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Credit And Guaranty Agreement

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Sectors: Computer Hardware
Governing Law: Hong kong
Effective Date: March 22, 2007
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Exhibit 10.1


EXECUTION


CREDIT AND GUARANTY AGREEMENT


DATED AS OF MARCH 22, 2007


AMONG


H3C HOLDINGS LIMITED,
AS BORROWER


3COM CORPORATION, 3COM HOLDINGS LIMITED AND 3COM TECHNOLOGIES,
AS HOLDCO GUARANTORS


VARIOUS LENDERS,


GOLDMAN SACHS CREDIT PARTNERS L.P.,
AS MANDATED LEAD ARRANGER, BOOKRUNNER, ADMINISTRATIVE AGENT AND SYNDICATION
AGENT,


AND


INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED,
AS COLLATERAL AGENT


----------


$430,000,000 SENIOR SECURED CREDIT FACILITY


----------


TABLE OF CONTENTS


PAGE
---- SECTION 1. DEFINITIONS AND INTERPRETATION................................ 1
1.1. DEFINITIONS...................................................... 1
1.2. ACCOUNTING TERMS................................................. 30
1.3. INTERPRETATION, ETC.............................................. 30


SECTION 2. LOANS......................................................... 30
2.1. TERM LOAN........................................................ 30
2.2. [RESERVED]....................................................... 31
2.3. [RESERVED]....................................................... 31
2.4. [RESERVED]....................................................... 31
2.5. PRO RATA SHARES; AVAILABILITY OF FUNDS........................... 31
2.6. USE OF PROCEEDS.................................................. 32
2.7. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES.... 32
2.8. INTEREST ON LOANS................................................ 33
2.9. CONVERSION/CONTINUATION.......................................... 34
2.10. DEFAULT INTEREST................................................ 35
2.11. FEES............................................................ 35
2.12. SCHEDULED PAYMENTS.............................................. 35
2.13. VOLUNTARY PREPAYMENTS........................................... 35
2.14. MANDATORY PREPAYMENTS........................................... 36
2.15. APPLICATION OF PREPAYMENTS...................................... 38
2.16. GENERAL PROVISIONS REGARDING PAYMENTS........................... 39
2.17. RATABLE SHARING................................................. 40
2.18. MAKING OR MAINTAINING EURODOLLAR RATE LOANS..................... 41
2.19. INCREASED COSTS; CAPITAL ADEQUACY............................... 43
2.20. TAXES; WITHHOLDING, ETC......................................... 44
2.21. OBLIGATION TO MITIGATE.......................................... 45
2.22. REMOVAL OR REPLACEMENT OF A LENDER.............................. 46


SECTION 3. CONDITIONS PRECEDENT.......................................... 46
3.1. CLOSING DATE..................................................... 46
3.2. FURTHER CONDITIONS TO ALL TERM LOANS............................. 47


SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 51
4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION....... 52
4.2. EQUITY INTERESTS AND OWNERSHIP................................... 52
4.3. DUE AUTHORIZATION................................................ 52
4.4. NO CONFLICT...................................................... 52
4.5. GOVERNMENTAL CONSENTS............................................ 53
4.6. BINDING OBLIGATION............................................... 53
4.7. HISTORICAL FINANCIAL STATEMENTS.................................. 53
4.8. PROJECTIONS...................................................... 53
4.9. NO MATERIAL ADVERSE CHANGE....................................... 54
4.10. NO RESTRICTED JUNIOR PAYMENTS................................... 54


