pending or, to such Borrower's knowledge, threatened which would reasonably be expected to have a Material Adverse Effect, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is, to such Borrower's knowledge, pending or proposed, which in either case would reasonably be expected to have a Material Adverse Effect.

6.24 No Material Adverse Change. No Material Adverse Effect has occurred since the latest date of the Financial Statements delivered to the Lenders.

6.25 [Intentionally Deleted]

6.26 [Intentionally Deleted]

6.27 Bank Accounts. Schedule 6.27 contains as of the Closing Date a complete and accurate list of all bank accounts maintained by such Borrower with any bank or other financial institution.

6.28 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, such Borrower or any of its Restricted Subsidiaries of this Agreement or any other Loan Document.

6.29 Accounts.

(a) Each Borrower hereby represents and warrants to the Agent and the Lenders, with respect to such Borrower's Accounts, that: (i) each existing Account represents, and each future Account will represent, a bona fide sale or lease and delivery of goods by such Borrower, or rendition of services by such Borrower, in the ordinary course of such Borrower's business; (ii) each existing Account is, and each future Account will be, for a liquidated amount payable by

the Account Debtor thereon on the terms set forth in the invoice therefor or in the schedule thereof delivered to the Agent, without any offset, deduction, defense, or counterclaim known to such Borrower except as disclosed to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Agreement; (iii) no payment will be received with respect to any Account, and no credit, discount, or extension, or agreement therefor will be granted on any Account, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Agreement; (iv) each copy of an invoice delivered to the Agent by such Borrower will be a genuine copy of the original invoice sent to the Account Debtor named therein; and (v) all goods described in any invoice representing a sale of goods will have been delivered to the Account Debtor and all services of such Borrower described in each invoice will have been performed, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Agreement.

(b) Such Borrower shall not re-date any invoice or sale or make sales on extended dating beyond that customary in such Borrower's business or extend or modify any Account, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Agreement. If such Borrower becomes aware of any matter adversely affecting the collectibility of any Account or the Account Debtor therefor, while Revolving Loans are outstanding, involving an amount greater than $1,000,000, including information regarding the Account Debtor's creditworthiness, such Borrower will promptly so advise the Agent and exclude such amounts from Eligible Accounts.

(c) Such Borrower shall not accept any note or other instrument (except a check or other instrument for the immediate payment of money) with respect to any Account unless it notifies Agent and promptly delivers such instrument to the Agent, endorsed by such Borrower to the Agent in a manner satisfactory in form and substance to the Agent.

(d) If Revolving Loans are outstanding, such Borrower shall notify the Agent promptly of all disputes and claims in excess of $1,000,000 with any Account Debtor, and agrees to settle, contest, or adjust such dispute or claim at no expense to the Agent or any Lender. No discount, credit or allowance shall be granted to any such Account Debtor without the Agent's prior written consent, except for discounts, credits and allowances made or given when no Event of Default exists hereunder. If Revolving Loans are outstanding, such Borrower shall send the Agent a copy of each credit memorandum in excess of $1,000,000 as soon as issued, and such Borrower shall promptly report that credit on Borrowing Base Certificates submitted by it. The Agent may at all times when an Event of Default exists hereunder, settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which the Agent or the Required Lenders, as applicable, shall consider advisable and, in all cases, the Agent will credit such Borrower's Loan Account with the net amounts received by the Agent in payment of any Accounts.

(e) If an Account Debtor returns any Inventory to such Borrower when no Event of Default exists, then such Borrower shall promptly determine the reason for such return and shall issue a credit memorandum to the Account Debtor in the appropriate amount. If Revolving Loans are outstanding such Borrower shall immediately report to the Agent any return which exceeds $1,000,000 in amount, or which, together with all other returns at such time that have not been reflected in the previous Borrowing Base Certificate, exceeds $5,000,000. Each such report shall indicate the reasons for the returns and the locations and condition of the returned Inventory. In the event any Account Debtor returns Inventory to such Borrower when an Event of Default exists, such Borrower, upon the request of the Agent, shall: (i) hold the returned Inventory in trust for the Agent; (ii) segregate all returned Inventory from all of its other property; (iii) dispose of the returned Inventory solely according to the Agent's written instructions; and (iv) not issue any credits or allowances with respect thereto without the Lenders' prior written consent. All returned Inventory shall be subject to the Lenders' Liens thereon. Whenever any Inventory is returned, the related Account shall be deemed ineligible to the extent of the amount owing by the Account Debtor with respect to such returned Inventory and such returned Inventory shall not be Eligible Inventory.

ARTICLE 7
AFFIRMATIVE AND NEGATIVE COVENANTS

Each Borrower covenants to the Agent and each Lender that so long as any of the Obligations remain outstanding or this Agreement is in effect:

7.1 Taxes and Other Obligations. Such Borrower shall, and shall cause each of its Restricted Subsidiaries to, (a) file when due all tax returns and other reports which it is required to file; (b) pay, or provide for the payment, when due, of all taxes, fees, assessments and other governmental charges against it or upon its property, income and franchises, make all required withholding and other tax deposits, and establish adequate reserves for the payment of all such items, and provide to the Agent and the Lenders, upon request, satisfactory evidence of its timely compliance with the foregoing; and (c) pay when due all Debt owed by it and all claims of materialmen, mechanics, carriers, warehousemen, landlords, processors and other like Persons, and all other indebtedness owed by it and perform and discharge in a timely manner all other obligations undertaken by it; provided, however, neither such Borrower nor any of its Restricted Subsidiaries need pay any such claim, tax, fee, assessment, or governmental charge (i) it is contesting in good faith by appropriate proceedings diligently pursued, (ii) as to which such Borrower or its Restricted Subsidiary, as the case may be, has established proper reserves as required under GAAP, and (iii) the nonpayment of which does not result in the imposition of a Lien (other than a Permitted Lien).

7.2 Legal Existence and Good Standing. Such Borrower shall, and shall cause each of its Subsidiaries to, maintain its legal existence and its qualification and good standing in all jurisdictions in which the failure to maintain such existence and qualification or good standing could reasonably be expected to have a Material Adverse Effect.

7.3 Compliance with Law and Agreements; Maintenance of Licenses. Such Borrower shall comply, and shall cause each of its Restricted Subsidiaries to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act, to the extent applicable, and all Environmental Laws). Such Borrower shall, and shall cause each of its Subsidiaries to, obtain and maintain all licenses, permits, franchises, and governmental authorizations necessary to own its property and to conduct its business as conducted on the Closing Date, except where the failure to obtain such licenses, permits, franchises and authorizations could not reasonably be expected to have a Material Adverse Effect. Such Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, modify, amend or alter its certificate or articles of incorporation, or its limited liability company operating agreement, limited partnership agreement, or other organizational documents as applicable, other than in a manner which does not materially and adversely affect the rights of the Lenders or the Agent.

7.4 Maintenance of Property; Inspection of Property.

(a) Such Borrower shall, and shall cause each of its Restricted Subsidiaries to, maintain all of the Collateral necessary and useful in the conduct of its business, in good operating condition and repair, ordinary wear and tear excepted, except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) Such Borrower shall permit representatives and independent contractors of the Agent (at the expense of such Borrower not to exceed four (4) times per year unless an Event of Default has occurred and is continuing) to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its officers, at such reasonable times during normal business hours and as soon as may be reasonably desired, upon reasonable advance notice to such Borrower; provided, however, when an Event of Default exists, the Agent or any Lender may do

any of the foregoing at the expense of such Borrower at any time during normal business hours and without advance notice.

7.5 [Intentionally Deleted]

7.6 Insurance and Condemnation Proceeds. Such Borrower shall as soon as practicable notify the Agent and the Lenders of any loss, damage, or destruction to the Collateral, whether or not covered by insurance. The Agent is hereby authorized to collect all insurance and condemnation proceeds in respect of Collateral directly and shall apply or remit them as follows:

(i) With respect to insurance and condemnation proceeds relating to Collateral other than Fixed Assets, after deducting from such proceeds the reasonable expenses, if any, incurred by the Agent in the collection or handling thereof, the Agent shall apply such proceeds, ratably, to the reduction of the Revolving Loans and, if an Event of Default has occurred and is continuing, to the reduction of the other Obligations in the order provided for in Section 3.8. Any remaining proceeds after application as provided in the preceding sentence shall be returned to such Borrower.

(ii) With respect to insurance and condemnation proceeds relating to Collateral consisting of Fixed Assets, the Agent shall permit or require such Borrower to use such proceeds, or any part thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction so long as (1) no Default or Event of Default has occurred and is continuing, (2) the aggregate proceeds do not exceed $3,000,000 per incident and (3) such Borrower first (i) provides the Agent and the Required Lenders with plans and specifications for any such repair or restoration which shall be reasonably satisfactory to the Agent and the Required Lenders and (ii) demonstrates to the reasonable satisfaction of the Agent and the Required Lenders that the funds available to it will be sufficient to complete such project in the manner provided therein. In all other circumstances, the Agent shall apply such insurance and condemnation proceeds, ratably, to the reduction of the Term Loans in the order provided in Section 3.4(b), and thereafter to the reduction of the Obligations in the order provided for in Section 3.8.

7.7 Environmental Laws.

(a) Such Borrower shall, and shall cause each of its Restricted Subsidiaries to, conduct its business in compliance in all material respects with all Environmental Laws applicable to it, including those relating to the generation, handling, use, storage, and disposal of any Contaminant. Such Borrower shall, and shall cause each of its Restricted Subsidiaries to, take prompt and appropriate action to respond to any such non-compliance with Environmental Laws and shall regularly report to the Agent on such response.

(b) Without limiting the generality of the foregoing, such Borrower shall submit to the Agent and the Lenders annually, commencing on the first Anniversary Date, and on each Anniversary Date thereafter, an update of the status of each environmental compliance or liability issue that could reasonably be expected to have a Material Adverse Effect, or that is required to be reported under Section 5.3. The Agent or any Lender may request copies of technical reports prepared by such Borrower or any of its Restricted Subsidiaries and its communications with any Governmental Authority to determine whether such Borrower or any of its Restricted Subsidiaries is proceeding reasonably to correct, cure or contest in good faith any such alleged non-compliance or environmental liability. In the event that such Borrower cannot provide any such technical reports to the Agent because they are subject to an attorney-client privilege, then such Borrower shall so advise Agent of such fact and Agent may commission its own environmental technical reports at such Borrower's expense. Such Borrower shall, at the Agent's or the Required Lenders' request

and at such Borrower's expense, (i) retain an independent environmental engineer acceptable to the Agent to evaluate the site, including tests if appropriate, where the non-compliance or alleged non-compliance with Environmental Laws has occurred that could reasonably be expected to have a Material Adverse Effect, and prepare and deliver to the Agent, in sufficient quantity for distribution by the Agent to the Lenders, a report setting forth the results of such evaluation, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof, and (ii) provide to the Agent and the Lenders a supplemental report of such engineer whenever the scope of the environmental problems, or the response thereto or the estimated costs thereof, shall increase in any material respect.

(c) The Agent and its representatives will have the right at any reasonable time to enter and visit the Real Estate and any other place where any property of such Borrower is located, so long as such location is under the control of such Borrower or such Borrower is permitted to enter such premises, for the purposes of observing the Real Estate, taking and removing soil or groundwater samples, and conducting tests on any part of the Real Estate. The Agent is under no duty, however, to visit or observe the Real Estate or to conduct tests, and any such acts by the Agent will be solely for the purposes of protecting the Agent's Liens and preserving the Agent and the Lenders' rights under the Loan Documents. No site visit, observation or testing by the Agent and the Lenders will result in a waiver of any default of such Borrower or impose any liability on the Agent or the Lenders. In no event will any site visit, observation or testing by the Agent be a representation that hazardous substances are or are not present in, on or under the Real Estate, or that there has been or will be compliance with any Environmental Law. Neither such Borrower nor any other party is entitled to rely on any site visit, observation or testing by the Agent. The Agent and the Lenders owe no duty of care to protect such Borrower or any other party against, or to inform such Borrower or any other party of, any hazardous substances or any other adverse condition affecting the Real Estate. The Agent may in its discretion disclose to such Borrower or to any other party if so required by law any report or findings made as a result of, or in connection with, any site visit, observation or testing by the Agent. Such Borrower understands and agrees that the Agent makes no warranty or representation to such Borrower or any other party regarding the truth, accuracy or completeness of any such report or findings that may be disclosed. Such Borrower also understands that depending on the results of any site visit, observation or testing by the Agent and disclosed to the Borrower, such Borrower may have a legal obligation to notify one or more environmental agencies of the results, that such reporting requirements are site-specific, and are to be evaluated by such Borrower without advice or assistance from the Agent. In each instance, the Agent will give such Borrower reasonable notice before entering the Real Estate or any other place the Agent is permitted to enter under this Section 7.7(c). The Agent will make reasonable efforts to avoid interfering with such Borrower's use of the Real Estate or any other property in exercising any rights provided hereunder.

7.8 [Intentionally Deleted]

7.9 Mergers, Consolidations or Sales. Neither such Borrower nor any of its Subsidiaries shall:

(a) enter into any transaction of merger, reorganization, or consolidation,

(b) transfer, sell, assign, lease, or otherwise dispose of all or any part of its property, or

Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, only the following are prohibited by the preceding sentence:

(i) mergers or consolidations of such Borrower where such Borrower is not the surviving entity or any of the Liens of Agent and the Lenders would be impaired;

(ii) any reorganization, wind up, liquidation or dissolution of such Borrower;

(iii) any transfer, sale, assignment, lease, or other disposal of any Accounts or Inventory, other than (y) a sale of Inventory in the ordinary course of business or (z) where the amount of all Loans advanced against or Letters of Credit collateralized by such Accounts and/or Inventory (as determined by Agent in its sole discretion) are repaid in full contemporaneously with such sale or disposition;

(v) any transaction which would result in the breach of Section 7.25.

7.10 Distributions; Capital Change; Investments. Neither such Borrower nor any of its Subsidiaries shall: (a) directly or indirectly declare or make, or incur any liability to make, any Distribution, except Distributions to such Borrower by its Subsidiaries, and Distributions by any Subsidiary of such Borrower to another Subsidiary of such Borrower which is its parent; (b) make any change in its capital structure which could have a Material Adverse Effect; or (c) make any Investment.

Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, only the following are prohibited by the preceding sentence:

(i) an Investment by such Borrower or any of its Restricted Subsidiaries in an Unrestricted Subsidiary which is not (x) in the ordinary course of such Borrower's or such Restricted Subsidiary's business, and (y) used for the ordinary operating costs of such Unrestricted Subsidiary; or

(ii) a Distribution or an Investment that would result in the breach of Section 7.25.

7.11 [Intentionally Deleted]

7.12 Guaranties. Neither such Borrower nor any of its Restricted Subsidiaries shall make, issue, or become liable on any Guaranty, except: Guaranties of the Obligations in favor of the Security Trustee. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, Guaranties shall not be prohibited by the preceding sentence, and any such Guaranties permitted to be made shall be permitted to continue to exist following a Liquidity Trigger Event.

7.13 Debt. Neither such Borrower nor any of its Restricted Subsidiaries shall incur or maintain any Debt, other than:

(i) the Obligations;

(ii) Debt existing on the Closing Date described on Schedule 6.9 that is not to be repaid with the proceeds of Loans made on the Initial Funding Date; and

(iii) Obligations under any Hedge Agreements.

7.14 Prepayment. After the occurrence and during the continuance of a Liquidity Trigger Event, neither such Borrower nor any of its Restricted Subsidiaries shall voluntarily prepay any Debt, except the Obligations in accordance with the terms of this Agreement.

7.15 Transactions with Affiliates. Except as set forth below in this Section 7.15, neither such Borrower nor any of its Restricted Subsidiaries shall sell, transfer, distribute, or pay any money or

property, including, but not limited to, any fees or expenses of any nature (including, but not limited to, any fees or expenses for management services), to any Affiliate (other than to such Borrower or a Restricted Subsidiary or a U.S. Restricted Subsidiary), or, lend or advance money or property to any Affiliate (other than to such Borrower or a Restricted Subsidiary or a U.S. Restricted Subsidiary), or invest in (by capital contribution or otherwise) or purchase or repurchase any Capital Stock or indebtedness, or any property, of any Affiliate (other than of such Borrower or a Restricted Subsidiary or a U.S. Restricted Subsidiary), or, become liable on any Guaranty of the indebtedness, dividends, or other obligations of any Affiliate unless (a) the Affiliate is a Restricted Subsidiary or a U.S. Restricted Subsidiary or (b) such obligations are to such Borrower or to a Restricted Subsidiary or a U.S. Restricted Subsidiary. Notwithstanding the foregoing, while no Liquidity Trigger Event has occurred and is continuing, such Borrower and its Restricted Subsidiaries may make Investments in Unrestricted Subsidiaries as permitted in Section 7.10(i), and may engage in transactions with Unrestricted Subsidiaries and Affiliates other than such Borrower or its Restricted Subsidiaries, if such transactions are in the ordinary course of business, and no less favorable to such Borrower and its Restricted Subsidiaries than would be obtained in a comparable arm's-length transaction with a third party who is not an Affiliate.

7.16 Investment Banking and Finder's Fees. Neither such Borrower nor any of its Subsidiaries shall pay or agree to pay, or reimburse any other party with respect to, any investment banking or similar or related fee, underwriter's fee, finder's fee, or broker's fee to any Person in connection with this Agreement. Such Borrower shall defend and indemnify the Agent and the Lenders against and hold them harmless from all claims of any Person that such Borrower is obligated to pay for any such fees, and all costs and expenses (including attorneys' fees) incurred by the Agent and/or any Lender in connection therewith.

7.17 [Intentionally Deleted]

7.18 Liens. Neither such Borrower nor any of its Restricted Subsidiaries shall create, incur, assume, or permit to exist any Lien on any property now owned or hereafter acquired by any of them, except Permitted Liens.

7.19 Sale and Leaseback Transactions. Neither such Borrower nor any of its Subsidiaries shall, directly or indirectly, enter into any arrangement with any Person providing for such Borrower or such Subsidiary to lease or rent property that such Borrower or such Subsidiary has sold or will sell or otherwise transfer to such Person. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event, sale and leaseback transactions shall not be prohibited by the preceding sentence, and any such sale and leaseback transactions permitted to be consummated shall be permitted to remain in effect following the occurrence of a Liquidity Trigger Event.

7.20 New Subsidiaries. Such Borrower shall not, directly or indirectly, organize, create, acquire or permit to exist any Subsidiary other than those listed on Schedule 6.5. Notwithstanding the foregoing, at any time prior to the occurrence of a Liquidity Trigger Event and on at least thirty (30) days advance written notice to Agent:

(i) Such Borrower may create or acquire one or more new Restricted Subsidiaries or Unrestricted Subsidiaries that are owned by such Borrower or another Restricted Subsidiary, so long as (1) upon such creation or acquisition of a Restricted Subsidiary, (y) such new Restricted Subsidiary enters into a continuing guaranty of the Obligations, and (z) Agent is granted a Lien by such Borrower or such other Restricted Subsidiary on 100% of the Capital Stock of such new Restricted Subsidiary, such shares are delivered to Agent and all other necessary steps are taken to perfect Agent's Lien therein; provided, however, that Agent's Lien on the shares of any new Restricted Subsidiary shall only secure Obligations hereunder and not U.S. Loan Obligations, and (2) upon such creation or acquisition of an Unrestricted Subsidiary, such Borrower certifies that such new Unrestricted Subsidiary complies with the provisions of Section 6.12. Any such new Subsidiary permitted to be organized, created, or acquired shall be permitted to remain a Subsidiary following the occurrence of a Liquidity Trigger Event; and

(ii) Such Borrower may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary, so long as each of the conditions set forth in clauses (i) (y) and (z), of this Section 7.20 is met. In the event that a foreign Unrestricted Subsidiary being redesignated as a Restricted Subsidiary is not permitted (due to local regulatory restrictions) to guarantee the Obligations, or to have its Capital Stock pledged to Agent, such Unrestricted Subsidiary may nevertheless be redesignated as a Restricted Subsidiary (for the purposes of this Section 7.20 a "Qualified Restricted Subsidiary") so long as each other condition is met. Notwithstanding any other definitions or provisions of this Agreement or the Loan Documents to the contrary, there may not exist at any one time more than $20,000,000 of Investments in the aggregate in all Qualified Restricted Subsidiaries by such Borrower or its other Restricted Subsidiaries.

7.21 [Intentionally Deleted]

7.22 [Intentionally Deleted]

7.23 [Intentionally Deleted]

7.24 [Intentionally Deleted]

7.25 Minimum Liquidity. There shall be maintained, at all times, Liquidity of not less than $500,000,000, provided, however, that, after the Term Loans and the U.S. Term Loans have been repaid in full, there shall be maintained Liquidity of not less than $400,000,000. Parent and 3Com Tech shall maintain Qualified Cash Management Investments in the Qualified Custodial Accounts at all times of not less than $210,000,000 (reduced by the amount of any Term Loan or U.S. Term Loan repayments), in the aggregate. Amounts in the Qualified Custodial Accounts shall count towards Liquidity.

7.26 [Intentionally Deleted]

7.27 Use of Proceeds. Such Borrower shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of such Borrower or others incurred to purchase or carry Margin Stock, or (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock.

7.28 Further Assurances. Such Borrower shall execute and deliver, or cause to be executed and delivered, to the Agent and/or the Lenders such documents and agreements, and shall take or cause to be taken such actions, as the Agent or any Lender may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents.

7.29 No More Restrictive Covenants. No term or provision, express or implied, in the Cayman Debenture, the Ireland Debenture, the UK Debenture, the UK Mortgage, or the Intercompany Subordination Agreement, nor any restrictions or limitations arising under applicable law or as a result of any of the charges created or to be created under the foregoing agreements, shall effect or impose any greater restrictions or limitations on any Borrower or Subsidiary with respect to the matters covered by this Article 7 (including rights to use, lease transfer, sell, assign lease or otherwise dispose of all or any part of their property) than those expressly provided in this Article 7, and the provisions of this Article 7 shall override and control over any inconsistent or more restrictive term or provision, express or implied, of any of the foregoing agreements and any restriction or limitation on any Borrower or Subsidiary arising as a result of the charges created or to be created by or pursuant thereto.

ARTICLE 8
CONDITIONS OF LENDING

8.1 Conditions Precedent to Making of Loans on the Initial Funding Date. The obligation of the Lenders to make the initial Revolving Loans and the Term Loans on the Initial Funding Date, and the

obligation of the Agent to cause the Letter of Credit Issuer to issue any Letter of Credit on the Closing Date, are subject to the following conditions precedent having been satisfied in a manner satisfactory to the Agent and each Lender:

(a) This Agreement and the other Loan Documents shall have been executed by each party thereto and each Borrower shall have performed and complied in all material respects with all covenants, agreements and conditions contained herein and the other Loan Documents which are required to be performed or complied with by such Borrower before or on such Closing Date.

(b) Upon making the Term Loans and the Revolving Loans (including such Revolving Loans made to finance as reimbursement for fees, costs and expenses then payable under this Agreement) the Parent, the Borrowers and their Subsidiaries shall have Liquidity on a consolidated basis (less, the amount of any accounts payable that are over 30 days past due) of at least $1,000,000,000.

(c) All representations and warranties made hereunder and in the other Loan Documents shall be true and correct as if made on such date.

(d) No Default or Event of Default shall have occurred and be continuing after giving effect to the Loans to be made and the Letters of Credit to be issued on the Initial Funding Date.

(e) The Agent and the Lenders shall have received such opinions of local counsel for Borrowers and/or Agent in the United Kingdom, the Cayman Islands, Ireland, and such other jurisdictions as Agent or Lenders may require, as the Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Agent, the Lenders, and their respective counsel.

(f) The Agent shall have satisfactorily reviewed title searches on any real property subject to the UK Mortgage.

(g) The Agent shall have received:

(i) acknowledgment copies of proper financing statements, or their equivalents, duly filed on or before the Closing Date in all jurisdictions that the Agent may deem necessary or desirable in order to perfect the Lenders' Liens;

(ii) duly executed UCC-3 Termination Statements, or their equivalents, and such other instruments, in form and substance satisfactory to the Agent, as shall be necessary to terminate and satisfy all Liens on the Property of the Borrowers and their Subsidiaries except Permitted Liens; and

(iii) certificates for all Capital Stock of Restricted Subsidiaries (and, to the extent Borrower can (using its best efforts) locate them, certificates for all Capital Stock of its domestic Unrestricted Subsidiaries) pledged pursuant to the Security Documents, together with undated stock powers duly endorsed in blank; and

(iv) Blocked Account Agreement with Bank, and a control agreement respecting 3Com Tech's Qualified Custodial Account.

(h) The Borrowers shall have paid all fees and expenses of the Agent and the Attorney Costs incurred in connection with any of the Loan Documents and the transactions contemplated thereby to the extent invoiced.

(i) Borrowers shall have paid all fees due and owing to the Agent and the Lenders on the Closing Date.

(j) Agent and the Lenders shall be satisfied with all environmental aspects relating to Borrowers and their business, including all environmental reports as may be required by Agent and the Lenders.

(k) The Total Facility and the U.S. Facility each shall have been successfully syndicated on the terms set forth herein and in the U.S. Credit Agreement, to the satisfaction of the Agent, and all Lenders shall ratably fund the Loans and the U.S. Loans on the Initial Funding Date.

(l) All conditions precedent to the funding of the initial loans and letters of credit under the U.S. Credit Agreement shall have been satisfied.

(m) The Agent shall have received evidence, in form, scope, and substance, reasonably satisfactory to the Agent, of all insurance coverage as required by this Agreement.

(n) The Agent and the Lenders shall have had an opportunity, if they so choose, to examine the books of account and other records and files of each Borrower and its Subsidiaries and to make copies thereof, and to conduct a pre-closing audit which shall include, without limitation, verification of Inventory, Accounts, and the Borrowing Base, and the results of such examination and audit shall have been satisfactory to the Agent and the Lenders in all respects.

(p) Without limiting the generality of the items described above, each Borrower and each Person guarantying or securing payment of the Obligations shall have delivered or caused to be delivered to the Agent (in form and substance reasonably satisfactory to the Agent), the financial statements, instruments, resolutions, documents, agreements, certificates, opinions and other items set forth on the "Closing Checklist" delivered by the Agent to each Borrower prior to the Closing Date.

The acceptance by each Borrower of any Loans made or Letters of Credit issued on the Initial Funding Date shall be deemed to be a representation and warranty made by such Borrower to the effect that all of the conditions precedent to the making of such Loans or the issuance of such Letters of Credit have been satisfied, with the same effect as delivery to the Agent and the Lenders of a certificate signed by a Responsible Officer of such Borrower, dated the Initial Funding Date, to such effect.

Execution and delivery to the Agent by a Lender of a counterpart of this Agreement shall be deemed confirmation by such Lender that (i) all conditions precedent in this Section 8.1 have been fulfilled to the satisfaction of such Lender, (ii) the decision of such Lender to execute and deliver to the Agent an executed counterpart of this Agreement was made by such Lender independently and without reliance on the Agent or any other Lender as to the satisfaction of any condition precedent set forth in this Section 8.1, and (iii) all documents sent to such Lender for approval consent, or satisfaction were acceptable to such Lender.

(a) The following statements shall be true, and the acceptance by such Borrower of any extension of credit shall be deemed to be a statement to the effect set forth in clauses (i), (ii) and

(iii) with the same effect as the delivery to the Agent and the Lenders of a certificate signed by a Responsible Officer, dated the date of such extension of credit, stating that:

(i) The representations and warranties contained in this Agreement and the other Loan Documents are correct in all material respects on and as of the date of such extension of credit as though made on and as of such date, other than any such representation or warranty which relates to a specified prior date and except to the extent the Agent and the Lenders have been notified in writing by such Borrower that any representation or warranty is not correct and the Required Lenders have explicitly waived in writing compliance with such representation or warranty; and

(ii) No event has occurred and is continuing, or would result from such extension of credit, which constitutes a Default or an Event of Default; and

(iii) No event has occurred and is continuing, or would result from such extension of credit, which has had or would have a Material Adverse Effect.

(b) No such Borrowing shall exceed Availability, provided, however, that the foregoing conditions precedent are not conditions to each Lender participating in or reimbursing the Bank or the Agent for such Lenders' Pro Rata Share of any Non-Ratable Loan or Agent Advance made in accordance with the provisions of Sections 1.2(h) and (i).

ARTICLE 9
DEFAULT; REMEDIES

9.1 Events of Default. It shall constitute an event of default ("Event of Default") if any one or more of the following shall occur for any reason:

(a) any failure by the Borrowers to pay (i) the principal amount of any Obligations when due, whether upon demand or otherwise, (ii) interest or premium on any of the Obligations within three (3) Business Days of when due, whether upon demand or otherwise, or (iii) any fee or other amount owing hereunder within ten (10) Business Days of when due, whether upon demand or otherwise;

(b) any representation or warranty made or deemed made by any Borrower in this Agreement or by any Borrower or any of its Subsidiaries in any of the other Loan Documents, any Financial Statement, or any certificate furnished by any Borrower or any of its Subsidiaries at any time to the Agent or any Lender shall prove to be untrue in any material respect as of the date on which made, deemed made, or furnished;

(c) (i) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 5.2(d), 7.2, 7.5, 7.9-7.27, or clause 7 of the U.K. Debenture, (ii) any default shall occur in the observance or performance of any of the covenants and agreements contained in Sections 5.2 (other than 5.2(d) or 5.3 and such default shall continue for ten (10) days or more; or (iii) any default shall occur in the observance or performance of any of the other covenants or agreements contained in any other Section of this Agreement or any other Loan Document, any other Loan Documents, or any other agreement entered into at any time to which any Borrower or any Subsidiary and the Agent or any Lender are party (including in respect of any Bank Products) and such default shall continue for thirty (30) days or more;

(d) any (i) Event of Default shall have occurred and be continuing under the U.S. Credit Agreement; (ii) default shall occur with respect to any Debt (other than the Obligations or the U.S. Loan Obligations) of any Borrower or any of its Restricted Subsidiaries in an outstanding principal amount which exceeds $5,000,000 in the aggregate at any one time, or under any agreement or instrument under or pursuant to which any such Debt may have been issued,

created, assumed, or guaranteed by any Borrower or any of its Restricted Subsidiaries, and such default shall continue for more than the period of grace, if any, therein specified, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate, or to permit the holders of any such Debt to accelerate, the maturity of any such Debt; or (iii) any such Debt shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;

(e) any Borrower or any of its Restricted Subsidiaries shall (i) file a voluntary petition in bankruptcy or file a voluntary petition or an answer or otherwise commence any action or proceeding seeking reorganization, arrangement or readjustment of its debts or for any other relief under the Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law of the United States, any foreign country, or any political subdivision of the foregoing, now or hereafter existing, or consent to, approve of, or acquiesce in, any such petition, action or proceeding; (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for it or for all or any part of its property; (iii) make an assignment for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;

(f) an involuntary petition shall be filed or an action or proceeding otherwise commenced seeking reorganization, arrangement, consolidation or readjustment of the debts of any Borrower or any of its Restricted Subsidiaries or for any other relief under the Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or law of the United States, any foreign country, or any political subdivision of the foregoing, now or hereafter existing and such petition or proceeding shall not be dismissed within thirty (30) days after the filing or commencement thereof or an order of relief shall be entered with respect thereto;

(g) a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee or similar officer for any Borrower or any of its Restricted Subsidiaries or for all or any part of its property shall be appointed or a warrant of attachment, execution or similar process shall be issued against any part of the property of any Borrower or any of its Restricted Subsidiaries;

(h) except as specifically permitted by Section 7.9, any Borrower or any of its Restricted Subsidiaries shall have passed a resolution to voluntarily wind up such Borrower or Restricted Subsidiary, shall file a certificate of dissolution or shall be liquidated, dissolved or wound-up or shall commence or have commenced against it any action or proceeding for dissolution, winding-up or liquidation, or shall take any corporate action in furtherance thereof;

(i) all or any material part of the property of any Borrower or any of its Restricted Subsidiaries shall be nationalized, expropriated or condemned, seized or otherwise appropriated, or custody or control of such property or of any Borrower or such Restricted Subsidiary shall be assumed by any Governmental Authority or any court of competent jurisdiction at the instance of any Governmental Authority, except where contested in good faith by proper proceedings diligently pursued where a stay of enforcement is in effect;

(j) any Loan Document shall be terminated, revoked or declared void or invalid or unenforceable or challenged by any Borrower or any other obligor;

(k) one or more judgments, orders, decrees or arbitration awards is entered against any Borrower involving in the aggregate liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage or by an indemnity of a third Person (other than such Borrower or any of its Affiliates) that Agent in its good faith judgment determines is acceptable as to which such indemnitor has not disputed liability) as to any single or related or unrelated series of transactions, incidents or conditions, of $7,500,000 or more, and the same shall remain unsatisfied, unvacated or unstayed pending appeal for a period of sixty (60) days

after the entry thereof. For the purposes of clarity, a judgment shall be deemed satisfied if a Borrower has entered into a stipulation or agreement with the adverse party to pay such judgment;

(l) any loss, theft, damage or destruction of any item or items of Collateral or other property of any Borrower or any Subsidiary occurs which could reasonably be expected to cause a Material Adverse Effect and is not adequately covered by insurance;

(m) there is filed against any Borrower or any of its Restricted Subsidiaries any action, suit or proceeding under any federal or state racketeering statute (including the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (i) is not dismissed within one hundred twenty (120) days, and (ii) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral;

(n) for any reason other than the failure of the Security Trustee or the Agent to take any action available to it to maintain perfection of the Lenders' Liens, pursuant to the Loan Documents, any Loan Document ceases to be in full force and effect or any Lien with respect to any material portion of the Collateral intended to be secured thereby ceases to be, or is not, valid, perfected and prior to all other Liens (other than Permitted Liens) or is terminated, revoked or declared void;

(o) there occurs an event having a Material Adverse Effect.

9.2 Remedies.

(a) If a Default or an Event of Default exists, the Agent may, in its discretion, and shall, at the direction of the Required Lenders, do one or more of the following at any time or times and in any order, without notice to or demand on any Borrower: (i) reduce the Maximum Revolver Amount, or the advance rates against Eligible Accounts and/or Eligible Inventory used in computing the Borrowing Base, or reduce one or more of the other elements used in computing the Borrowing Base; (ii) restrict the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to provide Letters of Credit or Credit Support; provided, however, that in the event that Agent takes any action under clause (i) of this sentence during a Default and as a result the Aggregate Revolver Outstandings exceed the Borrowing Base, then, notwithstanding anything to the contrary contained in Section 3.1, Borrowers shall not be obligated to repay such excess until the earlier of (y) ten (10) days after such overadvance is created or (z) the occurrence of an Event of Default. If an Event of Default exists, the Agent shall, at the direction of the Required Lenders, do one or more of the following, in addition to the actions described in the preceding sentence, at any time or times and in any order, without notice to or demand on any Borrower: (A) terminate the Commitments and this Agreement; (B) declare any or all Obligations to be immediately due and payable; provided, however, that upon the occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g), or 9.1(h), the Commitments shall automatically and immediately expire and all Obligations shall automatically become immediately due and payable without notice or demand of any kind; (C) require the Borrowers to cash collateralize all outstanding Letter of Credit Obligations; and (D) pursue its other rights and remedies under the Loan Documents and applicable law.

(b) If an Event of Default has occurred and is continuing: (i) the Agent shall have for the benefit of the Lenders, in addition to all other rights of the Agent and the Lenders, the rights and remedies of a secured party under the Loan Documents, the UCC and under the applicable laws of the United Kingdom and the Cayman Islands; (ii) the Agent (acting on behalf of or in conjunction with the Security Trustee) may, at any time, take possession of the Collateral and keep it on any Borrower's premises, at no cost to the Agent or any Lender, or remove any part of it to such other place or places as the Agent may desire, or each Borrower shall, upon the Agent's demand, at each Borrower's cost, assemble the Collateral and make it available to the Agent at a

place reasonably convenient to the Agent; and (iii) the Security Trustee may sell and deliver any Collateral at public or private sales, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion, and may, if the Agent deems it reasonable, postpone or adjourn any sale of the Collateral by an announcement at the time and place of sale or of such postponed or adjourned sale without giving a new notice of sale. Without in any way requiring notice to be given in the following manner, each Borrower agrees that any notice by the Agent of sale, disposition or other intended action hereunder or in connection herewith, whether required by the UCC or otherwise, shall constitute reasonable notice to such Borrower if such notice is mailed by registered or certified mail, return receipt requested, postage prepaid, or is delivered personally against receipt, at least ten (10) Business Days prior to such action to such Borrower's address specified in or pursuant to Section 13.8. If any Collateral is sold on terms other than payment in full at the time of sale, no credit shall be given against the Obligations until the Agent or the Lenders receive payment, and if the buyer defaults in payment, the Agent may resell the Collateral without further notice to any Borrower. In the event the Agent seeks to take possession of all or any portion of the Collateral by judicial process, each Borrower irrevocably waives: (A) the posting of any bond, surety or security with respect thereto which might otherwise be required; (B) any demand for possession prior to the commencement of any suit or action to recover the Collateral; and (C) any requirement that the Agent retain possession and not dispose of any Collateral until after trial or final judgment. Each Borrower agrees that the Agent has no obligation to preserve rights to the Collateral or marshal any Collateral for the benefit of any Person. The Agent is hereby granted a non-exclusive license or other right to use, without charge, each Borrower's labels, patents, copyrights, name, trade secrets, trade names, trademarks, and advertising matter, or any similar property, in completing production of, advertising or selling any Collateral, and such Borrower's rights under all licenses and all franchise agreements shall inure to the Agent's benefit for such purpose. The proceeds of sale shall be applied first to all expenses of sale, including attorneys' fees, and then to the Obligations. The Agent will return any excess to the Borrowers and the Borrowers shall remain liable for any deficiency.

(c) If an Event of Default exists, each Borrower hereby waives all rights to notice and hearing prior to the exercise by the Agent of the Agent's rights to repossess the Collateral without judicial process or to reply, attach or levy upon the Collateral without notice or hearing.

ARTICLE 10
TERM AND TERMINATION

10.1 Term and Termination. The term of this Agreement shall end on the Stated Termination Date unless sooner terminated in accordance with the terms hereof. The Agent upon direction from the Required Lenders may terminate this Agreement without notice upon the occurrence of an Event of Default. Upon the effective date of termination of this Agreement for any reason whatsoever, all Obligations (including all unpaid principal, accrued and unpaid interest and any accrued and unpaid fees) shall become immediately due and payable and each Borrower shall immediately arrange for the cancellation and return of Letters of Credit then outstanding. Notwithstanding the termination of this Agreement, until all Obligations are indefeasibly paid and performed in full in cash, each Borrower shall remain bound by the terms of this Agreement and shall not be relieved of any of its Obligations hereunder or under any other Loan Document, and the Agent and the Lenders shall retain all their rights and remedies hereunder (including the Lenders' Liens in and all rights and remedies with respect to all then existing and after-arising Collateral).

ARTICLE 11
AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

11.1 Amendments and Waivers.

(a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by any Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent at the written request of the Required Lenders) and the Borrowers and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Borrowers and acknowledged by the Agent, do any of the following:

(i) increase or extend the Commitment of any Lender;

(iii) reduce the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder or under any other Loan Document;

(iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Lenders or any of them to take any action hereunder;

(v) increase any of the percentages set forth in the definition of the Borrowing Base;

(vi) amend this Section or any provision of this Agreement providing for consent or other action by all Lenders;

(vii) release any guarantors of the Obligations from their guaranties, or release or contractually subordinate Lenders' Liens on any Collateral other than as permitted by Section 12.11;

(viii) change the definitions of "Liquidity," "Liquidity Trigger Event," "Majority Lenders," "Required Lenders," "Qualified Cash Management Investments," or "Qualified Custodial Accounts";

(ix) increase the Dollar amounts or any of the percentages set forth in the definitions of Maximum Revolver Amount, the Maximum Inventory Loan Amount, and Unused Letter of Credit Subfacility;

(x) amend to make less restrictive, or waive compliance with, Section 7.25;

(xi) amend the order of payments set forth in the second sentence of Section 3.8; or

(xii) amend the definitions of "Eligible Accounts" or "Eligible Inventory" such that eligibility criteria becomes less restrictive;

provided, however, the Agent may, in its sole discretion and notwithstanding the limitations contained in clauses (v) and (ix) above and any other terms of this Agreement, make Agent Advances in accordance with Section 1.2(i) and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent, affect the rights or duties of the Agent under this Agreement or any other Loan Document and provided further, that Schedule 1.2 hereto (Commitments) may be amended from time to time by Agent alone to reflect assignments of Commitments in accordance herewith.

(b) [Intentionally Deleted]

(ii) requiring the consent of Required Lenders, the consent of Majority Lenders is obtained,

11.2 Assignments; Participations.

(a) Any Lender may, with the written consent of the Agent (which consent shall not be unreasonably withheld), assign and delegate to one or more Eligible Assignees (provided that no consent of the Agent shall be required in connection with any assignment and delegation by a Lender to an Affiliate of such Lender or if such Lender merges, consolidates or sells or transfers substantially all of its loan portfolio) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Lender hereunder, in a minimum amount (in the aggregate with assignments of International Loans and International Commitments) of $10,000,000 (provided that, unless an assignor Lender has assigned and delegated all of its Loans and Commitments, no such assignment and/or delegation shall be permitted unless, after giving effect thereto, such assignor Lender retains a Commitment in a minimum amount of (in the aggregate with its International Commitment) of $10,000,000); provided, however, that each Borrower and the Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrowers and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Borrowers and the Agent an Assignment and Acceptance in the form of Exhibit F ("Assignment and Acceptance") together with any note or notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $3,500. Each Borrower agrees to promptly execute and deliver new promissory notes and replacement promissory notes as reasonably requested by the Agent to evidence assignments of the Loans and Commitments in accordance herewith.

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto or the attachment, perfection, or priority of any Lien granted by any Borrower to the Agent or any Lender in the Collateral; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or any Subsidiary or the performance or observance by any Borrower of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto; (iii) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon the Agent, such assigning Lender 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 this Agreement; (v) such Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers, including the discretionary rights and incidental power, as are reasonably incidental thereto; and (vi) such Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(e) Any Lender may at any time sell to one or more commercial banks, financial institutions, or other Persons not Affiliates of a Borrower (a "Participant") participating interests in any Loans, the Commitment of that Lender and the other interests of that Lender (the "originating Lender") hereunder and under the other Loan Documents; provided, however, that (i) the originating Lender's obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Borrowers and the Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document except the matters set forth in Section 11.1(a) (i), (ii) and (iii), and all amounts payable by any Borrower hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, 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 set-off in respect of its participating interest in amounts owing under this Agreement to the same extent and subject to the same limitation as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.

(g) Notwithstanding anything to the contrary contained in this Agreement, no assignment of a Lender's interest in its Loans or Commitment, and no sale of any participation interest in any Lender's interest in its Loans or Commitment, may be made without such Lender simultaneously assigning (in the case of an assignment) or selling a participation (in the case of a participation) to the same assignee or participant (as applicable), a proportional interest in such assigning or selling Lender's U.S. Loans and U.S. Commitments, in either case pursuant to the relevant assignment and participation provisions in the U.S. Credit Agreement.

ARTICLE 12
THE AGENT AND THE SECURITY TRUSTEE

12.1 Appointment and Authorization. Each Lender hereby designates and appoints Bank as its Agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes the Agent (subject to Section 12.21) to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. The Agent agrees to act as such on the express conditions contained in this Article 12. The provisions of this Article 12 are solely for the benefit of the Agent and the Lenders and the Borrowers shall have no rights as a third party beneficiary of any of the provisions contained herein. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Except as expressly otherwise provided in this Agreement, the Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions which the Agent is expressly entitled to take or assert under this Agreement and the other Loan Documents, including (a) the determination of the applicability of ineligibility criteria with respect to the calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to Section 1.2(i), and (c) the exercise of remedies pursuant to Section 9.2, and any action so taken or not taken shall be deemed consented to by the Lenders.

12.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by any Borrower or any Subsidiary or Affiliate of any Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder

or thereunder. No Agent-Related Person shall 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 other Loan Document, or to inspect the properties, books or records of any Borrower or any of such Borrower's Subsidiaries or Affiliates of any Borrower.

12.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement 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 counsel to the any Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, 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 Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or all Lenders if so required by Section 11.1) and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

12.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, unless the Agent shall have received written 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." The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, however, that unless and until the Agent has received any such request, the 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. If any Lender shall obtain actual knowledge of any Event of Default, such Lender shall promptly notify Agent.

12.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of any Borrower and its Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower and its Affiliates, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrowers. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person 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 and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Borrower which may come into the possession of any of the Agent-Related Persons.

12.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so), in accordance with their Pro Rata Shares, from and against any and all Indemnified Liabilities as such term is defined in Section 13.11; provided, however, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its Pro Rata Share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.

