10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 1, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 0-12867

3COM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2605794
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
350 Campus Drive
Marlborough, Massachusetts	01752
(Address of principal executive offices)	(Zip Code)

(508) 323-1000
(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value per share Preferred Stock Purchase Rights	The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ           No o     

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o           No þ     

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 þ           No o     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o           No þ     

As of December 1, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $1,601,609,102 based on the closing sale price as reported on the NASDAQ Global Select Market.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 27, 2007
Common Stock, $0.01 par value per share	399,502,446 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Shareholders to be held September 26, 2007 (Proxy Statement)	Part III, to the extent stated herein

3Com Corporation
Form 10-K Annual Report
For the Fiscal Year Ended June 1, 2007
Table of Contents

		Page
Part I
Item 1.	Business		3
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments		29
Item 2.	Properties		29
Item 3.	Legal Proceedings		30
Item 4.	Submission of Matters to a Vote of Security Holders		30
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		30
Item 6.	Selected Financial Data		32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		33
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		51
Item 8.	Financial Statements and Supplementary Data		53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		94
Item 9A.	Controls and Procedures		94
Item 9B.	Other Information		97
Part III
Item 10.	Directors, Executive Officers and Corporate Governance		97
Item 11.	Executive Compensation		97
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		97
Item 13.	Certain Relationships and Related Transactions, and Director Independence		97
Item 14.	Principal Accounting Fees and Services		98
Part IV
Item 15.	Exhibits and Financial Statement Schedules		98
	Exhibit Index		98
	Signatures		104
	Financial Statement Schedule		105
EX-10.21 Zheng Employment Agreement, effective as of March 29, 2007
EX-10.27 Hamilton Offer Letter dated November 2, 2005
EX-10.28 Hamilton Severance Benfits Agreement dated February 28, 2007
EX-10.29 Robert Y. L. Mao Employment Agreement, dated as of August 7, 2006
EX-10.31 Summary of Equity Appreciation Rights Plan
EX-10.33 Above Grade Severance Plan effective September 11, 2006
EX-10.36 Form of Management Retention Agreement
EX-10.53 Borrower Share Charge dated March 22, 2007
EX-10.54 Borrower Fixed and Floating Charge dated March 22, 2007
EX-10.55 Borrower Charge Over Bank Accounts dated March 22, 2007
EX-10.56 H3C Fixed and Floating Charge dated April 3, 2007
EX-10.57 H3C Share Mortgage dated March 30, 2007
EX-10.58 H3C Equitable Share Charge dated March 29, 2007
EX-10.59 Deed of Charge in relation to the 100% equity interest in WFOE dated April 3, 2007
EX-10.60 Deed of Charge in relation to the 100% equity interest in Queenhive dated April 3, 2007
EX-10.61 Deed of Release made march 30, 2007
EX-21.1 Subsidiaries of Registrant
EX-23.1 Consent of Deloitte & Touche LLP
EX-31.1 Certification of Principal Executive Officer
EX-31.2 Certification of Principal Financial Officer
EX-32.1 Certification of CEO and CFO Section 906

1

We use a 52 or 53 week fiscal year ending on the Friday nearest to May 31, with each fiscal quarter ending on the Friday generally nearest August 31, November 30 and February 28. For presentation purposes, the periods are shown as ending on August 31, November 30, February 28 and May 31, as applicable.

We acquired majority (51 percent) ownership of Huawei-3Com Co., Ltd. (“H3C”), a China-based joint venture, on January 27, 2006 and determined it was then appropriate to consolidate H3C’s results. For convenience of close purposes we consolidated the results of H3C as of February 1, 2006. H3C follows a calendar year basis of reporting and therefore results are consolidated on a two-month time lag. In fiscal 2006, we recorded equity income for the period April 1, 2005 through January 31, 2006 and consolidated H3C’s results for the period February 1, 2006 through March 31, 2006. Prior to 2006 we reported our equity in H3C’s net loss for H3C’s fiscal period from April 1, 2004 through March 31, 2005 and the date of formation (November 17, 2003) through March 31, 2004 in our results of operations for fiscal 2005 and 2004.

We acquired the remaining 49 percent minority interest of H3C on March 29, 2007.