ii


4.11. ADVERSE PROCEEDINGS, ETC........................................ 54
4.12. PAYMENT OF TAXES................................................ 54
4.13. PROPERTIES...................................................... 54
4.14. ENVIRONMENTAL MATTERS........................................... 55
4.15. NO DEFAULTS..................................................... 55
4.16. MATERIAL CONTRACTS.............................................. 55
4.17. GOVERNMENTAL REGULATION......................................... 55
4.18. MARGIN STOCK.................................................... 56
4.19. EMPLOYEE MATTERS................................................ 56
4.20. EMPLOYEE PLANS AND PRACTICES.................................... 56
4.21. CERTAIN FEES.................................................... 57
4.22. SOLVENCY........................................................ 57
4.23. ACQUISITION AGREEMENT........................................... 57
4.24. COMPLIANCE WITH STATUTES, ETC................................... 58
4.25. DISCLOSURE...................................................... 58
4.26. PATRIOT ACT..................................................... 58
4.27. PRC-RELATED REPRESENTATIONS..................................... 58


SECTION 5. AFFIRMATIVE COVENANTS......................................... 60
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS........................... 60
5.2. EXISTENCE........................................................ 64
5.3. PAYMENT OF TAXES AND CLAIMS...................................... 64
5.4. MAINTENANCE OF PROPERTIES........................................ 64
5.5. INSURANCE........................................................ 64
5.6. BOOKS AND RECORDS; INSPECTIONS................................... 65
5.7. LENDERS MEETINGS................................................. 65
5.8. COMPLIANCE WITH LAWS............................................. 65
5.9. REVERSAL OF NEGATIVE DISTRIBUTABLE RESERVE....................... 65
5.10. H3C FINANCIAL ASSISTANCE PROCEDURES............................. 65
5.11. POST-CLOSING COLLATERAL DOCUMENTS AND COUNTERPART AGREEMENT..... 66
5.12. REDUCTION OF SHARE PREMIUM...................................... 67
5.13. FINANCIAL ASSISTANCE, CORPORATE BENEFIT, ETC.................... 67
5.14. ENVIRONMENTAL................................................... 67
5.15. SUBSIDIARIES.................................................... 68
5.16. ADDITIONAL MATERIAL REAL ESTATE ASSETS.......................... 69
5.17. ADDITIONAL INTELLECTUAL PROPERTY................................ 69
5.18. OTHER COLLATERAL................................................ 70
5.19. INTEREST RATE PROTECTION........................................ 70
5.20. FURTHER ASSURANCES.............................................. 70
5.21. MISCELLANEOUS COVENANTS......................................... 70
5.22. PRC-RELATED COVENANTS........................................... 72
5.23. INTERCOMPANY COVENANT AGREEMENT................................. 73


SECTION 6. NEGATIVE COVENANTS............................................ 73
6.1. INDEBTEDNESS..................................................... 73
6.2. LIENS............................................................ 76
6.3. NO FURTHER NEGATIVE PLEDGES...................................... 78


iii


6.4. RESTRICTED JUNIOR PAYMENTS....................................... 78
6.5. RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS......................... 79
6.6. INVESTMENTS...................................................... 79
6.7. FINANCIAL COVENANTS.............................................. 81
6.8. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS......... 82
6.9. DISPOSAL OF SUBSIDIARY INTERESTS................................. 83
6.10. SALES AND LEASE-BACKS........................................... 83
6.11. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES................... 83
6.12. CONDUCT OF BUSINESS............................................. 84
6.13. PERMITTED ACTIVITIES OF BORROWER................................ 84
6.14. AMENDMENTS OR WAIVERS OF ORGANIZATIONAL DOCUMENTS, INTERCOMPANY
COVENANT AGREEMENT AND CERTAIN MATERIAL CONTRACTS............ 84
6.15. FISCAL YEAR..................................................... 84