12.8 Agent in Individual Capacity. The Bank and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with any Borrower and its Subsidiaries and Affiliates as though the Bank were not the Agent hereunder and without notice to or consent of the Lenders. The Bank or its Affiliates may receive information regarding the Borrowers, its Affiliates and Account Debtors (including information that may be subject to confidentiality obligations in favor of a Borrower or such Subsidiary) and acknowledge that the Agent and the Bank shall be under no obligation to provide such information to them. With respect to its Loans, the Bank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" include the Bank in its individual capacity.

12.9 Successor Agent. The Agent may resign as Agent upon at least 30 days' prior notice to the Lenders and the Borrowers, such resignation to be effective upon the acceptance of a successor agent to its appointment as Agent. In the event the Bank sells all of its Commitment and Revolving Loans as part of a sale, transfer or other disposition by the Bank of substantially all of its loan portfolio, the Bank shall resign as Agent and such purchaser or transferee shall become the successor Agent hereunder. Subject to the foregoing, if the Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrowers, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article 12 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

12.10 Withholding Tax.

(a) Each Lender that does not have the ability or desire to funds and book through a London branch, office or affiliate, agrees with and in favor of the Agent, to deliver to the Agent evidence that it has duly completed, executed and delivered to the Internal Revenue Service Form FD 13 before payment of any interest to such Lender hereunder. Such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(b) If any Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Borrower to such Lender. To the extent of such percentage amount, the Agent will treat such Lender's Form FD 13 as no longer valid.

(c) If any Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations owing to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by the laws of the United Kingdom, including providing evidence that any assignee or participant has duly completed, executed and delivered to the Internal Revenue Service Form FD 13 before payment of any interest to it hereunder.

(d) If the forms or other documentation required by subsections (a) or (c) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender, assignee or participant not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(e) If the Inland Revenue Service or any other Governmental Authority of the United Kingdom or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent.

12.11 Collateral Matters.

(a) The Lenders hereby irrevocably authorize the Security Trustee, at its option and in its sole discretion, to release any Lenders' Liens upon any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrowers of all Loans and reimbursement obligations in respect of Letters of Credit and Credit Support, and the termination of all outstanding Letters of Credit (whether or not any of such obligations are due) and all other Obligations; (ii) constituting property being sold or disposed of if the relevant Borrower certifies to the Agent that the sale or disposition is made in compliance with Section 7.9 and in conjunction with any paydown required by such Section, Section 3.4, or otherwise under this Agreement (and the Security Trustee may rely conclusively on any such certificate, without further inquiry); (iii) constituting Real Estate being refinanced if Borrowers certify to the Agent that the refinancing is in compliance with Section 7.13 and in conjunction with any paydown required by such Section, Section 3.4 or otherwise under this Agreement (and the Agent may rely conclusively on any such certificate, without further inquiry); (iv) constituting property in which the relevant Borrower owned no interest at the time the Lien was granted or at any time thereafter; (v) constituting property leased to any Borrower or Subsidiary thereof under a lease which has expired or been terminated in a transaction permitted under this Agreement; or (vi) constituting Real Property once the Term Loans have been repaid in full. Except as provided above, the Security Trustee will not release any of the Lenders' Liens without the prior written authorization of the Lenders; provided that the Security Trustee may, in its discretion, release the Lenders' Liens on Collateral (other than Collateral in the Qualified Custodial Accounts following attachment of Lenders' Lien thereon) valued in the aggregate not in excess of $500,000 during each Fiscal Year without the prior written authorization of the Lenders and the Security Trustee may release the

Lenders' Liens on Collateral (other than Collateral in the Qualified Custodial Accounts following attachment of Lenders' Lien thereon) valued in the aggregate not in excess of $1,000,000 during each Fiscal Year with the prior written authorization of Required Lenders. Upon request by the Agent or the Borrowers at any time, the Lenders will confirm in writing the Security Trustee's authority to release any Lenders' Liens upon particular types or items of Collateral pursuant to this Section 12.11.

(b) Upon receipt by the Security Trustee of any authorization required pursuant to Section 12.11(a) from the Lenders of the Security Trustee's authority to release Lenders' Liens upon particular types or items of Collateral, and upon at least five (5) Business Days prior written request by a Borrower, the Security Trustee shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Lenders' Liens upon such Collateral; provided, however, that (i) the Security Trustee shall not be required to execute any such document on terms which, in the Security Trustee's opinion, would expose the Security Trustee to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Borrowers in respect of) all interests retained by the Borrowers, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(c) The Agent and the Security Trustee shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by any Borrower or is cared for, protected or insured or has been encumbered, or that the Lenders' Liens have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent or the Security Trustee pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion given the Agent's own interest in the Collateral in its capacity as one of the Lenders and that the Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing.

12.12 Restrictions on Actions by Lenders; Sharing of Payments.

(a) Each of the Lenders agrees that it shall not, without the express consent of all Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon the request of all Lenders, set off against the Obligations, any amounts owing by such Lender to any Borrower or any accounts of any Borrower now or hereafter maintained with such Lender. Each of the Lenders further agrees that it shall not, unless specifically requested to do so by the Agent and the Security Trustee, take or cause to be taken any action to enforce its rights under this Agreement or against any Borrower, including the commencement of any legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral. Each Lender further agrees that it will undertake no "action" within the meaning of California Code of Civil Procedure Section 726, and the cases interpreting the meaning of same (a "Cal Action").

Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

12.13 Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting the Lenders' security interest in assets which, in accordance with Article 9 of the UCC can be perfected only by possession. Should any Lender (other than the Agent) obtain possession of any such Collateral, such Lender shall notify the Agent thereof, and, promptly upon the Agent's request therefor shall deliver such Collateral to the Agent or in accordance with the Agent's instructions.

12.14 Payments by Agent to Lenders. All payments to be made by the Agent to the Lenders shall be made by bank wire transfer or internal transfer of immediately available funds to each Lender pursuant to wire transfer instructions delivered in writing to the Agent on or prior to the Initial Funding Date (or if such Lender is an Assignee, on the applicable Assignment and Acceptance), or pursuant to such other wire transfer instructions as each party may designate for itself by written notice to the Agent. Concurrently with each such payment, the Agent shall identify whether such payment (or any portion thereof) represents principal, premium or interest on the Revolving Loans, Term Loans or otherwise. Unless the Agent receives notice from any Borrower prior to the date on which any payment is due to the Lenders that such Borrower will not make such payment in full as and when required, the Agent may assume that such Borrower has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent any Borrower has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid.

12.15 Settlement.

(a) (i) Each Lender's funded portion of the Revolving Loans is intended by the Lenders to be equal at all times to such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding such agreement, the Agent, the Bank, and the other Lenders agree (which agreement shall not be for the benefit of or enforceable by any Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement

among them as to the Revolving Loans, the Non-Ratable Loans and the Agent Advances shall take place on a periodic basis in accordance with the following provisions:

(ii) The Agent shall request settlement ("Settlement") with the Lenders on at least a weekly basis, or on a more frequent basis at Agent's election, (A) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, (B) for itself, with respect to each Agent Advance, and (C) with respect to collections received, in each case, by notifying the Lenders of such requested Settlement by telecopy, telephone or other similar form of transmission, of such requested Settlement, no later than 11:00 a.m. (London time) on the date of such requested Settlement (the "Settlement Date"). Each Lender (other than the Bank, in the case of Non-Ratable Loans and the Agent in the case of Agent Advances) shall transfer the amount of such Lender's Pro Rata Share of the outstanding principal amount of the Non-Ratable Loans and Agent Advances with respect to each Settlement to the London branch of Agent, to Agent's account, not later than 1:00 p.m. (London time), on the Settlement Date applicable thereto. Settlements may occur during the continuation of a Default or an Event of Default and whether or not the applicable conditions precedent set forth in Article 8 have then been satisfied. Such amounts made available to the Agent shall be applied against the amounts of the applicable Non-Ratable Loan or Agent Advance and, together with the portion of such Non-Ratable Loan or Agent Advance representing the Bank's Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders. If any such amount is not transferred to the Agent by any Lender on the Settlement Date applicable thereto, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after the Settlement Date and thereafter at the Interest Rate then applicable to the Revolving Loans (A) on behalf of the Bank, with respect to each outstanding Non-Ratable Loan, and (B) for itself, with respect to each Agent Advance.

(iii) Notwithstanding the foregoing, not more than one (1) Business Day after demand is made by the Agent (whether before or after the occurrence of a Default or an Event of Default and regardless of whether the Agent has requested a Settlement with respect to a Non-Ratable Loan or Agent Advance), each other Lender (A) shall irrevocably and unconditionally purchase and receive from the Bank or the Agent, as applicable, without recourse or warranty, an undivided interest and participation in such Non-Ratable Loan or Agent Advance equal to such Lender's Pro Rata Share of such Non-Ratable Loan or Agent Advance and (B) if Settlement has not previously occurred with respect to such Non-Ratable Loans or Agent Advances, upon demand by Bank or Agent, as applicable, shall pay to Bank or Agent, as applicable, as the purchase price of such participation an amount equal to one-hundred percent (100%) of such Lender's Pro Rata Share of such Non-Ratable Loans or Agent Advances. If such amount is not in fact made available to the Agent by any Lender, the Agent shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Rate for the first three (3) days from and after such demand and thereafter at the Interest Rate then applicable to Base Rate Revolving Loans.

If, as of any Settlement Date, collections received since the then immediately preceding Settlement Date have been applied to the Bank's Revolving Loans (other than to Non-Ratable Loans or Agent Advances in which such Lender has not yet funded its purchase of a participation pursuant to clause (iii) above), as provided for in the previous sentence, the Bank shall pay to the Agent for the accounts of the Lenders, to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Revolving Loans. During the period between Settlement Dates, the Bank with respect to Non-Ratable Loans, the Agent with respect to Agent Advances, and each Lender with respect to the Revolving Loans other than Non-Ratable Loans and Agent Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the actual average daily amount of funds employed by the Bank, the Agent and the other Lenders.

(vi) Unless the Agent has received written notice from a Borrower or a Lender to the contrary, the Agent may assume that the applicable conditions precedent set forth in Article 8 have been satisfied and the requested Borrowing will not exceed Availability on any Funding Date for a Revolving Loan or Non-Ratable Loan.

(c) Defaulting Lenders. Unless the Agent receives notice from a Lender on or prior to the Initial Funding Date or, with respect to any Borrowing after the Initial Funding Date, at least one Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to the Agent that Lender's Pro Rata Share of a Borrowing, the Agent may assume that each Lender has made such amount available to the Agent in immediately available funds on the Funding Date. Furthermore, the Agent may, in reliance upon such assumption, make available to any Borrower on such date a corresponding amount. If any Lender has not transferred its full Pro Rata Share to the Agent in immediately available funds and the Agent has transferred corresponding amount to any Borrower on the Business Day following such Funding Date that Lender shall make such amount available to the Agent, together with interest at the Federal Funds Rate for that day. A notice by the Agent submitted to any Lender with respect to amounts owing shall be conclusive, absent manifest error. If each Lender's full Pro Rata Share is transferred to the Agent as required, the amount transferred to the Agent shall constitute that Lender's Revolving Loan for all purposes of this Agreement. If that amount is not transferred to the Agent on the Business Day following the Funding Date, the Agent will notify the relevant Borrower of such failure to fund and, upon demand by the Agent, such Borrower shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the Interest Rate applicable at the time to the Revolving Loans comprising that particular Borrowing. The failure of any Lender to make any Revolving Loan on any Funding Date (any such Lender, prior to the cure of such failure, being hereinafter referred to as a "Defaulting Lender") shall not relieve any other Lender of its obligation hereunder to make a Revolving Loan on that Funding Date. No Lender shall be responsible for any other Lender's failure to advance such other Lenders' Pro Rata Share of any Borrowing.

(d) Retention of Defaulting Lender's Payments. The Agent shall not be obligated to transfer to a Defaulting Lender any payments made by any Borrower to the Agent for the Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall instead be paid to or retained by the Agent. In its discretion, the Agent may loan any Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. Any amounts so loaned to any Borrower shall bear interest at the rate applicable to Base Rate Revolving Loans and for all other purposes of this Agreement shall be treated as if they were Revolving Loans, provided, however, that for purposes of voting or consenting to matters with respect to the Loan Documents and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender". Until a Defaulting Lender cures its failure to fund its Pro Rata Share of any Borrowing (A) such Defaulting Lender shall not be entitled to any portion of the Unused Line Fee and (B) the Unused Line Fee shall accrue in favor of the Lenders which have funded their respective Pro Rata Shares of such requested Borrowing and shall be allocated among such performing Lenders ratably based upon their relative Commitments. This Section shall remain effective with respect to such Lender until such time as the Defaulting Lender shall no longer be in default of any of its obligations under this Agreement. The terms of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by each Borrower of its duties and obligations hereunder.

(e) Removal of Defaulting Lender. At any Borrower's request, the Agent or an Eligible Assignee reasonably acceptable to the Agent and such Borrower shall have the right (but not the obligation) to purchase from any Defaulting Lender, and each Defaulting Lender shall, upon such request, sell and assign to the Agent or such Eligible Assignee, all of the Defaulting Lender's outstanding Commitments hereunder. Such sale shall be consummated promptly after Agent has arranged for a purchase by Agent or an Eligible Assignee pursuant to an Assignment and Acceptance, and at a price equal to the outstanding principal balance of the Defaulting Lender's Loans, plus accrued interest and fees, without premium or discount, and shall be subject to the provisions of Section 11.2(g).

12.16 Letters of Credit; Intra-Lender Issues.

(a) Notice of Letter of Credit Balance. On each Settlement Date the Agent shall notify each Lender of the issuance of all Letters of Credit since the prior Settlement Date.

(b) Participations in Letters of Credit.

(i) Purchase of Participations. Immediately upon issuance of any Letter of Credit in accordance with Section 1.4(d), each Lender shall be deemed to have irrevocably and unconditionally purchased and received without recourse or warranty, an undivided interest and participation equal to such Lender's Pro Rata Share of the face amount of such Letter of Credit or the Credit Support provided through the Agent to the Letter of Credit Issuer, if not the Bank, in connection with the issuance of such Letter of Credit (including all obligations of any Borrower with respect thereto, and any security therefor or guaranty pertaining thereto).

(ii) Sharing of Reimbursement Obligation Payments. Whenever the Agent receives a payment from any Borrower on account of reimbursement obligations in respect of a Letter of Credit or Credit Support as to which the Agent has previously received for the account of the Letter of Credit Issuer thereof payment from a Lender, the Agent shall promptly pay to such Lender such Lender's Pro Rata Share of such payment from such Borrower. Each such payment shall be made by the Agent on the next Settlement Date.

(iii) Documentation. Upon the request of any Lender, the Agent shall furnish to such Lender copies of any Letter of Credit, Credit Support for any Letter of Credit, reimbursement

agreements executed in connection therewith, applications for any Letter of Credit, and such other documentation as may reasonably be requested by such Lender.

(iv) Obligations Irrevocable. The obligations of each Lender to make payments to the Agent with respect to any Letter of Credit or with respect to their participation therein or with respect to any Credit Support for any Letter of Credit or with respect to the Revolving Loans made as a result of a drawing under a Letter of Credit and the obligations of such Borrower for whose account the Letter of Credit or Credit Support was issued to make payments to the Agent, for the account of the Lenders, shall be irrevocable and shall not be subject to any qualification or exception whatsoever, including any of the following circumstances:

(1) any lack of validity or enforceability of this Agreement or any of the other Loan Documents;

(2) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary named in a Letter of Credit or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Lender, the Agent, the issuer of such Letter of Credit, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between any Borrower or any other Person and the beneficiary named in any Letter of Credit);

(4) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents;

(5) the occurrence of any Default or Event of Default; or

(6) the failure of any Borrower to satisfy the applicable conditions precedent set forth in Article 8.

(c) Recovery or Avoidance of Payments; Refund of Payments In Error. In the event any payment by or on behalf of any Borrower received by the Agent with respect to any Letter of Credit or Credit Support provided for any Letter of Credit and distributed by the Agent to the Lenders on account of their respective participations therein is thereafter set aside, avoided or recovered from the Agent in connection with any receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent their respective Pro Rata Shares of such amount set aside, avoided or recovered, together with interest at the rate required to be paid by the Agent upon the amount required to be repaid by it. Unless the Agent receives notice from any Borrower prior to the date on which any payment is due to the Lenders that such Borrower will not make such payment in full as and when required, the Agent may assume that such Borrower has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent any Borrower has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid.

(d) Indemnification by Lenders. To the extent not reimbursed by any Borrower and without limiting the obligations of any Borrower hereunder, the Lenders agree to indemnify the Letter of

Credit Issuer ratably in accordance with their respective Pro Rata Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Letter of Credit Issuer in any way relating to or arising out of any Letter of Credit or the transactions contemplated thereby or any action taken or omitted by the Letter of Credit Issuer under any Letter of Credit or any Loan Document in connection therewith; provided that no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Letter of Credit Issuer promptly upon demand for its Pro Rata Share of any costs or expenses payable by any Borrower to the Letter of Credit Issuer, to the extent that the Letter of Credit Issuer is not promptly reimbursed for such costs and expenses by such Borrower. The agreement contained in this Section shall survive payment in full of all other Obligations.

12.17 Concerning the Collateral and the Related Loan Documents. Subject to Section 12.21 below, each Lender authorizes and directs the Agent to enter into the other Loan Documents, for the ratable benefit and obligation of the Agent and the Lenders. Each Lender agrees that any action taken by the Agent, Majority Lenders or Required Lenders, as applicable, in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Agent, the Majority Lenders, or the Required Lenders, as applicable, of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. The Lenders acknowledge that the Revolving Loans, Term Loans, Agent Advances, Non-Ratable Loans, Bank Products and all interest, fees and expenses hereunder constitute one Debt, secured pari passu by all of the Collateral.

12.18 Field Audit and Examination Reports; Disclaimer by Lenders. By signing this Agreement, each Lender:

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agent or the Bank or other party performing any audit or examination will inspect only specific information regarding the Borrowers and their Subsidiaries and will rely significantly upon the Borrowers' and their Subsidiaries' books and records, as well as on representations of the Borrowers' and their Subsidiaries' personnel;

(d) agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except to its participants, or use any Report in any other manner; and

(e) without limiting the generality of any other indemnification provision coltained in this Agreement, agrees: (i) to hold the Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to any Borrower, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a loan or loans of any Borrower; and (ii) to pay and protect, and indemnify, defend and hold the Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses and other amounts (including Attorney Costs) incurred by the Agent and any such other

Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

12.20 Co-Agents. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a "lead arranger," "sole book manager," or "syndication agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders or other Persons as such. Without limiting the foregoing, none of the Lenders so identified as a "lead arranger," "sole book manager," or "syndication agent" shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

12.21 Security Trustee. Each Lender, the Letter of Credit Issuer and the Agent hereby appoints the Security Trustee to act as its trustee under and in relation to the Security Documents pursuant to this Agreement and to hold the Trust Property as trustee for the Agent, the Letter of Credit Issuer and Lenders on the trusts and other terms contained in the Security Documents and the Agent, the Letter of Credit Issuer and each Lender hereby irrevocably authorizes the Security Trustee to exercise such rights, powers and discretions as are specifically delegated to the Security Trustee by the terms of the Security Documents together with all such rights, powers and discretions as are reasonably incidental thereto.

12.22 Successor Security Trustee

(a) Resignation: The Security Trustee may resign its appointment under any of this Agreement or the Security Documents at any time by giving not less than thirty days' notice in writing to that effect to each of the other parties to this Agreement provided that such resignation shall not become effective until a successor to the Security Trustee has been appointed and accepted its appointment in accordance with the following provisions of this Section 12.22 and all necessary documents have been entered into to ensure that the benefit of the Security Documents is held by such successor.

(b) Appointment of Successor: If the Security Trustee gives notice of its resignation, the Agent may appoint a successor. If the Agent has not within sixty days after such notice of resignation appointed a successor to the Security Trustee which shall have accepted such appointment, the retiring Security Trustee shall have the right to appoint such a successor itself.

(c) Discharge: If a successor to the Security Trustee is appointed under the provisions of this Section 12.22, then the retiring Security Trustee shall be discharged from any further obligations under this Agreement and the Security Documents but shall remain entitled to the benefit of the provisions of this Section 12.22 and its successor and each of the other parties to this Agreement shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party to this Agreement.

(d) Disclosure: The retiring Security Trustee, shall make available to its successor such documents and records and provide such assistance as the successor may reasonably request for the purpose of performing its functions under this Agreement and the Security Documents. Notwithstanding any provision to the contrary, the Security Trustee shall not be obliged to disclose to any person any confidential or other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or fiduciary duty.

12.23 Protection of Security Trustee. The benefits conferred on the Agent pursuant to this Article 12 regarding rights to indemnification and the exercise of its rights, powers, authorizations, discretions, duties and responsibilities pursuant to this Agreement and any other Loan Document and also pursuant to Article 14 shall also be conferred, where appropriate, on the Security Trustee in relation to this Agreement and the Security Documents and references to Agent in this Article 12 and Article 14 shall be read and construed as references to the Agent and/or the Security Trustee accordingly.

ARTICLE 13
JOINT AND SEVERAL LIABILITY OF BORROWERS

13.1 Joint and Several Liability of Borrowers.

(a) Each Borrower shall be liable for all amounts due to the Agent, the Security Trustee and/or any Lender under this Agreement and the other Loan Documents, regardless of which Borrower actually receives Loans or other extensions of credit hereunder or the amount of such Loans received or the manner in which the Agent and/or such Lender accounts for such Loans or other extensions of credit on its books and records. Each Borrower's obligations with respect to Loans made to it, and such Borrower's Obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Loans made to any other Borrower hereunder, shall be separate and distinct obligations, but all such obligations shall be primary obligations of such Borrower.

(b) Each Borrower's Obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Loans or other extensions of credit made to any of the other Borrowers hereunder, and with respect to all other Obligations of any of the other Borrowers hereunder (including any such Obligation of any other Borrower in respect of interest accruing after the commencement by or against such other Borrower of an Insolvency Proceeding, regardless of whether a claim for such accrued interest is allowed in such Insolvency Proceeding), shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity, enforceability, avoidance or subordination of any of the Obligations of any of the other Borrowers or of any promissory note or other document evidencing all or any part of the Obligations of any of the other Borrowers, (ii) any incapacity or change in the constitution of any party to any of the Loan Documents or any related Liens, (iii) the absence of any attempt to collect any of the Obligations from any of the other Borrowers, any guarantor of any of such Obligations of any of the other Borrowers, or any other security therefor, or the absence of any other action to enforce the same, (iv) the waiver, consent, variation, extension, forbearance or granting of any indulgence by the Agent and/or any Lender with respect to any provision of any instrument evidencing the Obligations of any of the other Borrowers, or any part thereof, or any other agreement now or hereafter executed by any of the other Borrowers and delivered to the Agent and/or any Lender, (v) the failure by the Security Trustee, the Agent and/or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for any of the Obligations of any of the other Borrowers, (vi) the Agent's and/or any Lender's election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code, (vii) any borrowing or grant of a security interest by any other Borrower as debtor-in-possession under Section 364 of the U.S. Bankruptcy Code, (viii) the disallowance of all or any portion of the Agent's and/or any Lender's claim(s) for the repayment of the Obligations of any of the other Borrowers under Section 502 of the U.S. Bankruptcy Code, or (ix) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any of the other Borrowers or which might prejudicially affect the rights or remedies of the Agent or the Lenders under the Loan Documents or otherwise conferred by law. With respect to any Borrower's Obligations arising as a result of the joint and several liability of

such Borrower hereunder with respect to Loans or other extensions of credit made to any of the other Borrowers hereunder or any other Obligations of any of the other Borrowers hereunder, such Borrower waives, until all Obligations of all Borrowers shall have been paid in full and this Agreement shall have been terminated, (i) any right to enforce any right of indemnity, contribution (including under Section 13.2 below) or subrogation or any remedy which the Security Trustee, the Agent and/or any Lender now has or may hereafter have against any of the other Borrowers or any endorser or guarantor of all or any part of the Obligations of any of the other Borrowers or to claim or prove in a winding up or dissolution of any other Borrower or obligor in competition with the Agent or the Lenders and (ii) any benefit of, and any right to participate in, any security or collateral given to the Security Trustee, the Agent and/or any Lender to secure payment of any of the Obligations of any of the other Borrowers or any other liability of any of the other Borrowers to the Security Trustee, the Agent and/or any Lender.

(c) Without limiting the Agent's or any Lender's rights against any Borrower, upon any Event of Default, the Agent may proceed directly and at once, without notice, against each Borrower to collect and recover the full amount, or any portion, of the Obligations, without first proceeding against any other Borrower or any other Person, or against any security or collateral for any of the Obligations. Each Borrower consents and agrees that the Agent shall be under no obligation to marshal any assets in favor of any Borrower or against or in payment of any or all of the Obligations.

13.2 Contribution and Indemnification among the Borrowers. To the extent that any Borrower (the "Paying Borrower") shall, as a joint and several obligor in respect of Obligations of any other Borrower, repay any Loans made to any other Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (such other Borrower herein called the "Incurring Borrower", and the payment made by the Paying Borrower for Loans made to or Obligations incurred by the Incurring Borrower herein called an "Accommodation Payment"), then the Paying Borrower shall be entitled to reimbursement of such Accommodation Payment from the Incurring Borrower and shall further be entitled to contribution and indemnification from, and to be reimbursed by, each of the other Borrowers (the "Other Borrowers") in an amount, for each such Other Borrower, equal to a fraction of such Accommodation Payment, the numerator of which is such Other Borrower's "Allocable Amount" (as defined below) and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers other than the Incurring Borrower. As of any date of determination, the "Allocable Amount" of any Borrower (other than the Incurring Borrower) in respect of any Accommodation Payment shall be equal to the maximum amount of liability for such Accommodation Payment which could be asserted against such Borrower hereunder without (i) rendering such Borrower "insolvent" within the meaning of Section 101(31) of the U.S. Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (ii) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the U.S. Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, (iii) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the U.S. Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA, or (iv) in the case of a Borrower that is organized or registered outside of the United States of America, voiding or making unenforceable or illegal such liability or payment as against such Borrower under applicable foreign law. All rights and claims of contribution, indemnification and reimbursement under this section shall be subordinate in right of payment to the prior payment in full of all Obligations of all the Borrowers. The provisions of this section shall, to the extent expressly inconsistent with any provision in any Loan Document, supersede such inconsistent provision. The failure or inability of any Borrower to recover from any other Borrower such other Borrower's share of any Accommodation Payment made by such Borrower, or the unenforceability as to any Borrower of any of the foregoing provisions of this Section 13.2, shall not limit or otherwise affect any Borrower's joint and several obligations hereunder. In no event shall any Paying Borrower be entitled to any payment from the other Borrowers in respect

of any Accommodation Payment made by such Paying Borrower in excess of the amount of such Accommodation Payment.

13.3 Waiver. Each Borrower hereby waives and agrees not to assert or take advantage of: (i) any defense now existing or hereafter arising based upon any legal disability or other defense of any other Borrower or any guarantor or other Person, or by reason of the cessation or limitation of the liability of any other Borrower or any guarantor or other Person from any cause other than full payment and performance of all obligations due under this Agreement or any of the other Loan Documents; (ii) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of any other Borrower or any guarantor or other Person, or any defect in the formation of any other Borrower or any guarantor or other Person; (iii) the unenforceability or invalidity of any security or guaranty or the lack of perfection or continuing perfection, or failure of priority of any security for the Obligations; (iv) any and all rights and defenses arising out of an election of remedies by the Agent or any Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for an Obligation, has destroyed such Borrower's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (v) any defense based upon any failure to disclose to such Borrower any information concerning the financial condition of any other Borrower or any guarantor or other Person or any other circumstances bearing on the ability of any other Borrower or any guarantor or other Person to pay and perform all obligations due under this Agreement or any of the other Loan Documents; (vi) any failure by the Security Trustee, the Agent or any Lender to give notice to any Borrower or any guarantor or other Person of the sale or other disposition of security, and any defect in notice given by the Security Trustee, the Agent or any Lender in connection with any such sale or disposition of security; (vii) any failure of the Security Trustee, the Agent or any Lender to comply with applicable laws in connection with the sale or disposition of security, including, without limitation, any failure by the Lender to conduct a commercially reasonable sale or other disposition of such security; (viii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal, or that reduces a surety's or guarantor's obligations in proportion to the principal's obligation; (ix) any use of cash collateral under Section 363 of the U.S. Bankruptcy Code; (x) any defense based upon an election by the Agent or any Lender, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code or any successor statute; (xi) any defense based upon any borrowing or any grant of a security interest under Section 364 of the U.S. Bankruptcy Code or otherwise; (xii) any right of subrogation, any right to enforce any remedy which the Agent or any Lender may have against any other Borrower or any guarantor or other Person and any right to participate in, or benefit from, any security now or hereafter held by the Security Trustee, the Agent or any Lender for the Obligations; (xiii) presentment, demand, protest and notice of any kind, including notice of acceptance of this Agreement and of the existence, creation or incurring of new or additional Obligations; (xiv) the benefit of any statute of limitations affecting the liability of any other Borrower or any guarantor or other Person, enforcement of this Agreement or any other Loan Documents, the liability of any Borrower hereunder or the enforcement hereof; (xv) all notices of intention to accelerate and/or notice of acceleration of the Obligations; (xvi) relief from any applicable valuation or appraisement laws; (xvii) any other action by the Security Trustee, the Agent or any Lender, whether authorized by this Agreement or otherwise, or any omission by the Security Trustee, the Agent or any Lender or other failure of the Security Trustee, the Agent or any Lender to pursue, or delay in pursuing, any other remedy in its power; (xviii) any and all claims and/or rights of counterclaim, recoupment, setoff or offset; and (xix) any defense based upon the application of the proceeds of a Loan for purposes other than the purposes represented by the Borrowers or intended or understood by the Agent or any Lender or any Borrower. Each Borrower agrees that the payment and performance of all Obligations or any part thereof or other act which tolls any statute of limitations applicable to this Agreement or the other Loan Documents shall similarly

operate to toll the statute of limitations applicable to such Borrower's liability hereunder. Without limiting the generality of the foregoing or any other provision hereof, each Borrower further waives any and all rights and defenses that such Borrower may have because the debt of the Borrowers is secured by real property of other Borrowers; this means, among other things, that: (1) the Lenders may collect from such Borrower without first foreclosing on any real or personal property collateral pledged by any other Borrower, (2) if the Security Trustee, the Agent or any Lender forecloses on any real property collateral pledged by any other Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) the Security Trustee, the Agent or any Lender may collect from such Borrower even if the Security Trustee, the Agent or any Lender, by foreclosing on the real property collateral, has destroyed any right such Borrower may have to collect from any other Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses each Borrower may have because the Obligations are secured by real property of any other Borrower. Each Borrower acknowledges and agrees that California Civil Code Section 2856 authorizes and validates waivers of a guarantor's rights of subrogation and reimbursement and waivers of certain other rights and defenses available to a guarantor under California law. Based on the preceding sentence and without limiting the generality of the foregoing waivers contained in this subparagraph or any other provision hereof, each Borrower expressly waives to the extent permitted by law any and all rights and defenses (except the defense of indefeasible final payment in full), including without limitation any rights of subrogation, reimbursement, indemnification and contribution (except contribution pursuant to this Agreement), which might otherwise be available to such Borrower under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433 and under California Code of Civil Procedure Sections 580a, 580b, 580d and 726 (or any of such sections), or any other jurisdiction to the extent the same are applicable to this Agreement or the agreements, covenants or obligations of any Borrower hereunder.

13.4 Independent Investigation. Each Borrower is fully aware of the financial condition of the Borrowers, and is executing and delivering this Agreement based solely upon such Borrower's own independent investigation of all matters pertinent hereto and is not relying in any manner upon any representation or statement by the Agent or any Lender. Each Borrower hereby assumes full responsibility for obtaining any additional information concerning the financial condition of the Borrowers or any other guarantor or their respective properties, financial condition and prospects and any other matter pertinent hereto as such Borrower may desire, and such Borrower is not relying upon or expecting the Agent or any Lender to furnish to such Borrower any information now or hereafter in the possession of the Agent or any Lender concerning the same or any other matter. By executing this Agreement, each Borrower knowingly accepts the full range of risks encompassed within a contract of this type, which risks such Borrower acknowledges. No Borrower shall have the right to require the Agent or any Lender to obtain or disclose any information with respect to the Obligations, the financial condition or prospects of any Borrower, the ability of any Borrower to pay or perform the Obligations, the existence, perfection, priority or enforceability of any collateral security for any or all of the Obligations, the existence or enforceability of any other guaranties of all or any part of the Obligations, any action or non-action on the part of the Agent or any Lender, any Borrower or any other Person, or any other event, occurrence, condition or circumstance whatsoever.

13.5 Stay of Acceleration. If demand for, or acceleration of the time for, payment by any Borrower to any Lender or the Agent or the Security Trustee of any Obligations of any Borrower is stayed upon the commencement of any case under any Bankruptcy Code for such Borrower, all such Obligations otherwise subject to demand for payment or acceleration under the terms of this Agreement or any other Loan Document shall nonetheless be payable by each other Borrower hereunder forthwith on demand by the Agent.

13.6 Subrogation. No payment by any Borrower pursuant to Article 13 or other satisfaction of the Obligations of the Borrowers under Article 13 shall entitle it, by subrogation to the rights of any Lender or the Agent or the Security Trustee, or by right of contribution, reimbursement, exoneration or otherwise, to any payment from any Borrower or out of the property of any Borrower, except after the payment in full to all the Lenders and the Agent and the Security Trustee of all sums which are or may become payable to any of them at any time or from time to time by the Borrowers under this Agreement or any other Loan Document and the termination of this Agreement. Upon the payment in full of all sums referred to in the immediately preceding sentence and the termination of this Agreement, the Borrowers shall be subrogated to the rights of the Lenders and the Agent and the Security Trustee hereunder to the extent of any payments made by them under their guaranty contained herein.

13.7 Cumulative Remedies. The Agent may pursue its rights and remedies under this Article 13 and shall be entitled to payment from the Borrowers under this Article 13 notwithstanding any other guarantee of or security for all or any part of the Obligations of the Borrowers or any other Person, and notwithstanding any action taken or omitted to be taken by any Lender or the Agent or the Security Trustee to enforce any of its rights or remedies against any Borrower or any other Person hereunder or under such other guarantee or with respect to any other security.

13.8 Additional Waivers. Except for notices and demands expressly provided for herein, the Borrowers hereby waive diligence, presentment, demand of payment, protest and all notices (whether of nonpayment, dishonor, protest or otherwise) with respect to the Obligations, notice of acceptance of the guaranty by the Borrowers contained in this Article 13 and of the incurrence by any Borrower of any Obligation and all demands whatsoever.

13.9 Survival of Obligations. The provisions of Article 13 shall continue in effect and be binding upon the Borrowers until all of the Obligations have been paid in full and this Agreement is terminated. The liability of the Borrowers under this Article 13 shall be reinstated and revived with respect to any amount at any time paid to or for the account of any Lender or the Agent or the Security Trustee by any Borrower or any other Person which is thereafter required to be, and that is, restored and returned by such Lender or the Agent or the Security Trustee to such Borrower or such Person, or its trustee or receiver or similar official, upon the bankruptcy, insolvency or reorganization of such Borrower or such Person, or for any other reason, all as though such amount had not been paid by such Borrower or such Person.

ARTICLE 14
MISCELLANEOUS

14.1 No Waivers; Cumulative Remedies. No failure by the Agent or any Lender to exercise any right, remedy, or option under this Agreement or any present or future supplement thereto, or in any other agreement between or among one or more Borrowers, and the Agent and/or any Lender, or delay by the Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by the Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by the Agent or the Lenders on any occasion shall affect or diminish the Agent's and each Lender's rights thereafter to require strict performance by each Borrower of any provision of this Agreement. The Agent and the Lenders may proceed directly to collect the Obligations without any prior recourse to the Collateral. The Agent's and each Lender's rights under this Agreement will be cumulative and not exclusive of any other right or remedy which the Agent or any Lender may have.

14.2 Severability. The illegality or unenforceability of any provision of this Agreement or any Loan Document or any instrument or agreement required hereunder shall not in any way affect or

impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

14.3 Governing Law; Choice of Forum; Service of Process.

(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED THAT ISSUES WITH RESPECT TO CREATION, PERFECTION, AND ENFORCEMENT OF LIENS UNDER ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE SECURITY TRUSTEE, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE SECURITY TRUSTEE, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE SECURITY TRUSTEE, THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(c) EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA").

The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(g) No provision of Sections (d) through (g) shall limit the right of the Security Trustee, the Agent or the Lenders to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

14.4 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION 14.3(d), THE BORROWERS, THE LENDERS AND THE AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

14.5 Survival of Representations and Warranties. All of the Borrowers' representations and warranties contained in this Agreement shall survive the execution, delivery, and acceptance thereof by the parties, notwithstanding any investigation by the Agent or the Lenders or their respective agents.

14.6 Other Security and Guaranties. The Agent and/or the Security Trustee, may, without notice or demand and without affecting any Borrower's obligations hereunder, from time to time: (a) take from any Person and hold collateral (other than the Collateral) for the payment of all or any part of the Obligations and exchange, enforce or release such collateral or any part thereof; and (b) accept and hold any endorsement or guaranty of payment of all or any part of the Obligations and release or substitute any such endorser or guarantor, or any Person who has given any Lien in any other collateral as security for the payment of all or any part of the Obligations, or any other Person in any way obligated to pay all or any part of the Obligations.

14.7 Fees and Expenses. The Borrowers agree to pay to the Agent, for its benefit, on demand, all costs and expenses that Agent pays or incurs in connection with the negotiation, preparation, syndication, consummation, administration, enforcement, and termination of this Agreement or any of the other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses (including reasonable attorneys' and paralegals' fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection with the Loan Documents and the transactions contemplated thereby; (c) costs and expenses of lien and title searches and title insurance; (d) taxes, fees and other charges for recording the Mortgages, filing financing statements and continuations, and other actions to perfect, protect, and continue the Agent's Liens (including costs and expenses paid or incurred by the Agent in connection with the consummation of Agreement); (e) sums paid or incurred to pay any amount or take any action required of any Borrower under the Loan Documents that such Borrower fails to pay or take; (f) costs of appraisals, inspections, and verifications of the Collateral, including travel, lodging, and meals for inspections of the Collateral and any Borrower's operations by the Agent plus the Agent's then customary charge for field examinations and audits and the preparation of reports thereof (such charge is currently $750 per day (or portion thereof) for each Person retained or employed by the Agent with respect to each field examination or audit); and (g) costs and expenses of forwarding loan proceeds, collecting checks and other items of payment, and establishing and maintaining Payment Accounts and lock boxes, and costs and expenses of preserving and protecting the Collateral. In addition, the Borrowers agree to pay costs and expenses incurred by the Agent (including Attorneys' Costs) to the Agent, for its benefit, on demand, and to the other Lenders for their benefit, on demand, and all reasonable fees, expenses and disbursements incurred by such other Lenders for one law firm retained by such other Lenders, in each case, paid or incurred to obtain payment of the Obligations, enforce the Agent's Liens, sell or otherwise realize upon the Collateral, and otherwise enforce the provisions of the Loan Documents, or to defend any claims made or threatened against the Agent or any Lender arising out of the transactions contemplated hereby (including preparations for and consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of the Loan Documents regarding costs and expenses to be paid by any Borrower. All of the foregoing costs and expenses shall be charged to any Borrower's Loan Account as Revolving Loans as described in Section 3.7.

14.8 Notices. Except as otherwise provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registered, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows:

		If to the Agent or to the Bank:
				Bank of America, N.A. 55 South Lake Avenue Pasadena, California 91101 Attention: Stephen King Telecopy No.: (626) 578-6143
		with copies to:
				Buchalter, Nemer, Fields & Younger 601 South Figueroa, Suite 2400 Los Angeles, California 90017-5704 Attention: Robert Davidson Telecopy No.: (213) 896-0400
		If to any Borrower:
				3Com Europe Limited Boundary Way Hemel Hempstead HP2 7YU, England Attn: Graham Roberts Telecopy No.: 44.144.243.2250
		with copies to:
				c/o 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Chief Financial Officer Telecopy No.: (408) 326-6857
		with a copy to the attention of the General Counsel
				Telecopy No.: (408) 326-6434
		with copies to:
				Gray Cary Ware & Freidenrich LLP 400 Hamilton Avenue Palo Alto, California 94301 Attention: Craig Tighe, Esq. Telecopy No.: (650) 833-2001

14.9 Waiver of Notices. Unless otherwise expressly provided herein, each Borrower waives presentment, and notice of demand or dishonor and protest as to any instrument, notice of intent to accelerate the Obligations and notice of acceleration of the Obligations, as well as any and all other notices to which it might otherwise be entitled. No notice to or demand on any Borrower which the Agent or any Lender may elect to give shall entitle such Borrower to any or further notice or demand in the same, similar or other circumstances.

14.10 Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein may be assigned by any Borrower without prior written consent of the Agent and each Lender. The rights and benefits of the Agent and the Lenders hereunder shall, if such Persons so agree, inure to any party acquiring any interest in the Obligations or any part thereof.

14.11 Indemnity of the Agent, the Security Trustee and the Lenders by the Borrowers.

(a) The Borrowers agree to defend, indemnify and hold the Agent-Related Persons, and each Lender and each of its respective officers, directors, employees, counsel, representatives, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement, any other Loan Document, or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that no such Borrower shall have any obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities finally determined by a court of competent jurisdiction to result primarily from the willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

(b) The Borrowers agree to indemnify, defend and hold harmless the Agent-Related Persons and the Lenders from any loss or liability directly or indirectly arising out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance relating to any Borrower's or any of its Subsidiaries' operations, business or property. This indemnity will apply whether the hazardous substance is on, under or about any Borrower's or any of its Subsidiaries' property or operations or property leased to any Borrower or any of its Subsidiaries. The indemnity includes but is not limited to Attorneys Costs. The indemnity extends to the Agent and the Lenders, their parents, affiliates, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. "Hazardous substances" means any substance, material or waste that is or becomes designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or regulation under any federal, state or local law (whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including petroleum or natural gas. This indemnity will survive repayment of all other Obligations.

14.12 Limitation of Liability. NO CLAIM MAY BE MADE BY ANY BORROWER, ANY LENDER OR OTHER PERSON AGAINST THE AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT,

CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH BORROWER AND EACH LENDER HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

14.13 Final Agreement. This Agreement and the other Loan Documents are intended by the Borrowers, the Agent, the Security Trustee and the Lenders to be the final, complete, and exclusive expression of the agreement between them. This Agreement supersedes any and all prior oral or written agreements relating to the subject matter hereof. No modification, rescission, waiver, release, or amendment of any provision of this Agreement or any other Loan Document shall be made, except by a written agreement signed by the Borrowers and a duly authorized officer of each of the Agent, the Security Trustee and the requisite Lenders.

14.14 Counterparts. This Agreement may be executed in any number of counterparts, and by the Agent, the Security Trustee, each Lender and each Borrower in separate counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

14.15 Captions. The captions contained in this Agreement are for convenience of reference only, are without substantive meaning and should not be construed to modify, enlarge, or restrict any provision.

14.16 Right of Setoff. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists or the Loans have been accelerated, each Lender is authorized at any time and from time to time, without prior notice to any Borrower, any such notice being waived by each Borrower to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender or any Affiliate of such Lender to or for the credit or the account of any Borrower against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the relevant Borrower and the Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF ANY BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.

14.17 Confidentiality.

(a) Each Borrower hereby consents that the Agent and each Lender may issue and disseminate to the public general information describing the credit accommodation entered into pursuant to this Agreement, including, subject to the Borrowers' prior written approval, the name and address of any Borrower and a general description of such Borrower's business and may use such Borrower's name in advertising and other promotional material.

(b) Agent and each Lender severally agree to maintain the confidentiality of all information identified as "confidential" or "secret" by the Borrowers and provided to the Agent or such Lender by or on behalf of the Borrowers, under this Agreement or any other Loan Document,

except to the extent that such information (i) was or becomes generally available to the public other than as a result of disclosure by the Agent or such Lender, or (ii) was or becomes available on a nonconfidential basis from a source other than the Borrowers, provided that such source is not bound by a confidentiality agreement with the Borrowers known to the Agent or such Lender; provided, however, that the Agent, the Security Trustee and any Lender may disclose such information (1) at the request or pursuant to any requirement of any Governmental Authority to which the Agent or such Lender is subject or in connection with an examination of the Agent, the Security Trustee or such Lender by any such Governmental Authority; (2) pursuant to subpoena or other court process; (3) when required to do so in accordance with the provisions of any applicable Requirement of Law; (4) to the extent reasonably required in connection with any litigation or proceeding (including, but not limited to, any bankruptcy proceeding) to which the Agent, any Lender or their respective Affiliates may be party; (5) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (6) to the Agent's, the Security Trustee's or such Lender's independent auditors, accountants, attorneys and other professional advisors; (7) to any prospective Participant or Assignee under any Assignment and Acceptance, actual or potential, provided that such prospective Participant or Assignee agrees to keep such information confidential to the same extent required of the Agent, the Security Trustee and the Lenders hereunder; (8) as expressly permitted under the terms of any other document or agreement regarding confidentiality to which each Borrower is party or is deemed party with the Agent, the Security Trustee or such Lender, and (9) to its Affiliates provided such Affiliates are subject to a confidentiality agreement substantially identical to this Section 13.17(b).