3Com, the 3Com logo, Digital Vaccine, NBX, IntelliJack, OfficeConnect, TippingPoint Technologies, UnityOne, and H3C are registered trademarks of 3Com Corporation or its subsidiaries. TippingPoint and VCX are trademarks of 3Com Corporation. Other product and brand names may be trademarks or registered trademarks of their respective owners.

This Annual Report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the following aspects of our business: future growth of H3C, including strategy, growth, management of growth, dependence, expected benefits, method of consolidation, tax rate, sales from China, adjustments to preliminary purchase price allocation for 49 percent acquisition, and resources needed to comply with Sarbanes-Oxley and manage operations; impact of SFAS No. 123(R) and other accounting regulations; expected annual amortization expense; TippingPoint IPO; environment for enterprise networking equipment; challenges relating to sales growth; supply of components; trend towards Gigabit products; research and development focus; characteristics of IPS and certain H3C products; future sales of connectivity products; re-assessment, development and execution of our “go-to-market” strategy; strategic product and technology development plans; management of SCN segment to reach sustained profitability; goal of profitability; dependence on China; ability to satisfy cash requirements for at least the next twelve months; restructuring activities and expected charges to be incurred; potential additional restructuring and cost reduction activities; expected sale of land; expected cost savings from restructuring activities and integration; potential acquisitions and strategic relationships; future contractual obligations; recovery of deferred tax assets; reserves; market risk; outsourcing; competition and pricing pressures; and effect of litigation; and you can identify these and other forward-looking statements by the use of words such as “may,” “can,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any forward-looking statements.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I Item 1A Risk Factors. All forward-looking statements included in this document are based on our assessment of information available to us at the time this report is filed. We do not intend, and disclaim any obligation, to update any forward-looking statements.

In this Form 10-K we refer to the People’s Republic of China as China or the PRC.

2

PART I

ITEM 1. BUSINESS

GENERAL

We provide secure, converged networking solutions on a global scale to organizations of all sizes. Our products and solutions enable customers to manage business-critical voice, video and data in a secure, scalable, reliable and efficient network environment. We deliver networking products and services for enterprises that view their networks as mission critical, and value cost-effective superior performance. Our products form integrated solutions and function in multi-vendor environments based upon open, not proprietary, platforms. Our products are sold on a worldwide basis through a combination of value added partners and direct sales representatives.

We deliver products and solutions that support the increasingly complex and demanding application environments in today’s businesses. We aspire to be one of the leading enterprise networking companies by delivering innovative, secure, feature-rich products and solutions built on open platform technology. We believe that our global presence, brand identity and intellectual property portfolio provide a solid foundation for achieving our objectives.

On January 27, 2006, 3Com completed the purchase of an additional two percent ownership interest in, and we assumed majority ownership of, H3C, our China-based subsidiary, from Huawei Technologies, or Huawei. With the completion of that transaction, 3Com held a 51 percent majority interest in and control of the joint venture and has consolidated its results from the transaction closing date. Three years after formation of H3C, that started as a joint venture with Huawei, we and Huawei each had the right to initiate a bid process to purchase the equity interest in H3C held by the other. 3Com initiated the bidding process on November 15, 2006 to buy Huawei’s 49 percent stake in H3C and our last bid of $882 million was accepted by Huawei on November 27, 2006. The transaction closed on March 29, 2007, at which time the purchase price was paid in full.

When the joint venture was initially formed in 2003, we had three key objectives: first, to establish a substantial presence in China, a rapidly growing large market; second, to create a resource capable of building enterprise-class, cutting-edge switching and routing products faster than we could deliver on our own; and third, to capitalize on a rapidly growing pool of engineering talent. With the completion of our acquisition bringing us to 100 percent ownership of H3C we intend to continue to deliver on the above objectives as well as to increasingly integrate the businesses.

Since commencing the consolidation of H3C during our fourth fiscal quarter of 2006, 3Com has reported two operating business segments: the Secure, Converged Networking (SCN) segment, comprising our security, networking, and voice product offerings (other than H3C offerings in these areas), and the H3C segment. See Note 19 to our Consolidated Financial Statements in Item 8 of this Form 10-K for certain financial information relating to our segments.