SECTION 7. GUARANTY...................................................... 85
7.1. GUARANTY OF THE OBLIGATIONS...................................... 85
7.2. CONTRIBUTION BY GUARANTORS....................................... 85
7.3. PAYMENT BY GUARANTORS............................................ 85
7.4. LIABILITY OF GUARANTORS ABSOLUTE................................. 86
7.5. WAIVERS BY GUARANTORS............................................ 88
7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC............. 88
7.7. SUBORDINATION OF OTHER OBLIGATIONS............................... 89
7.8. CONTINUING GUARANTY.............................................. 89
7.9. AUTHORITY OF GUARANTORS OR BORROWER.............................. 89
7.10. FINANCIAL CONDITION OF BORROWER................................. 89
7.11. BANKRUPTCY, ETC................................................. 90
7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR.................... 90
7.13. DISCHARGE OF GUARANTIES FROM HOLDCO GUARANTORS.................. 90


SECTION 8. EVENTS OF DEFAULT............................................. 91
8.1. EVENTS OF DEFAULT................................................ 91


SECTION 9. AGENTS........................................................ 94
9.1. APPOINTMENT OF AGENTS............................................ 94
9.2. POWERS AND DUTIES................................................ 94
9.3. GENERAL IMMUNITY................................................. 95
9.4. AGENTS ENTITLED TO ACT AS LENDER................................. 96
9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT.......... 96
9.6. RIGHT TO INDEMNITY............................................... 97
9.7. SUCCESSOR ADMINISTRATIVE AGENT AND COLLATERAL AGENT.............. 97
9.8. COLLATERAL DOCUMENTS AND GUARANTY................................ 98


SECTION 10. MISCELLANEOUS................................................ 99
10.1. NOTICES......................................................... 99
10.2. EXPENSES........................................................ 101
10.3. INDEMNITY....................................................... 101


iv


10.4. SET-OFF......................................................... 102
10.5. AMENDMENTS AND WAIVERS.......................................... 102
10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.......................... 104
10.7. INDEPENDENCE OF COVENANTS....................................... 107
10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......... 107
10.9. NO WAIVER; REMEDIES CUMULATIVE.................................. 107
10.10. MARSHALLING; PAYMENTS SET ASIDE................................ 107
10.11. SEVERABILITY................................................... 108
10.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS..... 108
10.13. HEADINGS....................................................... 108
10.14. APPLICABLE LAW................................................. 108
10.15. CONSENT TO JURISDICTION........................................ 108
10.16. WAIVER OF JURY TRIAL........................................... 109
10.17. CONFIDENTIALITY................................................ 109
10.18. USURY SAVINGS CLAUSE........................................... 110
10.19. COUNTERPARTS................................................... 110
10.20. EFFECTIVENESS.................................................. 111
10.21. PATRIOT ACT.................................................... 111
10.22. ELECTRONIC EXECUTION OF ASSIGNMENTS............................ 111
10.23. JUDGMENT CURRENCY.............................................. 111


v


APPENDICES: A Term Loan Commitments
B Notice Addresses


SCHEDULES: 1.1A Security Principles
4.1 Jurisdictions of Organization and Qualification
4.2 Equity Interests and Ownership
4.13 Real Estate Assets
4.16 Material Contracts
4.27 PRC Matters
6.1 Certain Indebtedness
6.2 Certain Liens
6.3 Negative Pledges
6.5 Certain Restrictions on Subsidiary Distributions
6.6 Certain Investments
6.11 Certain Affiliate Transactions


EXHIBITS: A-1 Funding Notice
A-2 Conversion/Continuation Notice
B Note
C Compliance Certificate
D-1 Opinion of New York Counsel to the Credit Parties
D-2 Opinion of Hong Kong Counsel to the Credit Parties
D-3 Opinion of Cayman Counsel to the Credit Parties
E Assignment Agreement
F [Reserved]
G-1 Closing Date Certificate
G-2 Solvency Certificate
H Counterpart Agreement
I-1 Borrower Share Charge
I-2 Borrower Fixed and Floating Charge
J-1 Borrower Charge Over Bank Accounts
J-2 H3C Fixed and Floating Charge
J-3 H3C Equitable Share Charge
J-4 H3C Share Mortgage
K-1 H3C Subsidiary Share Charge (WFOE)
K-2 H3C Subsidiary Share Charge (Queenhive)