14.18 Conflicts with Other Loan Documents. Unless otherwise expressly provided in this Agreement (or in another Loan Document by specific reference to the applicable provision contained in this Agreement), if any provision contained in this Agreement conflicts with any provision of any other Loan Document, the provision contained in this Agreement shall govern and control.

14.19 Non-Public Information. Agent and Lenders acknowledge that information provided by the Borrowers in connection herewith contains material, non-public information concerning the Borrowers. Agent and Lenders agree not to use any non-public information provided herein or in connection herewith in violation of applicable restrictions imposed by United States securities laws on the purchase and sale of securities by any person who has received material, non-public information from the issuer of such securities and on the communication of such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information.

14.20 Designation of 3Com Europe as Agent of Borrowers. Each Borrower hereby designates and appoints 3Com Europe ("Administrative Borrower") and each officer thereof as the agent and attorney-in-fact of such Borrower for all purposes of this Agreement, including for the purpose of executing and delivering all documents, instruments and certificates contemplated herein and modifications thereof, giving and receiving notices and instructions, and making requests, hereunder and otherwise communicating with the Agent and the Lenders (including receiving the monthly Loan Account statements referred to in Section 4.11). The Agent and the Lenders may assume that such appointment and designate has not been revoked unless and until written notice of revocation is actually received by the Agent and the Lenders. Accordingly, the Agent and the Lenders may give notices and instruction to any Borrower through the Administrative Borrower and may accept and act upon any notices, instructions and requests given by the Administrative Borrower, or any officer thereof, on behalf of any Borrower, and any such notice, request and instructions shall be binding upon such Borrower until the Agent and the Lenders actually receive notice from such Borrower of its revocation of such appointment and designation of the Administrative Borrower as such Borrower's agent and attorney-in-fact. Notwithstanding such appointment and designation, the Agent and the

Lenders may also deal directly with, and give and receive notices, instructions and requests to and from, any Borrower. If conflicting instructions are received from a Borrower and from the Administrative Borrower, or any officer thereof, acting as agent or attorney-in-fact for such Borrower, the notice, instruction or request of such Borrower shall prevail, unless the Agent or the Lenders have, prior to their receipt of such notice, instruction or request from such Borrower, acted on a contrary notice, instruction or request from the Administrative Borrower, or any officer thereof, acting as agent and/or attorney-in-fact for such Borrower. Any acknowledgment, consent, direction, certification or other action which might otherwise be valid or effective only if given or taken by all or any of the Borrowers, shall be valid and effective if given or taken only by the Administrative Borrower, whether or not any Borrower joins therein.

IN WITNESS WHEREOF, the parties have executed this Agreement as a Deed on the date first above written.

		"BORROWER"
		3COM Technologies
		By:
		Title:
		in the presence of:
		Witness
		"BORROWER"
		3COM EUROPE LIMITED
		By:
		Title:
		in the presence of:
		Witness
		"AGENT"/"SECURITY TRUSTEE"
		BANK OF AMERICA, N.A., as the Agent
		By:
			, Vice President
		"BANK"
		BANK OF AMERICA, N.A., as the Bank
		By:
			, Vice President

		"LENDERS"
		BANK OF AMERICA, N.A., as a Lender
		By:
			, Vice President
		FOOTHILL CAPITAL CORPORATION, as a Lender
		By:
			, Vice President
		GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender
		By:	Duly Authorized Signatory
		CONGRESS FINANCIAL CORPORATION (WESTERN), as a Lender
		By:
			, Vice President
		THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender
		By:
			, Vice President
		PNC BANK, NATIONAL ASSOCIATION, as a Lender
		By:
			, Vice President

ANNEX A
to
Credit Agreement

Definitions

"Accounts" means, as to any Person, all of such Person's now owned or hereafter acquired or arising accounts, as defined in the Security Documents, including any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance.

"Account Debtor" means each Person obligated in any way on or in connection with an Account, Chattel Paper or General Intangibles (including a payment intangible).

"ACH Transactions" means any cash management or related services including the automatic clearing house transfer of funds by the Bank for the account of any Borrower pursuant to agreement or overdrafts.

"Administrative Borrower" has the meaning set forth in Section 14.20.

"Agent" means the Bank, solely in its capacity as agent for the Lenders, and any successor agent.

"Agent Advances" has the meaning specified in Section 1.2(i).

"Agreement" means the Credit Agreement to which this Annex A is attached, as from time to time amended, supplemented, modified or restated.

"Anniversary Date" means each anniversary of the Closing Date.

"Applicable Margin" means

(i) with respect to Base Rate Revolving Loans and all other Obligations (other than Base Rate Term Loans and LIBOR Rate Loans), 1.00%;

(ii) with respect to Base Rate Term Loans, 1.25%;

(iii) with respect to LIBOR Revolving Loans, 2.75%; and

(iv) with respect to LIBOR Term Loans, 3.00%.

"Assignee" has the meaning specified in Section 11.2(a).

"Assignment and Acceptance" has the meaning specified in Section 11.2(a).

ANNEX A–1

"Attorney Costs" means and includes all reasonable fees, expenses and disbursements of any law firm or other counsel engaged by the Agent.

"Availability" means at any time (a) the lesser of (i) the Maximum Revolver Amount or (ii) the Borrowing Base, minus (b) Reserves other than Reserves deducted in the calculation of the Borrowing Base, minus (c) the Aggregate Revolver Outstandings.

"Bank" means Bank of America, N.A., a national banking association, or any successor entity thereto.

"Bank Products" means any one or more of the following types of services or facilities extended to any Borrower or its Subsidiaries by the Bank or any affiliate of the Bank in reliance on the Bank's agreement to indemnify such affiliate: (i) credit cards; (ii) ACH Transactions; (iii) cash management, including controlled disbursement services; (iv) Hedge Agreements; and (v) guaranties for the benefit of any Borrower or its Subsidiaries.

"Bank Product Reserves" means all reserves which the Agent from time to time establishes in its reasonable discretion for the Bank Products then provided or outstanding.

"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. § 101 et seq.) (herein "U.S. Bankruptcy Code") and any bankruptcy or insolvency law and regulation of any other applicable jurisdiction.

"Base Rate Loans" means, collectively, the Base Rate Revolving Loans and the Base Rate Term Loans.

"Base Rate Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the Base Rate.

"Base Rate Term Loan" means any portion of a Term Loan during any period in which such portion bears interest based on the Base Rate.

"Blocked Account Agreement" means any agreement among one or more of the Borrowers, the Agent and a Clearing Bank, in form and substance reasonably satisfactory to the Agent, concerning the collection of payments which represent the proceeds of Accounts or of any other Collateral.

"Borrowers" has the meaning given that term in the preamble to the Agreement.

"Borrowing" means a borrowing hereunder by a Borrower consisting of Revolving Loans or Term Loans made on the same day by the Lenders to such Borrower or by Bank in the case of a Borrowing funded by Non-Ratable Loans or by the Agent in the case of a Borrowing consisting of an Agent Advance, or the issuance of Letters of Credit hereunder.

"Borrowing Base" means, at any time, an amount equal to the sum of (a) 85% of the Net Amount of Eligible Accounts; plus (b) the least of (i) the Maximum Inventory Loan Amount, (ii) 35% of Eligible Inventory valued at the lower of cost (on a first-in, first-out basis) or market and excluding any intercompany profit, or (iii) 80% of the net recovery value of appraised Eligible Inventory; minus (c) Reserves from time to time established by the Agent in its reasonable credit judgment.

ANNEX A–2

"Borrowing Base Certificate" means a certificate by a Responsible Officer of Administrative Borrower, substantially in the form of Exhibit B (or another form acceptable to the Agent) setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in such detail as shall be reasonably satisfactory to the Agent. All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall originally be made by Administrative Borrower and certified to the Agent; provided, that the Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment, any such calculation (1) to reflect its reasonable estimate of declines in value of any of the Collateral described therein, and (2) to the extent that such calculation is not in accordance with this Agreement.

"Business Day" means (a) any day that is not a Saturday, Sunday, or a day on which banks in London, Grand Cayman or Charlotte, North Carolina are required or permitted to be closed, and (b) with respect to all notices, determinations, fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any day that is a Business Day pursuant to clause (a) above and that is also a day on which trading in Dollars is carried on by and between banks in the London interbank market.

"Capital Lease" of a Person means any lease of property by such Person which, in accordance with GAAP, should be reflected as a capital lease on the balance sheet of such Person.

"Cash Collateral" has the meaning set forth in Section 1.4 (g).

"Cash Equivalents" means highly liquid debt investments acquired with a remaining maturity of three months or less.

"Cash Management Investments" means, for any Person, such Person's (a) cash and Cash Equivalents, (b) deposit accounts, (c) Investment Property, and (d) Short Term Investments.

"Cayman Debenture" means the Syndicated Composite Guarantee and Debenture of even date herewith among 3Com Holdings Limited, 3Com Technologies and Security Trustee, for the benefit of Lenders.

"Chattel Paper" means, as to any Person, all of such Person's now owned or hereafter acquired chattel paper, as defined in the UCC, including electronic chattel paper.

"Clearing Bank" means the Bank or any other banking institution with whom a Payment Account has been established pursuant to a Blocked Account Agreement.

"Closing Date" means the date of this Agreement.

"Code" means the Internal Revenue Code of 1986.

"Collateral" means all of the Borrowers' real and personal property and all other assets of any Person, including the "Charged Assets" as defined in Security Documents, from time to time subject to Lenders' Liens securing payment or performance of the Obligations.

ANNEX A–3

Lender hereunder in accordance with the provisions of Section 11.2, as such Commitment may be adjusted from time to time in accordance with the provisions of Section 11.2, and "Commitments" means, collectively, the aggregate amount of the commitments of all of the Lenders.

"Continuation/Conversion Date" means the date on which a Loan is converted into or continued as a LIBOR Rate Loan.

"Credit Support" has the meaning specified in Section 1.4(a).

"Debt" means, with respect to any Person and without duplication, all liabilities, obligations and indebtedness of such Person to any other Person, of any kind or nature, now or hereafter owing, arising, due or payable, howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise, consisting of indebtedness for borrowed money or the deferred purchase price of property, excluding trade payables or credit memoranda, but including (a) all Obligations; (b) all obligations and liabilities of any other Person secured by any Lien on such Person's property, even though such Person shall not have assumed or become liable for the payment thereof; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of such Person prepared in accordance with GAAP; (c) all obligations or liabilities created or arising under any Capital Lease or conditional sale or other title retention agreement with respect to property used or acquired by such Person, even if the rights and remedies of the lessor, seller or lender thereunder are limited to repossession of such property; provided, however, that all such obligations and liabilities which are limited in recourse to such property shall be included in Debt only to the extent of the book value of such property as would be shown on a balance sheet of such Person prepared in accordance with GAAP; (d) all obligations and liabilities under Guaranties and (e) the present value (discounted at the Base Rate) of lease payments due under synthetic leases.

"Default Rate" means a fluctuating per annum interest rate at all times equal to the sum of (a) the otherwise applicable Interest Rate plus (b) 2 percentage points per annum. Each Default Rate shall be adjusted simultaneously with any change in the applicable Interest Rate. In addition, the Default Rate shall result in an increase in the Letter of Credit Fee by 2 percentage points per annum.

"Defaulting Lender" has the meaning specified in Section 12.15(c).

"Deferred Revenue Reserve" means any reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for the potential offset against the Borrowers' Accounts arising from deferred revenue obligations that are accrued by the Borrowers.

"Designated Account" has the meaning specified in Section 1.2(c).

"Dilution" means, for each Borrower (as determined by the Agent in its sole discretion), based upon the experience of the immediately prior three months, the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, returns, rebates, promotional allowances, credits, or other dilutive items with respect to the Accounts of such Borrower, by (b) the aggregate amount of cash collections from such Borrower's Accounts plus the amount in clause (a) for such period.

ANNEX A–4

"Dilution Reserve" means a reserve that the Agent may from time to time establish (in its sole discretion) equal to (a) the total Dollar amount of Eligible Accounts of Borrowers times one tenth of one percentage point for each one tenth of one percentage point by which Dilution is in excess of 5%. By way of example, Dilution of 9.6% would require a Dilution Reserve of 4.6% of the amount of Borrowers' Eligible Accounts.

"Documents" means, with respect to any Person, all documents as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of title, now owned or hereafter acquired by such Person.

"DOL" means the United States Department of Labor or any successor department or agency.

"Dollar" and "$" means dollars in the lawful currency of the United States. Unless otherwise specified, all payments under the Loan Documents shall be made in Dollars.

"Eligible Accounts" means the Accounts of 3Com Europe which the Agent in the exercise of its reasonable commercial discretion determines to be Eligible Accounts. Without limiting the discretion of the Agent to establish other criteria of ineligibility, Eligible Accounts shall not, unless the Agent in its sole discretion elects, include any Account:

(a) with respect to which more than 90 days have elapsed since the date of the original invoice therefor or which is more than 60 days past due;

(b) with respect to which any of the representations, warranties, covenants, and agreements contained in the Security Agreement are incorrect or have been breached;

(d) which represents a progress billing (as hereinafter defined) or as to which 3Com Europe has extended the time for payment without the consent of the Agent; for the purposes hereof, "progress billing" means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the Account Debtor's obligation to pay such invoice is conditioned upon 3Com Europe's completion of any further performance under the contract or agreement;

(e) with respect to which any one or more of the following events has occurred to the Account Debtor on such Account: death or judicial declaration of incompetency of an Account Debtor who is an individual; the filing by or against the Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, examination or other relief under the bankruptcy, insolvency, or similar laws of the United States, any state or territory thereof, or any foreign jurisdiction, now or hereafter in effect; the making of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a receiver or trustee for the Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a "custodian," as defined in the United States Bankruptcy Code; the institution by or against the Account Debtor of any other type of insolvency proceeding (under the bankruptcy laws of the United States or the laws of the other jurisdictions noted above) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of all or any material part of the

ANNEX A–5

assets of the Account Debtor; the nonpayment generally by the Account Debtor of its debts as they become due; or the cessation of the business of the Account Debtor as a going concern;

(f) if 50% or more of the aggregate Dollar amount of outstanding Accounts owed at such time by the Account Debtor thereon is classified as ineligible under clause (a) above;

(g) owed by an Account Debtor which: (i) does not maintain its chief executive office in the United States of America, any member country of the European Union or Canada (other than the Province of Newfoundland); or (ii) is not organized under the laws of the United States of America, any member country of the European Union or Canada or any state or province thereof; or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof; except to the extent that such Account is either: (y) owed by an Account Debtor that is the foreign subsidiary of IBM, Hewlett Packard, Ingram Micro, Siemens, Solectron, Tech Data, Unysis, or any other corporation approved by Agent in its sole discretion, or (z) secured or payable by a letter of credit satisfactory to the Agent in its discretion;

(h) owed by an Account Debtor which is an Affiliate or employee of any Borrower;

(i) owed by an Account Debtor to which any Borrower or any of its Subsidiaries, is indebted in any way, or which is subject to any right of setoff or recoupment by the Account Debtor, unless the Account Debtor has entered into an agreement acceptable to the Agent to waive setoff rights; or if the Account Debtor thereon has disputed liability or made any claim with respect to any other Account due from such Account Debtor; but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim;

(j) owed by the government of the United States of America, or any department, agency, public corporation, or other instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq.), and any other steps necessary or desirable to perfect the Agent's Liens therein, have been complied with to the Agent's satisfaction with respect to such Account;

(k) owed by any state, municipality, or other political subdivision of the United States of America or any other country, or any department, agency, public corporation, or other instrumentality thereof and as to which the Agent determines that its Lien therein is not or cannot be perfected;

(l) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis;

(m) which is evidenced by a promissory note or other instrument or by chattel paper;

(n) if the Agent believes, in the exercise of its reasonable judgment, that the prospect of collection of such Account is impaired or that the Account may not be paid by reason of the Account Debtor's financial inability to pay;

(o) which arises out of a sale not made in the ordinary course of such Borrower's business;

(p) with respect to which the goods giving rise to such Account have not been shipped and delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been performed by such Borrower (including advance billings of maintenance contracts), and, if applicable, accepted by the Account Debtor, or the Account Debtor revokes its acceptance of such goods or services, or for which a debit memo or chargeback exists;

(q) owed by an Account Debtor which, together with its affiliates, is obligated to such Borrower respecting Accounts the aggregate unpaid balance of which exceeds 20% of the

ANNEX A–6

aggregate unpaid balance of all Accounts owed to such Borrower at such time by all of such Borrower's Account Debtors, but only to the extent of such excess;

(r) which is not subject to a first priority and perfected security interest in favor of the Agent for the benefit of the Lenders.

If any Account at any time ceases to be an Eligible Account, then such Account shall promptly be excluded from the calculation of Eligible Accounts.

"Eligible Inventory" means Inventory of 3Com Tech, which the Agent, in its reasonable commercial discretion, determines to be Eligible Inventory. Without limiting the discretion of the Agent to establish other criteria of ineligibility, Eligible Inventory shall not, unless the Agent in its sole discretion elects, include any Inventory:

(a) that is not owned by 3Com Tech;

(b) that is not subject to the Agent's Liens, which are perfected as to such Inventory, or that are subject to any other Lien whatsoever (other than the Liens described in clause (d) of the definition of Permitted Liens provided that such Permitted Liens (i) are junior in priority to the Agent's Liens or subject to Reserves and (ii) do not impair directly or indirectly the ability of the Agent to realize on or obtain the full benefit of the Collateral);

(d) that consists of work-in-process (including raw materials or finished goods categorized as "manufacturing line" by 3Com Tech), chemicals, samples, prototypes, supplies, or packing and shipping materials;

(f) that is not currently either usable or salable, at prices approximating at least cost, in the normal course of 3Com Tech's business, or that is slow moving or stale;

(g) that is obsolete or returned or repossessed or used goods taken in trade;

(h) that is located outside the United States of America, the United Kingdom or the Republic of Ireland (or that is in-transit from vendors or suppliers);

(i) that is located in a public warehouse or in possession of a bailee or in a facility leased by such Borrower if (y) such Borrower's customers have direct access to such Inventory, or (z) if the warehouseman, or the bailee, or the lessor has not delivered to the Agent, if requested by the Agent, a warehouse letter, a subordination agreement or landlord waiver in form and substance satisfactory to the Agent or if a Reserve for rents or storage charges has not been established for Inventory at that location;

(j) that contains or bears any Proprietary Rights licensed to such Borrower by any Person, if the Agent is not satisfied that it may sell or otherwise dispose of such Inventory in accordance with the terms of the Security Agreement and Section 9.2 without infringing the rights of the licensor of such Proprietary Rights or violating any contract with such licensor (and without payment of any royalties other than any royalties due with respect to the sale or disposition of such Inventory

ANNEX A–7

pursuant to the existing license agreement), and, as to which such Borrower has not delivered to the Agent a consent or sublicense agreement from such licensor in form and substance acceptable to the Agent if requested;

(k) that is not reflected in the details of a current perpetual inventory report; or

(l) that is Inventory placed on consignment.

If any Inventory at any time ceases to be Eligible Inventory, such Inventory shall promptly be excluded from the calculation of Eligible Inventory.

"Environmental Compliance Reserve" means any reserve which the Agent establishes in its reasonable discretion after prior written notice to Borrowers from time to time for amounts that are reasonably likely to be expended by Borrowers or any of their Subsidiary thereof in order for such Person and its operations and property (a) to comply with any notice from a Governmental Authority asserting material non-compliance with Environmental Laws, or (b) to correct any such material non-compliance identified in a report delivered to the Agent and the Lenders pursuant to Section 7.7.

"Environmental Laws" means all national, federal, state or local laws, statutes, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters.

"Event of Default" has the meaning specified in Section 9.1.

"Exchange Act" means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder.

"FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions.

ANNEX A–8

the Federal Funds Rate for such day shall be the average rate charged to the Bank on such day on such transactions as determined by the Agent.

"Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereto.

"Fiscal Month" means the Borrower's fiscal month for financial accounting purposes.

"Fiscal Quarter" means the Borrowers' fiscal quarter for financial accounting purposes.

"Fiscal Year" means the Borrowers' fiscal year for financial accounting purposes. The current Fiscal Year of the Borrowers will end on May 31, 2002.

"Fixed Assets" means, as to any Person, the Equipment and Real Estate of such Person.

"Funding Date" means the date on which a Borrowing occurs.

"General Intangibles" means, as to any Person, all of such Person's now owned or hereafter acquired general intangibles, choses in action and causes of action and all other intangible personal property of such Person of every kind and nature (other than Accounts), including, without limitation, all contract rights, payment intangibles, Proprietary Rights, corporate or other business records, inventions, designs, blueprints, plans, specifications, patents, patent applications, trademarks, service marks, trade names, trade secrets, goodwill, copyrights, computer software, customer lists, registrations, licenses, franchises, tax refund claims, any funds which may become due to such Person in connection with the termination of any Plan or other employee benefit plan or any rights thereto and any other amounts payable to such Person from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which such Person is beneficiary, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged equity interests or Investment Property and any letter of credit, guarantee, claim, security interest or other security held by or granted to such Person.

ANNEX A–9

for the purchase or payment of the guaranteed obligations or to maintain a working capital or other balance sheet condition; or (c) to lease property or to purchase any debt or equity securities or other property or services.

"Initial Funding Date" means the date of the funding of the Term Loans and the initial Revolving Loans hereunder.

"Instruments" means, as to any Person, all instruments as such term is defined in the UCC, now owned or hereafter acquired by such Person.

"Intercompany Subordination Agreement" has the meaning set forth in the U.S. Credit Agreement.

"Interest Period" means, as to any LIBOR Rate Loan, the period commencing on the Funding Date of such Loan or on the Continuation/Conversion Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and ending on the date one, two, or three months thereafter as selected by any Borrower in its Notice of Borrowing, in the form attached hereto as Exhibit D, or Notice of Continuation/Conversion, in the form attached hereto as Exhibit E, provided that:

"Interest Rate" means each or any of the interest rates, including the Default Rate, set forth in Section 2.1.

"Inventory" means, as to any Person, all of such Person's now owned and hereafter acquired inventory, stock-in-trade, goods and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded software), other materials and supplies of any kind, nature or description which are used or consumed in such Person's business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise, and all documents of title or other Documents representing them.

(a) acquisitions of Equipment to be used in the business of such Person;

(b) acquisitions of Inventory in the ordinary course of business of such Person;

ANNEX A–10

(d) Hedge Agreements.

"Ireland Debenture" means the Syndicated Composite Guarantee and Debenture of even date herewith among 3Com Technologies, 3Com Europe Limited and Security Trustee, for the benefit of Lenders.

"IRS" means the Internal Revenue Service and any Governmental Authority succeeding to any of its principal functions under the Code.

"Lenders' Liens" means the Liens in the Collateral granted to the Agent and/or Security Trustee, for the benefit of the Lenders, Bank, and Agent pursuant to this Agreement and the other Loan Documents.

"Letter of Credit" has the meaning specified in Section 1.4(a).

"Letter of Credit Fee" has the meaning specified in Section 2.6.

"Letter of Credit Issuer" means the Bank, any affiliate of the Bank or any other financial institution that issues any Letter of Credit pursuant to this Agreement.

"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate Loans, the rate of interest per annum determined pursuant to the following formula:

LIBOR Rate =

Offshore Base Rate

1.00 - Eurodollar Reserve Percentage

Where,

"Offshore Base Rate" means the rate per annum appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum appearing on Reuters Screen LIBOR Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic mean of all such rates. If for any reason none of the foregoing rates is available, the Offshore Base Rate shall be, for any Interest Period, the rate per annum determined by

ANNEX A–11

Agent as the rate of interest at which dollar deposits in the approximate amount of the LIBOR Rate Loan comprising part of such Borrowing would be offered by the Bank's London Branch to major banks in the offshore dollar market at their request at or about 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period.

"LIBOR Rate Loans" means, collectively, the LIBOR Revolving Loans and the LIBOR Term Loans.

"LIBOR Revolving Loan" means a Revolving Loan during any period in which it bears interest based on the LIBOR Rate.

"LIBOR Term Loan" means any portion of a Term Loan during any period in which such portion bears interest based on the LIBOR Rate.

"Lien" means: (a) any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, charge, claim, or lien arising from a mortgage, charge, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; (b) to the extent not included under clause (a), any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, lease or other title exception or encumbrance affecting property; and (c) any contingent or other agreement to provide any of the foregoing.

"Liquidity" means, at any time of measurement, the sum of: (a) the lesser of (y) $105,000,000 and (z) aggregate Availability hereunder and under the U.S. Credit Agreement, plus (b) the amount of Qualified Cash Management Investments, valued at current market values and as most recently reported to Agent in accordance with Section 5.2(k).

"Liquidity Trigger Event" means the first to occur of (1) an Event of Default (y) arising out of a breach of Section 7.25 or (z) under Section 9.1 (a), or (2) acceleration of the Loans pursuant to Section 9.2 (a)(B).

"Loan Account" means the loan account of each Borrower, which account shall be maintained by the Agent.

"Loan Documents" means this Agreement, the Notes, the Security Documents, all Guaranties, the Intercompany Subordination Agreement, any Hedge Agreements entered into by any Borrower or its Subsidiaries with Bank, and any other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise relating to the Obligations, the Collateral, or any other aspect of the transactions contemplated by this Agreement; provided, however, in no event shall the Loan Documents include, or be deemed to include, the U.S. Loan Documents.

"Majority Lenders" means at any date of determination Lenders whose Pro Rata Shares aggregate more than 50%, but in no event fewer than two (2) Lenders if there exist at least two (2) Lenders at such time.

"Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the Federal Reserve Board.

"Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of the Borrowers and the Restricted Subsidiaries (taken as a whole), or the Collateral (taken as a whole); (b) a material impairment of the ability of any Borrower or any of its Restricted Subsidiaries to perform under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrowers of any Loan Document to which it is a party.

ANNEX A–12

"Maximum Inventory Loan Amount" means, as of any date of measurement (a) $50,000,000, less (b) the U.S. Aggregate Revolver Outstandings advanced against Eligible Inventory of the U.S. Borrower.

"Maximum Revolver Amount" means, as of any date of measurement (a) $105,000,000, less (b) the U.S. Aggregate Revolver Outstandings.

"Minimum Price" for any parcel of Real Estate, has the meaning set forth on Schedule 3.4(b).

"Mortgages" means and includes any and all of the mortgages, charges, deeds of trust, deeds to secure debt, assignments and other instruments executed and delivered by any Borrower to or for the benefit of the Security Trustee or the Agent by which the Security Trustee or the Agent, on behalf of the Lenders, acquires a Lien on the Real Estate of any Borrower or a collateral assignment of any Borrower's interest under leases of Real Estate, and all amendments, modifications and supplements thereto.

"Net Amount of Eligible Accounts" means, at any time, the gross amount of Eligible Accounts, calculated in Dollars, less sales, excise or similar taxes, and less returns, discounts, claims, credits and allowances, accrued rebates, offsets, deductions, unapplied cash, counterclaims, disputes and other defenses of any nature at any time issued, owing, granted, outstanding, available or claimed.

"Net Proceeds" has the meaning specified in Section 3.4(b).

"Non-Ratable Loan" and "Non-Ratable Loans" have the meanings specified in Section 1.2(h).

"Notes" means, collectively, the Revolving Loan Notes and Term Loan Notes.

"Notice of Borrowing" has the meaning specified in Section 1.2(b).

"Notice of Continuation/Conversion" has the meaning specified in Section 2.2(b).

"Obligations" means all present and future loans, advances, liabilities, obligations, covenants, duties, and debts owing by any Borrower to the Agent, the Security Trustee and/or any Lender, arising under or pursuant to this Agreement or any of the other Loan Documents, whether or not evidenced by any note, or other instrument or document, whether arising from an extension of credit, opening of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, as principal or guarantor, and including all principal, interest (including any interest which accrues after the filing of a proceeding under the Bankruptcy Code or which would have accrued but for such filing), charges, expenses, fees, attorneys' fees, filing fees and any other sums chargeable to any Borrower hereunder or under any of the other Loan Documents. "Obligations" includes, without limitation, (a) all debts, liabilities, and obligations now or hereafter arising from or in connection with the Letters of Credit and (b) all debts, liabilities and obligations now or hereafter arising from or in connection with Bank Products. In no event shall Obligations include, or be deemed to include, any Debt, indebtedness, liabilities or obligations of 3Com Corporation, a Delaware corporation, or any of its subsidiaries or affiliates incorporated or organized under the laws of any jurisdiction within the United States of America.

"Parent" has the meaning specified in the recitals hereof.

ANNEX A–1

"Payment Account" means each bank account established pursuant to clause 7.3 of the U.K. Debenture, to which the proceeds of Accounts and other Collateral are deposited or credited, and which is maintained in the name of any Borrower, as the Agent may determine, on terms acceptable to the Agent.

"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental Authority succeeding to the functions thereof.

"Pending Revolving Loans" means, at any time, the aggregate principal amount of all Revolving Loans requested in any Notice of Borrowing received by the Agent which have not yet been advanced.

"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multi-employer Plan has made contributions at any time during the immediately preceding five (5) plan years.

"Permitted Liens" means:

(a) Liens for taxes not delinquent or statutory Liens for taxes in an amount not to exceed $5,000,000 provided that the payment of such taxes which are due and payable is being contested in good faith and by appropriate proceedings diligently pursued and as to which adequate financial reserves have been established on the relevant Borrower's books and records and a stay of enforcement of any such Lien is in effect;

(b) the Lenders' Liens;

(g) Interests of lessors under operating leases;

ANNEX A–2

(h) Liens on assets of the Unrestricted Subsidiaries, as long as the holder of such Lien has no recourse to Borrowers, U.S. Borrower, any Restricted Subsidiary, or any U.S. Restricted Subsidiaries or their assets;

(i) Liens securing purchase money secured Debt incurred to finance the purchase of Equipment and the payment of related software and installation, delivery and tax expenses provided that Liens securing the same attach only to the Equipment acquired by the incurrence of such Debt and the proceeds thereof, and (ii) such Debt is incurred no later than 180 days following the purchase of such Equipment and related property; and

(j) other Liens securing Debt not in excess of $10,000,000 in the aggregate at any time outstanding;

(k) Liens in connection with synthetic leases;

(l) Liens consisting of leases or subleases and licenses and sublicenses granted to others not interfering in any material respect with the business of any Borrower and its Subsidiaries, taken as a whole, and any interest or title of a lessor or licensor under any lease or license;

(m) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(n) Liens on cash collateral securing reimbursement obligations to issuing banks under letters of credit;

(o) Liens on Proprietary Rights to the extent such Liens do not secure Debt for borrowed money and are not in favor of a financial institution;

(p) Liens on assets acquired in any Investment not prohibited hereunder to the extent such Liens were in existence at the time of acquisition;

(q) Liens on earnest money deposits required under a letter of intent or purchase agreement not prohibited hereunder;

(r) Liens on property representing part of the proceeds of a sale or other disposition of property, to secure post-closing obligations to the buyer in connection with such sale or other disposition; and

(s) Liens on cash representing proceeds from the issuance of Debt for the purpose of making interest payments in connection with such Debt.

"Person" means any individual, sole proprietorship, partnership, limited liability company, unlimited liability company, body corporate, joint venture, trust, unincorporated organization, association, corporation, Governmental Authority, or any other entity.

"Priority Payable Reserve" means any reserve that the Agent may from time to time may establish (in its sole discretion after the occurrence of a Default or an Event of Default) for Eligible Inventory located in a jurisdiction where (y) unpaid suppliers are entitled to a Lien, claim, or trust against such Inventory that would be prior to or pari passu with, Agent's Lien thereon, which reserve shall be in an amount determined by the Agent to be sufficient to repay any amounts payable to such supplier to release such supplier's claim with respect to such Inventory, or (z) such Inventory is subject to prior claims for value added taxes, amounts payable to inland revenue, social security, occupational and state pension schemes, or unpaid employee salaries.

"Proprietary Rights" means, as to any Person, all of such Person's now owned and hereafter arising or acquired: licenses, franchises, permits, patents, patent rights, copyrights, registered designs, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent, trademark and service mark applications, and all licenses and rights related to any of the foregoing,

ANNEX A–3

and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing.

"Qualified Cash Management Investments" means, at any time of measurement, the aggregate Cash Management Investments that are: (a) owned by Parent or its Subsidiaries, (b) in conformity with the investment policy approved by the audit committee of Parent's Board of Directors, (c) unencumbered by any Lien (other than any Lien in favor of Agent or in favor of any depositary institution or financial intermediary on whose books the Cash Management Investment is carried, and in the latter case only to secure fees and costs arising out of carrying such Cash Management Investment), and (d) if owned by Borrowers, Restricted Subsidiaries or U.S. Restricted Subsidiaries, immediately distributable to Parent, directly or indirectly, without restriction (including any legal restrictions of any relevant jurisdiction on such Person's distributable assets) and without the need to obtain the consent of any third Person or the approval of any Governmental Authority. Not more than $50,000,000 at any one time of Cash Management Investments owned by Unrestricted Subsidiaries may be considered Qualified Cash Management Investments.

"Qualified Custodial Account" means any of 3Com Tech's custodial or other investment accounts designated by 3Com Tech that meet the following criteria: (i) such account is a securities account (as defined in Section 8501 of the UCC); (ii) such account is maintained by a securities intermediary whose jurisdiction (as defined in Section 8110 of the UCC) is in the United States; (iii) such securities intermediary has entered into a control agreement with Agent, on terms satisfactory to Agent, which among other things is sufficient to give Agent, for the benefit of the Lenders, control (as defined in Section 8106 of the UCC) over the securities account, any security entitlements therein, and any securities therein. As of the Closing Date, the following accounts are Qualified Custodial Accounts: Custodial Account Number CMYF 2000002 maintained at Mellon Bank, N.A.

"Required Lenders" means at any time Lenders whose Pro Rata Shares aggregate more than 66²/3%, but, in any event no fewer than two (2) Lenders if there exist at least two (2) Lenders at such time.

"Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to

ANNEX A–4

or binding upon the Person or any of its property or to which the Person or any of its property is subject.

"Reserves" means reserves that limit the availability of credit hereunder, consisting of reserves against Availability, Eligible Accounts or Eligible Inventory, established by Agent from time to time in Agent's reasonable credit judgment. Without limiting the generality of the foregoing, the following reserves shall be deemed to be a reasonable exercise of Agent's credit judgment: (a) Bank Product Reserves, (b) a reserve for accrued, unpaid interest on the Obligations, (c) reserves for not less than three months rent at leased locations subject to statutory or contractual landlord liens or where Agent has not received an acceptable agreement from the landlord; (d) Inventory shrinkage; (e) Environmental Compliance Reserves; (f) Royalty Reserves; (g) customs charges; (h) Priority Payable Reserves; (i) Deferred Revenue Reserves; (j) Warranty / Technical Support Reserves; (k) Dilution Reserves; and (l) warehousemen's or bailees' charges.

"Restricted Subsidiary" means 3Com UK Holdings Ltd.; and 3Com IFSC (Ireland); and any Subsidiary acquired or created after the Closing Date and designated to the Agent as a Restricted Subsidiary by Administrative Borrower.

"Revolving Loans" has the meaning specified in Section 1.2 and includes each Agent Advance and Non-Ratable Loan.

"Revolving Loan Note" and "Revolving Loan Notes" have the meanings specified in Section 1.2(a)(ii).

"Securities Act" means the Securities Act of 1933 and the rules and regulations promulgated thereunder.

"Security Documents" means, collectively, the UK Mortgage, the UK Debenture, the Ireland Debenture, and the Cayman Debenture.

"Security Trustee" means the Bank, solely in its capacity as trustee for the Agent and the Lenders, and any successor trustee thereto.

"Settlement" and "Settlement Date" have the meanings specified in Section 12.15(a)(ii).

"Short-term Investments" means investments with maturities exceeding three months but less than three years.

"Solvent" means, when used with respect to any Person, that at the time of determination:

(a) the assets of such Person, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities); and

(b) the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and

ANNEX A–5

(c) it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and

(d) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.

For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. At all times after the Initial Funding Date, the definition of the term "Solvent" shall be limited to subsections (c) and (d) above.

"Stated Termination Date" means November 28, 2004.

"Subsidiary" of a Person means any corporation, association, partnership, limited liability company, unlimited liability company, body corporate, joint venture or other business entity of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of each Borrower.

"Term Loan" and "Term Loans" have the meanings specified in Section 1.3(a).

"Term Loan Note" and "Term Loan Notes" have the meanings specified in Section 1.3(c).

"Termination Date" means the earliest to occur of (i) the Stated Termination Date, (ii) the date the Total Facility is terminated either by all the Borrowers pursuant to Section 3.2 or by the Required Lenders pursuant to Section 9.2, and (iii) the date this Agreement is otherwise terminated for any reason whatsoever pursuant to the terms of this Agreement.

"Total Facility" has the meaning specified in Section 1.1.

"Trust Property" all or any of the assets, rights, powers authorities and discretions at any time subject to or expressed to be subject to the security from time to time constituted by or arising pursuant to the Security Documents or vested in the Security Trustee or given under or pursuant to the Security Documents including all income and other sums at any time received or receivable by the Security Trustee in respect thereof;

"UK Debenture" means the Syndicated Composite Guarantee and Debenture of even date herewith among 3Com Technologies, 3Com Europe Limited, 3Com U.K. Holdings Limited and Security Trustee, for the benefit of Lenders.

ANNEX A–6

"UK Mortgage" means the legal mortgage of even date herewith between 3Com Europe Limited and the Security Trustee, for the benefit of Lenders, relating to land situated in Hemel Hempstead, Hertfordshire, England.

"Unrestricted Subsidiary" means any Subsidiary of Parent that is not a Restricted Subsidiary or a U.S. Restricted Subsidiary.

"Unused Letter of Credit Subfacility" means an amount equal to (a) $25,000,000 minus (b) the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit and U.S. Letters of Credit plus, without duplication, (ii) the aggregate unpaid reimbursement obligations with respect to all Letters of Credit and U.S. Letters of Credit.

"U.S. Aggregate Revolver Outstandings" means, as of any date of measurement, the "Aggregate Revolver Outstandings" (as that term is defined in the U.S. Credit Agreement).

"U.S. Borrower" means 3Com Corporation.

"U.S. Commitments" means, with respect to any Lender, such Lender's "Commitments" (as that term is defined in the U.S. Credit Agreement").

"U.S. Credit Agreement" means that certain Credit Agreement, of even date herewith, among Agent, Lenders, and U.S. Borrower."

"U.S. Facility" means, collectively, the revolving and term loan facilities in favor of the U.S. Borrower, making up the "Total Facility" (as that term is defined in the U.S. Credit Agreement).

"U.S. Letters of Credit" means "Letters of Credit" (as that term is defined in the U.S. Credit Agreement) issued for the benefit of U.S. Borrower.

"U.S. Loan Documents" means "Loan Documents," as that term is defined in the U.S. Credit Agreement.

"U.S. Loans" means, with respect to any Lender, such Lender's "Loans" (as that term is defined in the U.S. Credit Agreement).

"U.S. Loan Obligations" means, as of any date of measurement, the then outstanding "Obligations" (as that term is defined in the U.S. Credit Agreement) of U.S. Borrower.

"U.S. Restricted Subsidiary" means a "Restricted Subsidiary" under the U.S. Credit Agreement that is not a Restricted Subsidiary hereunder.

"U.S. Term Loans" means the "Term Loans" (as that term is defined in the U.S. Credit Agreement).

"Unused Line Fee" has the meaning specified in Section 2.5.

"Warranty/Technical Support Reserve" means the reserve that the Agent may from time to time establish (in its sole discretion after the occurrence of a Default or an Event of Default) for the potential offset against the Borrower's Accounts arising from obligations the Borrowers may have to an Account Debtor for warranty and technical support services.

3. Interpretive Provisions.

ANNEX A–7

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.

(ii) The term "including" is not limiting and means "including without limitation."

(iv) The word "or" is not exclusive.

(d) Unless otherwise expressly provided herein, (i) references to agreements (including the Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

(e) The captions and headings of the Agreement and other Loan Documents are for convenience of reference only and shall not affect the interpretation of the Agreement.

(g) For purposes of Section 9.1, a breach of a financial covenant contained in Sections 7.25 shall be deemed to have occurred as of any date of determination thereof by the Agent or as of the last day of any specified measuring period, regardless of when the Financial Statements or other certificates reflecting such breach are delivered to the Agent.

(h) The Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Borrowers and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely because of the Agent's or Lenders' involvement in their preparation.

ANNEX A–8

EXHIBIT A-1

FORM OF REVOLVING LOAN NOTE

Exhibit A–1

EXHIBIT A-2

FORM OF TERM LOAN NOTE

Exhibit A–2

EXHIBIT B

FORM OF BORROWING BASE CERTIFICATE

Exhibit B–1

EXHIBIT C

FINANCIAL STATEMENTS

Exhibit C–1

EXHIBIT D

NOTICE OF BORROWING

Date: , 200

To:

Bank of America, N.A. as Agent for the Lenders who are parties to the Credit Agreement dated as of , 2001 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among 3Com Europe Limited, 3Com Technologies, certain Lenders which are signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

The undersigned, 3COM TECHNOLOGIES, an exempted limited liability company incorporated in the Cayman Islands ("3Com Tech"), with offices at Ballycoolin Business Park, Blanchardstown, Dublin 15, Ireland, and 3COM EUROPE LIMITED., a company incorporated in England and Wales with registered number 2600346 ("3Com Europe"), with offices at Boundary Way, Hemel Hempstead HP2 7YU, England (each of 3Com Tech and 3Com Europe individually, a "Borrower" and collectively, the "Borrowers"), refer to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby give you notice irrevocably of the Borrowing specified below:

1.: The Business Day of the proposed Borrowing is , 200 .
2.: The aggregate amount of the proposed Borrowing is $ .
3.: The Borrowing is to be comprised of $ of Base Rate and $ of LIBOR Rate Loans.
4.: The duration of the Interest Period for the LIBOR Rate Loans, if any, included in the Borrowing shall be months.

(a) The representations and warranties of the Borrowers contained in the Credit Agreement are true and correct as though made on and as of such date;

(b) No Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; and

(c) The proposed Borrowing will not cause the Aggregate Revolver Outstandings to exceed (a) the lesser of (i) the Borrowing Base, or (ii) the Maximum Revolver Amount, less (b) Reserves.

		[NAME OF ADMINISTRATIVE BORROWER]
		By:
		Title:

EXHIBIT D–1

EXHIBIT E

NOTICE OF CONTINUATION/CONVERSION

Date: , 200

To:

Bank of America, N.A. as Agent for the Lenders to the Credit Agreement dated as of , 200 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among 3Com Europe Limited, 3Com Technologies, certain Lenders which are signatories thereto and Bank of America, N.A., as Agent

Ladies and Gentlemen:

The undersigned, 3Com Europe Limited, 3Com Technologies (each, a "Borrower" and collectively, the "Borrowers"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably of the [conversion] [continuation] of the Loans specified herein, that:

1.: The Continuation/Conversion Date is , 200.
2.: The aggregate amount of the Loans to be [converted] [continued] is $ .
3.: The Loans are to be [converted into] [continued as] [LIBOR Rate] [Base Rate] Loans.
4.: The duration of the Interest Period for the LIBOR Rate Loans included in the [conversion] [continuation] shall be months.

(a) The representations and warranties of each Borrower contained in the Credit Agreement are true and correct as though made on and as of such date;

(b) Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion][continuation]; and

(c) The proposed conversion-continuation will not cause the Aggregate Revolver Outstandings to exceed (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolver Amount, less (b) Reserves.

		[NAME OF ADMINISTRATIVE BORROWER]
		By:
		Title:

EXHIBIT E–1

EXHIBIT F

[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of , 200 is made between (the "Assignor") and (the "Assignee").

RECITALS

WHEREAS, the Assignor is party to that certain Credit Agreement dated as of , 200 (as amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement") among , a[n] corporation and , a[n] corporation (each, a "Borrower" and collectively, the "Borrowers"), the several financial institutions from time to time party thereto (including the Assignor, the "Lenders"), and Bank of America, N. A., as agent for the Lenders (the "Agent"). Any terms defined in the Credit Agreement and not defined in this Assignment and Acceptance are used herein as defined in the Credit Agreement;

WHEREAS, as provided under the Credit Agreement, the Assignor has committed to making Loans (the "Committed Loans") to the Borrowers in an aggregate amount not to exceed $ (the "Commitment");

WHEREAS, the Assignor has made Committed Loans in the aggregate principal amount of $ to the Borrowers

WHEREAS, [the Assignor has acquired a participation in its pro rata share of the Lenders' liabilities under Letters of Credit in an aggregate principal amount of $ (the "L/C Obligations")] [no Letters of Credit are outstanding under the Credit Agreement]; and

WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, together with a corresponding portion of each of its outstanding Committed Loans and L/C Obligations, in an amount equal to $ (the "Assigned Amount") on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows:

1. Assignment and Acceptance.

EXHIBIT F–1

performed by it as a Lender. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under Sections and of the Credit Agreement to the extent such rights relate to the time prior to the Effective Date.