In addition to our acquisition of incremental ownership in H3C, during the past year we undertook several actions we believe will enhance our competitiveness, execution and financial performance over the longer term. First, we continued to manage our expenses in an effort to achieve profitability. These actions will be discussed in more detail later in this report. Second, we focused on developing offerings that deliver on the needs of converged networking, and we began to launch products and enter into partnership arrangements to support our open platform networking strategy. More specifically, we have introduced multiple new products targeted at enterprises of all sizes, including new convergence ready switch offerings and secure switches for the small and medium enterprise, network based storage solutions for large enterprise, new security offerings including network access control features and enhancements to our TippingPoint products.

Third, we also announced our Open Services Networking (OSN) strategic initiative which is designed to uniquely provide enterprises and service providers with open intelligent switches and routers, to deliver converged voice, video and security services which are designed to reduce total cost of acquisition and ownership. OSN is intended to allow customers the freedom to innovate with an open “ecosystem” of open source, best of breed and 3Com technologies to enable the rapid development and deployment of new networking solutions in a timeframe that is driven by the customer.

During the fiscal year ended June 1, 2007, we focused on continuing the profitable growth of our H3C segment while reducing expenses in our SCN segment in a manner intended to limit the impact on revenues. In our 2008 fiscal year we intend to focus on growth in each of our segments, while maintaining our focus on controlling costs in our business.

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3Com was incorporated in California on June 4, 1979 and reincorporated in Delaware on June 12, 1997. Our corporate headquarters are located in Marlborough, Massachusetts. We have offices and sales capabilities in 35 countries and 60 locations worldwide. Our Web site address is www.3Com.com. We make available on our Web site, free of charge, our SEC filings (including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 filings on Forms 3, 4 and 5, and any amendments to those reports) as soon as reasonably practicable after we electronically file with or furnish such material to the Securities and Exchange Commission (SEC). The information contained on our Web site is not incorporated by reference in this Annual Report on Form 10-K.

SECURED, CONVERGED NETWORKING “SCN” SEGMENT PRODUCTS AND SERVICES

Networking needs vary among customers and, therefore, we offer a broad line of products and solutions. We strive to meet our customers’ needs by delivering scalable, feature-rich, high performance, reliable, and secure standards-based networking solutions.

Our long-term technology-based strategy centers on enterprises and public sector organizations migrating to secure IP-based infrastructures that deliver converged voice and data applications. Our products and services can generally be classified in the following categories:

§	Security;
§	IP Telephony;
§	Networking; and
§	Services.

During fiscal 2007 we decided to discontinue our connectivity products through an “end-of-life” program. The revenues from these products over the past three fiscal years were $15.4 million for 2007, $39.8 million for 2006 and $54.0 million for 2005. With the exception of certain revenue sharing and royalty relationships associated with the technologies for these products we expect the revenues from this business to be insignificant on a going-forward basis.

Each of our principal product categories and service offerings is described in greater detail below.

Security

We have a comprehensive security portfolio that includes end-to-end solutions for core-to-edge protection. Organizations can choose to implement overlaid or embedded security solutions that are automatic and centrally manageable and which provide adaptive and dynamic protection.

Our security products include the following:

§	Intrusion Prevention Systems;
§	Network Access Control; and
§	Firewalls.

Intrusion Prevention Systems

Our TippingPoint™ line of intrusion prevention systems (IPS) are hardware-based products utilizing high-speed network processors and Field Programmable Gate Arrays (FPGAs) that can operate at multi-Gigabit speeds. Our hardware platform is complemented by a robust security-oriented operating system and suite of vulnerability filters that can be dynamically updated. Our TippingPoint IPS offers bandwidth management, peer-to-peer protection, and default “Recommended Settings” to accurately block malicious traffic automatically upon installation without tuning.

The TippingPoint IPS provides application protection, performance protection and infrastructure protection through total packet inspection, which means that our system reviews all data processed through it for viruses and other malicious traffic. Application protection capabilities provide fast, accurate, reliable protection from internal and external cyber attacks. Through its infrastructure protection capabilities, the TippingPoint IPS protects IP telephony infrastructure, routers, switches, DNS and other critical infrastructure from targeted attacks and traffic anomalies. Our performance protection capabilities enable customers to throttle non-mission critical applications that hijack valuable bandwidth and IT resources, thereby aligning network resources and business-critical application performance.