vi


CREDIT AND GUARANTY AGREEMENT


This CREDIT AND GUARANTY AGREEMENT, dated as of March 22, 2007, is entered into by and among H3C HOLDINGS LIMITED, a limited liability company organized under the laws of the Cayman Islands ("BORROWER"), 3COM CORPORATION ("3COM"), 3COM HOLDINGS LIMITED ("3COM HOLDINGS"), 3COM TECHNOLOGIES ("3COM CAYMAN" and, together with 3Com and 3Com Holdings, the "HOLDCO GUARANTORS" and, together with any Guarantor Subsidiaries, the "GUARANTORS"), the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as Syndication Agent (in such capacity, "SYNDICATION AGENT") and as Administrative Agent (together with its permitted successors in such capacity, "ADMINISTRATIVE AGENT"), and INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED ("ICBC"), as Collateral Agent (together with its permitted successor in such capacity, "COLLATERAL AGENT").


RECITALS:


WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;


WHEREAS, Lenders have agreed to extend a Term Loan to Borrower, in an aggregate amount not to exceed $430,000,000, the proceeds of which will be used to (i) finance the Acquisition and (ii) pay related transaction costs, fees and expenses in connection with the Acquisition;


WHEREAS, Borrower has agreed to secure all of its Obligations by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of its assets, including a charge of all of its Equity Interest in H3C; and


WHEREAS, Guarantors have agreed to guarantee the obligations of Borrower hereunder; 3Com Cayman has agreed to grant a First Priority Lien on the shares held by 3Com Cayman in the Borrower and in H3C (during the period that 3Com Cayman owns such shares in H3C); and H3C, subject to compliance with Section 5.10 of this Agreement and to applicable governmental approvals, has agreed to grant a First Priority lien on substantially all of its assets, including a charge of all of the Equity Interests owned by H3C in WFOE and Queenhive.


NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:


SECTION 1. DEFINITIONS AND INTERPRETATION


1.1. DEFINITIONS. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings:


"3COM" as defined in the preamble hereto.


"3COM SUBSIDIARIES" means the Subsidiaries of 3Com which are not Subsidiaries of Borrower and which may be involved in the Subsidiary Integration Transactions.


"3COM CAYMAN" as defined in the preamble hereto.


"3COM HOLDINGS" as defined in the preamble hereto.


"ACQUISITION" means the acquisition by 3Com Cayman of 49% of the issued and outstanding Equity Interests in H3C pursuant to and in accordance with the terms of the Acquisition Agreement, which Equity Interests shall thereafter immediately be transferred to the Borrower either (x) in satisfaction of the loan made by Borrower to 3Com Cayman and used by 3Com Cayman to fund, in part, the Acquisition or (y) as consideration for the issuance of share(s) by Borrower to 3Com Cayman or (z) some combination of (x) and (y).


"ACQUISITION AGREEMENT" means, collectively, (x) that certain stock purchase agreement dated as of December 22, 2006 between Seller and 3Com Cayman, as the same may be amended from time to time and (y) the terms of the Shareholders' Agreement that govern 3Com Cayman's bid to purchase 49% of the Equity Interests in H3C that was accepted by Seller in November 2006.


"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (and rounding upward to the nearest 1/100 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Reuters Screen LIBOR01 Page which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the average of the offered quotation rates to first class banks in the London interbank market by Bank of America, N.A., Barclays Bank plc, JPMorganChase Bank, N.A. and The Royal Bank of Scotland Group for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) either (x) with respect to Lenders affected thereby and which are actually maintaining reserves against "Eurocurrency liabilities", the Applicable Reserve Requirement or (y) with respect to all other Lenders, zero.


2


"ADMINISTRATIVE AGENT" as defined in the preamble hereto.