(c) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee's Commitment will be $ .

(d) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor's Commitment will be $ .

2. Payments.

(b) The Assignee further agrees to pay to the Agent a processing fee in the amount specified in Section 11.2(a) of the Credit Agreement.

3. Reallocation of Payments.

4. Independent Credit Decision.

The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of each Borrower, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the 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 and legal decisions in taking or not taking action under the Credit Agreement.

5. Effective Date; Notices.

(a) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be , 200 (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date:

(i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee;

(iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance;

EXHIBIT F–2

[(iv) the Assignee shall have complied with Section 11.2 of the Credit Agreement (if applicable);]

(v) the processing fee referred to in Section 2(b) hereof and in Section 11.2(a) of the Credit Agreement shall have been paid to the Agent; and

(b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Borrowers and the Agent for acknowledgment by the Agent, a Notice of Assignment in the form attached hereto as Schedule 1.

6. [Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT]

(a) The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent and the Security Trustee by the Lenders pursuant to the terms of the Credit Agreement.

(b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent or Security Trustee under the Credit Agreement.]

7. Withholding Tax.

[Conform to Credit Agreement]

8. Representations and Warranties.

(b) The Assignor 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 other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Borrowers, or the performance or observance by the Borrowers, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith.

EXHIBIT F–3

Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; [and (iv) it is an Eligible Assignee.]

9. Further Assurances.

The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to the Borrowers or the Agent, which may be required in connection with the assignment and assumption contemplated hereby.

10. Miscellaneous.

(b) All payments made hereunder shall be made without any set-off or counterclaim.

(c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance.

(d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF [Note: confirm choice of law]. The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in [ ] over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such [ ] State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding.

NOTE: ASSIGNMENTS HEREUNDER MAY ONLY BE EFFECTED IN CONJUNCTION WITH A PROPORTIONAL ASSIGNMENT OF ASSIGNOR'S U.S. LOANS AND U.S. COMMITMENTS AS SET FORTH IN SECTION 11.2(g) OF THE CREDIT AGREEMENT.

EXHIBIT F–4

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written.

		[ASSIGNOR]
		By:
		Title:
		Address:
		[ASSIGNEE]
		By:
		Title:
		Address:

EXHIBIT F–5

SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE

NOTICE OF ASSIGNMENT AND ACCEPTANCE

, 200

Bank of America, N.A


Attn:

Re: [Name and Address of Borrowers]

Ladies and Gentlemen:

We refer to the Credit Agreement dated as of , 200 (as amended, amended and restated, modified, supplemented or renewed from time to time the "Credit Agreement") among and (each, a "Borrower" and collectively, the "Borrowers"), the Lenders referred to therein and Bank of America, N. A., as agent for the Lenders (the "Agent"). Terms defined in the Credit Agreement are used herein as therein defined.

2. The Assignee agrees that, upon receiving the consent of the Agent and, if applicable, the Borrowers to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest in the Credit Agreement.

3. The following administrative details apply to the Assignee:

(A)	Notice Address:
	Assignee name:
	Address:


	Attention:
	Telephone: (	)
	Telecopier: (	)
	Telex (Answerback	):
(B)	Payment Instructions:
	Account No.:
	At:


	Reference:
	Attention:

4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance.

SCHEDULE 1–11

		Very truly yours,
		[NAME OF ASSIGNOR]
		By:
		Title:
		[NAME OF ASSIGNEE]
		By:
		Title:

ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO:
Bank of America, N. A., as Agent
By:
Title:

SCHEDULE 1–12

SCHEDULE 1.2

COMMITMENTS

Lender	Revolving Loan Commitment	Term Loan Commitment	Pro Rata Share
Bank of America, N.A.	$25,000,000	$3,571,428.57	23.81%
Foothill Capital Corporation	$25,000,000	$3,571,428.57	23.81%
The CIT Group/Business Credit, Inc.	$12,500,000	$1,785,714.29	11.90%
Congress Financial Corporation (Western)	$15,000,000	$2,142,857.14	14.29%
General Electric Capital Corporation	$15,000,000	$2,142,857.14	14.29%
PNC Bank, National Association	$12,500,000	$1,785,714.29	11.90%

SCHEDULE 1.2–1

SCHEDULE 3.4(B)

3Com Centre
Boundary Way
Hemel Hempstead Hertfordshire
United Kingdom	$	25,500,000.00

SCHEDULE 3.4(B)–1

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Exhibit 10.15

TABLE OF CONTENTS
ANNEXES, EXHIBITS AND SCHEDULES
CREDIT AGREEMENT
W I T N E S S E T H
ARTICLE 1 LOANS AND LETTERS OF CREDIT
ARTICLE 2 INTEREST AND FEES
ARTICLE 3 PAYMENTS AND PREPAYMENTS
ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY
ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES; COLLATERAL REPORTING
ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS
ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS
ARTICLE 8 CONDITIONS OF LENDING
ARTICLE 9 DEFAULT; REMEDIES
ARTICLE 10 TERM AND TERMINATION
ARTICLE 11 AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
ARTICLE 12 THE AGENT AND THE SECURITY TRUSTEE
ARTICLE 13 JOINT AND SEVERAL LIABILITY OF BORROWERS
ARTICLE 14 MISCELLANEOUS
ANNEX A to Credit Agreement Definitions
EXHIBIT A-1 FORM OF REVOLVING LOAN NOTE
EXHIBIT A-2 FORM OF TERM LOAN NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FINANCIAL STATEMENTS
EXHIBIT D NOTICE OF BORROWING
EXHIBIT E NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F [FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
RECITALS
SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE NOTICE OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE 1.2 COMMITMENTS
SCHEDULE 3.4(B)
EX-10.16 6 a2067560zex-10_16.htm EX 10.16 Prepared by MERRILL CORPORATION
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Exhibit 10.16

SECURITY AGREEMENT

SECURITY AGREEMENT, dated as of November 28, 2001, between 3COM CORPORATION, a Delaware corporation ("Grantor"), and BANK OF AMERICA, N.A., in its capacity as Agent for Lenders.

W I T N E S S E T H:

WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof by and among Grantor, Agent and Lenders (including all annexes, exhibits and schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders have agreed to make the Loans and issue Letters of Credit on behalf of Grantor;

WHEREAS, in order to induce Agent and Lenders to enter into the Credit Agreement and the other Loan Documents and to induce Lenders to make the Loans and issue Letters of Credit as provided for in the Credit Agreement, Grantor has agreed to grant a continuing Lien on the Collateral (as hereinafter defined) to secure the Obligations;

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

1. DEFINED TERMS. The following terms shall have the following respective meanings:

"Accounts" means all of the Grantor's now owned or hereafter acquired or arising accounts, as defined in the UCC, including any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance.

"Cash Management Investments" means, for any Person, such Person's (a) cash and Cash Equivalents, (b) deposit accounts, (c) Investment Property, and (d) Short Term Investments. For purposes of this Agreement, Cash Management Investments shall not include: (i) Proceeds of any Collateral, unless and until such Proceeds have been disbursed from a Payment Account to Grantor pursuant to Section 11(a); and (ii) Investment Property consisting of Grantor's Capital Stock in its Subsidiaries.

"Chattel Paper" means all of the Grantor's now owned or hereafter acquired chattel paper, as defined in the UCC, including electronic chattel paper.

"Collateral has the meaning set forth in Section 2(a).

"Deposit Accounts" means all "deposit accounts" as such term is defined in the UCC, now or hereafter held in the name of Grantor.

"Documents" means all documents as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of title, now owned or hereafter acquired by the Grantor.

"Equipment" means all of the Grantor's now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (except Inventory), including embedded software, motor vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs, molds and office equipment, as well as all of such types of property leased by the Grantor and all of the Grantor's rights and interests with respect thereto under such leases (including,

without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

"Excluded Cash Management Investments" means Cash Management Investments that are not Included Cash Management Investments.

"General Intangibles" means all of the Grantor's now owned or hereafter acquired general intangibles, choses in action and causes of action and all other intangible personal property of the Grantor of every kind and nature (other than Accounts and Proprietary Rights), including, without limitation, all contract rights, payment intangibles, corporate or other business records, customer lists, registrations, tax refund claims, any funds which may become due to the Grantor in connection with the termination of any employee benefit plan or any rights thereto and any other amounts payable to the Grantor from any employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which the Grantor is beneficiary, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged equity interests or Investment Property and any letter of credit, guarantee, claim, security interest or other security held by or granted to the Grantor.

"Goods" means all "goods" as defined in the UCC, now owned or hereafter acquired by Grantor, wherever located, including embedded software to the extent included in "goods" as defined in the UCC, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals.

"Included Cash Management Investments" means Cash Management Investments consisting of: (a) the Qualified Custodial Accounts; (b) any Investment Property maintained in the Qualified Custodial Accounts; (c) any Deposit Accounts now or in the future maintained with Bank of America; and (d) the Payment Accounts.

"Instruments" means all instruments as such term is defined in the UCC, now owned or hereafter acquired by the Grantor.

"Inventory" means all of the Grantor's now owned and hereafter acquired inventory, goods and merchandise, wherever located, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded software), other materials and supplies of any kind, nature or description which are used or consumed in the Grantor's business or used in connection with the packing, shipping, advertising, selling or finishing of such goods, merchandise, and all documents of title or other Documents representing them.

"Investment Property" means all of the Grantor's right title and interest in and to any and all: (a) securities whether certificated or uncertificated; (b) securities entitlements; (c) securities accounts; (d) commodity contracts; or (e) commodity accounts.

"Letter-of-Credit Rights" means "letter-of-credit rights" as such term is defined in the UCC, now owned or hereafter acquired by Grantor, including rights to payment or performance under a letter of credit, whether or not Grantor, as beneficiary, has demanded or is entitled to demand payment or performance.

"Liquidity Trigger Event" means the first to occur of (1) an Event of Default (y) arising out of a breach of Section 7.25 of the Credit Agreement or (z) under Section 9.1(a) of the Credit Agreement, or (2) acceleration of the Loans pursuant to Section 9.2(a)(B) of the Credit Agreement.

"Payment Account" means each bank account established pursuant to this Security Agreement, to which the proceeds of Accounts and other Collateral are deposited or credited, and which is

maintained in the name of the Agent or the Grantor, as the Agent may determine, on terms acceptable to the Agent.

"Payment Account Trigger Event" means any Event of Default.

"Proceeds" has the meaning set forth in the UCC.

"Proprietary Rights" means all of the Grantor's now owned and hereafter arising or acquired: licenses, franchises, permits, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, trade secrets, patent, trademark and service mark applications, and all licenses and rights and goodwill related to any of the foregoing, and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing.

"Qualified Custodial Accounts" means account no. CMVF 1000002 maintained at Mellon Bank, N.A., any future securities or custodial accounts that are Qualified Custodial Accounts as defined in the Credit Agreement.

"Short-term Investments" means investments with maturities exceeding three months but less than three years.

"Software" means all "software" as such term is defined in the UCC, now owned or hereafter acquired by the Grantor, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program.

"Supporting Obligations" means all supporting obligations as such term is defined in the UCC.

All other capitalized terms used but not otherwise defined herein have the meanings given to them in the Credit Agreement or in Annex A thereto. All other undefined terms contained in this Security Agreement, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein.

2. GRANT OF LIEN.

(a) As security for all its Obligations, the Grantor hereby grants to the Agent, for the benefit of the Agent and the Lenders, a continuing security interest in, lien on, assignment of and right of set-off against, all of the following property and assets of the Grantor, whether now owned or existing or hereafter acquired or arising, regardless of where located:

(i) all Accounts;

(ii) all Inventory;

(iii) all contract rights;

(iv) all Chattel Paper;

(v) all Documents;

(vi) all Instruments;

(vii) all Supporting Obligations and Letter-of-Credit Rights;

(viii) all General Intangibles (including payment intangibles and Software);

(ix) all Goods;

(x) all Equipment;

(xi) Investment Property;

(xii) all of the Grantor's Deposit Accounts, credits, and balances with and other claims against the Agent, and any Payment Accounts;

(xiii) all books, records and other property related to or referring to any of the foregoing, including books, records, account ledgers, data processing records, computer software and other property and General Intangibles at any time evidencing or relating to any of the foregoing; and

(xiv) the following commercial tort claims in which the Grantor is a plaintiff:

		(1)	3Com v. Electronic Recovery Specialists, Davis Gilbert and Leonard Caldwell Docket No. 99 C 698 United States District Court for the Northern District of Illinois, Eastern Division Filed: January 27, 2000;
		(2)	3Com vs. Wave Technologies, Inc. CV797525 Superior Court of California, County of Santa Clara Filed: April 13, 2001;
		(3)	3Com Corporation vs. Total Upgrade Solutions, Inc. CA No. 01-1629-A United States District Court, Eastern District of Virginia;
		(4)	3Com Corporation and 3Com Canada, Inc. vs Intelligent Decisions, Inc. Ontario Superior Court of Justice Court file no. 00-CV-188089; and
		(5)	3Com Corporation and 3Com Canada, Inc. vs. Zorin International Corporation, et al Ontario Superior Court of Justice Court file no. 00-CV-198957;

(xv) all accessions to, substitutions for and replacements, products and proceeds of any of the foregoing, including, but not limited to, proceeds of any insurance policies, claims against third parties, and condemnation or requisition payments with respect to all or any of the foregoing.

(xvi) Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and Grantor shall not be deemed to have granted a security interest in:

(1) any of Grantor's rights and interests in any license, contract or agreement to which Grantor is a party or any of its rights thereunder to the extent, but only to the extent, that (A) such a grant is prohibited by law, provided, that immediately upon such legal prohibition terminating, the Collateral shall include, and Grantor shall be deemed to have granted a security interest in, all such rights and provisions as if such prohibition had never been in effect, or (B) such a grant would, under the terms of any such license, contract, or agreement or otherwise, result in a breach of the terms of, or constitute a default under any license, contract, or agreement to which Grantor is a party (other than to the extent that any such term would be rendered ineffective pursuant to the UCC of any relevant jurisdiction or any

other applicable law (including the Bankruptcy Code) or principles of equity); provided, that immediately upon the ineffectiveness, lapse, or termination of any such provision, the Collateral shall include, and Grantor shall be deemed to have granted a security interest in, all such rights and provisions as if such provision had never been in effect;

(2) any Equipment subject to a Capital Lease or purchase money financing (in each case as permitted by the Credit Agreement) that by its terms would not allow the security interest created hereunder;

(3) any Proprietary Rights;

(4) 35% of Grantor's shares of each of its foreign Restricted Subsidiaries and all of Grantor's shares of each of its foreign Unrestricted Subsidiaries; or

(5) any Excluded Cash Management Investments.

All of the foregoing, together with the Real Estate covered by the Mortgage(s), all equity interests in Subsidiaries pledged to the Agent and all other property of the Grantor in which the Agent or any Lender may at any time be granted a Lien as collateral for the Obligations, is herein collectively referred to as the "Collateral."

(b) All of the Obligations shall be secured by all of the Collateral.

(c) Notwithstanding anything herein to the contrary: (i) Agent's Lien on any Payment Account shall be deemed to automatically attach without further action upon, but in no event before, the occurrence of a Payment Account Trigger Event; and (ii) Agent's Lien on any Included Cash Management Investments shall be deemed to automatically attach without further action upon, but in no event before, the occurrence of a Liquidity Trigger Event. Until such attachment, Included Cash Management Investments shall not be deemed Collateral for purposes of the terms of this Security Agreement.

3. PERFECTION AND PROTECTION OF SECURITY INTEREST.

(a) The Grantor shall, at its expense, perform all steps requested by the Agent at any time to perfect, maintain, protect, and enforce the Agent's Liens granted under this Security Agreement or any other Loan Document, including: (i) executing, delivering and/or filing and recording of the Mortgages and executing and filing financing or continuation statements, and amendments thereof, in form and substance reasonably satisfactory to the Agent; (ii) delivering to the Agent the originals of all Instruments, Documents, and tangible Chattel Paper, and all other Collateral in Grantor's possession of which the Agent determines it should have physical possession in order to perfect and protect the Agent's security interest therein, duly pledged, endorsed, or assigned to the Agent without restriction; (iii) delivering to the Agent warehouse receipts covering any portion of the Collateral located in warehouses and for which warehouse receipts are issued and certificates of title covering any portion of the collateral for which certificates of title have been issued; (iv) when an Event of Default has occurred and is continuing, transferring Inventory to warehouses or other locations designated by the Agent; (v) placing notations on the Grantor's books of account to disclose the Agent's security interest; (vi) assigning and, upon the Agent's request during the continuance of an Event of Default, delivering to the Agent all Supporting Obligations, including letters of credit on which such Grantor is named beneficiary with the written consent of the issuer thereof; and (vii) taking such other steps as are deemed necessary or desirable by the Agent to maintain and protect the Agent's Liens. The Grantor agrees that a carbon, photographic, photostatic, or other reproduction of this Security Agreement or of a financing statement is sufficient as a financing statement.

(b) Unless Agent shall otherwise consent in writing (which consent may be revoked), Grantor shall deliver to Agent all Collateral consisting of negotiable Documents, certificated securities

(accompanied by stock papers executed in blank), Chattel Paper and Instruments promptly after Grantor receives the same.

(c) Grantor shall, in accordance with the terms of the Credit Agreement, obtain or use its best efforts to obtain waivers or subordinations of Liens from landlords and mortgagees, and Grantor shall in all instances obtain signed acknowledgements of Agent's Liens from bailees having possession of any Collateral that they hold for the benefit of Agent.

(d) If required by the terms of the Credit Agreement and not waived by Agent in writing (which waiver may be revoked), Grantor shall obtain authenticated control agreements from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for Grantor. Notwithstanding anything to the contrary herein or in the Loan Documents, Agent will not deliver to any Person any notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any account control agreement with respect to (i) the Qualified Custodial Accounts or the Deposit Accounts (other than Payment Accounts), except in connection with the exercise of remedies hereunder following the occurrence of a Liquidity Trigger Event or (ii) the Payment Accounts, except in connection with the exercise of remedies hereunder following the occurrence of a Payment Account Trigger Event.

(e) If Grantor is or becomes the beneficiary of a letter of credit Grantor shall promptly notify Agent thereof and, if an Event of Default exists, upon the Agent's request, enter into a tri-party agreement with Agent and the issuer and/or confirmation bank with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to Agent and directing all payments thereunder to the Payment Account, all in form and substance reasonably satisfactory to Agent.

(f) Grantor shall take all steps necessary to grant the Agent control of all electronic chattel paper in accordance with the Code and all "transferable records" as defined in the Uniform Electronic Transactions Act.

(g) Grantor hereby irrevocably authorizes the Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Grantor as to which Grantor has granted a security interest hereunder, or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Division 9 of the UCC of the State of California or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Division 9 of the UCC of the State of California for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Grantor is an organization, the type of organization and any organization identification number issued to Grantor, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Grantor agrees to furnish any such information to the Agent promptly upon request. Grantor also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.

(h) Grantor shall promptly notify Agent of any commercial tort claim (as defined in the UCC) acquired by it and unless otherwise consented by Agent, Grantor shall enter into a supplement to this Security Agreement, granting to Agent a Lien in such commercial tort claim.

(i) From time to time, the Grantor shall, upon the Agent's request, execute and deliver confirmatory written instruments pledging to the Agent, for the ratable benefit of the Agent and the Lenders, the Collateral, but the Grantor's failure to do so shall not affect or limit any security interest or any other rights of the Agent or any Lender in and to the Collateral with respect to the Grantor. So long as the Credit Agreement is in effect and until all Obligations have been fully satisfied, the Agent's

Liens shall continue in full force and effect in all Collateral (whether or not deemed eligible for the purpose of calculating the Availability or as the basis for any advance, loan, extension of credit, or other financial accommodation).

(j) [Intentionally Deleted].

(k) Without limiting the prohibitions on mergers involving Grantor contained in the Credit Agreement, Grantor shall not reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof or change its type of entity as identified on Schedule II without giving thirty (30) days' prior written notice to Agent.

(l) Grantor acknowledges that it is not authorized to file any financing statement regarding Agent's Liens on the Collateral or amendment or termination statement with respect to any financing statement regarding Agent's Liens on the Collateral without the prior written consent of Agent and agrees that it will not do so without the prior written consent of Agent, subject to Grantor's rights under Section 9509(d)(2) of the UCC.

4. LOCATION OF COLLATERAL. (a) The Grantor represents and warrants to the Agent and the Lenders that: (A) Schedule I is a correct and complete list of the location of Grantor's location of its books and records, the locations of the Collateral, and the locations of all of its places of business; provided, however, that Collateral at undisclosed locations shall not constitute a breach of this provision to the extent that it does not exceed $2,000,000 in value at any one undisclosed location and $10,000,000 in value at all undisclosed locations; and (B) Schedule I correctly identifies any of such facilities and locations that are not owned by the Grantor and sets forth the names of the owners and lessors or sublessors of such facilities and locations.

(b) The Grantor covenants and agrees that it will not: (A) maintain any Collateral, at any location other than those locations listed for the Grantor on Schedule I; provided, however, that Collateral at undisclosed locations shall not constitute a breach of this provision to the extent that it does not exceed $2,000,000 in value at any one undisclosed location and $10,000,000 in value at all undisclosed locations; or (B) otherwise change or add to any of such locations, unless it gives the Agent at least thirty (30) days' prior written notice thereof and executes any and all financing statements and other documents that the Agent reasonably requests in connection therewith; such notice shall be deemed to amend Schedule I to include each new location described in the notice.

(c) Without limiting the foregoing, the Grantor represents that all of its Inventory (other than Inventory in transit) is, and covenants that all of its Inventory (other than Inventory in Transit) will be, located either: (A) on premises owned by the Grantor; (B) on premises leased by the Grantor, provided that the Grantor has complied with its best efforts obligations with respect to each of the leased premises in accordance with Section 3(c); (C) in a warehouse or with a bailee, provided that the Agent has received an executed warehouseman or bailee letter from the applicable Person in form and substance satisfactory to the Agent; (D) on consignment, provided that the Borrower has taken all actions necessary to protect its interests in such Collateral against such consignees and their creditors (including the filing of precautionary financing statements against such consignees and has provided to Agent an assignment of such financing statements); or (E) in transit to one of the foregoing locations.

5. JURISDICTION OF ORGANIZATION. Schedule II hereto identifies Grantor's name as of the Closing Date as it appears in official filings in the state of its incorporation or other organization, the type of entity of Grantor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by Grantor's state of incorporation or organization or a statement that no such number has been issued and the jurisdiction in which the Grantor is incorporated or organized. Grantor has only one state of incorporation or organization.

6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. The Grantor represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that:

(a) Grantor has and will continue to have rights in and the power to transfer all of the Collateral free and clear of all Liens whatsoever, except for Permitted Liens; (b) the Agent's Liens in the Collateral will not be subject to any prior Lien except for those Liens identified in clauses (c), (d), (e), (h), (l), (m) and (o) of the definition of Permitted Liens; and (c) the Grantor will use, store, and maintain the Collateral with all reasonable care and will use such Collateral for lawful purposes only.

7. APPRAISALS. Grantor shall, at its sole expense and upon the Agent's request, provide the Agent with appraisals or updates thereof of any or all of the Collateral in which it has an interest from an appraiser, and prepared on a basis, satisfactory to the Agent, such appraisals and updates to include, without limitation, information required by applicable laws and regulations and by the internal policies of the Lenders, or required to calculate the Borrowing Base; provided, that unless a Default or Event of Default has occurred and is continuing, no Grantor shall be required to pay for an appraisal or update pursuant to this sentence more frequently than (i) twice prior to the Stated Maturity Date with respect to Real Estate, or (ii) once per quarter with respect to Inventory.

8. ACCESS AND EXAMINATION. The Agent may at all reasonable times on a quarterly basis and during regular business hours (and at any time and frequency when a Default or Event of Default exists and is continuing) have access to, examine, audit, make extracts from or copies of and inspect any or all of the Grantor's records, files, and books of account and the Collateral, and discuss the Grantor's affairs with the Grantor's officers and management. The foregoing may be accomplished by Agent's own employees or its agents or independent contractors, accompanied by any Lender which so elects, and shall, to the extent expenses are reasonable, be at the sole expense of Grantor. The Grantor will deliver to the Agent any instrument necessary for the Agent to obtain records from any service bureau maintaining financial records for the Grantor. The Agent may, and at the direction of the Required Lenders shall, at any time when a Default or Event of Default exists, and at the Grantor's expense, make copies of all of the Grantor's books and records, or require the Grantor to deliver such copies to the Agent. The Agent may, during the continuance of an Event of Default, and at the sole expense of the Grantor, use such of the Grantor's respective personnel, supplies, and Real Estate as may be reasonably necessary for maintaining or enforcing the Agent's Liens. The Agent shall have the right to contact Account Debtors, warehousemen, bailees and similar third Persons, at any time, in the name of a nominee of the Agent (and when an Event of Default exists and is continuing, in Agent's name), to verify the validity, amount or any other matter relating to the Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise.

9. COLLATERAL REPORTING. The Grantor shall provide the Agent with the following documents at the following times in form satisfactory to the Agent: (a) at the times specified in Section 5.2(k) of the Credit Agreement, or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time, a schedule of the Grantor's Accounts created, credits given, cash collected and other adjustments to Accounts since the last such schedule and a Borrowing Base Certificate; (b) on a monthly basis, by the 15th day of the following month, a reconciliation to the corresponding Borrowing Base and to the Grantor's general ledger; (c) on a monthly basis by the 15th day of the following month, or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time, an aging of the Grantor's Accounts, and an aging of the Grantor's accounts payable; (d) on a monthly basis by the 15th day of the following month (or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time), a detailed calculation of Eligible Accounts and Eligible Inventory; (e) on a monthly basis by the 15th day of the following month (or more frequently if requested by the Agent and if Liquidity is less than $650,000,000 at such time), Inventory reports by category, product line, and location, together with a reconciliation to the corresponding Borrowing Base and to the Grantor's general ledger; (f) upon request, copies of invoices in connection with the Grantor's Accounts, customer statements, credit memos, remittance advices and reports, deposit slips, shipping and delivery documents in connection with the Grantor's Accounts and for Inventory and Equipment acquired by the Grantor, purchase orders and invoices; (g) upon request,

a statement of the balance of each of the Intercompany Accounts; (h) such other reports as to the Collateral of the Grantor as the Agent shall reasonably request from time to time; and (i) with the delivery of each of the foregoing, a certificate of the Grantor executed by an officer thereof certifying as to the accuracy and completeness of the foregoing. If any of the Grantor's records or reports of the Collateral are prepared by an accounting service or other agent, the Grantor hereby authorizes such service or agent to deliver such records, reports, and related documents to the Agent, for distribution to the Lenders.

10. ACCOUNTS.

(a) The Grantor hereby represents and warrants to the Agent and the Lenders, with respect to the Grantor's Accounts, that: (i) each existing Account represents, and each future Account will represent, a bona fide sale or lease and delivery of goods by the Grantor, or rendition of services by the Grantor, in the ordinary course of the Grantor's business; (ii) each existing Account is, and each future Account will be, for a liquidated amount payable by the Account Debtor thereon on the terms set forth in the invoice therefor or in the schedule thereof delivered to the Agent, without any offset, deduction, defense, or counterclaim known to the Grantor except as disclosed to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement; (iii) no payment will be received with respect to any Account, and no credit, discount, or extension, or agreement therefor will be granted on any Account, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement; (iv) each copy of an invoice delivered to the Agent by the Grantor will be a genuine copy of the original invoice sent to the Account Debtor named therein; (v) all goods described in any invoice representing a sale of goods will have been delivered to the Account Debtor and all services of the Grantor described in each invoice will have been performed, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement; and (vi) none of such Accounts derives 20% or more of its value from copyrights employed in the inventory sold to generate such Accounts except to the extent of Accounts not in excess of 10% of the amount of Grantor's Accounts in the aggregate outstanding at any one time.

(b) The Grantor shall not re-date any invoice or sale or make sales on extended dating beyond that customary in the Grantor's business or extend or modify any Account, except as reported to the Agent and the Lenders in Borrowing Base Certificates delivered in accordance with this Security Agreement. If the Grantor becomes aware of any matter adversely affecting the collectibility of any Account or the Account Debtor therefor, while Revolving Loans are outstanding, involving an amount greater than $1,000,000, including information regarding the Account Debtor's creditworthiness, the Grantor will promptly so advise the Agent and exclude such amounts from Eligible Accounts.

(c) The Grantor shall not accept any note or other instrument (except a check or other instrument for the immediate payment of money) with respect to any Account unless it notifies Agent and promptly delivers such instrument to the Agent, endorsed by the Grantor to the Agent in a manner satisfactory in form and substance to the Agent.

(d) If Revolving Loans are outstanding, the Grantor shall notify the Agent promptly of all disputes and claims in excess of $1,000,000 with any Account Debtor, and agrees to settle, contest, or adjust such dispute or claim at no expense to the Agent or any Lender. No discount, credit or allowance shall be granted to any such Account Debtor without the Agent's prior written consent, except for discounts, credits and allowances made or given when no Event of Default exists hereunder. If Revolving Loans are outstanding, the Grantor shall send the Agent a copy of each credit memorandum in excess of $1,000,000 as soon as issued, and the Grantor shall promptly report that credit on Borrowing Base Certificates submitted by it. The Agent may at all times when an Event of Default exists hereunder, settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms which the Agent or the Required Lenders, as applicable, shall consider advisable and, in all cases, the Agent will credit the Grantor's Loan Account with the net amounts received by the Agent in payment of any Accounts.

(e) If an Account Debtor returns any Inventory to the Grantor when no Event of Default exists, then the Grantor shall promptly determine the reason for such return and shall issue a credit memorandum to the Account Debtor in the appropriate amount. If Revolving Loans are outstanding the Grantor shall immediately report to the Agent any return which exceeds $1,000,000 in amount, or which, together with all other returns at such time that have not been reflected in the previous Borrowing Base Certificate, exceeds $5,000,000. Each such report shall indicate the reasons for the returns and the locations and condition of the returned Inventory. In the event any Account Debtor returns Inventory to the Grantor when an Event of Default exists, the Grantor, upon the request of the Agent, shall: (i) hold the returned Inventory in trust for the Agent; (ii) segregate all returned Inventory from all of its other property; (iii) dispose of the returned Inventory solely according to the Agent's written instructions; and (iv) not issue any credits or allowances with respect thereto without the Agent's prior written consent. All returned Inventory shall be subject to the Agent's Liens thereon. Whenever any Inventory is returned, the related Account shall be deemed ineligible to the extent of the amount owing by the Account Debtor with respect to such returned Inventory and such returned Inventory shall not be Eligible Inventory.

11. COLLECTION OF ACCOUNTS; PAYMENTS.

(a) Until the Agent notifies the Grantor to the contrary, the Grantor shall make collection of all Accounts and other Collateral (including any rents for leased Real Estate) for the Agent, shall receive all payments as the Agent's trustee, and shall immediately deliver all payments in their original form duly endorsed in blank into a Payment Account established for the account of the Grantor at a Clearing Bank acceptable to the Agent, subject to a Blocked Account Agreement. On or prior to the date hereof, the Grantor shall establish a lock-box service for collections of Accounts at a Clearing Bank acceptable to the Agent and subject to documentation acceptable to the Agent. The Grantor shall instruct all Account Debtors to make all payments directly to the address established for such service. If, notwithstanding such instructions, the Grantor receives any proceeds of Accounts or other Collateral (including any rents for leased Real Estate), it shall receive such payments as the Agent's trustee, and shall immediately deliver such payments to the Agent in their original form duly endorsed in blank or deposit them into a Payment Account, as the Agent may direct. All collections of Accounts and other Collateral received in any lock-box or Payment Account or directly by the Grantor or the Agent, and all funds in any Payment Account or other account to which such collections are deposited shall be subject to the Agent's sole control and withdrawals by the Grantor shall not be permitted; provided, however, that each Blocked Account Agreement shall provide that until Agent notifies the Clearing Bank to the contrary, (which notice the Agent will not send until the occurrence of a Payment Account Trigger Event), Grantor may cause monies in the Payment Account to be sent to Grantor or otherwise pursuant to Grantor's direction. The Agent or the Agent's designee may, at any time after the occurrence of an Event of Default, notify Account Debtors that the Accounts have been assigned to the Agent and of the Agent's security interest therein, and may collect them directly and charge the collection costs and expenses to the Loan Account as a Revolving Loan. So long as an Event of Default has occurred and is continuing, the Grantor, at the Agent's request, shall execute and deliver to the Agent such documents as the Agent shall require to grant the Agent access to any post office box in which collections of Accounts are received.

(b) If sales of Inventory are made or services are rendered for cash, the Grantor shall immediately deposit into a Payment Account the cash which the Grantor receives, or if a Payment Account Trigger Events has occurred, deliver such cash to the Agent.

(c) If a Payment Account Trigger Event has occurred, all payments including immediately available funds received by the Agent at a bank account designated by it, will be the Agent's sole

property for its benefit and the benefit of the Lenders and will be credited to the Loan Account (conditional upon final collection) on the date of receipt.

(d) In the event the Grantor repays all of the Obligations upon the termination of the Credit Agreement or upon acceleration of the Obligations, other than through the Agent's receipt of payments on account of the Accounts or proceeds of the other Collateral, such payment will be credited (conditioned upon final collection) to the Grantor's Loan Account upon the Agent's receipt of immediately available funds.

12. INVENTORY; PERPETUAL INVENTORY.

(a) The Grantor represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that all of the Inventory owned by the Grantor is and will be held for sale or lease, or to be furnished in connection with the rendition of services, in the ordinary course of the Grantor's business. The Grantor will keep its Inventory in good and marketable condition, except for damaged or defective goods arising in the ordinary course of the Grantor's business. Grantor will not, without prior written notice to the Agent, acquire or accept any Inventory on consignment or approval. The Grantor agrees that all Inventory produced by the Grantor in the United States of America will be produced in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations, and orders thereunder. The Grantor will conduct a physical count of the Inventory at least once per Fiscal Year, and after and during the continuation of an Event of Default, at such other times as the Agent requests; provided, however, that so long as an Event of Default does not exist, in lieu of an annual physical inventory, the Borrower may conduct cycle counts that are in compliance with Borrower's internal audit procedures as approved by Borrower's independent certified public accountants. The Grantor will maintain a perpetual inventory reporting system at all times. If Revolving Loans are outstanding, the Grantor will not, without prior written notice to the Agent, sell any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis except in conformity with Borrower's business practices as of the Closing Date.

(b) In connection with all Inventory financed by Letters of Credit, the Grantor will, at the Agent's request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, Documents or Instruments in which the Agent holds a security interest to deliver them to the Agent and/or subject to the Agent's order, and if they shall come into the Grantor's possession, to deliver them, upon request, to the Agent in their original form. The Grantor shall also, at the Agent's request, designate the Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

13. EQUIPMENT.

(a) The Grantor represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders that all of the Equipment owned by the Grantor is and will be used or held for use in the Grantor's business. The Grantor shall keep and maintain its Equipment in good operating condition and repair (ordinary wear and tear excepted) and shall make all necessary replacements thereof.

(b) The Grantor shall promptly inform the Agent of any material additions to or deletions from the Equipment. The Grantor will not, without the Agent's prior written consent, alter or remove any identifying symbol or number on any of the Grantor's Equipment constituting Collateral.

14. [Intentionally Deleted].

15. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. The Grantor represents and warrants to the Agent and the Lenders that (a) all Documents, Instruments, and Chattel Paper

describing, evidencing, or constituting Collateral, and all signatures and endorsements thereon, are and will be complete, valid, and genuine, and (b) all goods evidenced by such Documents, Instruments, and Chattel Paper are and will be owned by the Grantor, free and clear of all Liens other than Permitted Liens. If Grantor retains possession of any Chattel Paper or Instruments with Agent's consent, such Chattel Paper and Instruments shall be marked with the following legend: "This writing and the obligations evidenced or served hereby are subject to the security interest of Bank of America, N.A., as Agent, for the benefit of Agent and certain Lenders."

16. RIGHT TO CURE. The Agent may, in its discretion, and shall, at the direction of the Required Lenders, pay any amount or do any act required of the Grantor hereunder or under any other Loan Document in order to preserve, protect, maintain or enforce the Obligations, the Collateral or the Agent's Liens therein, and which the Grantor fails to pay or do, including payment of any judgment against the Grantor, any insurance premium, any warehouse charge, any finishing or processing charge, any landlord's or bailee's claim, and any other Lien upon or with respect to the Collateral. All payments that the Agent makes under this Section 16 and all out-of-pocket costs and expenses that the Agent pays or incurs in connection with any action taken by it hereunder shall be charged to the Grantor's Loan Account as a Revolving Loan. Any payment made or other action taken by the Agent under this Section 16 shall be without prejudice to any right to assert an Event of Default hereunder and to proceed thereafter as herein provided.

17. POWER OF ATTORNEY. The Grantor hereby appoints the Agent and the Agent's designee as the Grantor's attorney, with power: (a) to endorse the Grantor's name on any checks, notes, acceptances, money orders, or other forms of payment or security that come into the Agent's or any Lender's possession; (b) to sign the Grantor's name on any invoice, bill of lading, warehouse receipt or other negotiable or non-negotiable Document constituting Collateral, on drafts against customers, on assignments of Accounts, on notices of assignment, financing statements and other public records and to file any such financing statements by electronic means with or without a signature as authorized or required by applicable law or filing procedure; (c) so long as any Event of Default has occurred and is continuing, to notify the post office authorities to change the address for delivery of the Grantor's mail to an address designated by the Agent and to receive, open and dispose of all mail addressed to the Grantor; provided, however, that the Agent and the Agent's designee, as appropriate, upon completion of its review of such mail and handling of any Collateral contained therein, shall promptly forward it to Grantor; (d) to send requests (which do not disclose the Agent's or any Lender's name, if sent when no Event of Default exists) for verification of Accounts to customers or Account Debtors; (e) to complete in the Grantor's name or the Agent's name, any order, sale or transaction, obtain the necessary Documents in connection therewith, and collect the proceeds thereof; (f) to clear Inventory through customs in the Grantor's name, the Agent's name or the name of the Agent's designee, and to sign and deliver to customs officials powers of attorney in the Grantor's name for such purpose; (g) to the extent that Grantor's authorization given in Section 3(g) of this Security Agreement is not sufficient, to file such financing statements with respect to this Security Agreement, with or without Grantor's signature, or to file a photocopy of this Security Agreement in substitution for a financing statement, as the Agent may deem appropriate and to execute in Grantor's name such financing statements and amendments thereto and continuation statements which may require the Grantor's signature; and (h) to do all things necessary to carry out the Credit Agreement and this Security Agreement. The Grantor ratifies and approves all acts of such attorney. None of the Lenders or the Agent nor their attorneys will be liable for any acts or omissions or for any error of judgment or mistake of fact or law except for their willful misconduct and gross negligence. This power, being coupled with an interest, is irrevocable until the Credit Agreement has been terminated and the Obligations have been fully satisfied.

18. THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.

(a) The Grantor assumes all responsibility and liability arising from or relating to the use, sale, license or other disposition of the Collateral. The Obligations shall not be affected by any failure of the

Agent or any Lender to take any steps to perfect the Agent's Liens or to collect or realize upon the Collateral, nor shall loss of or damage to the Collateral release the Grantor from any of the Obligations. Following the occurrence and during the continuation of an Event of Default, the Agent may (but shall not be required to), and at the direction of the Required Lenders shall, without notice to or consent from the Grantor, sue upon or otherwise collect, extend the time for payment of, modify or amend the terms of, compromise or settle for cash, credit, or otherwise upon any terms, grant other indulgences, extensions, renewals, compositions, or releases, and take or omit to take any other action with respect to the Collateral, any security therefor, any agreement relating thereto, any insurance applicable thereto, or any Person liable directly or indirectly in connection with any of the foregoing, without discharging or otherwise affecting the liability of the Grantor for the Obligations or under the Credit Agreement or any other agreement now or hereafter existing between the Agent and/or any Lender and the Grantor.

(b) It is expressly agreed by Grantor that, anything herein to the contrary notwithstanding, Grantor shall remain liable under each of its contracts and each of its licenses to observe and perform all the conditions and obligations to be observed and performed by it thereunder. Neither Agent nor any Lender shall have any obligation or liability under any contract or license by reason of or arising out of this Security Agreement or the granting herein of a Lien thereon or the receipt by Agent or any Lender of any payment relating to any contract or license pursuant hereto. Neither Agent nor any Lender shall be required or obligated in any manner to perform or fulfill any of the obligations of Grantor under or pursuant to any contract or license, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any contract or license, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(c) Agent may at any time after an Event of Default has occurred and is continuing, without prior notice to Grantor, notify Account Debtors, and other Persons obligated on the Collateral that Agent has a security interest therein, and that payments shall be made directly to Agent, for itself and the benefit of Lenders. Upon the request of Agent, after an Event of Default has occurred and is continuing, Grantor shall so notify Account Debtors and other Persons obligated on Collateral. Once any such notice has been given to any Account Debtor or other Person obligated on the Collateral, the Grantor shall not give any contrary instructions to such Account Debtor or other Person without Agent's prior written consent.

(d) If an Event of Default shall have occurred and be continuing, Grantor, at its own expense, shall cause the independent certified public accountants then engaged by Grantor to prepare and deliver to Agent and each Lender at any time and from time to time promptly upon Agent's request the following reports with respect to Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test verification of such Accounts as Agent may request. Grantor, at its own expense, shall deliver to Agent the results of each physical verification, if any, which Grantor may in its discretion have made, or caused any other Person to have made on its behalf, of all or any portion of its Inventory.

19. [Intentionally Deleted].

20. INDEMNIFICATION. In any suit, proceeding or action brought by Agent or any Lender relating to any Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect thereto, Grantor will save, indemnify and keep Agent and Lenders harmless from and against all expense (including reasonable attorneys' fees and expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the Account Debtor or other Person obligated on the Collateral, arising out of a breach by Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing

to, or in favor of, such obligor or its successors from Grantor, except in the case of Agent or any Lender, to the extent such expense, loss, or damage is attributable solely to the gross negligence or willful misconduct of Agent or such Lender as finally determined by a court of competent jurisdiction. All such obligations of Grantor shall be and remain enforceable against and only against Grantor and shall not be enforceable against Agent or any Lender.

21. LIMITATION ON LIENS ON COLLATERAL. Grantor will not create, permit or suffer to exist, and will defend the Collateral against, and take such other action as is necessary to remove, any Lien on the Collateral except Permitted Liens, and will defend the right, title and interest of Agent and Lenders in and to any of Grantor's rights under the Collateral against the claims and demands of all Persons whomsoever.

22. NOTICE REGARDING COLLATERAL. Grantor will advise Agent promptly, in reasonable detail, (i) of any Lien (other than Permitted Liens) or claim made or asserted against any of the Collateral, and (ii) of the occurrence of any other event which could reasonably be expected to have a Material Adverse Effect.

23. REMEDIES; RIGHTS UPON DEFAULT.

(a) In addition to all other rights and remedies granted to it under this Security Agreement, the Credit Agreement, the other Loan Documents and under any other instrument or agreement securing, evidencing or relating to any of the Obligations, if any Event of Default shall have occurred and be continuing, Agent may exercise all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing, Grantor expressly agrees that in any such event Agent, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may forthwith enter upon the premises of Grantor where any Collateral is located through self-help, without judicial process, without first obtaining a final judgment or giving Grantor or any other Person notice and opportunity for a hearing on Agent's claim or action and may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, license, assign, give an option or options to purchase, or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem acceptable, for cash or on credit or for future delivery without assumption of any credit risk. Agent or any Lender shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of Agent and Lenders, the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption Grantor hereby releases. Such sales may be adjourned and continued from time to time with or without notice. Agent shall have the right to conduct such sales on Grantor's premises or elsewhere and shall have the right to use Grantor's premises without charge for such time or times as Agent deems necessary or advisable.

(b) Grantor further agrees, at Agent's request, to assemble the Collateral and make it available to Agent at a place or places designated by Agent which are reasonably convenient to Agent and Grantor, whether at Grantor's premises or elsewhere. Until Agent is able to effect a sale, lease, or other disposition of Collateral, Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by Agent. Agent shall have no obligation to Grantor to maintain or preserve the rights of Grantor as against third parties with respect to Collateral while Collateral is in the possession of Agent. Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of Agent's remedies (for the benefit of Agent and Lenders), with respect to such appointment without prior notice or hearing as to such appointment.

Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the Obligations as provided in the Credit Agreement, and only after so paying over such net proceeds, and after the payment by Agent of any other amount required by any provision of law, need Agent account for the surplus, if any, to Grantor. To the maximum extent permitted by applicable law, Grantor waives all claims, damages, and demands against Agent or any Lender arising out of the repossession, retention or sale of the Collateral except such as arise solely out of the gross negligence or willful misconduct of Agent or such Lender as finally determined by a court of competent jurisdiction. Grantor agrees that ten (10) Business Days prior notice by Agent of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Grantor shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any attorneys' fees or other expenses incurred by Agent or any Lender to collect such deficiency.

(c) Except as otherwise specifically provided herein, Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral.

(d) To the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, Grantor acknowledges and agrees that it is not commercially unreasonable for the Agent (a) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (d) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as the Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (k) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral. Grantor acknowledges that the purpose of this Section 23(d) is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent's exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 23(d). Without limitation upon the foregoing, nothing contained in this Section 23(d) shall be construed to grant any rights to Grantor or to impose any duties on Agent that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 23(d).

24. GRANT OF LICENSE TO USE PROPRIETARY RIGHTS. For the purpose of enabling Agent to exercise rights and remedies under Section 23 (including, without limiting the terms of Section 23, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market

for sale, sell or otherwise dispose of Collateral) at such time as Agent shall be lawfully entitled to exercise such rights and remedies, Grantor hereby grants to Agent, for the benefit of Agent and Lenders, such sufficient rights to any Propriety Rights now owned or hereafter acquired by Grantor (including, as necessary, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license or sublicense any such Proprietary Rights) to the extent necessary to enable Agent to exercise rights and remedies under Section 23, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. Notwithstanding the foregoing provisions of this Section 24 to the contrary, with respect to Grantor's Proprietary Rights licensed to it by others, the sublicense granted to Agent under the Section 24 shall be limited to a sublicense solely for purposes of enabling Agent to exercise its rights under Section 23 to take possession of, hold, preserve, assemble, prepare for sale, market for sale, sell or otherwise dispose of the Collateral, and not for the purposes of processing, completing or otherwise manufacturing the Collateral.

25. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL. Agent and each Lender shall use reasonable care with respect to the Collateral in its possession or under its control. Neither Agent nor any Lender shall have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of Agent or such Lender, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto.

26. MISCELLANEOUS.

(a) Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Grantor for liquidation or reorganization, should Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of Grantor's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

(b) Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give and serve upon any other party any communication with respect to this Security Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be given in the manner, and deemed received, as provided for in the Credit Agreement.

(c) Severability. Whenever possible, each provision of this Security Agreement shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. This Security Agreement is to be read, construed and applied together with the Credit Agreement and the other Loan Documents which, taken together, set forth the complete understanding and agreement of Agent, Lenders and Grantor with respect to the matters referred to herein and therein.

(d) No Waiver; Cumulative Remedies. Neither Agent nor any Lender shall by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Agent and then only to the extent therein set forth. A waiver by Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Agent would otherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of Agent or any Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law. None of the terms or provisions of this Security Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by Agent and Grantor.

(e) Limitation by Law. All rights, remedies and powers provided in this Security Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Security Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Security Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.

(f) Termination of this Security Agreement. Subject to Section 26 (a) hereof, this Security Agreement shall terminate only upon: the termination of all commitments, the posting of satisfactory collateral for all outstanding Letters of Credit and any contingent obligations owed by Grantor under the Guaranty in accordance with the Credit Agreement, and the payment in full of all other Obligations (other than indemnification Obligations as to which no claim has been asserted).

(g) Successors and Assigns. This Security Agreement and all obligations of Grantor hereunder shall be binding upon the successors and assigns of Grantor (including any debtor-in-possession on behalf of Grantor) and shall, together with the rights and remedies of Agent, for the benefit of Agent and Lenders, hereunder, inure to the benefit of Agent and Lenders, all future holders of any instrument evidencing any of the Obligations and their respective successors and assigns. No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall in any manner affect the Lien granted to Agent, for the benefit of Agent and Lenders, hereunder. Grantor may not assign, sell, hypothecate or otherwise transfer any interest in or obligation under this Security Agreement.

(h) Counterparts. This Security Agreement may be authenticated in any number of separate counterparts, each of which shall collectively and separately constitute one and the same agreement. This Security Agreement may be authenticated by manual signature, facsimile or, if approved in writing by Agent, electronic means, all of which shall be equally valid.

(i) Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(i) THIS SECURITY AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT ISSUES WITH RESPECT TO CREATION, PERFECTION, AND ENFORCEMENT OF LIENS UNDER DIVISION 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN DIVISION 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, EACH OF THE GRANTOR AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE GRANTOR AND THE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE AGENT SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST GRANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(iii) GRANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY OVERNIGHT MAIL, COURIER SERVICE, OR REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO FLEETWOOD AT ITS ADDRESS SET FORTH IN THE CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

(iv) NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECURITY AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY HERETO BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Security Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(v) Notwithstanding the provisions of (iv) above, no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or related to an obligation to the Agent or any Lender which is secured by real estate property collateral (exclusive of real estate space lease assignments). If all

the parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in Section 26 (i)(vi).

(vi) At the request of either party a controversy or claim which is not submitted to arbitration as provided and limited in Sections 26 (i), (iv) and (v) shall be determined by judicial reference. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced.

(vii) No provision of Sections (iv) through (vi) shall limit the right of the Agent or the Lenders to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

(j) Waiver of Jury Trial. SUBJECT TO THE PROVISIONS OF SECTION 26 (i)(iv), GRANTOR AND THE AGENT EACH IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS SECURITY AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GRANTOR AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS SECURITY AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS.

(k) Limitation of Liability. NO CLAIM MAY BE MADE BY GRANTOR AGAINST THE AGENT OR THE LENDERS, OR THE AFFILIATES, DIRECTORS, OFFICERS, OFFICERS, EMPLOYEES, OR AGENTS OF THE AGENT OR THE LENDERS FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND GRANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

(l) Section Titles. The Section titles contained in this Security Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

(m) No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Security Agreement.

(n) Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Security Agreement and, specifically, the provisions of Section 26 (i) and Section 26 (j), with its counsel.

(o) Benefit of Lenders. All Liens granted or contemplated hereby shall be for the benefit of Agent and Lenders, and all proceeds or payments realized from Collateral in accordance herewith shall be applied to the Obligations in accordance with the terms of the Credit Agreement.

[Signatures on following pages]

IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

		3COM CORPORATION, a Delaware corporation
		By:
		Name:
		Title:
		BANK OF AMERICA, N.A., as Agent
		By:
		Name:
		Title:

SCHEDULE I
to
SECURITY AGREEMENT

LOCATION OF COLLATERAL

A. Location of Chief Executive Office

B. Location of Books and Records

C. Location of Collateral

D. Location of all other places of business

E. Location of leased facilities and name of lessor/sublessor

SCHEDULE II
to
SECURITY AGREEMENT

JURISDICTION OF ORGANIZATION

A.		Grantor's official name:
B.		Type of entity (i.e. corporation, partnership, limited partnership, limited liability company)
C.		Organizational identification number issued by Grantor's state of incorporation or organization or a statement that no such number has been issued.
D.		State of Incorporation or Organization.

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Exhibit 10.16

SECURITY AGREEMENT
W I T N E S S E T H
SCHEDULE I to SECURITY AGREEMENT LOCATION OF COLLATERAL
SCHEDULE II to SECURITY AGREEMENT JURISDICTION OF ORGANIZATION
EX-10.17 7 a2067560zex-10_17.htm EX 10.17 Prepared by MERRILL CORPORATION
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Exhibit 10.17

CONTINUING GUARANTY

This CONTINUING GUARANTY, dated as of November 28, 2001, is made by 3COM CORPORATION, a Delaware corporation ("Guarantor"), in favor of the Lenders (as defined below) and BANK OF AMERICA, N.A., as agent for the Lenders (in such capacity as agent, together with its successors and assigns, the "Agent"), in light of the following:

R E C I T A L S

WHEREAS, 3Com Technologies, an exempted limited liability company incorporated in the Cayman Islands ("3Com Technologies") and 3Com Europe Limited, a company incorporated in England and Wales with registered number 2600346 ("3Com UK" and, collectively with 3Com Technologies, the "Borrowers") are currently entering into that certain Credit Agreement, of even date herewith (as amended, supplemented, or otherwise modified from time to time, the "International Credit Agreement") with various financial institutions (together with their successors and assigns, the "Lenders"), Bank of America, N.A., as "Bank" and "Issuing Bank" thereunder and as security trustee ("Trustee") and Agent (collectively, the Lenders, Bank, Issuing Bank, Trustee, and Agent are referred to herein as the "Credit Parties");

WHEREAS, 3Com Technologies is an indirect wholly-owned subsidiary of Guarantor, and 3Com UK is an indirect wholly-owned subsidiary of 3Com Technologies;

WHEREAS, Guarantor will derive substantial, direct and indirect benefit from the transactions contemplated by the International Credit Agreement; and

WHEREAS, as a condition to the Credit Parties extending certain financial accommodations to Borrowers pursuant to the International Credit Agreement, the Credit Parties have required that Guarantor guarantee the Guaranteed Obligations (as defined below).

FOR GOOD AND VALUABLE CONSIDERATION, Guarantor irrevocably and unconditionally undertakes and agrees for the benefit of the Credit Parties as follows:

A G R E E M E N T

1. DEFINITIONS AND CONSTRUCTION.

1.1 Definitions. All initially capitalized terms used but not defined in this Guaranty shall have the meanings set forth in the International Credit Agreement. In addition, the following terms shall have the following meanings:

"Bankruptcy Code" means any applicable bankruptcy or insolvency act or law, including the US Bankruptcy Code, now or hereafter existing, and any and all rules issued or promulgated in connection therewith.

"Borrowers" has the meaning set forth in the recitals hereto, and includes all successors-in-interest of each such corporation by operation of law or otherwise, including any "Trustee" (as defined in the Bankruptcy Code) or debtor-in-possession, and any successor-in-interest arising out of any merger or reorganization involving each such corporation.

"Credit Parties" has the meaning set forth in the recitals hereto.

"Guaranteed Obligations" means all present and future loans, advances, liabilities, obligations, covenants, duties, and Debt owing by Borrowers to the Credit Parties, arising under or relating to the International Credit Agreement or any other Loan Document, whether or not evidenced by

any note, or other instrument or document, whether arising from an extension of credit, opening of a letter of credit, reimbursement obligations relating to Letters of Credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those debts of Borrowers arising under or related to the International Credit Agreement or any other Loan Document acquired by assignment from others, and any participation by the Credit Parties in Borrowers' debts arising under or related to the International Credit Agreement or any other Loan Document), absolute or contingent, due or to become due, primary or secondary, as principal or guarantor, and including, without limitation, all interest (including interest that, but for the filing of a petition under the Bankruptcy Code with respect to any Borrower, would have accrued on any such obligations, indebtedness, or liabilities), charges, reasonable expenses, fees, attorneys' and paralegals' fees and disbursements, filing fees and any other sums chargeable to Borrowers under the International Credit Agreement or under another Loan Document, whether made, incurred, or created before or after any entry of order for relief with respect to any Borrower in a case under the Bankruptcy Code and whether recovery is or hereafter becomes barred by any statue of limitations or otherwise becomes unenforceable for any reason whatsoever, including any act or failure to act by the Credit Parties.

"Guarantor" has the meaning set forth in the introduction hereto.

"Guaranty" means this Continuing Guaranty, any concurrent or subsequent exhibits or schedules hereto, and any extensions, supplements, amendments, or modifications to or in connection with this Continuing Guaranty, or to any such schedules or exhibits.

"Lender" has the meaning set forth in the introduction hereto.

"International Credit Agreement" has the meaning set forth in the recitals hereto.

"US Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101-1330), as amended or supplemented from time to time, and any successor statute, and any and all rules issued or promulgated in connection therewith.

"US Credit Agreement" means that certain Credit Agreement, of even date herewith, among Guarantor, Agent, Bank, and certain other financial institutions signatory thereto.

1.2 Construction. Unless the context of this Guaranty clearly requires otherwise: (a) references to the plural include the singular and references to the singular include the plural; (b) references to any gender include the other gender; (c) the terms "include" and "including" are not limiting; and (d) the term "or" has the inclusive meaning represented by the phrase "and/or." The terms "hereof," "herein," "hereby," and "hereunder," and other similar terms in this Guaranty, refer to this Guaranty as a whole and not to any particular provision of this Guaranty. References in this Guaranty to any "determination," or any matter being "determined," by the Credit Parties include good faith estimates (in the case of quantitative determinations), and good faith beliefs (in the case of qualitative determinations) by the Credit Parties and mean that any such determination so made shall be conclusive absent manifest error. Unless otherwise specified, section and subsection references are to this Guaranty. Any reference to any statute, law, or regulation shall include all amendments thereto and revisions thereof. Any reference herein to any of the Loan Documents includes any and all alterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, as applicable. If there exists any inconsistency between the terms of the US Credit Agreement and this Agreement or if the terms, conditions, or obligations under this Agreement are any more restrictive on Guarantor than those provided with respect to Guarantor under the US Credit Agreement, then the terms of the US Credit Agreement shall prevail, so that nothing herein contained shall impose any greater or more onerous liability or restriction on Guarantor than is imposed under the US Credit Agreement. To the extent any provision of the US Credit Agreement addresses the same subject matter covered by a provision hereunder, actions or omissions which are expressly permitted or not prohibited

by the terms of the US Credit Agreement shall not constitute a breach of the express or implied terms of this Agreement.

2. GUARANTY BY GUARANTOR.

2.1 Promise to Pay and Perform. Guarantor unconditionally and irrevocably guarantees to the Credit Parties the payment and performance of the Guaranteed Obligations when and as the same shall become due and payable (whether at stipulated date of maturity or any accelerated or earlier date (including the date of any required prepayment)). It is Guarantor's intent that this Guaranty is a guaranty of payment and not a guaranty of collection. If any Borrower fails to pay or perform any Guaranteed Obligation on or before the date when due (whether at the stipulated date of maturity or any accelerated or earlier date (including the date of any required prepayment)), Guarantor shall unconditionally and immediately make such payment or render such performance upon demand therefor by the Agent.

2.2 Cumulative Obligations. The obligations of Guarantor hereunder are in addition to any other obligations of Guarantor under any other guaranties of the Guaranteed Obligations or other obligations of any Borrower or any other Person at any time given to any Credit Party. This Guaranty shall not affect or invalidate any such other guaranties.

2.3 Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain in full force and effect notwithstanding the fact that, at any particular time, no Guaranteed Obligations may be outstanding. This Guaranty includes Guaranteed Obligations arising under successive transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing the Guaranteed Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Guaranteed Obligations after prior Guaranteed Obligations have been satisfied in whole or in part.

2.4 Joint and Several Obligation; Independent Obligation. Guarantor is directly, jointly and severally with all other guarantors of the Guaranteed Obligations or any portion thereof, liable to the Credit Parties. The obligations of Guarantor hereunder are direct and primary and are independent of the obligations of Borrowers or any other such guarantor, and a separate action may be brought against Guarantor irrespective of whether an action is brought against Borrowers or any other such other guarantor or whether any Borrower or any such other guarantor is joined in such action. Guarantor's liability hereunder shall not be contingent upon the exercise or enforcement by any Credit Party of any remedies it may have against any Borrower or any other guarantor or the enforcement of any Lien or realization upon any security the Credit Parties may at any time possess. Any release which may be given by the Credit Parties to any Borrower or any other guarantor shall not release Guarantor. Guarantor acknowledges that the Credit Parties shall have the right to seek recourse against Guarantor to the fullest extent provided for herein and no election by the Credit Parties to proceed in one form of action or proceeding, or against any party or on any obligation, shall constitute a waiver of the Credit Parties' right to proceed in any other form of action or proceeding or against other parties unless they have expressly waived such right in writing.

3. PAYMENTS.

3.1 Nature and Application of Payments. Guarantor shall make all payments hereunder in immediately available lawful money of the United States, without deduction or withholding (whether for taxes (whether income, excise, or otherwise) or offset). Without regard to the form in which received, the Credit Parties may apply any payment with respect to the Guaranteed Obligations or any other amounts due hereunder in such order as is provided for in Section 3.8 of the International Credit Agreement, irrespective of any contrary instructions received from any other Person.

3.2 Revival. In the event that, for any reason, all or any portion of any payment to the Credit Parties is set aside or restored, including, but not limited to, payments subject to a right of any Person whomsoever, including any Borrower, any Borrower as debtor in possession, or any trustee (whether appointed under the Bankruptcy Code or otherwise) of Borrower's assets to invalidate or set aside such payments, to seek to recoup the amount of such payments or any portion thereof, or to declare same to be fraudulent or preferential, whether voluntarily or involuntarily, and repaid by the Credit Parties for any reason after being made by Guarantor, the amount so set aside shall be revived as a Guaranteed Obligation and Guarantor shall be liable for the full amount the Credit Parties are required to repay plus all costs and expenses (including attorneys' fees, costs, and expenses) incurred by them in connection therewith.

4. REPRESENTATIONS AND WARRANTIES OF GUARANTOR.

Guarantor represents and warrants as follows (which representations and warranties shall be true, correct, and complete in all respects at all times):

4.1 Reliance by Guarantor; Financial Condition of Borrowers. This Guaranty is not made by Guarantor in reliance on any representation or warranty, express or implied, by the Credit Parties concerning the financial condition of Borrowers, the nature, value, or extent of any security for the Guaranteed Obligations, or any other matter. Guarantor is presently informed of the financial condition of Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations. Guarantor has read and reviewed each of the Loan Documents and understands the terms and conditions thereof.

4.2 Adequate Consideration. The consideration given or provided, or to be given or provided, by the Credit Parties in connection with this Guaranty is adequate and satisfactory in all respects, and represents reasonably equivalent value, to support this Guaranty and Guarantor's obligations hereunder.

5. COVENANTS OF GUARANTOR.

5.1 Borrower's Financial Condition. Guarantor shall keep informed of Borrower's financial condition, the status of any guarantors or of any security for the Guaranteed Obligations, and all other changes, potential changes or circumstances which affect, or bear upon the risk of nonpayment of, the Guaranteed Obligations.

5.2 Further Assurances. Guarantor shall, from time to time, at the expense of Guarantor, promptly execute and deliver all further documents and take all further action that may be necessary, or that the Credit Parties may reasonably request, to enable the Credit Parties to exercise and enforce their rights and remedies hereunder.

6. ACKNOWLEDGMENTS AND AGREEMENTS OF GUARANTOR.

6.1 Modifications to Loan Documents and Guaranteed Obligations. Guarantor acknowledges and agrees that, without notice to Guarantor and without affecting or impairing the obligations of Guarantor hereunder, in accordance with the terms of the International Credit Agreement, the Credit Parties may, by action or inaction, compromise or settle, extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations or may grant other indulgences to Borrowers in respect thereof, or may amend or modify in any manner and at any time (or from time to time) any one or more of the Loan Documents or otherwise with respect to the Guaranteed Obligations, or may, by action or inaction, release or substitute any guarantor, if any, of the Guaranteed Obligations, or may enforce, exchange, release,

or waive, by action or inaction, any security for the Guaranteed Obligations or any guaranty of the Guaranteed Obligations, or any portion thereof.

6.2 The Agent as Guarantor's Attorney-in-Fact. Guarantor irrevocably appoints the Agent as Guarantor's attorney-in-fact, with full authority in the place and stead and name of Guarantor, from time to time at the Agent's discretion but only following the occurrence and during the continuation of an Event of Default, to take any action and to execute any instrument which the Credit Parties may, in accordance with the provisions of the Loan Documents or this Guaranty, require as necessary or advisable to accomplish the purposes of this Guaranty.

7. CERTAIN WAIVERS BY GUARANTOR.

GUARANTOR MAKES THE FOLLOWING WAIVERS WITH FULL KNOWLEDGE AND UNDERSTANDING THAT WERE SUCH WAIVERS NOT MADE, GUARANTOR MIGHT BE ABLE TO AVOID OR LIMIT GUARANTOR'S LIABILITY HEREUNDER EITHER IN WHOLE OR IN PART.

7.1 Notices. Guarantor absolutely, unconditionally, knowingly, and expressly waives: (a) notice of the acceptance by the Credit Parties of this Guaranty; (b) notice of any loans or other financial accommodations consisting of Guaranteed Obligations; (c) notice of the amount of the Guaranteed Obligations, subject, however, to Guarantor's right to make inquiry, at any reasonable time, of the Agent to ascertain the amount of the Guaranteed Obligations owing to the Credit Parties; (d) notice of any adverse change in the financial condition of Borrowers, of any change in value, or the release, of any Collateral, or of any other fact that might increase Guarantor's risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to any instrument; (f) notice of any default; and (g) all other notices (except if such notice is to be given to Guarantor under the express terms of this Guaranty or any of the other Loan Documents to which Guarantor is a party, or the International Credit Agreement) and demands to which Guarantor might otherwise be entitled.

7.2 Revocation. Guarantor absolutely, unconditionally, knowingly, and expressly waives any right to revoke Guarantor's guaranty obligation hereunder as to future Guaranteed Obligations and, in light thereof, all protection afforded Guarantor under Section 2815 of the California Civil Code. Guarantor fully realizes and understands that, upon execution of this Guaranty, Guarantor will not have any right to revoke this Guaranty as to any future indebtedness and, thus, may have no control over Guarantor's ultimate responsibility for the Guaranteed Obligations.

7.3 Defenses of Borrowers. Guarantor absolutely, unconditionally, knowingly, and expressly waives any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and paid) of Borrowers or by reason of the cessation from any cause whatsoever (including any act or failure to act by Borrowers or the Credit Parties) of the liability of Borrowers in respect thereof, including any such defense or cessation of liability arising from or as a result of: (a) any lack of power or authority of Borrowers or any person acting or purporting to act on Borrower's behalf; or (b) any claim of fraudulent transfer or preference.

7.4 Suretyship and Certain Other Rights and Defenses of Guarantor. Guarantor absolutely, unconditionally, knowingly, and expressly waives:

(a) any right to assert against the Credit Parties any defense (legal or equitable), set-off, counterclaim, or claim which Guarantor may now or at any time hereafter have against Borrowers or any other Person liable to the Credit Parties;

(b) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly or indirectly from the present or future lack of perfection, sufficiency, validity, or enforceability

of any of the Guaranteed Obligations or any security therefor, or from any failure of the Credit Parties to act in a commercially reasonable manner;

(c) any defense arising by reason of or deriving from (i) any claim or defense based upon an election of remedies by the Credit Parties (including a nonjudicial foreclosure sale of any real property collateral which destroys, diminishes, or otherwise adversely affects Guarantor's rights of subrogation, reimbursement, indemnity, or contribution or other rights against Borrowers or any other Person), including any defense based upon an election of remedies by the Credit Parties under the provisions of Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or any similar law of California or any other jurisdiction; or (ii) any election by the Credit Parties under US Bankruptcy Code Section 1111(b) to limit the amount of or collateral securing its claim against Borrowers. Pursuant to California Civil Code Section 2856(b):

"Guarantor waives all rights and defenses arising out of an election of remedies by the creditor, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of subrogation and reimbursement against Borrowers by the operation of Section 580(d) of the California Code of Civil Procedure or otherwise.

"Guarantor waives all rights and defenses that Guarantor may have because Borrower's Obligations are secured by real property. This means, among other things:

"(1) Credit Parties may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrowers.

"(2) If Credit Parties foreclose on any real property collateral pledged by Borrowers:

(A) The amount of the Guaranteed Obligation may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price.

(B) Credit Parties may collect from Guarantor even if Credit Parties, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrowers.

"This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower's Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 590d, or 726 of the California Code of Civil Procedure."

In making these waivers, Guarantor specifically acknowledges that it understands and is aware that, under Sections 580b and 580d of the California Code of Civil Procedure, if the Credit Parties conducted a nonjudicial foreclosure sale of real property collateral, absent these waivers: (A) the Credit Parties would lose the right to pursue one or more of the Borrowers for any deficiency that might remain following such sale; (B) if Guarantor were to pay such deficiency following such sale, Guarantor would be precluded from pursuing one or more of the Borrowers for reimbursement; and (C) as a result, the Credit Parties might be prevented from pursuing Guarantor for such deficiency following such sale;

(d) the benefit of any statue of limitations affecting Guarantor's liability hereunder (or the enforcement thereof) and any act which shall defer or delay the operation of any statute of limitations applicable to the Guaranteed Obligations shall similarly operate to defer or delay the operation of such statute of limitations applicable to Guarantor's liability hereunder;

(e) any defense based on any alteration, impairment, or release of the Guaranteed Obligations or any security therefor, irrespective of whether resulting from any act or failure to act by the Credit Parties;

(f) any right to require the Credit Parties: (i) to institute suit or otherwise proceed against Borrowers or any other Person; or (ii) to exhaust any rights and remedies which the Credit Parties may have against Borrowers or any other Person; and

(g) any other defense (other than indefeasible payment in full) available to Borrowers or Guarantor under applicable law.

7.5 Marshaling. Guarantor absolutely, unconditionally, knowingly, and expressly waives any rights it has to require the Credit Parties to marshal, foreclose upon, sell, or otherwise realize upon or collect or apply any particular part of any other assets securing any of the Guaranteed Obligations (including any rights arising by virtue of Sections 2899 and 3433 of the California Civil Code).

7.6 Claims Against Borrowers And Others. To the extent of any claim of preference liability with respect to any Collateral upon which the Agent acquires a Lien within a year preceding the filing of a petition in bankruptcy under the Bankruptcy Code with respect to any Borrower, Guarantor absolutely, unconditionally, knowingly, and expressly waives; and in all other cases, until such time as the Guaranteed Obligations have been fully, finally, and indefeasibly paid in full, in cash, Guarantor postpones: (a) any right of subrogation, indemnity, or contribution Guarantor has or may have as against Borrowers or any other Person with respect to any of the Guaranteed Obligations; (b) any right to proceed against Borrowers or any other Person, now or hereafter, for contribution, indemnity, reimbursement, or any other suretyship rights and claims (irrespective of whether direct or indirect, liquidated or contingent) with respect to any of the Guaranteed Obligations; and (c) any right to proceed or to seek recourse against or with respect to any assets of Borrowers or any other Person with respect to any of the Guaranteed Obligations. Guarantor specifically acknowledges and agrees that, in light of the waivers contained in this subsection, Guarantor shall not be a "creditor" (as that term is defined in the US Bankruptcy Code or otherwise) of Borrowers or any other Person (whether for purposes of application of Sections 547 or 550 of the US Bankruptcy Code or otherwise) with respect to any of the Guaranteed Obligations.

7.7 Certain Additional Statutory Rights. Without limiting the generality of any other waiver or other provision set forth in this Guaranty, Guarantor absolutely, unconditionally, knowingly, and expressly waives any and all benefits or defenses, if any, arising directly or indirectly under any one or more of Sections 2792, 2793, 2799, 2806, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2838, 2839, 2845, 2848, 2849, 2850 and 2855 of the California Civil Code, Sections 580a, 580b, 580c, 580d, and 726 of the California Code of Civil Procedure, and Sections 3116, 3118, 3119, 3419, 3605, 9610, 9611, 9612, 9613, 9614, 9615, 9616, 9617, 9618, 9619, 9620, 9621, 9622, 9623, 9624, 9625, 9626 and 9627 of the California Uniform Commercial Code.

8. GENERAL PROVISIONS.

8.1 Cumulative Remedies. The enumeration herein of the Credit Parties' rights and remedies is not intended to be exclusive, and such rights and remedies are in addition to and not by way of limitation of any other rights or remedies that the Credit Parties may have under the Loan Documents, the California Uniform Commercial Code or other applicable law. The Credit Parties shall have the right, in their sole discretion, to determine which rights and remedies are to be exercised by the Credit Parties and in which order. The exercise of one right or remedy shall not preclude the exercise of any others, all of which shall be cumulative.

8.2 No Implied Waivers. No failure by the Credit Parties to exercise any right, remedy, or option under this Guaranty or any present or future Loan Document, or delay by any Credit Party in exercising the same, will operate as a waiver thereof. No waiver by the Credit Parties will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by the Credit Parties on any occasion shall affect or diminish the Credit Parties' rights thereafter to require strict performance by the Guarantor of any provision of this Agreement. The Credit Parties may proceed directly to collect the Guaranteed Obligations without any prior recourse to any Collateral therefor. The Credit Parties' rights under this Agreement will be cumulative and not exclusive of any other right or remedy which the Agent, Security Trustee or any Credit Party may have.

8.3 Severability. The illegality or unenforceability of any provision of this Guaranty or any Loan Document or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Guaranty or any instrument or agreement required hereunder.

8.4 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a) THIS GUARANTY SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE CREDIT PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE CREDIT PARTIES SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE CREDIT PARTIES DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE GUARANTEED OBLIGATIONS AND (2) GUARANTOR ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(c) THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION 8.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS

POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF CREDIT PARTIES TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE GUARANTOR AND THE CREDIT PARTIES, ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this GUARANTY, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Notwithstanding the provisions of (d) above, no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or related to an Guaranteed Obligation which is secured by real property collateral (exclusive of real estate space lease assignments). If all the parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in Section 8.4(f).

(f) At the request of either party a controversy or claim which is not submitted to arbitration as provided and limited in Section 8.4(d) and (e) shall be determined by judicial reference. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced.

(g) No provision of Sections (d) through (g) shall limit the right of the Credit Parties to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's and/or Trustee's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

8.5 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION 8.4(d), THE GUARANTOR IRREVOCABLY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR AGREES THAT ANY SUCH CLAIM

OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE GUARANTOR FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS A GUARANTY OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.

8.6 Survival of Representations and Warranties. All of Guarantor's representations, and warranties contained in this Guaranty shall survive the execution, delivery and acceptance thereof by the parties, notwithstanding any investigation by the Credit Parties or any of their agents.

8.7 Fees and Expenses. Guarantor shall pay to the Credit Parties on demand all reasonable costs and expenses that the Agent pays or incurs in connection with the negotiation, preparation, consummation, administration, enforcement, and termination of this Guaranty and the other Loan Documents, including, without limitation: (a) Agent's attorneys' and paralegals' fees and disbursements; (b) costs and expense (including Agent's attorneys' and paralegals' fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection with this Guaranty and the transactions contemplated thereby; and (c) costs and expenses (including Agent's attorneys' and paralegals' fees and disbursements) paid or incurred to obtain payment of the Guaranteed Obligations and otherwise enforce the provisions of this Guaranty, or to defend any claims made or threatened against the Credit Parties arising out of the transactions contemplated hereby (including without limitation, preparations for the consultations concerning any such matters). The foregoing shall not be construed to limit any other provisions of the Loan Documents regarding costs and expenses to be paid by Guarantor.

8.8 Notices. Except as otherwise provided herein, all notices, demands and requests that any party is required or elects to give to any other shall be in writing, or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including, but not limited to, delivery by overnight mail and courier service, (b) four (4) days after it shall have been mailed by United States mail, first class, certified or registered, with postage prepaid, or (c) in the case of notice by such a telecommunications device, when properly transmitted, in each case addressed to the party to be notified as follows:

		If to the Credit Parties:		Bank of America, N.A. 55 South Lake Avenue, Suite 900 Pasadena, California 91101 Attention: Stephen King Facsimile: (626) 578-6143
		With copies to:		Buchalter, Nemer, Fields & Younger 601 South Figueroa, Suite 2400 Los Angeles, California 90017-5704 Attention: Robert Davidson Facsimile: (213) 896-0400

		If to Guarantor:		3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attention: Chief Financial Officer Facsimile: (408) 326-6857
				with a copy to the attention of the General Counsel Facsimile: (408) 326-6434
		With copies to:		Gray Cary Ware & Freidenrich LLP 400 Hamilton Avenue Palo Alto, California 94301 Attention: Craig Tighe, Esq. Facsimile: (650) 833-2001

8.9 Waiver of Notices. No notice to or demand on Guarantor which the Credit Parties may elect to give shall entitle Guarantor to any or further notice or demand in the same, similar or other circumstances.

8.10 Binding Effect; Assignment. This Guaranty shall be binding upon Guarantor's successors and assigns and shall inure to the benefit of the successors and assigns of the Credit Parties; provided, however, Guarantor shall not assign this Guaranty or delegate any of its duties hereunder without the Credit Parties' prior written consent. Any assignment without the consent of the Credit Parties shall be absolutely void. In the event of any assignment or other transfer of rights by any of the Credit Parties, the rights and benefits herein conferred upon the assignor/transferor shall automatically extend to and be vested in such assignee or other transferee.

8.11 Ambiguities. To the extent permitted by applicable law, neither this Guaranty nor any uncertainty or ambiguity herein shall be construed or resolved using any presumption against either Guarantor or the Credit Parties, whether under any rule of construction or otherwise. On the contrary, this Guaranty has been reviewed by each of Guarantor, the Credit Parties and their respective counsel. To the extent permitted by applicable law, in case of any ambiguity or uncertainty, this Guaranty shall be construed and interpreted according to the ordinary meaning of the words used to accomplish fairly the purposes and intentions of all parties hereto.

8.12 Modification. This Guaranty is intended by Guarantor and the Credit Parties to be the final, complete, and exclusive expression of the agreement between them. This Guaranty supersedes any and all prior oral or written agreements relating to the subject matter hereof. No modification, rescission, waiver, release or amendment of any provision of this Guaranty shall be made, except by a written agreement signed by Guarantor and a duly authorized officer of the Agent on behalf of the Credit Parties.

8.13 Captions. The captions contained in this Guaranty are for convenience only, are without substantive meaning and should not be construed to modify, enlarge or restrict any provision.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed by Guarantor's duly authorized officers as of the date first written above.

GUARANTOR:		3COM CORPORATION, a Delaware corporation
		By
		Title:

NOTICE: THIS GUARANTY CONTAINS WAIVERS OF VARIOUS RIGHTS, BENEFITS, AND DEFENSES WHICH THE PARTY EXECUTING THIS GUARANTY POSSESSES. THESE RIGHTS, BENEFITS, AND DEFENSES, IF NOT SO WAIVED, MIGHT OTHERWISE ALLOW THE PARTY EXECUTING THIS GUARANTY TO AVOID OR LIMIT SUCH PARTY'S LIABILITY UNDER THIS GUARANTY EITHER IN WHOLE OR IN PART. THIS GUARANTY ALSO CONTAINS A WAIVER BY THE PARTY EXECUTING THIS GUARANTY OF SUCH PARTY'S RIGHT TO TRIAL BY JURY.

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Exhibit 10.17

CONTINUING GUARANTY
R E C I T A L S
A G R E E M E N T
EX-10.18 8 a2067560zex-10_18.htm EX 10.18 Prepared by MERRILL CORPORATION
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Exhibit 10.18

INTERCOMPANY SUBORDINATION AGREEMENT

THIS INTERCOMPANY SUBORDINATION AGREEMENT (this "Agreement"), dated as of November 28, 2001, is made among the Obligors (as defined below), and BANK OF AMERICA, N.A., as agent ("Agent") for itself and the lenders ("Lenders") party to the Credit Agreements (as defined below), in light of the following:

WHEREAS, 3Com Corporation, a Delaware corporation ("3Com"), on the one hand, and Agent and Lenders (collectively, and together with any successors or assigns of any of the foregoing, the "Credit Parties"), on the other hand, are parties to that certain Credit Agreement, dated as of even date herewith (as amended, modified, renewed, extended, or replaced from time to time, the "US Credit Agreement"), pursuant to which the Credit Parties have agreed to make certain financial accommodations to 3Com;

WHEREAS, 3Com Technologies, an exempted limited liability company incorporated in the Cayman Islands ("3Com Tech"), and 3Com Europe Limited, a company incorporated in England and Wales with registered number 2600346 ("3Com Europe"), on the one hand, and the Credit Parties, on the other hand, are parties to that certain Credit Agreement, dated as of even date herewith (as amended, modified, renewed, extended, or replaced from time to time, the "International Credit Agreement"; the International Credit Agreement, together with the US Credit Agreement, are collectively referred to herein as the "Credit Agreements"), pursuant to which the Credit Parties have agreed to make certain financial accommodations to 3Com Tech and 3Com Europe;

WHEREAS, each Obligor has made or may make certain loans or advances from time to time to one or more other Obligors, or such other Obligors may otherwise be indebted to such Obligor; and

WHEREAS, each Obligor has agreed to subordinate in favor of the Credit Parties all indebtedness of the other Obligors owing to such Obligor, upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions, representations, and warranties set forth herein and for other good and valuable consideration, the parties hereto agree as follows:

SECTION 1. Definitions; Interpretation.

(a) Terms Defined in Credit Agreements. All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreements.

(b) Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

"Insolvency Events" has the meaning set forth in Section 3.

"Non-US Obligors" means, individually and collectively, all Obligors that are not US Obligors.

"Obligors" means, individually and collectively, 3Com, 3Com Tech, 3Com Europe, 3Com Holdings Limited, 3Com Asia Pacific Rim Pte. Ltd., 3Com IFSC (Ireland), 3Com Ventures, Inc., 3Com U.K Holdings Limited, and any Subsidiary acquired or created after the Closing Date and designated to the Agent as a Restricted Subsidiary by Borrower.

"Senior Debt" means: (a) as applied to any US Obligor, the Obligations on a cumulative basis under both Credit Agreements; and (b) as applied to any Non-US Obligor, the Obligations under the International Credit Agreement only.

"Subordinated Debt" means, with respect to each Obligor, all indebtedness, liabilities, and other obligations of the other Obligors (individually and jointly with other Obligors) owing to

such Obligor in respect of any and all loans or advances made by such Obligor to such other Obligor, or any other indebtedness of such other Obligor to such Obligor (other than trade debt), whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including all fees and all other amounts payable by such other Obligor to such Obligor under or in connection with any documents or instruments related thereto. The foregoing notwithstanding, "Subordinated Debt" shall not include any indebtedness, liabilities and other obligations that a US Obligor owes to any Non-US Obligor.

"Subordinated Debt Payment" means any payment or distribution by or on behalf of any Obligor, directly or indirectly, for or on account of any Subordinated Debt, including, without limitation, any payment or distribution of assets of such Obligor of any kind or character, whether in cash, property, or securities, made in connection with a purchase, redemption, or other acquisition of Subordinated Debt, made as a result of any collection, sale, or other disposition of Collateral, or made by setoff, exchange, or in any other manner.

"US Obligors" means, individually and collectively, all Obligors organized under the laws of any jurisdiction of the United States.

(c) Interpretation. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. References to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto. References to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending, or replacing the statute or regulation referred to. The captions and headings are for convenience of reference only and shall not affect the construction of this Agreement. If there exists any inconsistency between the terms of either Credit Agreement and this Agreement or if the terms, conditions, or obligations under this Agreement are any more restrictive on any Obligor, then the terms of the applicable Credit Agreement shall prevail, so that nothing herein contained shall impose any greater or more onerous liability or restriction on any Obligor than is imposed on any Obligor under the applicable Credit Agreement. To the extent any provision of the applicable Credit Agreement addresses the same subject matter covered by a provision hereunder, actions or omissions which are expressly permitted or not prohibited by the terms of such Credit Agreement shall not constitute a breach of the express or implied terms of this Agreement.

SECTION 2. Subordination to Payment of Senior Debt. Except as otherwise provided herein, as to each Obligor, all payments on account of the Subordinated Debt shall be subject, subordinate, and junior, in right of payment and exercise of remedies, to the extent and in the manner set forth herein, to the prior payment, in full, in cash or cash equivalents, of the Senior Debt applicable to each Obligor.

SECTION 3. Subordination Upon Any Distribution of Assets of the Obligors. As to each Obligor, if, after a Liquidity Trigger Event, there shall be any payment or distribution of assets of any other Obligor to such Obligor of any kind or character, whether in cash, property, or securities, upon the dissolution, winding up, or total or partial liquidation or reorganization, readjustment, arrangement, or similar proceeding relating to such other Obligor or its property, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership, arrangement, or similar proceedings or upon an assignment for the benefit of creditors, or upon any other marshaling or composition of the assets and liabilities of such other Obligor, or otherwise (such events, collectively, the "Insolvency Events"): (i) all amounts

owing on account of the Senior Debt applicable to such Obligor shall first be paid, in full, in cash, or payment provided for in cash or in cash equivalents, before any Subordinated Debt Payment is made; and (ii) to the extent permitted by applicable law, any Subordinated Debt Payment to which such Obligor would be entitled except for the provisions hereof, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other liquidating agent making such payment or distribution directly to Agent, for the ratable benefit of the Credit Parties, for application to the payment of the Senior Debt applicable to such Obligor in accordance with clause (i), after giving effect to any concurrent payment or distribution or provision therefor to Agent in respect of such Senior Debt applicable to such Obligor.

SECTION 4. Payments on Subordinated Debt.

(a) Permitted Payments. So long as no Liquidity Trigger Event has occurred and is continuing, each Obligor may make, and each other Obligor shall be entitled to accept and receive, any Subordinated Debt Payment.

(b) No Payment Upon Liquidity Trigger Event. Upon the occurrence of a Liquidity Trigger Event, and until such Liquidity Trigger Event is cured or waived, each Obligor shall not make, and each other Obligor shall not accept or receive, any Subordinated Debt Payment. Notwithstanding anything to the contrary in this Agreement, from and after a Liquidity Trigger Event, no US Obligors shall make any payments to any Non-US Obligor, on account of any indebtedness, liabilities and other obligations of such US Obligor to such Non-US Obligor.

SECTION 5. Subordination of Remedies. Until all Senior Debt, as applicable to each Obligor, has been repaid in full, in cash or cash equivalents, and all commitments of Agent or any member of the Credit Parties to extend credit under the Credit Agreements and the other Loan Documents have been irrevocably terminated, such Obligors shall not, after a Liquidity Trigger Event, without the prior written consent of Agent:

(a) accelerate, make demand, or otherwise make due and payable prior to the original due date thereof any Subordinated Debt or bring suit or institute any other actions or proceedings to enforce its rights or interests in respect of the obligations of any other Obligor owing to such Obligor;

(b) exercise any rights under or with respect to guaranties of the Subordinated Debt by any Obligor, if any;

(c) exercise any rights to set-offs and counterclaims in respect of any indebtedness, liabilities, or obligations of such Obligor to any other Obligor against any of the Subordinated Debt; or

(d) commence, or cause to be commenced, or join with any creditor other than a member of the Credit Parties in commencing, any bankruptcy, insolvency, or receivership proceeding against any other Obligor.

SECTION 6. Payment Over to Agent. In the event that, notwithstanding the provisions of Sections 3, 4, and 5, any Subordinated Debt Payments shall be received in contravention of such Sections 3, 4, and 5 by any Obligor before all Senior Debt applicable to such Obligor is paid, in full, in cash or cash equivalents, such Subordinated Debt Payments shall be held in trust for the benefit of the Credit Parties and shall be paid over or delivered to Agent for the ratable benefit of the Credit Parties for application to the payment, in full, in cash or cash equivalents of all Senior Debt remaining unpaid to the extent necessary to give effect to such Sections 3, 4, and 5, after giving effect to any concurrent payments or distributions to Agent in respect of the Senior Debt applicable to such Obligor.

SECTION 7. Authorization to Agent. If, while any Subordinated Debt is outstanding, there is an occurrence and continuation of an Event of Default with respect to any other Obligor or its property: (i) to the extent of any outstanding Senior Debt, as applicable to each Obligor, each Obligor hereby

irrevocably authorizes and empowers Agent (in the name of such Obligors or otherwise), but Agent shall have no obligation, to demand, sue for, collect, and receive every payment or distribution in respect of such Obligors' respective Subordinated Debt and give acquittance therefor and to file claims and proofs of claim and take such other action (including voting the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Credit Parties; and (ii) to the extent of any outstanding Senior Debt, as applicable to each Obligor, each Obligor shall promptly take such action as Agent reasonably may request (A) to collect the Subordinated Debt for the account of the Credit Parties and to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to Agent such powers of attorney, assignments, and other instruments as it may request to enable it to enforce any and all claims with respect to the Subordinated Debt, and (C) to collect and receive any and all Subordinated Debt Payments.

SECTION 8. Certain Agreements of Each Obligor.

(a) No Benefits. Each Obligor understands that there may be various agreements between the Credit Parties and any other Obligor evidencing and governing the Senior Debt applicable to each Obligor, and each Obligor acknowledges and agrees that such agreements are not intended to confer any benefits on such Obligor and that neither Agent nor any member of the Credit Parties shall have any obligation to such Obligor or any other Person to exercise any rights, enforce any remedies, or take any actions which may be available to them under such agreements.

(b) No Interference. Each Obligor acknowledges that certain, but not all, of the other Obligors have granted to Agent on behalf of the Credit Parties a security interest in certain portions of such Obligor's assets, and agrees not to interfere with or in any manner oppose a disposition of any Collateral by Agent for the ratable benefit of the Credit Parties in accordance with applicable law.