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The switch-like performance characteristics of the TippingPoint IPS allow it to be placed at the core, in-line at the perimeter, on internal network segments, and at remote site locations with minimal or no adverse network impact. Additionally, our IPS solutions are deployed and managed using a scalable, tiered Security Management System (SMS). Using SMS, customers implement and manage coherent, enterprise-wide security policies based on rules and thresholds set within the SMS. The SMS offers a rich reporting system, allowing customized reports to be generated and distributed automatically on a scheduled basis. Support for multiple user profiles allows a range of users, such as administrators and executives, access to this management system.

We provide a real-time update service, called Digital Vaccine^® service, which automatically and rapidly delivers vulnerability filters against the latest threats. To facilitate the creation of Digital Vaccine filters, our Threat Management Center monitors and collects security intelligence from customers and security agencies around the world. Based on this intelligence, we perform investigations of new software vulnerabilities and create antidotes that are delivered directly to our products.

Network Access Control

We offer Network Access Control (NAC) features which enable enterprises to enforce device and user policies to ensure endpoint compliance, through our TippingPoint NAC Enforcer offering. We are developing additional products for NAC functionality as well as investigating the integration of this technology into other network offerings.

Firewalls

We offer a range of firewall solutions including embedded, standalone and application or situation-specific offerings. Our firewall solutions are designed to protect networks by preventing unauthorized network access, blocking attacks and encrypting traffic traveling across the Internet.

Our firewall solutions include the following:

§	Integrated switch firewalls;
§	Secure network interface cards;
§	Secure switches and routers; and
§	SMB VPN firewall devices with Content Filter Services.

Internet Protocol (IP) Telephony

Voice communications are a mission critical function for businesses of all kinds and sizes around the world. IP is ubiquitous today both within an enterprise and outside of it, providing the ability for software applications and computers to communicate in an efficient manner. We offer a broad portfolio of IP telephony products that work together to deliver business-focused applications, including: next-generation dial tone, IP messaging, IP presence, IP conferencing, IP mobility and IP customer contact center services. Our secure, Session Initiation Protocol (SIP)-driven platform and applications are designed to meet the performance expectations of today’s business environments: cost effectiveness, increased user productivity and strengthened customer interactions. These products include the following:

§	IP Telephony Platforms
§	Convergence Application Suite
§	IP Phones

IP Telephony Platforms

Our IP telephony platforms deliver converged voice and data services to enterprises with distributed or single-location networks. Our NBX^® platform was initially introduced in 1998, making it the first-to-market IP-Private Branch Exchange (PBX) system. NBX platforms provide the benefits of industry-standard, SIP-based call control along with a robust set of built-in applications to small to medium size businesses. Our VCX™ platform, introduced in April 2003, delivers the benefits of SIP-based carrier-class “survivability” and next-generation network applications to enterprises with up to thousands of users. Designed for enterprise campus, multi-site and multinational networks, VCX platforms include modular software components that are highly scalable – performing call control, signaling, application creation and media control.

5

Convergence Application Suite

Our Convergence Application Suite includes real-time, efficiency-generating applications that share a common infrastructure for call control, authentication, privacy, location and presence. These applications are designed to help enterprises lower cost, improve productivity, and strengthen customer interactions. Our Convergence Application Suite includes the following components:

§	IP Telephony Module. Scalable and flexibly-deployed NBX and VCX solutions delivering proven reliability and cost-effective capabilities for organizations of all sizes.
§	IP Messaging Module. Messaging with server software for centralized voice mail, fax mail, and e-mail services.
§	IP Presence Module. Software for improving collaboration and communications.
§	IP Conferencing Module. Audio, video, and data sharing to cost-effectively enhance collaboration.
§	IP Mobility Module. 802.11 wireless phone and remote telecommuting options designed to address the increasing needs of a mobile workforce.
§	IP Contact Center Module. Complete multi-media customer interaction management application.
§	IP Convergence Client. Provides convenient personal portal to a variety of interpersonal communications functions including telephony, audio & video conferencing, messaging, presence, document sharing and instant messaging.
§	IP Telecommuting Module. Delivers the benefits of 3Com Converged applications to users connecting to enterprise network from remote locations.