"ADVERSE PROCEEDING" means any action, suit, proceeding, hearing (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Borrower or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the best knowledge of Borrower or any of its Subsidiaries, threatened against or affecting Borrower or any of its Subsidiaries or any property of Borrower or any of its Subsidiaries.


"AFFECTED LENDER" as defined in Section 2.18(b).


"AFFECTED LOANS" as defined in Section 2.18(b).


"AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.


"AGENT" means each of the Administrative Agent, Syndication Agent and Collateral Agent.


"AGENT AFFILIATES" as defined in Section 10.1(b).


"AGGREGATE AMOUNTS DUE" as defined in Section 2.17.


"AGGREGATE PAYMENTS" as defined in Section 7.2.


"AGREEMENT" means this Credit and Guaranty Agreement, dated as of March 22, 2007, as it may be amended, supplemented or otherwise modified from time to time.


"ALLOWED DISTRIBUTABLE RESERVES" means, for any period and with respect to any Person, the lesser of (i) the reserves of such Person generated for the four-Fiscal Quarter period then ended which are permitted by applicable laws, regulations and otherwise to be distributed as dividends or other distribution to the holders of such Person's Equity Interests and (ii) available Cash and Cash Equivalents on hand of such Person as of the date of determination.


"APPLICABLE MARGIN" means (i) with respect to Eurodollar Rate Loans, (a) from the Funding Date until the date of delivery of the Compliance Certificate and the audited consolidated financial statements of Borrower and its Subsidiaries for Fiscal Year 2006, a percentage, per annum, determined by reference to the following table as if the Leverage Ratio then in effect were 2.87:1.00, based on an estimated Consolidated Adjusted EBITDA of $150,000,000; provided, that, after delivery of the Compliance Certificate and the audited consolidated financial statements of Borrower and its Subsidiaries for Fiscal Year 2006, if the


3


actual Consolidated Adjusted EBITDA with respect to Fiscal Year 2006 would result in a Leverage Ratio that would require application of a different Applicable Margin pursuant to the below grid, then such revised Applicable Margin shall be applied with retroactive effect to the Funding Date and any excess amounts owed pursuant to such application shall be paid on the next Interest Payment Date; provided, further, that such Applicable Margin then in effect (after delivery of such financial statements) may not be reduced prior to the first anniversary of the Funding Date; and (b) thereafter, a percentage, per annum, determined by reference to the Leverage Ratio in effect at the date such ratio is determined as set forth below:


LEVERAGE RATIO APPLICABLE MARGIN
-------------- -----------------
> 3.00:1.00 2.25%


2.00:1.00 2.00%


1.00:1.00 1.75%


< or = 1.00:1.00 1.50%


and (ii) with respect to Base Rate Loans, an amount equal to (a) the Applicable Margin for Eurodollar Rate Loans as set forth in clause (i)(a) or (i)(b) above, as applicable, minus (b) 1.00% per annum. No change in the Applicable Margin shall be effective until three Business Days after the date on which Administrative Agent shall have received the applicable financial statements and a Compliance Certificate pursuant to Section 5.1(d) calculating the Leverage Ratio. At any time, but only for so long as, Borrower has not submitted to Administrative Agent the applicable information when required under Section 5.1(d) and provided that this is not remedied within five Business Days after notice has been given by Administrative Agent to Borrower, the Applicable Margin shall be determined as if the Leverage Ratio were in excess of 3.00:1.00. Within one Business Day of receipt of the applicable information under Section 5.1(d), Administrative Agent shall give each Lender telefacsimile or telephonic notice (confirmed in writing) of the Applicable Margin in effect from such date.


"APPLICABLE RESERVE REQUIREMENT" means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against "Eurocurrency liabilities" (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained pursuant to regulations issued from time to time by the Board of Governors by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted Eurodollar Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve


4


Requirement and the applicable Lender shall as soon as is reasonably practicable notify Borrower in writing of any such change.


"APPROVED ELECTRONIC C
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