(c) Reliance by Credit Parties. Each Obligor acknowledges and agrees that the Credit Parties will have relied upon and will continue to rely upon the subordination provisions provided for herein and the other provisions hereof in entering into the applicable Loan Documents and making or issuing the Advances thereunder.

(d) Waivers. Except as provided under the applicable Credit Agreement, each Obligor waives any and all notice of the incurrence of the Senior Debt applicable to such Obligor or any part thereof and any right to require marshaling of assets.

(e) Obligations of Each Obligor Not Affected. Each Obligor agrees that at any time and from time to time, without notice to or the consent of such Obligor, without incurring responsibility to such Obligor, and without impairing or releasing the subordination provided for herein or otherwise impairing the rights of Agent or the Credit Parties hereunder: (i) the time for any other Obligor's performance of or compliance with any of its agreements contained in the applicable Loan Documents may be extended or such performance or compliance may be waived by Agent; (ii) the agreements of any other Obligor with respect to the applicable Loan Documents may from time to time be modified by such other Obligor and Agent for the purpose of adding any requirements thereto or changing in any manner the rights and obligations of such other Obligor or Agent thereunder; (iii) the manner, place, or terms for payment of Senior Debt or any portion thereof may be altered or the terms for payment extended, or the Senior Debt may be renewed in whole or in part; (iv) the maturity of the Senior Debt may be accelerated in accordance with the terms of any present or future agreement by any other Obligor and any member of the Credit Parties; (v) any Collateral may be sold, exchanged, released, or substituted and any Lien in favor of Agent on behalf of the Credit Parties may be terminated, subordinated, or fail to be perfected or become unperfected; (vi) any Person liable in any manner for Senior Debt may be discharged, released, or substituted; and (vii) all other rights against the other Obligors, any other Person, or

with respect to any Collateral may be exercised (or Agent may waive or refrain from exercising such rights).

(f) Rights of Credit Parties Not to Be Impaired. No right of the Credit Parties to enforce the subordination provided for herein or to exercise its other rights hereunder shall at any time in any way be prejudiced or impaired by any act or failure to act by any Obligor or any member of the Credit Parties hereunder or under or in connection with the other applicable Loan Documents or by any noncompliance by such other Obligor with the terms and provisions and covenants herein or in any other applicable Loan Document, regardless of any knowledge thereof the Credit Parties may have or otherwise be charged with.

(g) Financial Condition of the Obligors. Except as provided under the applicable Credit Agreement, each Obligor shall not have any right to require Agent or any member of the Credit Parties to obtain or disclose any information with respect to: (i) the financial condition or character of any other Obligor or the ability of such other Obligor to pay and perform Senior Debt; (ii) the Senior Debt; (iii) the Collateral or other security for any or all of the Senior Debt; (iv) the existence or nonexistence of any guarantees of, or any other subordination agreements with respect to, all or any part of the Senior Debt; or (v) any action or inaction on the part of Agent or any other Person; or (vi) any other matter, fact, or occurrence whatsoever.

(h) Acquisition of Liens or Guaranties. Each Obligor shall not, without the prior consent of Agent, acquire any Lien against any Collateral (other than Permitted Liens) not owned by such Obligor. Each Obligor shall not, without prompt notice to Agent, accept any guaranties for the Subordinated Debt which are not currently existing or being entered into in connection with the transactions contemplated by the applicable Loan Documents.

SECTION 9. Subrogation.

(a) Subrogation. Until the payment and performance in full of all Senior Debt applicable to such Obligor, each Obligor shall not directly or indirectly exercise any rights that it may acquire by way of subrogation under this Agreement, by any payment or distribution to Agent hereunder or otherwise. Upon the payment and performance in full of all Senior Debt applicable to such Obligor, each Obligor shall be subrogated to the rights of the Credit Parties to receive payments or distributions applicable to the Senior Debt until the Subordinated Debt shall be paid in full. For the purposes of the foregoing subrogation, no payments or distributions by any Obligor to Agent, for the ratable benefit of the Credit Parties, of any cash, property, or securities to which any other Obligor would be entitled except for the provisions of Section 3, 4, or 5 shall, as among such Obligor, its creditors (other than the Credit Parties), and the other Obligors, be deemed to be a payment by such Obligor to or on account of the Senior Debt.

(b) Payments Over to the Obligors. If any payment or distribution to which any Obligor would otherwise have been entitled but for the provisions of Section 3, 4, or 5 shall have been applied pursuant to the provisions of Section 3, 4, or 5 to the payment of all amounts payable under the Senior Debt applicable to such Obligor, such Obligor shall be entitled to receive from Agent any payments or distributions received by Agent in excess of the amount sufficient to pay in full all amounts payable under or in respect of such Senior Debt. If any such excess payment is made to Agent, Agent shall promptly remit such excess to such Obligor and until so remitted shall hold such excess payment for the benefit of such Obligor. To the extent Agent remits any payments to an Obligor hereunder, such Obligor shall indemnify the Agent and the Credit Parties and hold the Agent and the Credit Parties harmless from and against any claims made by any Person (including a trustee in bankruptcy) to recover from Agent or any member of the Credit Parties such payment or distribution that gave rise to the remittance made to the Obligor.

SECTION 10. Continuing Agreement; Reinstatement.

(a) Continuing Agreement. This Agreement is a continuing agreement of subordination and shall continue in effect and be binding upon each Obligor until payment and performance in full of the Senior Debt applicable to such Obligor and: (i) with respect to Non-US Obligors, termination of the International Credit Agreement, and with respect to US Obligors, termination of each Credit Agreement. The subordinations, agreements, and priorities set forth herein shall remain in full force and effect regardless of whether any party hereto in the future seeks to rescind, amend, terminate, or reform, by litigation or otherwise, its respective agreements with any other Obligor.

(b) Reinstatement. This Agreement shall continue to be effective or shall be reinstated, as the case may be, if, for any reason, any payment of the Senior Debt by or on behalf of the other Obligor shall be rescinded or must otherwise be restored by Agent, whether as a result of an Insolvency Event or otherwise.

SECTION 11. Transfer of Subordinated Debt. Each Obligor may not assign or transfer its rights and obligations in respect of the Subordinated Debt without: (i) prior written notice to Agent, and (ii) such non-Obligor transferee or assignee, as a condition to acquiring an interest in the Subordinated Debt, shall agree to be bound hereby, in form satisfactory to Agent.

SECTION 12. Obligations of the Obligors Not Affected. The provisions of this Agreement are intended solely for the purpose of defining the relative rights of each Obligor against the other Obligors, on the one hand, and of the Credit Parties against such other Obligors, on the other hand. Nothing contained in this Agreement shall (i) impair, as between each Obligor and each other Obligor, the obligation of such other Obligor to pay its obligations with respect to the Subordinated Debt as and when the same shall become due and payable, or (ii) otherwise affect the relative rights of each Obligor against each other Obligor, on the one hand, and of the creditors (other than the Credit Parties) of such other Obligor against such other Obligor, on the other hand.

SECTION 13. Endorsement of Obligor Documents; Further Assurances and Additional Acts.

(a) Endorsement of Obligor Documents. At the request of Agent, all documents and instruments evidencing any of the Subordinated Debt, if any, shall be endorsed with a legend noting that such documents and instruments are subject to this Agreement, and each Obligor shall promptly deliver to Agent evidence of the same.

(b) Further Assurances and Additional Acts. Each Obligor shall execute, acknowledge, deliver, file, notarize, and register at its own expense all such further agreements, instruments, certificates, financing statements, documents, and assurances, and perform such acts as Agent reasonably shall deem necessary or appropriate to effectuate the purposes of this Agreement, and promptly provide Agent with evidence of the foregoing reasonably satisfactory in form and substance to Agent.

SECTION 14. Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including by facsimile transmission) and shall be mailed, sent, or delivered in accordance with the notice provisions contained in the applicable Credit Agreement. For the purposes hereof, the address of each party hereto shall be as set forth in the applicable Credit Agreement or, as to any such party, such other address as shall be designated by such party in a written notice to the other parties hereto.

SECTION 15. No Waiver; Cumulative Remedies. No failure on the part of Agent to exercise, and no delay in exercising, any right, remedy, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.

The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers, and privileges that may otherwise be available to Agent.

SECTION 16. Costs and Expenses.

(a) Payments by the Obligors. Each of the Obligors jointly and severally agrees to pay to Agent on demand all reasonable costs and expenses of Agent or the Credit Parties, and the reasonable fees and disbursements of counsel, in connection with the negotiation, preparation, execution, delivery, administration, enforcement or attempted enforcement of, and preservation of rights or interests under, this Agreement (including any amendments, modifications, or waivers of the terms hereof), including any losses, costs and expenses sustained by Agent or the Credit Parties as a result of any failure by any Obligor to perform or observe its obligations contained in this Agreement.

SECTION 17. Survival. All covenants, agreements, representations and warranties made in this Agreement shall, except to the extent otherwise provided herein, survive the execution and delivery of this Agreement, and shall continue in full force and effect so long as any Senior Debt remains unpaid. Without limiting the generality of the foregoing, the obligations of each Obligor under Section 16 shall survive the satisfaction of the Senior Debt.

SECTION 18. Benefits of Agreement. This Agreement is entered into for the sole protection and benefit of the parties hereto and their successors and assigns, and no other Person shall be a direct or indirect beneficiary of, or shall have any direct or indirect cause of action or claim in connection with, this Agreement.

SECTION 19. Binding Effect. This Agreement shall be binding upon, inure to the benefit of and be enforceable by each Obligor and Agent and their respective successors and permitted assigns.

SECTION 20. Governing Law; Choice of Forum; Service of Process.

(i) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE CREDIT PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN SANTA CLARA COUNTY, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE OBLIGORS, THE AGENT, AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE OBLIGORS, THE AGENT, AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE CREDIT PARTIES SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OBLIGOR, OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE CREDIT PARTIES DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE

COLLATERAL OR OTHER SECURITY FOR THE SENIOR DEBT AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

(iii) EACH OF THE OBLIGORS HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH OBLIGOR AT ITS ADDRESS SET FORTH IN SECTION 14 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF CREDIT PARTIES TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

(iv) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER APPLICABLE LOAN DOCUMENT INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this AGREEMENT, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuant to a provisional or ancillary remedy shall not constitute a waiver of the right of either party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(v) Notwithstanding the provisions of (d) above, no controversy or claim shall be submitted to arbitration without the consent of all parties if, at the time of the proposed submission, such controversy or claim arises from or related to an Guaranteed Obligation which is secured by real property collateral (exclusive of real estate space lease assignments). If all the parties do not consent to submission of such a controversy or claim to arbitration, the controversy or claim shall be determined as provided in Section 20(v).

(vi) At the request of either party a controversy or claim which is not submitted to arbitration as provided and limited in Section 20(iv) and (v) shall be determined by judicial reference. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced.

(vii) No provision of Sections (iv) through (vii) shall limit the right of the Credit Parties to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At the Agent's and/or Security Trustee's option, foreclosure under a

deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

SECTION 21. WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION 20(iv), THE OBLIGORS, THE AGENT, AND THE LENDERS EACH IRREVOCABLY WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE OBLIGORS, THE AGENT, AND THE LENDERS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS A AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

SECTION 22. Entire Agreement; Amendments and Waivers.

(a) Entire Agreement. This Agreement constitutes the entire agreement of each of the Obligors and Agent on behalf of the Credit Parties with respect to the matters set forth herein and supersedes any prior agreements, commitments, drafts, communications, discussions, and understandings, oral or written, with respect thereto.

(b) Amendments and Waivers. No amendment to any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed by each of the Obligors and Agent; and no waiver of any provision of this Agreement, or consent to any departure by any Obligor therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent. Any such amendment, waiver, or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 23. Conflicts. In case of any conflict or inconsistency between any terms of this Agreement, on the one hand, and any documents or instruments in respect of the Subordinated Debt, on the other hand, then the terms of this Agreement shall control.

SECTION 24. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement or the validity or effectiveness of such provision in any other jurisdiction.

SECTION 25. Interpretation. This Agreement is the result of negotiations between, and has been reviewed by the respective counsel to, the Obligors and Agent and is the product of all parties hereto. Accordingly, this Agreement shall not be construed against any party merely because of such party's involvement in the preparation hereof.

SECTION 26. Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and

the same agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally effective as delivery of an executed original counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. This Agreement shall become effective as to each Obligor upon the execution and delivery of a counterpart hereof by such Obligor (whether or not a counterpart hereof shall have been executed and delivered by any other Obligor).

SECTION 27. Termination of Agreement. Upon final payment and performance in full, in cash or cash equivalents, of the Senior Debt, this Agreement shall terminate and Agent shall promptly execute and deliver to each Obligor such documents and instruments as shall be necessary to evidence such termination; provided, however, that the obligations of each Obligor under Section 16 shall survive such termination until satisfaction thereof.

[Signature page to follow.]

IN WITNESS WHEREOF, the undersigned has executed and delivered this Agreement as of the date first written above.

		3COM CORPORATION, a Delaware corporation
		By:
		Name:
		Title:
		3COM TECHNOLOGIES, an exempted limited liability company incorporated in the Cayman Islands
		By:
		Name:
		Title:
		3COM EUROPE LIMITED, a company incorporated in England and Wales with registered number 2600346
		By:
		Name:
		Title:
		3COM HOLDINGS LIMITED.,
		By:
		Name:
		Title:
		3COM ASIA PACIFIC RIM PTE. LTD.,
		By:
		Name:
		Title:
		3COM IFSC (IRELAND),
		By:
		Name:
		Title:
		3COM VENTURES, INC.,
		By:
		Name:
		Title:

		3COM U.K HOLDINGS LIMITED,
		By:
		Name:
		Title:
		BANK OF AMERICA, N.A., as Agent and a Lender
		By:
		Name:
		Title:

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Exhibit 10.18

INTERCOMPANY SUBORDINATION AGREEMENT
EX-10.19 9 a2067560zex-10_19.htm EX 10.19 Prepared by MERRILL CORPORATION
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Exhibit 10.19

INSTRUMENT PREPARED BY,
KEVIN M. BRANDT, ESQ.
BUCHALTER, NEMER, FIELDS & YOUNGER
601 South Figueroa Street, Suite 2400
Los Angeles, California 90017

RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit
Account Executive

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT

THIS DOCUMENT TO BE RECORDED BOTH AS
A MORTGAGE AND FIXTURE FILING

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

THIS MORTGAGE SECURES AN INDEBTEDNESS
IN THE AGGREGATE AMOUNT OF $210,000,000
(CONSISTING OF A LOAN AND A GUARANTY)

THE STATE OF ILLINOIS	)
	)	ss.
COUNTY OF COOK	)

MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FINANCING STATEMENT made this 28^th day of November, 2001, between 3COM CORPORATION, a Delaware corporation ("Mortgagor") having an office at 5400 Bayfront Plaza, Santa Clara, California 95052, as mortgagor, and BANK OF AMERICA, N.A., as agent, having an office at 55 South Lake Avenue, Pasadena, California 91101, Attn: Business Credit Account Executive, as mortgagee. Initially capitalized terms used but not defined herein shall have the meaning set forth in the Credit Agreement (as such term is defined herein).

WITNESSETH

WHEREAS, Mortgagor is the owner of the premises described in Exhibit A attached hereto and made a part hereof; and

NOW, WITNESSETH, that Mortgagor, for the purpose of securing indebtedness in the principal amount of Two Hundred Ten Million Dollars ($210,000,000), including, without limitation, (a) the payment of an indebtedness in the amount of One Hundred Ninety-Five Million Dollars ($195,000,000), to be paid in accordance with the terms and with interest as set forth in those certain "Notes", as defined in the Credit Agreement, as hereinafter defined (hereinafter referred to as the "Notes"), of even date herewith, made by Mortgagor to the order of Lenders, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (b) the payment and performance of all indebtedness and obligations of Mortgagor arising under this Mortgage and other documents executed by Mortgagor in connection herewith and (c) payment of any money advanced by

Bank of America, N.A., (Bank of America, N.A. and any successor agent appointed pursuant to the Credit Agreement is hereinafter referred to as "Mortgagee") to Mortgagor, or its successors, with interest thereon, evidenced by additional notes (indicating that they are so secured) or by endorsement of the original note, executed by Mortgagor or its successor, and (d) the payment and performance of all indebtedness and obligations of Mortgagor arising under that certain International Guaranty, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (e) the payment and performance of all indebtedness and obligations of Mortgagor arising under that certain Credit Agreement of even date herewith to which Lenders, Mortgagor, and Mortgagee are parties (the "Credit Agreement") including, without limitation those contained in Article 12.7 therein, but expressly excluding Bank Products from the secured obligations, and all modifications, extensions and/or renewals thereof, and as, for and in consideration of the further sum of One Dollar ($1.00) into Mortgagor paid by Mortgagee at and before the sealing and delivery hereof, the receipt whereof is hereby acknowledged, Mortgagor has granted, mortgaged, transferred and assigned, and by these presents does grant, mortgage, transfer and assign unto Mortgagee, all its estate, right, title and interest in, to and under any and all of the property located in the City of Mt. Prospect, County of Cook, State of Illinois, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Mortgagor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Mortgagor in and to all buildings, structures and improvements now or hereafter erected on the Land including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever now or hereafter located on or forming part of said buildings, structures and improvements (collectively, the "Improvements"; the Land and Improvements being hereinafter collectively referred to as the "Premises");

TOGETHER with all of the right, title and interest of Mortgagor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

TOGETHER with, subject to the terms and conditions below, any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property (as defined below), the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Mortgagee and Mortgagee, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and, subject to the terms and conditions below, Mortgagor hereby covenants and agrees to and with Mortgagee, upon request by Mortgagee, to make, execute and deliver, at Mortgagor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Mortgagee free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furniture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property as more particularly described in that certain Security Agreement of even date herewith, by and between Mortgagor and Mortgagee, as agent for Lenders (other than any of the forgoing personal property which is or at any time has become Hazardous Substances, as defined in the Credit Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof whether or not attached or

incorporated to the premises thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TOGETHER with leases of the Premises or the Chattels or any part thereof now or hereafter entered into and all right, title and interest of Mortgagor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder (whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms) and, subject to the terms and conditions below, all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Mortgagor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Mortgagor in and to all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises;

TOGETHER with all sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into with respect to the sale to any purchasers of any part of the Premises, and all deposits and other proceeds thereof;

TOGETHER with all permits, plans, licenses, specifications, subdivision rights, tentative tract maps, final tract maps, security interests, contracts, contract rights or other rights as may affect or otherwise relate to the Premises;

TOGETHER with all rights of Mortgagor in or to any fund, program or trust monies and any reimbursement therefrom directly or indirectly established, maintained or administered by any governmental authority or any other individual or entity which is designed to or has the effect of providing funds (whether directly or indirectly or as reimbursement) for the repair or replacement of storage tanks (whether above or below ground) located on the Premises or the remediation or cleanup of any spill, leakage or contamination from any such tank or resulting from the ownership, use or maintenance of any such tank or to compensate third parties for any personal injury or property damage;

TOGETHER with all rents, issues, profits, revenues, income and other benefits to which Mortgagor may now or hereafter be entitled from the Premises or the Chattels (which Premises, titles, interests, awards, Chattels, easements, rents, income, benefits, ways, waters, rights, powers, liberties, privileges, utilities, tenements, hereditaments, appurtenances, reversions, remainders, rents, issues, profits, estate, property, possession, claims and demands, are hereinafter collectively referred to as the "Mortgaged Property");

TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its successors and assigns forever.

ARTICLE I

And Mortgagor further covenants with Mortgagee as follows:

SECTION 1.01 Mortgagor has title to an indefeasible fee estate in the Premises subject to no lien, charge, or encumbrance except Permitted Liens and such other liens, charges or encumbrances as may be disclosed as exceptions in any policy of title insurance issued to and accepted by Mortgagee insuring this Mortgage; that it owns the Chattels free and clear of liens and claims except Permitted Liens; that this Mortgage is and will remain a valid and enforceable first and prior lien on the Mortgaged Property subject only to the exceptions referred to above. Until the obligations secured by this Mortgage have been paid or satisfied, Mortgagor will forever preserve, warrant and defend the same unto Mortgagee, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever.

SECTION 1.02 Intentionally Deleted.

SECTION 1.03 Intentionally Deleted.

SECTION 1.04 Intentionally Deleted.

SECTION 1.05 All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by, or released to, or constructed, assembled or placed by Mortgagor on the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Mortgagor, shall become subject to the first and prior lien and security interest of this Mortgage as fully and completely, and with the same effect, as though now owned by Mortgagor and specifically described in the granting clause hereof.

SECTION 1.06 Mortgagor will pay from time to time when the same shall become due, all lawful claims and demands for payment made by mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Mortgagor, without expense to Mortgagee.

SECTION 1.07 In the event of the passage, after the date of this Mortgage, of any law of the State of Illinois deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of mortgages, or debts secured thereby, for state or local purposes, or the manner of operation of any such taxes so as to adversely affect the interest of Mortgagee, then and in such event, Mortgagor shall bear and pay the full amount of such taxes, provided that if for any reason payment by Mortgagor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Notes, the Credit Agreement, or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Notes, the Credit Agreement, or this Mortgage, or otherwise, Mortgagee may, at its option, upon thirty (30) days' written notice to Mortgagor, pay that amount or portion of such taxes as renders the Notes, the Credit Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Mortgagor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08 Except to the extent permitted under the Credit Agreement, Mortgagor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property without the prior written consent of Mortgagee.

SECTION 1.09 Notwithstanding Section 1.08 to the contrary, Mortgagor shall have the right to enter into leases of the Premises provided such leases are subordinate to this mortgage.

SECTION 1.10 Mortgagor shall comply (so that such compliance will not cause a Material Adverse Effect on the Mortgaged Property) with all applicable restrictive covenants, zoning and subdivision ordinances and building codes, all health and environmental laws and regulations and all other applicable laws, rules, regulations, requirements, directions, orders and notices of violations issued by any governmental agency, body or officer relating to or affecting the Premises or the business or activity being conducted thereon whether by Mortgagor or by any occupant thereof.

SECTION 1.11 If Mortgagor shall fail to perform any of the covenants contained herein on its part to be performed, and if such failure shall continue for more than thirty (30) days after written notice to Mortgagor (or if such failure cannot reasonably be cured within thirty (30) days, such longer time as is reasonably needed to effect such cure, provided Mortgagor is diligently attempting to

effectuate such cure), Mortgagee may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Mortgagor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Credit Agreement, shall be a lien upon the Mortgaged Property and shall, at Mortgagee's option, be added to the indebtedness secured hereby. Mortgagor will repay within two (2) Business Days after written request by Mortgagee, all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any failure by Mortgagor in the observance of any covenant contained in this Mortgage from constituting an Event of Default hereunder.

SECTION 1.12 Mortgagor will not commit any waste at or with respect to the Mortgaged Property nor will Mortgagor do or fail to do anything which will in any way materially increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13 Mortgagor will immediately notify Mortgagee of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. Mortgagee may participate in any such proceeding and Mortgagor from time to time will deliver to Mortgagee all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, subject to the terms and conditions below, the award or compensation payable shall be paid to Mortgagee and thereafter disbursed and applied in accordance with Section 7.6(ii) of the Credit Agreement. Mortgagee shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Mortgagor or to make settlement of Mortgagor's claim. In any such condemnation proceedings the Mortgagee may be represented by counsel selected by Mortgagee. Notwithstanding the foregoing or provisions of the Credit Agreement to the contrary, in the event of any proceeding for the condemnation or taking by eminent domain (or any sale in lieu thereof) of any portion of the Mortgaged Property having a value of less than One Million Dollars ($1,000,000), Mortgagor shall have the sole and exclusive right to control the contest or settlement of such proceedings or claim related thereto. In such event, the entire amount of the proceeds or any taking or sale in lieu thereof shall be paid to Mortgagor. Furthermore, notwithstanding the foregoing, the proceeds of any taking or sale in lieu thereof shall first be made available to Mortgagor to fund restoration of the remaining portion of the Mortgaged Property, but only to the extent that Mortgagee shall receive a first perfected security interest in any such additional items acquired by Mortgagor, before any proceeds are applied to the repayment of the Notes or other Secured Obligations.

SECTION 1.14 The assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Mortgage shall be fully operative without any further action on the part of Mortgagor or Mortgagee and specifically Mortgagee shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Mortgagee takes possession of the Mortgaged Property. Mortgagor shall at all times direct that all rents from the Mortgaged Property be deposited in the Payment Account established at the Clearing Bank pursuant to a Blocked Account Agreement, and the disposition of such rents governed accordingly. Mortgagor hereby further grants to Mortgagee the right (i) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Mortgagee, (ii) to let the Mortgaged Property or any part thereof, and (iii) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Mortgage constituting and evidencing the irrevocable consent of Mortgagor to the entry upon and taking possession of the Mortgaged Property by Mortgagee pursuant to such grant, whether or not sale or foreclosure has been instituted. Neither the exercise of any rights under this Section by Mortgagee nor the application of the rents to the indebtedness and other sums secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

The foregoing provisions hereof shall constitute an absolute and present assignment of the rents from the Mortgaged Property, subject, however, to the conditional permission given to Mortgagor to collect and use the rents until the occurrence of an Event of Default at which time such conditional permission shall automatically terminate; and the existence or exercise of such right of Mortgagor shall not operate to subordinate this assignment, in whole or in part, to any subsequent assignment by Mortgagor permitted under the provisions of this Mortgage, and any such subsequent assignment by Mortgagor shall be subject to the rights of Mortgagee hereunder.

SECTION 1.15 (a) Mortgagor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Mortgage, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property (where the annual gross rent equals or exceeds $500,000) or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease (where the annual gross rent equals or exceeds $500,000) or give consent to any assignment or subletting without Mortgagee's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases (where the annual gross rent equals or exceeds $500,000), except prepayments for a period less than thirty (30) days in advance of the date when due or prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Property or the security of Mortgagee for the payment of the indebtedness secured hereby.

(b) Mortgagor will not execute any lease of all or a substantial portion of the Mortgaged Property except for actual occupancy by the lessee thereunder, and will at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all leases of the Mortgaged Property now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such lease provides for the giving by the lessee of certificates with respect to the status of such leases, Mortgagor shall exercise its right to request such certificates within five (5) days of any written request therefor by Mortgagee.

(c) Mortgagor shall furnish to Mortgagee, within fifteen (15) days after a written request by Mortgagee to do so, a written statement containing the names of all lessees for the Mortgaged Property, the terms of their respective leases, the spaces occupied, the rentals paid and any security therefor.

(d) Mortgagor shall, from time to time upon written request of Mortgagee, specifically assign to Mortgagee as additional security hereunder, by an instrument in writing in such form as may be reasonably approved by Mortgagee, all right, title and interest of Mortgagor in and to any and all leases now or hereafter on or affecting the Mortgaged Property, subject to the conditional permission hereinabove given to Mortgagor to collect the rentals under any such lease. Mortgagor shall also execute and deliver to Mortgagee any notification, financing statement or other document reasonably required by Mortgagee to perfect the foregoing assignment as to any such lease.

SECTION 1.16 Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by Mortgagee of the remedies provided for by law or by this Mortgage, any person succeeding to the interest of Mortgagor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Mortgagee to terminate any one or more of such leases in connection with the exercise of Mortgagee's remedies hereunder.

SECTION 1.17 Intentionally Deleted.

ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

SECTION 2.01 An "Event of Default" under the Credit Agreement shall constitute an event of default ("Event of Default") hereunder. As used herein, the term "event of default" or "default", as the context so indicates, means an Event of Default as defined in the immediately preceding sentence of this Section 2.01.

Upon the occurrence of an Event of Default, and in every such case:

I. Mortgagee personally, or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the possessory interest in same, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Mortgagee, at the expense of Mortgagor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of any portion of the Improvements and in the course of such completion may make such reasonable changes in the contemplated Improvements as it may deem necessary; may insure or reinsure the same as provided in the Credit Agreement, and likewise, from time to time, at the expense of Mortgagor, Mortgagee may make all necessary or proper repairs, renewals, replacements, and alterations to the Mortgaged Property or any part thereof and thereon as it may deem advisable; and in every such case Mortgagee shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best; and Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof; and after deducting the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments which may be made for taxes, assessments, insurance, in payment of any prior mortgage and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Mortgagee for the services of Mortgagee and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Mortgagee shall apply the moneys arising as aforesaid in accordance with Section 3.8 of the Credit Agreement.

II. Mortgagee, with or without entry, personally or by its agents or attorneys, insofar as applicable, may:

(1) sell the Mortgaged Property to the extent permitted and pursuant to the procedures provided by law, and all estate, right, title and interest, claim and demand therein, and right of redemption thereof, at one or more sales as a single parcel or as more than one parcel, at such time and place, upon such terms, and in such order and after such notice thereof as may be required or permitted by law; or

(2) institute proceedings for the complete or partial foreclosure of this Mortgage; or

(3) take such steps to protect and enforce its rights or enforce its remedies, whether by action, suit or proceeding at law or in equity, whether for damages or for the specific performance of any covenant, condition or agreement in the Notes, Credit Agreement or in this Mortgage, or in aid of the execution of any power herein granted or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as Mortgagee shall elect; or

(4) without limitation of the foregoing, as an alternative to the right of foreclosure for the full indebtedness evidenced by the Notes and the Credit Agreement and any other Mortgagor's liabilities, after acceleration thereof, Mortgagee shall have the right to institute partial foreclosure proceedings with respect to the portion of Mortgagor's liabilities so in default, as if under a full foreclosure, and without declaring all of Mortgagor's liabilities to be immediately due and payable (such proceedings being referred to herein as "partial foreclosure"), and provided that, if Mortgagee has not elected to accelerate all of Mortgagor's liabilities and a foreclosure sale is made because of default in payment of only a part of Mortgagor's liabilities, such sale may be made subject to the continuing lien of this Mortgage for the unmatured part of Mortgagor's liabilities. Any sale pursuant to a partial foreclosure, if so made, shall not in any manner affect the unmatured portion of Mortgagor's liabilities, but as to such unmatured portion, this Mortgage and the lien thereof shall remain in full force and effect just as though no foreclosure sale had been made. Notwithstanding the filing of any partial foreclosure or entry of a decree of sale therein, Mortgagee may elect, at any time prior to a foreclosure sale pursuant to such decree, to discontinue such partial foreclosure and to accelerate Mortgagor's liabilities by reason of any Event of Default upon which such partial foreclosure was predicated or by reason of any other defaults, and proceed with full foreclosure proceedings. Mortgagee may proceed with one or more partial foreclosures without exhausting its right to proceed with a full or partial foreclosure sale for any unmatured portion of Mortgagor's liabilities, it being the purpose to permit, from time to time a partial foreclosure sale for any unmatured portion of Mortgagor's liabilities without exhausting the power to foreclose and to sell the Mortgaged Property pursuant to any partial foreclosure in respect of any other portion of Mortgagor's liabilities, whether matured at the time or subsequently maturing, and without exhausting at any time the right of acceleration and the right to proceed with a full foreclosure.

III. On and after the occurrence of an Event of Default, Mortgagor shall pay all rents, issues and profits thereafter received by Mortgagor from the Mortgaged Property to Mortgagee and to the extent not paid shall hold such amounts as trust funds for the benefit of Mortgagee and such rents, issues and profits shall be deemed "cash collateral" of Mortgagee under 11 U.S.C., as amended.

SECTION 2.02 (a) Mortgagee may adjourn from time to time, as permitted by law, any sale to be made by it under or by virtue of this Mortgage by announcement at any time and place appointed for such sale or for such adjourned sale or sales; and Mortgagee, without further notice or publication, except as otherwise provided by any applicable provision of law, may make such sale at the time and place to which the same shall be so adjourned.

(b) Upon the completion of any sale or sales made by Mortgagee under or by virtue of this Mortgage, Mortgagee, or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient deed and such other instrument, or instruments, as may be necessary to convey, assign and transfer all estate, right, title and interest in and to the Mortgaged Property and rights sold, but without any covenant or warranty, express or implied, and without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property. Mortgagee is hereby irrevocably appointed the true and lawful attorney of Mortgagor in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Mortgaged Property and rights so sold and for that purpose Mortgagee may execute all necessary instruments of conveyance, assignment and transfer, and may substitute one or more persons with like power, Mortgagor hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless, Mortgagor if so requested by Mortgagee shall ratify and confirm any such sale or sales by executing and delivering to Mortgagee or to such purchaser or purchasers all such instruments as may be advisable, in the judgment of Mortgagee, for the purpose, and as may be designated in such request. The receipt of Mortgagee of the Loan Documents, or of the court

officer conducting any such sale, for the purchase money paid at any such sale shall be a sufficient discharge therefor to any purchaser of the Mortgaged Property, or any part thereof, sold as aforesaid; and no such purchaser or his representatives, grantees or assigns, after paying such purchase money and receiving such a receipt, shall be bound to see to the application of such purchase money upon or for the purpose of this Mortgage or the Notes or Credit Agreement, or shall be answerable in any manner whatsoever for any loss, misapplication or non-application of any such purchase money or any part thereof, nor shall any such purchaser be bound to inquire as to the necessity or expediency of any such sale. Any such sale or sales made under or by virtue of this Mortgage (whether made under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale) shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Mortgagor in and to the Mortgaged Property so sold, and shall be a perpetual bar both at law and in equity against Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof from, through or under Mortgagor.

(c) The purchase money proceeds or avails of any sale made under or by virtue of this Mortgage, together with any other sums which then may be held by Mortgagee under this Mortgage, shall be applied in accordance with Section 3.8 of the Credit Agreement.

(d) In the event of a sale of the Mortgaged Property, or any part thereof, and the execution of a deed or deeds therefor, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the State of Illinois and of this Mortgage; and any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Mortgagor and all other persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid.

(e) Upon any sale made under or by virtue of this Mortgage, whether made by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the indebtedness secured hereby, the net sales price after deducting therefrom the expenses of the sale and the costs of the action and any other sums which Mortgagee is authorized to deduct under this Mortgage. Mortgagee, upon so acquiring the Mortgaged Property, or any part thereof, shall be entitled to hold, lease, rent, operate, manage and sell the same in any manner provided by applicable laws.

(f) In the event of any sale made under or by virtue of this Mortgage (whether made by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale), the indebtedness secured hereby if not previously due and payable, and all other sums required to be paid by Mortgagor pursuant to this Mortgage, immediately thereupon shall, anything in the Notes, the Credit Agreement or in this Mortgage to the contrary notwithstanding, become due and payable.

SECTION 2.03 (a) Upon the occurrence of an Event of Default then, upon written demand of Mortgagee, Mortgagor will pay to Mortgagee the entire indebtedness secured hereby, and after the happening of said Event of Default will also pay to Mortgagee interest at the default rate set forth in the Credit Agreement, and also pay all other sums required to be paid by Mortgagor pursuant to any provision of this Mortgage, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection incurred by Mortgagee hereunder including reasonable compensation to Mortgagee, its agents, attorneys and counsel (including, but not limited to, fees and costs pursuant to 11 U.S.C.). In the event Mortgagor shall fail forthwith to pay such amounts upon such demand, Mortgagee, in its own name, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the amounts so due and unpaid, and may prosecute

any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against Mortgagor and collect, out of the property of Mortgagor wherever situated, as well as out of the Mortgaged Property, in the manner provided by law, the moneys adjudged or decreed to be payable.

(b) Mortgagee shall, if permitted by law, be entitled to recover judgment as aforesaid either before or after or during the pendency of any proceedings for the foreclosure of the lien and provisions of this Mortgage. The right of Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions of this Mortgage, or the foreclosure of the lien hereof. In the event of a sale of the Mortgaged Property, and of the application of the proceeds of sale to the payment of the indebtedness secured hereby, Mortgagee shall be entitled to enforce payment of, and to receive the entire indebtedness secured hereby and to enforce payment of all charges, payments and costs due under this Mortgage, and shall be entitled to recover judgment for any sums due under the Notes, the Credit Agreement or this Mortgage remaining unpaid, with interest at the default rate set forth in the Credit Agreement. In case there shall be pending proceedings for the bankruptcy or liquidation of assets or for the reorganization of Mortgagor under the Federal bankruptcy laws or any other applicable law, or in case a receiver or mortgagee shall have been appointed for the property of Mortgagor or in case of any other similar judicial proceedings relative to Mortgagor, or to the creditors or property of Mortgagor, Mortgagee shall be entitled and empowered to prove against Mortgagor the whole amount of the indebtedness secured hereby to the full amount thereof, and all other payments, charges and costs due under this Mortgage, without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property, provided, however, that in no event shall Mortgagee receive from the aggregate amount of the proceeds of the sale of the Mortgaged Property and the distribution from the estate of Mortgagor an amount greater than the entire amount secured hereby and such other payments, charges and costs.

(c) No recovery of any judgment by Mortgagee and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of Mortgagor shall affect in any manner or to any extent, the lien of this Mortgage upon the Mortgaged Property or any part thereof, or any liens, rights, powers or remedies of Mortgagee hereunder, but such liens, rights powers and remedies of Mortgagee shall continue unimpaired as before.

(d) Any moneys thus collected by Mortgagee under this Section 2.03 shall be applied by Mortgagee in accordance with the provisions of subsection 2.02(c).

SECTION 2.04 After the occurrence of any Event of Default by Mortgagor under this Mortgage and immediately upon the commencement of any action, suit or other legal proceeding by Mortgagee to obtain judgment for the indebtedness secured hereby and other sums required to be paid by Mortgagor pursuant to any provisions of this Mortgage, or of any other nature in aid of the enforcement of the Notes, Credit Agreement or this Mortgage, Mortgagor waives trial by jury and will enter its voluntary appearance in such action, suit or proceeding. Further, Mortgagor hereby consents to the appointment of a receiver or receivers of the Mortgaged Property or a mortgagee in possession, as mortgagee elects, and of all the earnings, revenues, rents, issues, profits and income thereof. After the occurrence of any Event of Default or upon the commencement of any proceedings to foreclose this Mortgage or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of Mortgagee hereunder, Mortgagee shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the indebtedness

secured hereby, forthwith either before or after declaring the entire indebtedness secured hereby to be due and payable:

(i) To the appointment of such a receiver or receivers or to the appointment of Mortgagee as mortgagee in possession (without the necessity of Mortgagee posting a bond). Such receiver, or Mortgagee or its employees, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; take any action necessary to enforce compliance with any Act, including but not limited to spending rents to abate the problem; make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Mortgagee deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Mortgagee's judgment, to protect or enhance the security hereof; incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or take any and all other actions which may be necessary or desirable to comply with Mortgagor's obligations hereunder and under the Notes and Credit Agreement. All sums realized by Mortgagee under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Mortgagee deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby as provided in Section 3.8 of the Credit Agreement. Neither application of said sums to said indebtedness, nor any other action taken by Mortgagee under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Mortgagee, or any employee or agent of Mortgagee, or a receiver may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing or serving of a notice of default. Mortgagee shall be liable to account only for such rents, income and other benefits actually received by Mortgagee, whether received pursuant to this Section 2.04 or otherwise. Notwithstanding the appointment of any receiver or other custodian, Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by, or payable or deliverable under the terms of this Mortgage to Mortgagee.

(ii) With or without notice, and without releasing Mortgagor from any obligation hereunder, to cure any Event of Default of Mortgagor and, in connection therewith, Mortgagee or its agents, acting by themselves as mortgagee in possession or through a receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Mortgagee deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including without limitation of any of its other rights: (a) to obtain a court order to enforce Mortgagee's right to enter and inspect the Mortgaged Property to which the decision of Mortgagee as to whether there exists a release or threatened release of a Hazardous Substances onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto; and (b) to have a receiver appointed to enforce Mortgagee's right to enter and inspect the Mortgaged Property for Hazardous Substances. In connection with Mortgagee's exercise of its rights under this Section 2.04, all costs and expenses incurred by Mortgagee with respect to the audits, tests, inspections, and examinations which Mortgagee or its agents or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Mortgagor. All costs and expenses incurred by Mortgagee pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the default rate set forth in the Credit Agreement from the date they are incurred until said sums have been paid.

(iii) To seek a judgment that Mortgagor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in the Credit Agreement, by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract, whether commenced prior to or after foreclosure of the Mortgaged Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out-of-pocket costs or expenses actually incurred by Mortgagee (collectively, the "Environmental Costs") incurred or advanced by Mortgagee relating to the Remediation or other response action required by any Act or to which Mortgagee believes reasonably necessary to protect the Mortgaged Property. All Environmental Costs incurred by Mortgagee under this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the default rate set forth in the Credit Agreement from the date of expenditure until said sums have been paid. Mortgagee shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

Mortgagor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Loan Documents (as defined in the Credit Agreement), the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision contained herein or in the Loan Documents, and Mortgagor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Mortgage, and Mortgagor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Mortgage. For the purposes of any action brought under this subparagraph, Mortgagor hereby waives the defense of laches and any applicable statute of limitations.

(iv) To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired and to exercise any and all rights and remedies of an unsecured creditor against Mortgagor and all of Mortgagor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order. Mortgagor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Loan Documents, all judgments and awards entered against Mortgagor shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents or contained herein, and Mortgagor shall be fully and personally liable for all judgments and awards entered against Mortgagor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Mortgage and Mortgagor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Mortgage. For the purposes of any action brought under this subparagraph, Mortgagor hereby waives the defense of laches and any applicable statute of limitations.

(v) Nothing contained herein shall be construed to limit any and all rights that Mortgagee has at law or pursuant hereto.

SECTION 2.05 No remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of Mortgagee to exercise any right or power occurring upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. Nothing in this Mortgage or in the Notes or Credit Agreement shall affect the obligation of

Mortgagor to pay the principal and interest on the Notes and all sums due under the Credit Agreement in the manner and at the time and place therein respectively expressed.

SECTION 2.06 To the extent permitted by law, Mortgagor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Mortgage; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; and Mortgagor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to Mortgagee, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. Mortgagor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Mortgagor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Mortgagee against Mortgagor. Mortgagor acknowledges that the transaction of which this Mortgage is a part is a transaction which does not include either agricultural real estate (as defined in Section 15-1201 of the Illinois Mortgage Foreclosure Law (Chapter 110, Sections 15-1101 et seq., Illinois Revised Statutes) (herein called the "Illinois Act")) or residential real estate (as defined in Section 15-1219 of the Illinois Act), and to the full extent permitted by law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption as allowed under Section 15-1601(b) of the Illinois Act.

SECTION 2.07 Intentionally Deleted.

SECTION 2.08 Without affecting the personal liability of any person, firm, corporation, or other entity, including Mortgagor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Mortgage for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Mortgagee is authorized and empowered as follows: Mortgagee may, at any time and from time to time, either before or after the maturity of the Notes or the expiration of the Credit Agreement and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Mortgagee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist: (a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09 This Mortgage constitutes a Security Agreement under the laws of the State of Illinois so that Mortgagee shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Mortgagor agrees to execute, as debtor, such financing statement or statements as Mortgagee may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Mortgage further constitutes a fixture filing under Sections 9-334 and 9-502 of the Illinois Uniform Commercial Code, as amended or recodified from time to time; provided, however that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or

are to become fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

Notwithstanding any release of any or all of the property included in the Premises which is deemed "real property", any proceedings to foreclose this Mortgage, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Mortgagor as are now or hereafter evidenced by the Notes and Credit Agreement.

SECTION 2.10 During the continuance of any Event of Default, Mortgagee shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of Illinois, and specifically the right to direct notice and collections of any obligation owing to Mortgagor by any lessee. In addition to its rights to foreclose this Mortgage, Mortgagee shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Mortgagee may deem proper. Mortgagee shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Mortgagor, all of which are hereby waived and released. Mortgagor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published as required by the Code. The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Mortgagee against the liabilities, obligations and indebtedness of Mortgagor to Mortgagee secured by this Mortgage and evidenced by the Notes or the Credit Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Mortgagor to Mortgagee shall be returned to the respective parties which delivered the same to Mortgagee. If at any time Mortgagor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Mortgagee shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Mortgagee.

SECTION 2.11 From the date of its recording, this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to are to become fixtures related to the real estate described herein. For this purpose, the following information is set forth:

(a): Name and Address of Mortgagor:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attn: Real Estate Manager, Americas
(b): Name and Address of Mortgagee:
BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit
Account Executive
(c): This document covers good which are or are to become fixtures.

SECTION 2.12 Intentionally Deleted.

SECTION 2.13 If Mortgagee shall have proceeded to enforce any right or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings have been discontinued or abandoned for any reason, or such proceedings shall have resulted in a final determination adverse to Mortgagee, then and in every such case Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceedings had occurred or had been taken.

SECTION 2.14 All rights, remedies and powers provided by Sections 2.01-2.13, 3.09 & 3.10 hereof may be exercised and any waivers by Mortgagor set forth in such Sections shall be enforceable only to the extent that the exercise thereof or waiver by Mortgagor does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Mortgage invalid, illegal or unenforceable under the provisions of any applicable law.