IP Phones

The advanced features and high-fidelity of our IP Phones are designed to help enterprises function more productively and meet customer needs more competitively. Our IP Phones are compatible with our NBX and VCX IP Telephony platforms. In addition to customary features, our phones include advanced functionality such as power over ethernet, or PoE, interactive display, intuitive user interface and browser-based administration.

Our line of phones consists of the following products:

§	3108 Wireless Phone;
§	3106/3107 Cordless Phones;
§	3105 Attendant Console;
§	3103 Manager Phone;
§	3102 Business Phone;
§	3101 Basic Phone and with Speaker
§	3100 Entry Phone.

Networking

In order to meet the business and technology needs of our customers, our networking infrastructure products focus on the requirements for a secure, converged network: availability, performance, scalability and ease-of-use. We focus on reducing complexity by making management and configuration of secure, converged voice and data networking much easier, and we continue to innovate around a standards-based, open architecture that supports multi-vendor environments. We deliver our networking infrastructure capabilities in the following categories of data networking infrastructure products and solutions, each of which is described in greater detail below:

§	Local Area Network (LAN) Switches;
§	Routers and Gateways;
§	Mobility and Wireless LAN; and
§	Network and Security Management.

6

LAN Switches

Switches are multi-port devices, located in the network core and at the network edge, that join multiple computers and peripheral devices and serve as the foundation for transporting voice, video and data over a network. We offer a number of fixed-configuration and modular chassis switches that we believe provide the performance and flexibility required by our customers.

Our switching products represent a broad offering, including full-featured modular, stackable and stand-alone switches ranging from 10 Megabits per second (Mbps) to near Terabit per second performance. Our switches are available as managed units, which are typically found in enterprise environments and unmanaged, standalone units, typically used by small and medium-sized organizations. We design our enterprise-class switches to share a common operating system and user interface that work together to lower the cost of ownership and management. We offer a number of switching products, which we generally classify in the following families:

§	Core Switching. We offer modular chassis core networking solutions in our Switch 8800 series and Switch 7750 series of products. They are highly resilient, secure and convergence-ready, with Layer 2 and Layer 3 IPv4 and IPv6 Gigabit Ethernet and 10-Gigabit connectivity. The 7750 series can also be used in conjunction with the 8800 as either an aggregation or edge switch capable of delivering PoE, as well as Quarantine Protection, a feature of our TippingPoint Security Management System.
§	Gigabit Ethernet Switching. Our Switch 5500G, 4500G, 4200G families of products address the growing requirements for Gigabit speeds at the edge of the network as well as features such as PoE, security and Quarantine Protection. These stackable switches are offered in configurations to provide customers with both 24- and 48-port models and built-in 10-Gigabit expansion slot capability.
§	Fast Ethernet Switching. We offer a full range of fixed-configuration switches that deliver performance and flexibility to the edge of the network. These include enterprise-class offerings such as the Switch 5500 family, Switch 4500 and Switch 4200 families of products, as well as our OfficeConnect® and Baseline series. Several of these switches are available in managed and unmanaged configurations, offer line speeds of 10/100/1000 Mbps and incorporate PoE technology allowing power from the wiring closet to be supplied to any compliant device, including IP phones, wireless LAN access points and IntelliJack® products.

Routers and Gateways

Our enterprise routers, in combination with our other networking infrastructure products, provide a means of transporting converged voice and data traffic across an IP Wide Area Network (WAN) while preserving the Quality of Service (QoS) required for mission critical applications.

Our enterprise routers, all of which support a variety of WAN connection speeds, are offered in the following three families of products:

§	Router 6000 Products. The Router 6000 series of products bring enterprise-class WAN routing features, redundancy and performance to the regional offices of large enterprise customers and to the headquarters of medium-sized businesses.
§	Router 5000 Products. The Router 5000 series of modular products are designed to connect corporate sites, from small branch to large regional offices.
§	Router 3000 Products. The Router 3000 series of products provide a fixed configuration platform to securely connect small offices and remote offices of large enterprises.

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Mobility and Wireless LAN

We offer wireless networking products and solutions that enable users to stay connected to the network while at their desks or roaming within an enterprise or a large campus environment. The productivity increase associated with this ease of information access in a secure manner is driving many businesses to deploy wireless networks. We offer a complete portfolio of high-performance, standards-based wireless solutions, including 802.11 a/b/g wireless standards, along with wireless security and policy enforcement.

Our wireless product offerings include the following:

§	Wireless LAN Access Points – stand-alone and managed;
§	Wireless Controllers and Switches;
§	Wireless Routers;
§	Wireless Bridges; and
§	Wireless Switch Manager.

Network and Security Management

We offer flexible and comprehensive network and security management application packages for advanced IT environments. Our network and security management applications help our customers manage large and small wired and wireless networks with tools for network monitoring, device control and fast problem resolution. Our network management applications include the following solutions:

§	Network Supervisor. Practical, easy-to-use software, downloadable from the Internet, maps and monitors the network and quickly alerts administrators to emerging problems.
§	Network Director. Turnkey management application suite offering advanced monitoring and control features to IT managers.
§	Enterprise Management Suite. Comprehensive and flexible solutions for very large enterprise environments.
§	Solutions for Open Management Platforms. A selection of solutions that enable enterprises to choose management applications that meet their business and technical needs.
§	Security Management System. A scalable and flexible reporting tool used to manage our intrusion prevention system, TippingPoint SMS enables users to manage multiple devices and reports on network security activity.

Services

We provide our channel partners and customers a single point of accountability for service performance and quality. Our global service offerings cover key aspects of support that customers need to keep their data networking and voice solutions operating effectively, including telephone support, hardware replacement, software updates, dedicated on-site engineers and spare parts. We also offer high-end professional services and training to provide complete product plus service solutions for our customers. Our portfolio of professional services includes assessment and design, project management, training and certifications, installation, and integration services that are especially important to our customers that purchase higher-end switches, routers and IP telephony communications systems.

We have a team of highly skilled and professional in-house services experts and also partner with select third party service providers and we offer customers the benefits of virtually integrated services resources. Additionally, we have agreements with local and regional professional services providers to augment our onsite coverage and meet the demand for our services.

H3C

H3C Technologies, our wholly-owned Chinese subsidiary, began operations on November 17, 2003. H3C is domiciled in Hong Kong, and its principal operating center is in Hangzhou, China.

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H3C SEGMENT PRODUCTS AND SERVICES

H3C products can generally be classified in the following categories:

§	Networking – LAN Switches, Routers, Network Management Software and Access Control Server;
§	Security – Firewalls and VPN Gateways;
§	Emerging Technology – IP Storage and IP Video Surveillance; and
§	Services.

Each of H3C’s principal product categories are described in greater detail below. H3C is significantly dependent on its China operations.

LAN Switches

H3C offers customers a full portfolio of LAN switch products ranging from switches for the small business market to enterprise-class switches to Metro Ethernet Switches geared to the carrier markets. H3C’s switches enable customers to easily upgrade their network solution as their business and network requirements grow. H3C switches also include robust network security features, and are built to support the convergence of data, voice and video.