ARTICLE III

MISCELLANEOUS

SECTION 3.01 Mortgagor acknowledges and agrees that this Mortgage secures, inter alia, the entire principal amount of the Notes and the Credit Agreement and interest accrued thereon, regardless of whether any or all of the loan proceeds are disbursed on or after the date hereof, and regardless of whether the outstanding principal is repaid in part, and all future advances made at a later date, as well as any amounts owed to Mortgagee pursuant to this Mortgage and any other amounts as provided herein or in any of the other Loan Documents (as defined in the Credit Agreement), including without limitation the payment of any and all loan commissions, service charges, liquidated damages, expenses and advances due to or paid or incurred by Mortgagee in connection with the Loan Documents, all in accordance with the application and loan commitment issued in connection with this transaction and the Loan Documents. Under no circumstances, however, shall the total indebtedness exceed five (5) times the original principal amount of the Notes and the Credit Agreement.

SECTION 3.02 (a) In the event that any provision in this Mortgage shall be inconsistent with any provisions of the Illinois Act, the Illinois Act shall take precedence over the provisions of this Mortgage, but the Illinois Act shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Illinois Act.

(b) If any provision of this Mortgage shall grant to Mortgagee any rights or remedies upon default of Mortgagor which are more limited than the rights that would otherwise be vested in Mortgagee under the Illinois Act in the absence of said provision, Mortgagee shall be vested with the rights granted in the Illinois Act to the full extent permitted by law.

(c) Without limiting the generality of the foregoing, all expenses incurred by Mortgagee to the extent reimbursable under Section 15-1510 and 15-1512 of the Illinois Act, whether incurred before or after any decree or judgment of foreclosure shall be added to the indebtedness hereby secured or by the judgment of foreclosure.

SECTION 3.03 In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

SECTION 3.04 All notices or demands by any party relating to this Mortgage or any other agreement entered into in connection herewith shall be sent in the form and manner set forth in the Credit Agreement.

SECTION 3.05 Whenever in this Mortgage the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.06 All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Mortgagor and Mortgagee.

SECTION 3.07 Intentionally Deleted.

SECTION 3.08 It shall be lawful for Mortgagee, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Mortgage and to proceed thereon to judgment and execution for the recovery of all sums payable by Mortgagor pursuant to the terms of this Mortgage without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.09 Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, or of any of its property, or of the Mortgaged Property, or any part thereof, Mortgagee shall be entitled to retain possession and control of all property now or hereafter held under this Mortgage.

SECTION 3.10 Intentionally Deleted.

SECTION 3.11 Mortgagor hereby waives and relinquishes unto, and in favor of Mortgagee, all benefit under all laws, now in effect or hereafter passed, to relieve Mortgagor in any manner from the obligations assumed and the obligation for which this Mortgage is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Mortgage.

SECTION 3.12 Neither Mortgagor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated to take action to foreclose on this Mortgage or otherwise enforce any provisions hereof or of the Notes or under the Credit Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending the time of payment or modifying the terms hereof without first having obtained the consent of Mortgagor or such other person; and in the latter event Mortgagor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Mortgagee.

SECTION 3.13 By accepting or approving anything required to be observed, performed or fulfilled or to be given to Mortgagee pursuant to this Mortgage, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Mortgagee shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Mortgagee.

SECTION 3.14 No offset or claim which Mortgagor now or may in the future have against Mortgagee shall relieve Mortgagor from paying installments or performing any other obligation herein or secured hereby.

SECTION 3.15 Intentionally Deleted.

SECTION 3.16 Intentionally Deleted.

SECTION 3.17 EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 2.09 AND 2.10 HEREOF, THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS GRANTED BY THIS MORTGAGE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS AND IN ALL OTHER RESPECTS THIS MORTGAGE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

SECTION 3.18 Time is of the essence of all Mortgagor's obligations hereunder.

SECTION 3.19 Simultaneously with, and in addition to, the execution of this Mortgage, Mortgagor, and/or related or affiliated entities of Mortgagor, has executed and delivered as security for the Notes and Credit Agreement a mortgage or deed of trust on parcels of property which may or may not be outside the boundaries of this county. Upon the occurrence of an Event of Default under (as defined in) any one of such other mortgages or deeds of trust, including this mortgage, such Event of Default shall be an Event of Default under each and every one of such mortgages and deeds of trust, including this Mortgage. Thereafter, Mortgagee may proceed against any or all of the property comprising security under such mortgage or deed of trust, including this mortgage, or against any other security for the Notes and the Credit Agreement in such order as Mortgagee, in its sole and absolute discretion may determine. Mortgagor hereby waives, to the extent permitted by applicable law, the benefit of any statute or decision relating to the marshalling of assets which is contrary to the foregoing. Mortgagee shall not be compelled to release or be prevented from foreclosing this instrument or any other instrument securing the Notes and/or the Credit Agreement unless all indebtedness evidenced by the Notes and/or the Credit Agreement and all items hereby secured shall have been paid in full and Mortgagee shall not be required to accept any part or parts of any property securing the Notes and the Credit Agreement, as distinguished from the entire whole thereof, as payment of or upon the Notes and/or the Credit Agreement to the extent of the value of such part or parts, and shall not be compelled to accept or allow any apportionment of the indebtedness evidenced by the Notes and/or the Credit Agreement to or among any separate parts of said property.

Notwithstanding the foregoing or any other provisions hereof to the contrary, Mortgagor shall have the right to require that Mortgagee release and reconvey this mortgage and all right, title and interest in and to the Mortgaged Property by paying to Mortgagee the applicable Minimum Price or repayment in full of the Term Loan in accordance with the provisions of Section 3.4 of the Credit Agreement.

IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed as of the day and year first above written.

		"MORTGAGOR" 3COM CORPORATION, a Delaware corporation
		By:

			(Seal)

ATTEST

Officer

STATE OF	)
	)	ss.
COUNTY OF	)

I, , a notary public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that , who are personally known to me are the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that they signed and delivered the said instrument pursuant to authority, as their free and voluntary act, for the uses and purposes therein set forth.

GIVEN under my hand and notarial seal this day of , 2001.

			Notary Public
My Commission Expires:

EXHIBIT A

LEGAL DESCRIPTION:

LOT1 IN AM CENTRAL ROAD MULTIGRAPHICS RESUBDIVISION, BEING A RESUBDIVISION OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SECTION 33, TOWNSHIP 42 NORTH, RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREFORE RECORDED NOVEMBER 7, 1984 AS DOCUMENT NO. 27327775, EXCEPTING THEREFROM THAT PART OF THE LAND CONVEYED TO THE VILLAGE OF MOUNT PROSPECT BY INSTRUMENT RECORDED OCTOBER 6, 1998 AS DOCUMENT NO. 98893818, IN COOK COUNTY, ILLINOIS.

THE STREET ADDRESS OF THE LAND IS .

THE PROPERTY IDENTIFICATION NUMBERS OF THE PREMISES ARE .

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Exhibit 10.19

ARTICLE II EVENTS OF DEFAULT AND REMEDIES
EXHIBIT A
EX-10.20 10 a2067560zex-10_20.htm EX 10.20 Prepared by MERRILL CORPORATION
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Exhibit 10.20

RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit Account Executive

THIS DOCUMENT TO BE RECORDED BOTH AS
A DEED OF TRUST AND FIXTURE FILING

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF SANTA CLARA	)

DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made this 28^th day of November, 2001, between 3COM CORPORATION, a Delaware corporation ("Trustor") having an office at 5400 Bayfront Plaza, Santa Clara, California 95052, as trustor, and FIRST AMERICAN TITLE GUARANTY COMPANY, as trustee ("Trustee") and BANK OF AMERICA, N.A., as agent, having an office at 55 South Lake Avenue, Pasadena, California 91101, Attn: Business Credit Account Executive. Initially capitalized terms not otherwise defined herein shall have the meaning set forth in the Credit Agreement (as such term is defined herein).

WITNESSETH

THIS DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTION 9-502(c) OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF CALIFORNIA. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF CALIFORNIA, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESS: 5303, 5403,& 5453 BETSY ROSS DRIVE, SANTA CLARA, CALIFORNIA. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS 3COM CORPORATION.

FOR THE PURPOSE OF SECURING indebtedness in the principal amount of Two Hundred Ten Million Dollars ($210,000,000), including, without limitation, (a) the payment of an indebtedness in the amount of One Hundred Ninety Five Million Dollars ($195,000,000), to be paid in accordance with the terms and with interest as set forth in those certain "Notes", as defined in the Credit Agreement, as hereinafter defined (hereinafter referred to as the "Notes"), of even date herewith, made by Trustor to the order of Lenders, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (b) the payment and performance of all indebtedness and obligations of Trustor arising under this Deed of Trust and other documents executed by Trustor in connection herewith, and (c) payment of any money advanced by Bank of America, N.A. (Bank of America, N.A. and any successor agent appointed pursuant to the Credit Agreement is hereinafter referred to as "Beneficiary") to Trustor, or its successors, with interest thereon, evidenced by additional notes (indicating that they are so secured) or by endorsement of the original note, executed by Trustor or its successor, and (d) the payment and performance of all indebtedness and obligations of Trustor arising under that certain International Guaranty, as defined in the Credit Agreement, and all modifications,

extensions and/or renewals thereof, and (e) the payment and performance of all indebtedness and obligations of Trustor arising under that certain Credit Agreement of even date herewith to which Lenders, Trustor, and Beneficiary, as a Lender and as agent are parties (the "Credit Agreement") including, without limitation those contained in Article 12.7 therein, but expressly excluding Bank Products from the secured obligations, and all modifications, extensions and/or renewals thereof, Trustor has granted, transferred and assigned unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Santa Clara, County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Trustor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Trustor in and to all buildings, structures and improvements now or hereafter erected on the Land including all plant equipment, apparatus, machinery and fixtures of every kind and nature whatsoever now or hereafter located on or forming part of said buildings, structures and improvements (collectively, the "Improvements"; the Land and Improvements being hereinafter collectively referred to as the "Premises");

TOGETHER with all of the right, title and interest of Trustor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

TOGETHER with, subject to the terms and conditions below, any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property (as defined below), the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and, subject to the terms and conditions below, Trustor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Trustor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furniture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property as more particularly described in that certain Security Agreement, dated of even date herewith, by and between Trustor and Beneficiary, in its capacity as agent for Lenders (other than any of the forgoing personal property which is or at any time has become Hazardous Substances, as defined in the Credit Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

(whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms) and, subject to the terms and conditions below, all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Trustor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Trustor in and to all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises;

TOGETHER with all rights of Trustor in or to any fund, program or trust monies and any reimbursement therefrom directly or indirectly established, maintained or administered by any governmental authority or any other individual or entity which is designed to or has the effect of providing funds (whether directly or indirectly or as reimbursement) for the repair or replacement of storage tanks (whether above or below ground) located on the Premises or the remediation or cleanup of any spill, leakage or contamination from any such tank or resulting from the ownership, use or maintenance of any such tank or to compensate third parties for any personal injury or property damage;

TOGETHER with all rents, issues, profits, revenues, income and other benefits to which Trustor may now or hereafter be entitled from the Premises or the Chattels (which Premises, titles, interests, awards, Chattels, easements, rents, income, benefits, ways, waters, rights, powers, liberties, privileges, utilities, tenements, hereditaments, appurtenances, reversions, remainders, rents, issues, profits, estate, property, possession, claims and demands, are hereinafter collectively referred to as the "Mortgaged Property");

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

ARTICLE I

And Trustor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.01. Trustor has title to an indefeasible fee estate in the Premises subject to no lien, charge, or encumbrance except Permitted Liens and such other liens, charges or encumbrances as may be disclosed as exceptions in any policy of title insurance issued to and accepted by Beneficiary insuring this Deed of Trust; that it owns the Chattels free and clear of liens and claims except Permitted Liens; that this Deed of Trust is and will remain a valid and enforceable first and prior monetary lien on the Mortgaged Property subject only to the exceptions referred to above. Until the obligations secured by this Deed of Trust have been paid or satisfied, Trustor will preserve such title, and will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever.

SECTION 1.02. Intentionally Deleted.

SECTION 1.03. Intentionally Deleted.

SECTION 1.04. Intentionally Deleted.

SECTION 1.05. All right, title and interest of Trustor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by, or released to, or constructed, assembled or placed by Trustor on the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Trustor, shall become subject to the first and prior lien and security interest of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Trustor and specifically described in the granting clause hereof.

SECTION 1.06. Trustor will pay from time to time when the same shall become due, all lawful claims and demands for payment made by mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Trustor, without expense to Beneficiary.

SECTION 1.07. In the event of the passage, after the date of this Deed of Trust, of any law of the State of California deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of deeds of trust, or debts secured thereby, for state or local purposes, or the manner of operation of any such taxes so as to adversely affect the interest of Beneficiary, then and in such event, Trustor shall bear and pay the full amount of such taxes, provided that if for any reason payment by Trustor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Notes, the Credit Agreement or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Notes, the Credit Agreement, or this Deed of Trust, or otherwise, Beneficiary may, at its option, upon thirty (30) days' written notice to Trustor, pay that amount or portion of such taxes as renders the Notes, the Credit Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Trustor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08. Except to the extent permitted under the Credit Agreement, Trustor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property, without the prior written consent of Beneficiary.

SECTION 1.09. Notwithstanding Section 1.08 to the contrary, Trustor shall have the right to enter into leases of the Premises provided such leases are subordinate to this Deed of Trust.

SECTION 1.10. Trustor shall comply (so that such compliance will not cause a Material Adverse Effect on the Mortgaged Property) with all applicable restrictive covenants, zoning and subdivision ordinances and building codes, all health and environmental laws and regulations and all other applicable laws, rules, regulations, requirements, directions, orders and notices of violations issued by any governmental agency, body or officer relating to or affecting the Premises or the business or activity being conducted thereon whether by Trustor or by any occupant thereof.

at Beneficiary's option, be added to the indebtedness secured hereby. Trustor will repay within two (2) Business Days after written request by Beneficiary, all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any failure by Trustor in the observance of any covenant contained in this Deed of Trust from constituting an Event of Default hereunder.

SECTION 1.12. Trustor will not commit any waste at or with respect to the Mortgaged Property nor will Trustor do or fail to do anything which will in any way materially increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13. Trustor will immediately notify Beneficiary of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. The Trustee and Beneficiary may participate in any such proceeding and Trustor from time to time will deliver to Beneficiary all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, subject to the terms and conditions below, the award or compensation payable shall be paid to Beneficiary and thereafter disbursed and applied in accordance with Section 7.6(ii) of the Credit Agreement. Beneficiary shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Trustor or to make settlement of Trustor's claim. In any such condemnation proceedings the Trustee and Beneficiary may be represented by counsel selected by Beneficiary. Notwithstanding the foregoing or provisions of the Credit Agreement to the contrary, in the event of any proceeding for the condemnation or taking by eminent domain (or any sale in lieu thereof) of any portion of the Mortgaged Property having a value of less than One Million Dollars ($1,000,000), Trustor shall have the sole and exclusive right to control the contest or settlement of such proceedings or claim related thereto. In such event, the entire amount of the proceeds or any taking or sale in lieu thereof shall be paid to Trustor. Furthermore, notwithstanding the foregoing, the proceeds of any taking or sale in lieu thereof shall first be made available to Trustor to fund restoration of the remaining portion of the Mortgaged Property, but only to the extent that Beneficiary shall receive a first perfected security interest in any such additional items acquired by Trustor, before any proceeds are applied to the repayment of the Note or other Secured Obligations.

SECTION 1.14. In accordance with Section 2938 of the California Civil Code, the assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Deed of Trust shall be fully operative without any further action on the part of Trustor or Beneficiary and specifically Beneficiary shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Trustor shall at all times direct that all rents from the Mortgaged Property be deposited in the Payment Account established at the Clearing Bank pursuant to a Blocked Account Agreement, and the disposition of such rents governed accordingly. Upon the occurrence and during the continuance of an Event of Default, Trustor hereby further grants to Beneficiary the right (i) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Beneficiary, (ii) to let the Mortgaged Property or any part thereof, and (iii) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Deed of Trust constituting and evidencing the irrevocable consent of Trustor to the entry upon and taking possession of the Mortgaged Property by Beneficiary pursuant to such grant, whether or not sale or foreclosure has been instituted. Neither the exercise of any rights under this Section by Beneficiary nor the application of the rents to the indebtedness and other sums secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

In accordance with Section 2938 of the California Civil Code, the foregoing provisions hereof shall constitute an absolute and present assignment of the rents from the Mortgaged Property, subject, however, to the conditional permission given to Trustor to collect and use the rents until the occurrence of an Event of Default at which time such conditional permission shall automatically terminate; and the existence or exercise of such right of Trustor shall not operate to subordinate this assignment, in whole or in part, to any subsequent assignment by Trustor permitted under the provisions of this Deed of Trust, and any such subsequent assignment by Trustor shall be subject to the rights of the Trustee and Beneficiary hereunder.

SECTION 1.15. (a) Trustor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property (where the annual gross rent equals or exceeds $500,000) or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease (where the annual gross rent equals or exceeds $500,000) or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases (where the annual gross rent equals or exceeds $500,000), except prepayments for a period less than thirty (30) days in advance of the date when due or prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby.

(b) Trustor will not execute any lease of all or a substantial portion of the Mortgaged Property except for actual occupancy by the lessee thereunder, and will at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all leases of the Mortgaged Property now or hereafter existing, on the part of the lessor thereunder to be kept and performed. If any such lease provides for the giving by the lessee of certificates with respect to the status of such leases, Trustor shall exercise its right to request such certificates within five (5) days of any written request therefor by Beneficiary.

(c) Trustor shall furnish to Beneficiary, within fifteen (15) days after a written request by Beneficiary to do so, a written statement containing the names of all lessees for the Mortgaged Property, the terms of their respective leases, the spaces occupied, the rentals paid and any security therefor.

(d) Trustor shall, from time to time upon written request of Beneficiary, specifically assign to Beneficiary as additional security hereunder, by an instrument in writing in such form as may be reasonably approved by Beneficiary, all right, title and interest of Trustor in and to any and all leases now or hereafter on or affecting the Mortgaged Property, subject to the conditional permission hereinabove given to Trustor to collect the rentals under any such lease. Trustor shall also execute and deliver to Beneficiary any notification, financing statement or other document reasonably required by Beneficiary to perfect the foregoing assignment as to any such lease.

SECTION 1.16. Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by the Trustee or Beneficiary of the remedies provided for by law or by this Deed of Trust, any person succeeding to the interest of Trustor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Beneficiary to terminate any one or more of such leases in connection with the exercise of its or the Trustee's remedies hereunder.

SECTION 1.17. Intentionally Deleted.

ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

SECTION 2.01. An "Event of Default" under the Credit Agreement shall constitute an event of default ("Event of Default") hereunder. As used herein, the term "event of default" or "default", as the context so indicates, means an Event of Default as defined in the immediately preceding sentence of this Section 2.01.

Upon the occurrence of an Event of Default, and in every such case:

I. During the continuance of any Event of Default, Beneficiary personally, or by its agents or attorneys may enter into and upon all or any part of the Mortgaged Property, and each and every part thereof, and may exclude the party owning the beneficial interest in same, its agents and servants wholly therefrom; and having and holding the same, may use, operate, manage and control the Mortgaged Property for any lawful purpose and conduct the business thereof, either personally or by its superintendents, managers, agents, servants, attorneys or receivers; and upon every such entry, Beneficiary, at the expense of Trustor, from time to time, either by purchase, repairs or construction, may maintain and restore the Mortgaged Property, whereof it shall become possessed as aforesaid, may complete the construction of any portion of the Improvements and in the course of such completion may make such reasonable changes in the contemplated Improvements as it may deem necessary; may insure or reinsure the same as provided in the Credit Agreement, and likewise, from time to time, at the expense of Trustor, Beneficiary may make all necessary or proper repairs, renewals, replacements, and alterations, to the Mortgaged Property or any part thereof and thereon as it may deem advisable; and in every such case Beneficiary shall have the right to manage and operate the Mortgaged Property, possessed as aforesaid, and to carry on the business thereof and exercise all rights and powers of the party owning such property with respect thereto either in the name of such party or otherwise as it shall deem best; and Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues, profits and income of the Mortgaged Property and every part thereof; and after deducting the expenses of conducting the business thereof and of all maintenance, repairs, replacements, alterations, additions, betterments and improvements and all payments which may be made for taxes, assessments, insurance, in payment of any prior deed of trust and prior or other proper charges upon the Mortgaged Property or any part thereof, as well as just and reasonable compensation of Beneficiary for the services of Beneficiary and for all attorneys, counsel, agents, clerks, servants and other employees by it properly engaged and employed, Beneficiary shall apply the moneys arising as aforesaid in accordance with Section 3.8 of the Credit Agreement.

II. Beneficiary, at its option, may declare the entire unpaid balance of the indebtedness secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and written notice of default and of election to cause the Mortgaged Property to be sold, which notice Trustee shall cause to be duly filed for record. Beneficiary shall also deposit with the Trustee this Deed of Trust, the Notes and all documents evidencing the expenditures secured hereby.

III. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Mortgaged Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. If the Mortgaged Property consists of several known lots or parcels, Beneficiary may designate the order in which such parcels shall be sold or offered for sale. Any person, including Trustor, Trustee or Beneficiary, may purchase at such sale.

IV. Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement.

V. On and after the occurrence of an Event of Default, Trustor shall pay all rents, issues and profits thereafter received by Trustor from the Mortgaged Property to Beneficiary and to the extent not paid shall hold such amounts as trust funds for the benefit of Beneficiary and such rents, issues and profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as amended.

SECTION 2.02. (a) Trustee, after making such sale, and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged Property so sold, but without any covenant or warranty, express or implied, and without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment in accordance with Section 3.8 of the Credit Agreement.

(b) In the event of a sale of the Mortgaged Property, or any part thereof, and the execution of a deed or deeds therefor under these trusts, the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof and of the fact that said sale was regularly and validly made in accordance with all requirements of the laws of the State of California and of this Deed of Trust; and any such deed or deeds, with such recitals therein, shall be effectual and conclusive against Trustor and all other persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligations to see to the proper application of the purchase money according to the trusts aforesaid.

SECTION 2.03. After the happening of an Event of Default by Trustor under this Deed of Trust and immediately upon the commencement of any action, suit or other legal proceeding by Beneficiary to obtain judgment for the principal of, or interest on, the Notes or due pursuant to the Credit Agreement and other sums required to be paid by Trustor pursuant to any provisions of this Deed of Trust, or of any other nature in aid of the enforcement of the Notes, the Credit Agreement, or of this Deed of Trust, Trustor will waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding. Further, Trustor hereby consents to the appointment of a receiver or receivers of the Mortgaged Property and of all the earnings, revenues, rents, issues, profits and income thereof. After the happening of any such Event of Default and during its continuance or upon the commencement of any proceedings to foreclose this Deed of Trust or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Trustee or Beneficiary hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the Deed of Trust indebtedness, forthwith either before or after declaring all sums evidenced by the Notes or due pursuant to the Credit Agreement to be due and payable, to the appointment of such a receiver or receivers.

SECTION 2.04. During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

(i) Beneficiary or its employees, acting by themselves or through a court-appointed receiver, may enter upon, possess, manage, operate, dispose of, and contract to dispose of the Mortgaged Property or any part thereof; take custody of all accounts; negotiate with governmental authorities with respect to the Mortgaged Property's environmental compliance and remedial measures; take any action necessary to enforce compliance with any Act, including but not limited to spending rents to abate the problem; make, terminate, enforce or modify leases of the Mortgaged Property upon such terms and conditions as Beneficiary deems proper; contract for goods and services, hire agents, employees, and counsel, make repairs, alterations, and improvements to the Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance the security hereof; incur the risks and obligations ordinarily incurred by owners of property (without any personal obligation on the part of the receiver); and/or take any and all other actions which may be necessary or desirable to comply with Trustor's obligations hereunder and under the Notes or Credit Agreement. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby as provided in Section 3.8 of the Credit Agreement. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

(ii) With or without notice, and without releasing Trustor from any obligation hereunder, to cure any Event of Default of Trustor and, in connection therewith, Beneficiary or its agents, acting by themselves or through a court appointed receiver, may enter upon the Mortgaged Property or any part thereof and perform such acts and things as Beneficiary deems necessary or desirable to inspect, investigate, assess, and protect the security hereof, including without limitation of any of its other rights: (a) to obtain a court order to enforce Beneficiary's right to enter and inspect the Mortgaged Property under California Civil Code Section 2929.5, to which the decision of Beneficiary as to whether there exists a release or threatened release of a Hazardous Substances onto the Mortgaged Property shall be deemed reasonable and conclusive as between the parties hereto; and (b) to have a receiver appointed under California Code of Civil Procedure Section 564 to enforce Beneficiary's right to enter and inspect the Mortgaged Property for Hazardous Substances. In connection with Beneficiary's exercise of its rights under this Section 2.04, all costs and expenses incurred by Beneficiary with respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or employees may conduct, including the fees of the engineers, laboratories, contractors, consultants, and attorneys, shall be paid by Trustor. All costs and expenses incurred by Trustee and Beneficiary pursuant to this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate set forth in the Credit Agreement from the date they are incurred until said sums have been paid.

or other response action required by any Act or to which Beneficiary believes reasonably necessary to protect the Mortgaged Property. All Environmental Costs incurred by Beneficiary under this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in the other Loan Documents (as defined in the Credit Agreement), the Environmental Costs shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust, and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations.

(iv) To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired in accordance with California Code of Civil Procedure Section 726.5 and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order under California Code of Civil Procedure Section 483.010. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Notes or Credit Agreement, all judgments and awards entered against Trustor shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and personally liable for all judgments and awards entered against Trustor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations.

(v) Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

SECTION 2.05. No remedy herein conferred upon or reserved to the Trustee or Beneficiary is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of the Trustee or Beneficiary to exercise any right or power occurring upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Deed of Trust to the Trustee or Beneficiary may be exercised from time to time and as often as may be deemed expedient by the Trustee or Beneficiary. Nothing in this Deed of Trust or in the Notes or Credit Agreement shall affect the obligation of Trustor to pay the principal and interest on the Notes and all sums due under the Credit Agreement in the manner and at the time and place therein respectively expressed.

wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; and Trustor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. Trustor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Trustor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Trustor.

SECTION 2.07. Intentionally Deleted.

SECTION 2.08. Without affecting the personal liability of any person, firm, corporation or other entity, including Trustor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Deed of Trust for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Beneficiary and Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, either before or after the maturity of the Notes or the expiration of the Credit Agreement, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Trustee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist, but only upon the written request of Beneficiary and presentation of this Deed of Trust and the Notes for endorsement: (a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09. This Deed of Trust constitutes a Security Agreement under the laws of the State of California so that Beneficiary shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Trustor agrees to execute, as debtor, such financing statement or statements as Beneficiary may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Deed of Trust further constitutes a fixture filing under Sections 9-334 and 9-502 of the California Uniform Commercial Code, as amended or recodified from time to time; provided, however, that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or are to become fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

Notwithstanding any release of any or all of the property included in the Premises which is deemed "real property", any proceedings to foreclose this Deed of Trust, or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the repayment or satisfaction in full of the obligations of Trustor as are now or hereafter evidenced by the Notes and Credit Agreement.

Trustor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Trustor, all of which are hereby waived and released. Trustor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code. The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Trustor to Beneficiary secured by this Deed of Trust and evidenced by the Notes or the Credit Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Trustor to Beneficiary shall be returned to the respective parties which delivered the same to Beneficiary. If at any time Trustor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary.

SECTION 2.11. All rights, remedies and powers provided by Sections 2.01-2.10, 3.09 and 3.10 hereof may be exercised and any waivers by Trustor set forth in such Sections shall be enforceable only to the extent that the exercise thereof or waiver by Trustor does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Mortgage invalid, illegal or unenforceable under the provisions of any applicable law.

ARTICLE III
MISCELLANEOUS

SECTION 3.01. In the event any one or more of the provisions contained in this Deed of Trust shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Deed of Trust, but this Deed of Trust shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

SECTION 3.02. All notices or demands by any party relating to this Deed of Trust or any other agreement entered into in connection herewith shall be sent in the form and manner set forth in the Credit Agreement.

SECTION 3.03. Whenever in this Deed of Trust the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.04. All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Trustor and Beneficiary and to the successors of the Trustee.

SECTION 3.05. Intentionally Deleted.

SECTION 3.06. It shall be lawful for the Trustee, or Beneficiary, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Deed of Trust and to proceed thereon to judgment and execution for the recovery of all sums payable by Trustor pursuant to the terms of this Deed of Trust without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.07. Notwithstanding the appointment of any receiver, liquidator or trustee of Trustor, or of any of its property, or of the Mortgaged Property, or any part thereof, the Trustee shall be entitled to retain possession and control of all property now or hereafter held under this Deed of Trust.

SECTION 3.08. Intentionally Deleted.

SECTION 3.09. Trustor hereby waives and relinquishes unto, and in favor of Beneficiary, all benefit under all laws, now in effect or hereafter passed, to relieve Trustor in any manner from the obligations assumed and the obligation for which this Deed of Trust is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Deed of Trust.

SECTION 3.10. Neither Trustor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Beneficiary to comply with any request of Trustor or of any other person so obligated to take action to foreclose on this Deed of Trust or otherwise enforce any provisions hereof or of the Notes or under the Credit Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Beneficiary extending the time of payment or modifying the terms hereof without first having obtained the consent of Trustor or such other person; and in the latter event Trustor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Beneficiary.

SECTION 3.11. By accepting or approving anything required to be observed, performed or fulfilled or to be given to Beneficiary pursuant to this Deed of Trust, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Beneficiary shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Beneficiary.

SECTION 3.12. Beneficiary may from time to time, without notice to Trustor or to the Trustee, and with or without cause and with or without the resignation of the Trustee substitute a successor or successors to the Trustee named herein or acting hereunder to execute this trust. Upon such appointment and without conveyance to the successor Trustee, the latter shall be vested with all title, powers and duties conferred upon the Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written document executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office, shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

SECTION 3.13. Intentionally Deleted.

SECTION 3.14. Intentionally Deleted.

SECTION 3.15. Simultaneously with, and in addition to, the execution of this Deed of Trust, Trustor, and/or related or affiliated entities of Trustor, has executed and delivered as security for the Notes and Credit Agreement a mortgage or deed of trust on parcels of property which may or may not be outside the boundaries of this county. Upon the occurrence of an Event of Default under (as defined in) any one of such other mortgages or deeds of trust, including this deed of trust, such Event of Default shall be an Event of Default under each and every one of such mortgages and deeds of trust, including this Deed of Trust. Thereafter, Beneficiary may proceed against any or all of the property comprising security under such mortgage or deed of trust, including this deed of trust, or against any other security for the Notes and the Credit Agreement in such order as Beneficiary, in its sole and absolute discretion may determine. Trustor hereby waives, to the extent permitted by applicable law, the benefit of any statute or decision relating to the marshalling of assets which is contrary to the foregoing. Beneficiary shall not be compelled to release or be prevented from foreclosing this instrument or any other instrument securing the Notes and/or the Credit Agreement unless all indebtedness evidenced by the Notes and/or the Credit Agreement and all items hereby secured shall have been paid in full and Beneficiary shall not be required to accept any part or parts of any property securing the Notes and the Credit Agreement, as distinguished from the entire whole thereof, as payment of or upon the Notes and/or the Credit Agreement to the extent of the value of such part or parts, and shall not be compelled to accept or allow any apportionment of the indebtedness evidenced by the Notes and/or the Credit Agreement to or among any separate parts of said property.

Notwithstanding the foregoing or any other provisions hereof to the contrary, Trustor shall have the right to require that Beneficiary release and reconvey this deed of trust and all right, title and interest in and to the Mortgaged Property by paying to Beneficiary the applicable Minimum Price or repayment in full of the Term Loan in accordance with the provisions of Section 3.4 of the Credit Agreement.

IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed as of the day and year first above written.

		"TRUSTOR"
		3COM CORPORATION, a, Delaware corporation
		By

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF	)

On , before me, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument

WITNESS my hand and official seal.

EXHIBIT A

That certain real property situate in the City of Santa Clara, County of Santa Clara, State of California, described as follows:

PARCEL ONE:

All of Parcel 105 as shown upon that certain Map entitled, "Parcel Map Marriott Business Park Unit No. 2 Improvement Project No. 174 being portions of the Rancho Pastoria De Las Borregas and the Rancho Ulistac and in Sections 16, T6S. R1W, M.D.M.", which map was filed for record in the Office of the County Recorder of the County of Santa Clara, State of California on February 17, 1978 in Book 413 of Maps, at pages 13, 14 and 15.

PARCEL TWO:

All of Parcel 106 as shown upon that certain Map entitled, "Parcel Map Marriott Business Park Unit No. 2 Improvement Project No. 174 being portions of the Rancho Pastoria De Las Borregas and the Rancho Ulistac and in Sections 16, T6S. R1W, M.D.M.", which map was filed for record in the Office of the County Recorder of the County of Santa Clara, State of California on February 17, 1978 in Book 413 of Maps, at pages 13, 14 and 15.


APN:		104-49-019 104-2-16.05 104-2-16.06

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Exhibit 10.20

ARTICLE I
ARTICLE II EVENTS OF DEFAULT AND REMEDIES
ARTICLE III MISCELLANEOUS
EXHIBIT A
EX-10.21 11 a2067560zex-10_21.htm EX 10.21 Prepared by MERRILL CORPORATION
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Exhibit 10.21

RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit Account Executive

THIS DOCUMENT TO BE RECORDED BOTH AS
A DEED OF TRUST AND FIXTURE FILING

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF SANTA CLARA	)

DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made this 28^th day of November, 2001, between 3COM CORPORATION, a Delaware corporation ("Trustor") having an office at 5400 Bayfront Plaza, Santa Clara, California 95052, as trustor, and FIRST AMERICAN TITLE GUARANTY COMPANY, as trustee ("Trustee") and BANK OF AMERICA, N.A., as agent, having an office at 55 South Lake Avenue, Pasadena, California 91101, Attn: Business Credit Account Executive. Initially capitalized terms used but not defined herein shall have the meaning set forth in the Credit Agreement (as such term is defined herein).

WITNESSETH

THIS DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTION 9-502(c) OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF CALIFORNIA. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF CALIFORNIA, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESS: 5400, 5420, 5450 BAYFRONT PLAZA, SANTA CLARA, CALIFORNIA. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS 3COM CORPORATION.

FOR THE PURPOSE OF SECURING indebtedness in the principal amount of Two Hundred Ten million Dollars ($210,000,000), including, without limitation, (a) the payment of an indebtedness in the amount of One Hundred Million Dollars ($195,000,000), to be paid in accordance with the terms and with interest as set forth in those certain "Notes", as defined in the Credit Agreement, as hereinafter defined (hereinafter referred to as the "Notes"), of even date herewith, made by Trustor to the order of Lenders, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (b) the payment and performance of all indebtedness and obligations of Trustor arising under this Deed of Trust and other documents executed by Trustor in connection herewith, and (c) payment of any money advanced by Bank of America, N.A., (Bank of America, N.A. and any successor agent appointed pursuant to the Credit Agreement is hereinafter referred to as "Beneficiary") to Trustor, or its successors, with interest thereon, evidenced by additional notes (indicating that they are so secured) or by endorsement of the original note, executed by Trustor or its successor, and (d) the payment and performance of all indebtedness and obligations of Trustor arising under that certain International Guaranty, as defined in the Credit Agreement, and all modifications,

extensions and/or renewals thereof, and (e) the payment and performance of all indebtedness and obligations of Trustor arising under that certain Credit Agreement of even date herewith to which Lenders, Trustor, and Beneficiary are parties (the "Credit Agreement") including, without limitation those contained in Article 12.7 therein, but expressly excluding Bank Products from the secured obligations, and all modifications, extensions and/or renewals thereof, Trustor has granted, transferred and assigned unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Santa Clara, County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Trustor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Trustor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

TOGETHER with, subject to the terms and conditions below, any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property (as defined below), the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and, subject to the terms and conditions below, Trustor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Trustor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furniture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property as more particularly described in that certain Security Agreement of even date herewith, by and between Trustor and Beneficiary, as agent for Lenders (other than any of the forgoing personal property which is or at any time has become Hazardous Substances, as defined in the Credit Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TOGETHER with leases of the Premises or the Chattels or any part thereof now or hereafter entered into and all right, title and interest of Trustor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees of their obligations thereunder (whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due immediately prior to the expiration of

such terms) and, subject to the terms and conditions below, all rights to all insurance proceeds and unearned premiums arising from or relating to the Premises and all other rights and easements of Trustor now or hereafter existing pertaining to the use and enjoyment of the Premises and all right, title and interest of Trustor in and to all declarations of covenants, conditions and restrictions as may affect or otherwise relate to the Premises;

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

ARTICLE I

And Trustor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.01. Trustor has title to an indefeasible fee estate in the Premises subject to no lien, charge, or encumbrance except Permitted Liens and such other liens, charges or encumbrances as may be disclosed as exceptions in any policy of title insurance issued to and accepted by Beneficiary insuring this Deed of Trust; that it owns the Chattels free and clear of liens and claims except Permitted Liens; that this Deed of Trust is and will remain a valid and enforceable first and prior monetary lien on the Mortgaged Property subject only to the exceptions referred to above. Until the obligations secured by this Deed of Trust have been paid or satisfied, Trustor will preserve such title, and will forever preserve, warrant and defend the same unto the Trustee and Beneficiary, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever.

SECTION 1.02. Intentionally Deleted.

SECTION 1.03. Intentionally Deleted.

SECTION 1.04. Intentionally Deleted.

acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Trustor, shall become subject to the first and prior lien and security interest of this Deed of Trust as fully and completely, and with the same effect, as though now owned by Trustor and specifically described in the granting clause hereof.

SECTION 1.09. Notwithstanding Section 1.08 to the contrary, Trustor shall have the right to enter into leases of the Premises provided such leases are subordinate to this Deed of Trust.

SECTION 1.10. Trustor shall comply (so that compliance will not cause a Material Adverse Effect on the Mortgaged Property) with all applicable restrictive covenants, zoning and subdivision ordinances and building codes, all health and environmental laws and regulations and all other applicable laws, rules, regulations, requirements, directions, orders and notices of violations issued by any governmental agency, body or officer relating to or affecting the Premises or the business or activity being conducted thereon whether by Trustor or by any occupant thereof.

SECTION 1.11. If Trustor shall fail to perform any of the covenants contained herein on its part to be performed, and if such failure shall continue for more than thirty (30) days after written notice to Trustor (or if such failure cannot reasonably be cured within thirty (30) days, such longer time as is reasonably needed to effect such cure, provided Trustor is diligently attempting to effectuate such cure), Beneficiary may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Trustor's behalf, and all sums so advanced shall bear interest, from and after the date advanced until repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Credit Agreement, shall be a lien upon the Mortgaged Property and shall, at Beneficiary's option, be added to the indebtedness secured hereby. Trustor will repay within two (2) Business Days after written request by Beneficiary, all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any failure by Trustor in the observance of any covenant contained in this Deed of Trust from constituting an Event of Default hereunder.

Trust, and any such subsequent assignment by Trustor shall be subject to the rights of the Trustee and Beneficiary hereunder.

SECTION 1.15. (a) Trustor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property (where gross rent equals or exceeds $500,000) or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease (where gross rent equals or exceeds $500,000) or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases (where gross rent equals or exceeds $500,000), except prepayments for a period less than thirty (30) days in advance of the date when due or prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby.

SECTION 1.17. Intentionally Deleted.

ARTICLE II
EVENTS OF DEFAULT AND REMEDIES

Upon the occurrence of an Event of Default, and in every such case:

SECTION 2.02. (a) Trustee, after making such sale, and upon receipt of the purchase price, shall make, execute and deliver to the purchaser or purchasers its deed or deeds conveying the Mortgaged

Property so sold, but without any covenant or warranty, express or implied, and without any representation, express or implied, as to the existence, or lack thereof, of Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of sale thereof to payment in accordance with Section 3.8 of the Credit Agreement.

SECTION 2.04. During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

(iii) To seek a judgment that Trustor has breached its covenants, representations and/or warranties with respect to the environmental matters set forth in the Credit Agreement by commencing and maintaining an action or actions in any court of competent jurisdiction for breach of contract pursuant to California Code of Civil Procedure Section 736, whether commenced prior to or after foreclosure of the Mortgaged Property, and to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments, indemnification payments to third parties, and other out-of-pocket costs or expenses actually incurred by Beneficiary (collectively, the "Environmental Costs") incurred or advanced by Beneficiary relating to the cleanup, remediation or other response action required by any Act or to which Beneficiary believes reasonably necessary to protect the Mortgaged Property. All Environmental Costs incurred by Beneficiary under this subparagraph (including without limitation court costs, consultant fees and attorneys' fees, including, without limitation, fees incurred pursuant to 11 U.S.C., whether incurred in litigation or not and whether before or after judgment) shall bear interest at the Default Rate from the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at the sale of the Mortgaged Property, the amount of said costs, expenses and interest in addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of cash.

(iv) To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired in accordance with California Code of Civil Procedure Section 726.5 and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order under California Code of Civil Procedure Section 483.010. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Notes or Credit Agreement, all judgments and awards entered against Trustor shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and personally liable for all judgments and awards entered against Trustor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations.

(v) Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

SECTION 2.06. To the extent permitted by law, Trustor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Deed of Trust; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; and Trustor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Trustee or Beneficiary, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. Trustor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Trustor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Trustor.

SECTION 2.07. Intentionally Deleted.

Trustee are respectively authorized and empowered as follows: Beneficiary may, at any time and from time to time, either before or after the maturity of the Notes or the expiration of the Credit Agreement, and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Trustee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist, but only upon the written request of Beneficiary and presentation of this Deed of Trust and the Notes for endorsement: (a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.10. During the continuance of any Event of Default, Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of California, and specifically the right to direct notice and collections of any obligation owing to Trustor by any lessee. In addition to its rights to foreclose this Deed of Trust, Beneficiary shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Beneficiary may deem proper. Beneficiary shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Trustor, all of which are hereby waived and released. Trustor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published not less than seven days prior to any sale, in any newspaper of general circulation distributed in the city in which the property to be sold is located or as otherwise required by the Code. The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Beneficiary against the liabilities, obligations and indebtedness of Trustor to Beneficiary secured by this Deed of Trust and evidenced by the Notes or the Credit Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Trustor to Beneficiary shall be returned to the respective

parties which delivered the same to Beneficiary. If at any time Trustor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Beneficiary shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Beneficiary.

ARTICLE III
MISCELLANEOUS

SECTION 3.05. Intentionally Deleted.

SECTION 3.08. Intentionally Deleted.

SECTION 3.13. Intentionally Deleted.

SECTION 3.14. Intentionally Deleted.

indebtedness evidenced by the Notes and/or the Credit Agreement to or among any separate parts of said property.

IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed as of the day and year first above written.

		"TRUSTOR"
		3COM CORPORATION, a Delaware corporation
		By

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF	)

WITNESS my hand and official seal.

EXHIBIT A

LEGAL DESCRIPTION

REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows:

(PHASE I LAND)

PARCEL ONE:

Parcel A, as shown on that certain Parcel Map recorded July 7, 1989, Book 602 of Maps, at pages 34 and 35, Records of Santa Clara County, California.

EXCEPTING THEREFROM that portion described in that certain Lot Line Adjustment and deeded August 16, 1991 in Book L826, at page 0826 of Official Records and described as follows:

Beginning at the Southwest corner of said Parcel "A"; thence on the Westerly and Northerly lines of said Parcel "A" the following 5 courses:

1. North 00° 12' 36" East a distance of 665.00 feet;

2. North 45° 12' 36" East a distance of 64.00 feet;

3. North 00° 12' 36" East a distance of 82.98 feet to a point on a non-tangent curve the center of which bears North 29° 17' 50" West a distance of 9000.00 feet;

4. Northeasterly a distance of 79.37 feet on the arc of said curve to the left through a central angle of 00° 30' 19" (chord bears North 60° 27' 01" East a distance of 79.37 feet, to a point on said curve;

5. North 66° 32' 39" East, departing said curve, a distance of 75.89 feet;

Thence South 62° 07' 20" West a distance of 104.00 feet to a point of curvature; thence Southwesterly a distance of 9.53 feet on the arc of said 10136.00 foot radius curve to the right through a central angle of 00° 03' 14" (chord bears South 62° 08' 57" West a distance of 9.53 feet) to a point on said curve; thence South 00° 12' 36" West a distance of 809.62 feet to a point on the South line of said Parcel "A"; thence North 89° 47' 24" West, on said South line, a distance of 83.50 feet to the point of beginning.

ALSO EXCEPTING THEREFROM that portion of said land as condemned to the State of California by Order recorded March 10, 1993 in Book M660, page 1700, described as follows:

Being a portion of Parcel A, as shown on that certain Parcel Map filed for record in Book 602 of Maps at pages 34 and 35 Santa Clara County Records described as follows:

Beginning at the Northeast corner of said Parcel A; thence from said point of beginning, along the Northerly line of said Parcel A, S 67° 25' 20" W 39.39 feet; thence leaving said Northerly line S 41° 34' 47" E 73.60 feet to a point in the easterly line of said Parcel A; thence along said Easterly line of N 10° 04' 48" W 71.28 feet to the point of beginning.

PARCEL TWO:

That portion of Parcel B, as shown on that certain Parcel Map recorded July 7, 1989, Book 602 of Maps, at pages 34 and 35, Records of Santa Clara County, California and described in that certain Lot Line Adjustment and Deeded August 16, 1991 in Book L826, at page 0826 of Official Records and described as follows:

Beginning at a point on the most Northerly Southeasterly line of said Parcel "B" which bears South 66° 32' 39" West a distance of 226.19 feet from the most Easterly corner thereof; thence South

10° 57' 34" East a distance of 218.69 feet; thence North 89° 47' 24" West a distance of 324.26 feet; thence North 77° 17' 24" West a distance of 141.24 feet; thence North 66° 32' 39" East a distance of 458.33 feet to the point of beginning.

APN: 104-52-006 and 016
ARB: 104-01-x46, x46.02 and 46.02.01

REAL PROPERTY in the City of Santa Clara, County of Santa Clara, State of California, described as follows:

(PHASE II LAND)

PARCEL THREE:

Parcel B, as shown on that certain Parcel Map recorded July 7, 1989, Book 602 of Maps, at pages 34 and 35, Records of Santa Clara County, California.

EXCEPTING THEREFROM that portion described in that certain Lot Line Adjustment and Deeded August 16, 1991 in Book L826, at page 0826 of Official Records and described as follows:

Beginning at a point on the most Northerly Southeasterly line of said Parcel "B" which bears South 66° 32'39" West a distance of 226.19 feet from the most Easterly corner thereof; thence South 10° 57' 34" East a distance of 218.69 feet; thence North 89° 47' 24" West a distance of 324.26 feet; thence North 77°17' 24" West a distance of 141.24 feet; thence North 66° 32' 39" East a distance of 458.33 feet to the point of beginning.

Also excepting therefrom that parcel Deeded to the State of California in Book L826 at page 839 and being described as follows:

Commencing at the most Northerly corner of said Parcel B; thence along the general Easterly line of said Parcel B the following courses: S. 10° 04' 48" E., 80.00 feet, N. 79° 55' 12" E., 30.00 feet, and S. 10° 04' 48" E., 195.61 feet to the Northerly corner of Parcel A; thence leaving said general Easterly line S. 67° 25' 20" W., along the Northerly line of Parcel A and its Westerly prolongation, 814.32 feet; thence from a tangent that bears S. 61° 04' 32" W., along the Northerly line of Parcel A on a curve to the right with a radius of 8999.52 feet through an angle of 00° 30' 19", an arc length of 79.36 feet; thence leaving said line S. 01° 05' 17" W., 3.47 feet; thence from a tangent that bears S. 63° 16' 34" W., along a curve to the right with a radius of 10,136.00 feet, through an angle of 05° 40' 34", an arc length of 1,004.14 feet to a point on the Westerly line of said Parcel B; thence along last said line N. 00° 50' 30" E., 113.93 feet to the Northwesterly corner of said Parcel B; thence along the general Northerly line of last said parcel N. 60° 54' 13" E., 1,641.25 feet and N 63° 04' 12" E., 253.25 feet to the point of commencement.

PARCEL FOUR:

That portion of Parcel A, as shown on that certain Parcel Map recorded July 7, 1989, Book 602 of Maps, at pages 34 and 35, records of Santa Clara County, California and described in that certain Lot Line Adjustment and Deeded August 16, 1991 in Book L826, page 0826 of Official Records and described as follows:

Beginning at the Southwest corner of said Parcel "A"; thence on the Westerly and Northerly lines of said

Parcel "A" the following 5 courses:

1. North 00° 12' 36" East a distance of 665.00 feet;

2. North 45° 12' 36" East a distance of 64.00 feet;

3. North 00° 12' 36" East a distance of 82.98 feet to a point on a non-tangent curve the center of which bears North 29° 17' 50" West a distance of 9000.00 feet;

5. North 66° 32' 39" East, departing said curve, a distance of 75.89 feet;

APN: 104-52-012 and 013
ARB: 104-01-x24 and x46.02

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Exhibit 10.21

ARTICLE I
ARTICLE II EVENTS OF DEFAULT AND REMEDIES
ARTICLE III MISCELLANEOUS
EXHIBIT A
EX-10.22 12 a2067560zex-10_22.htm EX 10.22 Prepared by MERRILL CORPORATION
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Exhibit 10.22

RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit Account Executive

THIS DOCUMENT TO BE RECORDED BOTH AS
A DEED OF TRUST AND FIXTURE FILING

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF SANTA CLARA	)

DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE FILING made this 28^th day of November, 2001, between 3COM CORPORATION, a Delaware corporation ("Trustor") having an office at 5400 Bayfront Plaza, Santa Clara, California 95052, as trustor, and FIRST AMERICAN TITLE GUARANTY COMPANY, as trustee ("Trustee") and BANK OF AMERICA, N.A., as agent, having an office at 55 South Lake Avenue, Pasadena, California 91101, Attn: Business Credit Account Executive. Initially capitalized terms used but not defined herein shall have the meaning set forth in the Credit Agreement (as such term is defined herein).

WITNESSETH

THIS DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTION 9-502(c) OF THE UNIFORM COMMERCIAL CODE OF THE STATE OF CALIFORNIA. TO THE EXTENT THE GOODS ARE FIXTURES UNDER THE LAWS OF THE STATE OF CALIFORNIA, THE FIXTURES ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO, COMMONLY KNOWN BY THE STREET ADDRESS: 5450, 5470, 5480 GREAT AMERICAN PARKWAY, SANTA CLARA, CALIFORNIA. THE NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS 3COM CORPORATION.

FOR THE PURPOSE OF SECURING indebtedness in the principal amount of Two Hundred Ten Million Dollars ($210,000,000), including, without limitation, (a) the payment of an indebtedness in the amount of One Hundred Ninety-Five Million Dollars ($195,000,000), to be paid in accordance with the terms and with interest as set forth in those certain "Notes", as defined in the Credit Agreement, as hereinafter defined (hereinafter referred to as the "Notes"), of even date herewith, made by Trustor to the order of Lenders, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (b) the payment and performance of all indebtedness and obligations of Trustor arising under this Deed of Trust and other documents executed by Trustor in connection herewith, and (c) payment of any money advanced by Bank of America, N.A., (Bank of America, N.A. and any successor agent appointed pursuant to the Credit Agreement is hereinafter referred to as "Beneficiary") to Trustor, or its successors, with interest thereon, evidenced by additional notes (indicating that they are so secured) or by endorsement of the original note, executed by Trustor or its successor, and (d) the payment and performance of all indebtedness and obligations of Trustor arising

under that certain International Guaranty, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (e) the payment and performance of all indebtedness and obligations of Trustor arising under that certain Credit Agreement of even date herewith to which Lenders, Trustor, and Beneficiary are parties (the "Credit Agreement") including, without limitation those contained in Article 12.7 therein, but expressly excluding Bank Products from the secured obligations, and all modifications, extensions and/or renewals thereof, Trustor has granted, transferred and assigned unto the Trustee, in trust, WITH POWER OF SALE, all its estate, right, title and interest in, to and under any and all of the property located in the City of Santa Clara, County of Santa Clara, State of California, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Trustor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Trustor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

TOGETHER with, subject to the terms and conditions below, any and all award and awards heretofore made or hereafter to be made by any governmental authorities to the present and all subsequent owners of the Premises which may be made with respect to the Premises as a result of the return of excess taxes paid on the Mortgaged Property (as defined below), the exercise of the right of eminent domain, the alteration of the grade of any street or any other injury to or decrease of value of the Premises, which said award or awards are hereby assigned to Beneficiary and Beneficiary, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such award or awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same as hereinafter provided; and, subject to the terms and conditions below, Trustor hereby covenants and agrees to and with Beneficiary, upon request by Beneficiary, to make, execute and deliver, at Trustor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid award or awards to Beneficiary free, clear and discharged of any and all encumbrances of any kind or nature whatsoever;

TOGETHER with all goods, equipment, machinery, furniture, furnishings, fixtures, appliances, inventory, building materials, chattels and articles of personal property as more particularly described in that certain Security Agreement of even date herewith, by and between Trustor and Beneficiary, as agent for Lenders (other than any of the forgoing personal property which is or at any time has become Hazardous Substances, as defined in the Credit Agreement), including any interest therein, now or at any time hereafter affixed to, attached to, or used in any way in connection with or to be incorporated at any time into the Premises, or placed on any part thereof but not attached or incorporated thereto, together with any and all replacements thereof, appertaining and adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its successors and assigns forever.

ARTICLE I

And Trustor further covenants with the Trustee and Beneficiary as follows:

SECTION 1.02. Intentionally Deleted.

SECTION 1.03. Intentionally Deleted.

SECTION 1.04. Intentionally Deleted.

SECTION 1.09. Notwithstanding Section 1.08 to the contrary, Trustor shall have the right to enter into leases of the Premises provided such leases are subordinate to this Deed of Trust.

SECTION 1.15. (a) Trustor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Deed of Trust, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property (where annual gross rent equals or exceeds $500,000) or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease (where annual gross rent equals or exceeds $500,000) or give consent to any assignment or subletting without Beneficiary's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases (where annual gross rent equals or exceeds $500,000), except prepayments for a period less than thirty (30) days in advance of the date when due or prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Property or the security of the Trustee or Beneficiary for the payment of the indebtedness secured hereby.

SECTION 1.17. Intentionally Deleted.

ARTICLE II
EVENTS OF DEFAULT AND REMEDIES

Upon the occurrence of an Event of Default, and in every such case:

SECTION 2.04. During the continuance of an Event of Default, Beneficiary shall have the following rights and remedies:

to comply with Trustor's obligations hereunder and under the Notes or Credit Agreement. All sums realized by Beneficiary under this subparagraph, less all costs and expenses incurred by it under this subparagraph, including attorneys' fees, and less such sums as Beneficiary deems appropriate as a reserve to meet future expenses under the subparagraph, shall be applied on any indebtedness secured hereby as provided in Section 3.8 of the Credit Agreement. Neither application of said sums to said indebtedness, nor any other action taken by Beneficiary under this subparagraph shall cure or waive any Event of Default or notice of default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or proceeding hereunder without regard to (a) the adequacy of the security for the indebtedness secured hereunder, (b) the existence of a declaration that the indebtedness secured hereby has been declared immediately due and payable, or (c) the filing of a notice of default.

Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in the other Loan Documents (as defined in the Credit Agreement), the Environmental Costs

shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and personally liable for the Environmental Costs hereunder, and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust, and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations.

(iv) To waive its lien against the Mortgaged Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired in accordance with California Code of Civil Procedure Section 726.5 and to exercise any and all rights and remedies of an unsecured creditor against Trustor and all of Trustor's assets and property for the recovery of any deficiency and Environmental Costs, including, but not limited to, seeking an attachment order under California Code of Civil Procedure Section 483.010. Trustor acknowledges and agrees that notwithstanding any term or provision contained herein or in the Notes or Credit Agreement, all judgments and awards entered against Trustor shall be exceptions to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and personally liable for all judgments and awards entered against Trustor hereunder and such liability shall not be limited to the original principal amount of the obligations secured by this Deed of Trust and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or any other transfer of the Mortgaged Property or this Deed of Trust. For the purposes of any action brought under this subparagraph, Trustor hereby waives the defense of laches and any applicable statute of limitations.

(v) Nothing contained herein shall be construed to limit any and all rights that Beneficiary has at law or pursuant hereto.

further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Beneficiary against Trustor.

SECTION 2.07. Intentionally Deleted.

ARTICLE III
MISCELLANEOUS

SECTION 3.05. Intentionally Deleted.

SECTION 3.08. Intentionally Deleted.

reference to this Deed of Trust and its place of record, which when duly filed for record in the proper office, shall be conclusive proof of proper appointment of the successor Trustee. The procedure herein provided for substitution of the Trustee shall be conclusive of all other provisions for substitution, statutory or otherwise.

SECTION 3.13. Intentionally Deleted.

SECTION 3.14. Intentionally Deleted.

IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed as of the day and year first above written.

		"TRUSTOR" 3COM CORPORATION, a Delaware corporation
		By:

STATE OF CALIFORNIA	)
	)	ss.
COUNTY OF	)

WITNESS my hand and official seal.

EXHIBIT A
LEGAL DESCRIPTION

All that real property, situate in the City of Santa Clara, County of Santa Clara, State of California, being a portion of the lands of the City of Santa Clara Land Fill Corporation and the City of Santa Clara described as Parcel B in that Deed of Gift recorded August 30, 1967 in Book 7840 at Page 204, Official Records of Santa Clara County and being a portion of the lands of the City of Santa Clara as described in the deed recorded in Book 9458 at page 115, Official Records of Santa Clara County, said real property being more particularly described as follows:

Beginning at the brass pin monument located at the intersection of the monument line of Great America Parkway (125 feet wide) and the centerline Old Mountain View—Alviso Road (60 feet wide) as shown on that Parcel Map filed for record in Book 602 of Maps at Page 34, Santa Clara County Records; thence along the centerline of Old Mountain View—Alviso Road, North 89°47'24" West 259.00 feet to the southerly prolongation of the easterly line of the lands of Santa Clara Valley Water District, described as Parcel 1 in the Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County; thence along said prolongated line, North 10°57'34" West 30.58 feet to the southeasterly corner of said lands of Santa Clara Valley Water District and the True Point of Beginning, said point being on the north line of said Old Mt. View—Alviso Road as shown on that Parcel Map filed for record in Book 413 of Maps at Page 13, Santa Clara County Records; thence along the easterly line of San Tomas Aquino Creek, conveyed to the Santa Clara Valley Water District as Parcel 1 in that Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County, and in that Quitclaim recorded in Book D928 at Page 716, Official Records of Santa Clara County, North 10°57'34" West 1325.72 feet to the southerly corner of that parcel described in the Grant Deed from the City of Santa Clara to the Santa Clara Valley Water District, recorded February 14, 1997, Document 13613165, Official Records of Santa Clara County; thence along the southeasterly line of said parcel, North 19°14'15" East 105.25 feet to the southeasterly line of that parcel described as Parcel 1 in that Grant Deed from the City of Santa Clara to the State of California, recorded February 10, 1997, Document 13607858, Official Records of Santa Clara County; thence along the general southerly boundary of the last said parcel the following six (6) courses: North 63°34'28" East 51.54 feet; North 62°02'11" East 153.02 feet; North 61°29'12" East 230.90 feet; Easterly and southeasterly along a tangent curve to the right, having a radius of 32.00 feet, through a central angle of 100°07'12", an arc length of 55.92 feet to a point of compound curvature; Southerly along a tangent curve to the right, having a radius of 282.00 feet, through a central angle of 18°23'50", an arc length of 90.55 feet; South 00°00'14" West 55.36 feet to the westerly line of said Great America Parkway, shown as "Proposed Great America Parkway" on that Record of Survey filed for record in Book 34 of Maps at Pages 1 through 8, Santa Clara County Records; thence along said westerly line, South 01°05'29" West 1395.20 feet; thence along a tangent curve to the right, having a radius of 50.00 feet, through a central angle of 89°07'07", for an arc length of 77.77 feet to a point of tangency on said North line of Old Mt. View—Alviso Road; thence along said North line, North 89°47'24" West 150.14 feet to said True Point of Beginning.

APN: 104-52-020
ARB: 104-1-26.04, 65.01; 104-2-89.03

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Exhibit 10.22

ARTICLE I
ARTICLE II EVENTS OF DEFAULT AND REMEDIES
ARTICLE III MISCELLANEOUS
EXHIBIT A LEGAL DESCRIPTION
EX-10.23 13 a2067560zex-10_23.htm EX 10.23 Prepared by MERRILL CORPORATION
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Exhibit 10.23

INSTRUMENT PREPARED BY,
KEVIN M. BRANDT, ESQ.
BUCHALTER, NEMER, FIELDS & YOUNGER
601 South Figueroa Street, Suite 2400
Los Angeles, California 90017

RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit Account Executive

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT

THIS DOCUMENT TO BE RECORDED BOTH AS
A MORTGAGE AND FIXTURE FILING

THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST

THIS MORTGAGE SECURES AN INDEBTEDNESS
IN THE AGGREGATE AMOUNT OF $210,000,000
(CONSISTING OF A LOAN AND A GUARANTY)

THE STATE OF ILLINOIS	)
	)	ss.
COUNTY OF COOK	)

WITNESSETH

WHEREAS, Mortgagor is the owner of the premises described in Exhibit A attached hereto and made a part hereof; and

NOW, WITNESSETH, that Mortgagor, for the purpose of securing indebtedness in the principal amount of Two Hundred Ten Million Dollars ($210,000,000) including, without limitation, (a) the payment of an indebtedness in the amount of One Hundred Ninety-Five Million Dollars ($195,000,000), to be paid in accordance with the terms and with interest as set forth in those certain "Notes", as defined in the Credit Agreement, as hereinafter defined (hereinafter referred to as the "Notes"), of even date herewith, made by Mortgagor to the order of Lenders, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (b) the payment and performance of all indebtedness and obligations of Mortgagor arising under this Mortgage and other documents executed by Mortgagor in connection herewith and (c) payment of any money advanced by

Bank of America, N.A.,(Bank of America, N.A. and any successor agent appointed pursuant to the Credit Agreement is hereinafter referred to as "Mortgagee") to Mortgagor, or its successors, with interest thereon, evidenced by additional notes (indicating that they are so secured) or by endorsement of the original note, executed by Mortgagor or its successor, and (d) the payment and performance of all indebtedness and obligations of Mortgagor arising under that certain International Guaranty, as defined in the Credit Agreement, and all modifications, extensions and/or renewals thereof, and (e) the payment and performance of all indebtedness and obligations of Mortgagor arising under that certain Credit Agreement of even date herewith to which Lenders, Mortgagor, and Mortgagee are parties (the "Credit Agreement") including, without limitation those contained in Article 12.7 therein, but expressly excluding Bank Products from the secured obligations, and all modifications, extensions and/or renewals thereof, and as, for and in consideration of the further sum of One Dollar ($1.00) into Mortgagor paid by Mortgagee at and before the sealing and delivery hereof, the receipt whereof is hereby acknowledged, Mortgagor has granted, mortgaged, transferred and assigned, and by these presents does grant, mortgage, transfer and assign unto Mortgagee, all its estate, right, title and interest in, to and under any and all of the property located in the City of Rolling Meadows, County of Cook, State of Illinois, and more particularly described in Exhibit A attached hereto and made a part hereof, including all easements, rights, privileges, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title, interest, claim, demand, reversion or remainder whatsoever of Mortgagor therein or thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired, including, without limitation, all and singular the ways, waters, water courses, water rights and powers, liberties, privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other services to the property (collectively, the "Land");

TOGETHER with all of the right, title and interest of Mortgagor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Premises;

adapted to the complete and compatible use, enjoyment, occupancy, operation or improvement of the Premises (collectively, the "Chattels");

TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its successors and assigns forever.

ARTICLE I

And Mortgagor further covenants with Mortgagee as follows:

SECTION 1.01. Mortgagor has title to an indefeasible fee estate in the Premises subject to no lien, charge, or encumbrance except Permitted Liens and such other liens, charges or encumbrances as may be disclosed as exceptions in any policy of title insurance issued to and accepted by Mortgagee insuring this Mortgage; that it owns the Chattels free and clear of liens and claims except Permitted Liens; that this Mortgage is and will remain a valid and enforceable first and prior lien on the Mortgaged Property subject only to the exceptions referred to above. Until the obligations secured by this Mortgage have been paid or satisfied, Mortgagor will forever preserve, warrant and defend the same unto Mortgagee, and will forever preserve, warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever.

SECTION 1.02. Intentionally Deleted.

SECTION 1.03. Intentionally Deleted.

SECTION 1.04. Intentionally Deleted.

SECTION 1.05. All right, title and interest of Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes and replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by, or released to, or constructed, assembled or placed by Mortgagor on the Premises, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement or conversion, as the case may be, and in each such case, without any further grant, conveyance, assignment or other act by Mortgagor, shall become subject to the first and prior lien and security interest of this Mortgage as fully and completely, and with the same effect, as though now owned by Mortgagor and specifically described in the granting clause hereof.

SECTION 1.06. Mortgagor will pay from time to time when the same shall become due, all lawful claims and demands for payment made by mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Property or any part thereof, or on the revenues, rents, issues, income and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien and security interest hereof shall be fully preserved, at the cost of Mortgagor, without expense to Mortgagee.

SECTION 1.07. In the event of the passage, after the date of this Mortgage, of any law of the State of Illinois deducting from the value of the Mortgaged Property for the purpose of taxing the amount of any lien thereon, or changing in any way the laws now in force for the taxation of mortgages, or debts secured thereby, for state or local purposes, or the manner of operation of any such taxes so as to adversely affect the interest of Mortgagee, then and in such event, Mortgagor shall bear and pay the full amount of such taxes, provided that if for any reason payment by Mortgagor of any such new or additional taxes would be unlawful or if the payment thereof would constitute usury or render the Notes, the Credit Agreement, or the indebtedness secured hereby wholly or partially usurious under any of the terms or provisions of the Notes, the Credit Agreement, or this Mortgage, or otherwise, Mortgagee may, at its option, upon thirty (30) days' written notice to Mortgagor, pay that amount or portion of such taxes as renders the Notes, the Credit Agreement, or the indebtedness secured hereby unlawful or usurious, in which event Mortgagor shall concurrently therewith pay the remaining lawful non-usurious portion or balance of said taxes.

SECTION 1.08. Except to the extent permitted under the Credit Agreement, Mortgagor will not further encumber, sell, convey or transfer any interest in, or any part of, the Mortgaged Property without the prior written consent of Mortgagee.

SECTION 1.09. Notwithstanding Section 1.08 to the contrary, Mortgagor shall have the right to enter into leases of the Premises provided such leases are subordinate to this mortgage.

SECTION 1.10. Mortgagor shall comply (so that such compliance will not cause a Material Adverse Effect on the Mortgaged Property) with all applicable restrictive covenants, zoning and subdivision ordinances and building codes, all health and environmental laws and regulations and all other applicable laws, rules, regulations, requirements, directions, orders and notices of violations issued by any governmental agency, body or officer relating to or affecting the Premises or the business or activity being conducted thereon whether by Mortgagor or by any occupant thereof.

SECTION 1.11. If Mortgagor shall fail to perform any of the covenants contained herein on its part to be performed, and if such failure shall continue for more than thirty (30) days after written notice to Mortgagor (or if such failure cannot reasonably be cured within thirty (30) days, such longer time as is reasonably needed to effect such cure, provided Mortgagor is diligently attempting to effectuate such cure), Mortgagee may, but shall not be required to, make advances to perform the same, or cause the same to be performed, on Mortgagor's behalf, and all sums so advanced shall bear

interest, from and after the date advanced until repaid, at the lower of (i) the maximum rate permitted by law or (ii) the default rate set forth in the Credit Agreement, shall be a lien upon the Mortgaged Property and shall, at Mortgagee's option, be added to the indebtedness secured hereby. Mortgagor will repay within two (2) Business Days after written request by Mortgagee, all sums so advanced on its behalf with interest at the rate herein set forth. This Section 1.11 shall not be construed as preventing any failure by Mortgagor in the observance of any covenant contained in this Mortgage from constituting an Event of Default hereunder.

SECTION 1.12. Mortgagor will not commit any waste at or with respect to the Mortgaged Property nor will Mortgagor do or fail to do anything which will in any way materially increase the risk of fire or other hazard to the Premises, Improvements or Chattels or to any part thereof.

SECTION 1.13. Mortgagor will immediately notify Mortgagee of the institution of any proceeding for the condemnation or taking by eminent domain of the Mortgaged Property, or any portion thereof. Mortgagee may participate in any such proceeding and Mortgagor from time to time will deliver to Mortgagee all instruments requested by it to permit such participation. In the event of such condemnation proceedings, or a conveyance in lieu of such taking, subject to the terms and conditions below, the award or compensation payable shall be paid to Mortgagee and thereafter disbursed and applied in accordance with Section 7.6(ii) of the Credit Agreement. Mortgagee shall be under no obligation to question the amount of any such award or compensation and may accept the same in the amount in which the same shall be paid, but shall have no right to bind Mortgagor or to make settlement of Mortgagor's claim. In any such condemnation proceedings the Mortgagee may be represented by counsel selected by Mortgagee. Notwithstanding the foregoing or provisions of the Credit Agreement to the contrary, in the event of any proceeding for the condemnation or taking by eminent domain (or any sale in lieu thereof) of any portion of the Mortgaged Property having a value of less than One Million Dollars ($1,000,000), Mortgagor shall have the sole and exclusive right to control the contest or settlement of such proceedings or claim related thereto. In such event, the entire amount of the proceeds or any taking or sale in lieu thereof shall be paid to Mortgagor. Furthermore, notwithstanding the foregoing, the proceeds of any taking or sale in lieu thereof shall first be made available to Mortgagor to fund restoration of the remaining portion of the Mortgaged Property, but only to the extent that Mortgagee shall receive a first perfected security interest in any such additional items acquired by Mortgagor, before any proceeds are applied to the repayment of the Notes or other Secured Obligations.

SECTION 1.14. The assignment of rents, income and other benefits (collectively, "rents") contained in the granting clause of this Mortgage shall be fully operative without any further action on the part of Mortgagor or Mortgagee and specifically Mortgagee shall be entitled, at its option, to all rents from the Mortgaged Property whether or not Mortgagee takes possession of the Mortgaged Property. Mortgagor shall at all times direct that all rents from the Mortgaged Property be deposited in the Payment Account established at the Clearing Bank pursuant to a Blocked Account Agreement, and the disposition of such rents governed accordingly. Mortgagor hereby further grants to Mortgagee the right (i) to dispossess by the usual summary proceedings any tenant defaulting in the payment thereof to Mortgagee, (ii) to let the Mortgaged Property or any part thereof, and (iii) to apply the rents, after payment of all necessary charges and expenses, on account of the indebtedness and other sums secured hereby. Such assignment and grant shall continue in effect until the indebtedness and other sums secured hereby are paid, the execution of this Mortgage constituting and evidencing the irrevocable consent of Mortgagor to the entry upon and taking possession of the Mortgaged Property by Mortgagee pursuant to such grant, whether or not sale or foreclosure has been instituted. Neither the exercise of any rights under this Section by Mortgagee nor the application of the rents to the indebtedness and other sums secured hereby, shall cure or waive any Event of Default, or notice of default hereunder or invalidate any act done pursuant hereto, but shall be cumulative of all other rights and remedies.

SECTION 1.15. (a) Mortgagor will not (i) execute an assignment of the rents or any part thereof from the Mortgaged Property unless such assignment shall provide that it is subject and subordinate to the assignment contained in this Mortgage, and any additional or subsequent assignment executed pursuant hereto, or (ii) except where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of any lease of the Mortgaged Property (where the annual gross rent equals or exceeds $500,000) or of any part thereof, now existing or hereafter to be made or (iii) modify any such lease (where the annual gross rent equals or exceeds $500,000) or give consent to any assignment or subletting without Mortgagee's prior written consent, or (iv) accept prepayments of any installments of rent or additional rent to become due under such leases (where the annual gross rent equals or exceeds $500,000), except prepayments for a period less than thirty (30) days in advance of the date when due or prepayments in the nature of security for the performance of the lessee's obligations thereunder, or (v) in any other manner materially impair the value of the Mortgaged Property or the security of Mortgagee for the payment of the indebtedness secured hereby.

SECTION 1.16. Each lease of the Mortgaged Property or of any part thereof entered into after the date hereof shall provide that, in the event of the enforcement by Mortgagee of the remedies provided for by law or by this Mortgage, any person succeeding to the interest of Mortgagor as a result of such enforcement shall not be bound by any payment of rent or additional rent for more than one (1) month in advance, provided, however, that nothing herein set forth shall affect or impair the rights of Mortgagee to terminate any one or more of such leases in connection with the exercise of Mortgagee's remedies hereunder.

SECTION 1.17. Intentionally Deleted.

ARTICLE II

EVENTS OF DEFAULT AND REMEDIES

Upon the occurrence of an Event of Default, and in every such case:

II. Mortgagee, with or without entry, personally or by its agents or attorneys, insofar as applicable, may:

(2) institute proceedings for the complete or partial foreclosure of this Mortgage; or

SECTION 2.02. (a) Mortgagee may adjourn from time to time, as permitted by law, any sale to be made by it under or by virtue of this Mortgage by announcement at any time and place appointed for such sale or for such adjourned sale or sales; and Mortgagee, without further notice or publication, except as otherwise provided by any applicable provision of law, may make such sale at the time and place to which the same shall be so adjourned.

SECTION 2.03. (a) Upon the occurrence of an Event of Default then, upon written demand of Mortgagee, Mortgagor will pay to Mortgagee the entire indebtedness secured hereby, and after the happening of said Event of Default will also pay to Mortgagee interest at the default rate set forth in the Credit Agreement, and also pay all other sums required to be paid by Mortgagor pursuant to any provision of this Mortgage, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection incurred by Mortgagee hereunder including reasonable compensation to Mortgagee, its agents, attorneys and counsel (including, but not limited to, fees and costs pursuant to 11 U.S.C.). In the event Mortgagor shall fail forthwith to pay such amounts upon such demand, Mortgagee, in its own name, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the amounts so due and unpaid, and may prosecute

(d) Any moneys thus collected by Mortgagee under this Section 2.03 shall be applied by Mortgagee in accordance with the provisions of subsection 2.02(c).

SECTION 2.04. After the occurrence of any Event of Default by Mortgagor under this Mortgage and immediately upon the commencement of any action, suit or other legal proceeding by Mortgagee to obtain judgment for the indebtedness secured hereby and other sums required to be paid by Mortgagor pursuant to any provisions of this Mortgage, or of any other nature in aid of the enforcement of the Notes, Credit Agreement or this Mortgage, Mortgagor waives trial by jury and will enter its voluntary appearance in such action, suit or proceeding. Further, Mortgagor hereby consents to the appointment of a receiver or receivers of the Mortgaged Property or a mortgagee in possession, as mortgagee elects, and of all the earnings, revenues, rents, issues, profits and income thereof. After the occurrence of any Event of Default or upon the commencement of any proceedings to foreclose this Mortgage or to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of Mortgagee hereunder, Mortgagee shall be entitled, as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy or inadequacy of any security for the indebtedness

secured hereby, forthwith either before or after declaring the entire indebtedness secured hereby to be due and payable:

(v) Nothing contained herein shall be construed to limit any and all rights that Mortgagee has at law or pursuant hereto.

SECTION 2.05. No remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission of Mortgagee to exercise any right or power occurring upon the Event of Default shall impair any such right or power or shall be construed to be a waiver thereof or an acquiescence therein; and every power and remedy given by this Mortgage to Mortgagee may be exercised from time to time and as often as may be deemed expedient by Mortgagee. Nothing in this Mortgage or in the Notes or Credit Agreement shall affect the obligation of Mortgagor to pay the principal and interest on the Notes and all sums due under the Credit Agreement in the manner and at the time and place therein respectively expressed.

SECTION 2.06. To the extent permitted by law, Mortgagor will not at any time insist upon, or plead, or in any manner whatever claim or take any benefit or advantage of, any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Mortgage; nor claim, take or insist upon any benefit or advantage of any law now or hereafter in force providing for the marshalling of the Mortgaged Property, or any part thereof, prior or subsequent to any sale or sales thereof which may be made pursuant to any provision herein, or pursuant to the decree, judgment or order of any court of competent jurisdiction; and Mortgagor hereby expressly waives all benefit or advantage of any such law or laws, and covenants not to hinder, delay or impede the execution of any power herein granted or delegated to Mortgagee, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. Mortgagor hereby waives the right to require any sale to be made in parcels, or the right to select parcels to be so sold, and there shall be no requirement for marshalling of assets. Mortgagor hereby further waives any rights it may have under applicable law relating to the prohibition of the obtaining of a deficiency judgment by Mortgagee against Mortgagor. Mortgagor acknowledges that the transaction of which this Mortgage is a part is a transaction which does not include either agricultural real estate (as defined in Section 15-1201 of the Illinois Mortgage Foreclosure Law (Chapter 110, Sections 15-1101 et seq., Illinois Revised Statutes) (herein called the "Illinois Act")) or residential real estate (as defined in Section 15-1219 of the Illinois Act), and to the full extent permitted by law, hereby voluntarily and knowingly waives its rights to reinstatement and redemption as allowed under Section 15-1601(b) of the Illinois Act.

SECTION 2.07. Intentionally Deleted.

SECTION 2.08. Without affecting the personal liability of any person, firm, corporation, or other entity, including Mortgagor (other than any person released pursuant hereto), for the payment of the indebtedness secured hereby, and without affecting the lien of this Mortgage for the full amount of the indebtedness remaining unpaid upon any property not reconveyed pursuant hereto, Mortgagee is authorized and empowered as follows: Mortgagee may, at any time and from time to time, either before or after the maturity of the Notes or the expiration of the Credit Agreement and without notice: (a) release any person liable for the payment of any of the indebtedness, (b) make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, (d) release any property, real or personal, securing the indebtedness. Mortgagee may, without liability therefor and without notice, at any time and from time to time so long as the lien or charge hereof shall subsist: (a) consent to the making of any map or plat of the Land, (b) join in granting any easement thereon or in creating any covenants restricting use or occupancy thereof, (c) reconvey, without warranty, any part of the Mortgaged Property, (d) join in any extension agreement or in any agreement subordinating the lien or charge hereof.

SECTION 2.09. This Mortgage constitutes a Security Agreement under the laws of the State of Illinois so that Mortgagee shall have and may endorse a security interest in any or all of the Mortgaged Property which may or might now or hereafter be or be deemed to be personal property, fixtures or property other than real estate (collectively, "Personal Property") and Mortgagor agrees to execute, as debtor, such financing statement or statements as Mortgagee may now or hereafter reasonably request in order that such security interest or interests may be perfected pursuant to such laws. This Mortgage further constitutes a fixture filing under Sections 9-334 and 9-502 of the Illinois Uniform Commercial Code, as amended or recodified from time to time; provided, however that the execution and/or filing hereof does not imply that the items of Personal Property included in the Mortgaged Property are or are to become fixtures. The filing hereof as a fixture filing is intended to protect the parties from unwarranted assertions by third parties.

SECTION 2.10. During the continuance of any Event of Default, Mortgagee shall have all of the rights and remedies of a secured party under the Uniform Commercial Code (the "Code") of the State of Illinois, and specifically the right to direct notice and collections of any obligation owing to Mortgagor by any lessee. In addition to its rights to foreclose this Mortgage, Mortgagee shall have the right to sell the Personal Property or any part thereof, or any further, or additional, or substituted Personal Property, at one or more times, and from time to time, at public sale or sales or at private sale or sales, on such terms as to cash or credit, or partly for cash and partly on credit, as Mortgagee may deem proper. Mortgagee shall have the right to become the purchaser at any such public sale or sales, free and clear of any and all claims, rights of equity of redemption in Mortgagor, all of which are hereby waived and released. Mortgagor shall not be credited with the amount of any part of such purchase price, unless, until and only to the extent that such payment is actually received in cash. Notice of public sale, if given, shall be sufficiently given, for all purposes, if published as required by the Code. The net proceeds of any sale of the Personal Property which may remain after the deduction of all costs, fees and expenses incurred in connection therewith, including, but not limited to, all advertising expenses, broker's or brokerage commissions, documentary stamps, recording fees, foreclosure costs, stamp taxes and counsel fees, shall be credited by Mortgagee against the liabilities, obligations and indebtedness of Mortgagor to Mortgagee secured by this Mortgage and evidenced by the Notes or the Credit Agreement. Any portion of the Personal Property which may remain unsold after the full payment, satisfaction and discharge of all of the liabilities, obligations and indebtedness of Mortgagor to Mortgagee shall be returned to the respective parties which delivered the same to Mortgagee. If at any time Mortgagor or any other party shall become entitled to the return of any of the Personal Property hereunder, any transfer or assignment thereof by Mortgagee shall be, and shall recite that the same is, made wholly without representation or warranty whatsoever by, or recourse whatsoever against Mortgagee.

SECTION 2.11. From the date of its recording, this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to are to become fixtures related to the real estate described herein. For this purpose, the following information is set forth:

(a): Name and Address of Mortgagor:

3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attn: Real Estate Manager, Americas
(b): Name and Address of Mortgagee:

BANK OF AMERICA, N.A.
55 South Lake Avenue
Pasadena, California 91101
Attn: Business Credit
Account Executive
(c): This document covers good which are or are to become fixtures.

SECTION 2.12. Intentionally Deleted.

SECTION 2.13. If Mortgagee shall have proceeded to enforce any right or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings have been discontinued or abandoned for any reason, or such proceedings shall have resulted in a final determination adverse to Mortgagee, then and in every such case Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Mortgagee shall continue as if no such proceedings had occurred or had been taken.

SECTION 2.14. All rights, remedies and powers provided by Sections 2.01-2.13, 3.09 & 3.10 hereof may be exercised and any waivers by Mortgagor set forth in such Sections shall be enforceable only to the extent that the exercise thereof or waiver by Mortgagor does not violate any applicable provision of law in the jurisdiction in which the Premises are located, and all such provisions are intended to be subject to all applicable provisions of law which may be controlling in such jurisdiction and to be limited to the extent necessary so that they will not render this Mortgage invalid, illegal or unenforceable under the provisions of any applicable law.

ARTICLE III
MISCELLANEOUS

SECTION 3.01. Mortgagor acknowledges and agrees that this Mortgage secures, inter alia, the entire principal amount of the Notes and the Credit Agreement and interest accrued thereon, regardless of whether any or all of the loan proceeds are disbursed on or after the date hereof, and regardless of whether the outstanding principal is repaid in part, and all future advances made at a later date, as well as any amounts owed to Mortgagee pursuant to this Mortgage and any other amounts as provided herein or in any of the other Loan Documents (as defined in the Credit Agreement), including without limitation the payment of any and all loan commissions, service charges, liquidated damages, expenses and advances due to or paid or incurred by Mortgagee in connection with the Loan Documents, all in accordance with the application and loan commitment issued in connection with this transaction and the Loan Documents. Under no circumstances, however, shall the total indebtedness exceed five (5) times the original principal amount of the Notes and the Credit Agreement.

SECTION 3.02. (a) In the event that any provision in this Mortgage shall be inconsistent with any provisions of the Illinois Act, the Illinois Act shall take precedence over the provisions of this Mortgage, but the Illinois Act shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Illinois Act.

SECTION 3.03. In the event any one or more of the provisions contained in this Mortgage shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

SECTION 3.04. All notices or demands by any party relating to this Mortgage or any other agreement entered into in connection herewith shall be sent in the form and manner set forth in the Credit Agreement.

SECTION 3.05. Whenever in this Mortgage the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person or persons entitled to receive such notice.

SECTION 3.06. All of the grants, covenants, terms, obligations, provisions and conditions herein contained shall run with the land and shall apply to, bind and inure to the benefit of, the successors and assigns of Mortgagor and Mortgagee.

SECTION 3.07. Intentionally Deleted.

SECTION 3.08. It shall be lawful for Mortgagee, at its election, upon the occurrence of an Event of Default, to sue out forthwith a complaint in foreclosure upon this Mortgage and to proceed thereon to judgment and execution for the recovery of all sums payable by Mortgagor pursuant to the terms of this Mortgage without further stay, any law, usage or custom to the contrary notwithstanding.

SECTION 3.09. Notwithstanding the appointment of any receiver, liquidator or trustee of Mortgagor, or of any of its property, or of the Mortgaged Property, or any part thereof, Mortgagee shall be entitled to retain possession and control of all property now or hereafter held under this Mortgage.

SECTION 3.10. Intentionally Deleted.

SECTION 3.11. Mortgagor hereby waives and relinquishes unto, and in favor of Mortgagee, all benefit under all laws, now in effect or hereafter passed, to relieve Mortgagor in any manner from the obligations assumed and the obligation for which this Mortgage is security or to reduce the amount of the said obligation to any greater extent than the amount actually paid for the Mortgaged Property, in any judicial proceedings upon the said obligation, or upon this Mortgage.

SECTION 3.12. Neither Mortgagor nor any other person now or hereafter obligated for payment for all or any part of the indebtedness secured hereby shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated to take action to foreclose on this Mortgage or otherwise enforce any provisions hereof or of the Notes or under the Credit Agreement or by reason of the release, regardless of consideration, of all or any part of the security held for the indebtedness secured hereby, or by reason of any agreement of stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending the time of payment or modifying the terms hereof without first having obtained the consent of Mortgagor or such other person; and in the latter event Mortgagor and all other such persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement, unless expressly released and discharged in writing by Mortgagee.

SECTION 3.13. By accepting or approving anything required to be observed, performed or fulfilled or to be given to Mortgagee pursuant to this Mortgage, including (but not limited to) any certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal or insurance policy, Mortgagee shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Mortgagee.

SECTION 3.14. No offset or claim which Mortgagor now or may in the future have against Mortgagee shall relieve Mortgagor from paying installments or performing any other obligation herein or secured hereby.

SECTION 3.15. Intentionally Deleted.

SECTION 3.16. Intentionally Deleted.

SECTION 3.17. EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 2.09 AND 2.10 HEREOF, THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS GRANTED BY THIS MORTGAGE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS AND IN ALL OTHER RESPECTS THIS MORTGAGE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

SECTION 3.18. Time is of the essence of all Mortgagor's obligations hereunder.

SECTION 3.19. Simultaneously with, and in addition to, the execution of this Mortgage, Mortgagor, and/or related or affiliated entities of Mortgagor, has executed and delivered as security for the Notes and Credit Agreement a mortgage or deed of trust on parcels of property which may or may not be outside the boundaries of this county. Upon the occurrence of an Event of Default under (as defined in) any one of such other mortgages or deeds of trust, including this mortgage, such Event of Default shall be an Event of Default under each and every one of such mortgages and deeds of trust, including this Mortgage. Thereafter, Mortgagee may proceed against any or all of the property comprising security under such mortgage or deed of trust, including this mortgage, or against any other security for the Notes and the Credit Agreement in such order as Mortgagee, in its sole and absolute discretion may determine. Mortgagor hereby waives, to the extent permitted by applicable law, the benefit of any statute or decision relating to the marshalling of assets which is contrary to the foregoing. Mortgagee shall not be compelled to release or be prevented from foreclosing this instrument or any other instrument securing the Notes and/or the Credit Agreement unless all indebtedness evidenced by the Notes and/or the Credit Agreement and all items hereby secured shall have been paid in full and Mortgagee shall not be required to accept any part or parts of any property securing the Notes and the Credit Agreement, as distinguished from the entire whole thereof, as payment of or upon the Notes and/or the Credit Agreement to the extent of the value of such part or parts, and shall not be compelled to accept or allow any apportionment of the indebtedness evidenced by the Notes and/or the Credit Agreement to or among any separate parts of said property.

IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed as of the day and year first above written.

		"MORTGAGOR" 3COM CORPORATION, a, Delaware corporation
		By:

			(Seal)

ATTEST

Officer

STATE OF	)
	)	ss.
COUNTY OF	)

GIVEN under my hand and notarial seal this day of , 2001.

			Notary Public
My Commission Expires:

EXHIBIT A

LEGAL DESCRIPTION:

PARCEL 1:

LOT 1 IN 3800 GOLF ROAD SUBDIVISION OF PART OF FRACTIONAL SECTION 7, TOWNSHIP 41 NORTH, RANGE 11 EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT RECORDED JANUARY 31, 1996 AS DOCUMENT NO. 96080514, IN COOK COUNTY, ILLINOIS.

PARCEL 2:

EASEMENT FOR THE BENEFIT OF PARCEL 1 AFORESAID, TO GO UPON LOT 2 IN 3800 GOLF ROAD SUBDIVISION AFORESAID, FOR THE PURPOSE OF PERFORMING WORK OF CONSTRUCTION AND MAINTENANCE OF BERM IF SUCH WORK IS NOT TIMELY PERFORMED BY THE OWNER OF SAID LOT 2, AS GRANTED IN PARAGRAPH 9.4 OF ARTICLE 9 OF THE DECLARATION AND GRANT OF EASEMENTS, COVENANTS AND RESTRICTIONS EXECUTED BY AT&T CORP., A NEW YORK CORPORATION, DATED JANUARY 26, 1996 AND RECORDED FEBRUARY 9, 1996 AS DOCUMENT NO. 96110279, IN COOK COUNTY, ILLINOIS.

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Exhibit 10.23

ARTICLE I
ARTICLE II EVENTS OF DEFAULT AND REMEDIES
ARTICLE III MISCELLANEOUS
EXHIBIT A
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