§	Core Routing Switches. The S9500 Series 10G Multi-service Core Routing Switch is a new generation high performance switch. It is extensively applied as the core layer of E-government networks, campus networks, education networks and other enterprise networks and core layer or aggregation layer of carriers’ IP Metro Area Networks (MANs). Moreover, based on the 10G platform, it supports the new generation high-speed 10Gbps interface card that provides interconnection between MANs, campus networks and data centers to construct end-to-end Ethernet, featuring cost-effective, high performance and reliability to support abundant services. Furthermore, it provides Layer 2 and Layer 3 wire-speed packet forwarding and distributed Multi-protocol Label Switching (MPLS) wire-speed forwarding by its high performance, high density and high reliability chassis architecture design. It also provides rich service functions, such as a QoS guarantee, complete security management and high reliability. The S9500 series is designed to fully satisfy the requirements of end-users seeking, its high capability, high reliability and multiple services.
§	Multi-Service Switches. The S7500 Series high-end multi-service switch features high performance, high port density and high flexibility. It can be applied to the core layer of enterprise networks, campus networks and education MANs, to the convergence layer of carriers’ IP MANs, and to the access layer of data centers. The S7500 Series switch can provide Layer 2 and Layer 3 switching. It can provide high-speed links for MAN, campus networks and data centers based on the 10GE platform and offer service functions, such as NAT/NetStream/PBR and PoE solutions, a powerful QoS guarantee, a comprehensive security management mechanism and high level carrier-class reliability, designed to fully satisfy the requirements of high-end users for multiple services.
§	Layer 3 Intelligent and Resilient Switches. The S5600 Series Switches are innovative switches that improve LAN operating efficiency by integrating leading technology called Intelligent Resilient Framework (IRF). These switches allow high stacking bandwidth up to 96G, high density GE, 10GE uplink and a swappable power supply unit. This series represents the next generation of desktop switches, which can help customers implement a gigabit Ethernet core network or aggregation layer with high availability as well as scalability.
§	Layer 2 Intelligent Gigabit Ethernet Switches. The S5000 Series are intelligent Layer 2 wire-speed Gigabit Ethernet switching products that provide high capacity with a full range of features. With the high performance ASIC and flexible modular structure, they provide Layer 2-Layer 7 intelligent flow classification and Access Control Lists (ACL) policies. They implement complete service control and user management, so they are suitable for the access layer switches in enterprise networks and MANs.

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§	Fast Ethernet Layer 3 Intelligent and Resilient Switches. The S3900 Series Ethernet Switches are a new generation of premier multi-layer switches that are designed to meet the enterprise customers’ requirement of designing and implementing a unified, highly resilient network. One of the most important and innovative elements of these switches, is their IRF technology that allows network managers to build affordable stackable networks with the high resilience, flexibility and exceptional performance of larger systems.
§	10/100 Mbps Enhanced Layer 3 Switches. The S3500 Series Switches are Layer 3 wire-speed Ethernet switches with 10/100M aggregation in service provider data centers, server cluster, wiring cabinet and MANs. It provides six types of high performance Ethernet switches. Running on H3C’s (VRP) networking operating system, this series of products provides abundant routing protocols, Virtual LAN (VLAN) switching, traffic management, QoS, powerful bandwidth control and user management.
§	10/100 Mbps Enhanced Layer 2 Intelligent and Access Switches. The S3000 and S2000-EI Series are intelligent Layer 2 wire-speed Ethernet switching products that are designed to meet the needs of large-capacity switching and high QoS requirements. This series utilizes high performance ASICs and a flexible modular structure, providing Layer 2 through Layer 7 intelligent flow classification, complete QoS, comprehensive service control and subscriber management. It can be used as the access layer switch for service control, user management and network security guarantee in enterprise networks and MANs.
§	Unmanaged Ethernet Switches. The S1000/1200 Series is a non-intelligent, Layer 2 wire speed switch. By deploying power plug and play and fan-less design, it provides a perfect silent desktop access solution for offices. The S1000 series provides 10/100M Ethernet ports while the S1200 series supports 10/100/1000M Ethernet ports. With minimum cost required for network management, this product line is an ideal choice for the small and home office environment.

Routers

H3C offers a full portfolio of router products from carrier-class core routers to modular routers to small business access routers designed to scale as these businesses grow. H3C router products are classified as either NetEngine Series Routers or AR Series Routers. All NetEngine routers are IPv6 ready and include carrier-class availability with redundancy in all key modules to support multiple services such as Multi-protocol Label Switching Virtual Private Network (MPLS VPN), Multi-protocol Label Switching Traffic Engineering (MPLS TE), Multicasting and Netstream. The AR Series Routers support multiple services, integrating data voice and video in one device. They are also easy to manage, offer VPN functionality as well as support multiple security products including firewalls, IPS and Intrusion Detection Systems (IDS).

§

NetEngine SeriesRouters. The NetEngine family of routers is purchased from Huawei Technologies under an original equipment manufacturing agreement. These core routers consist of products from a super-large capacity core router, which can be applied in the national backbone networks, provincial backbone networks and other super-large networks (including those serving at the backbone network edge and MAN core, to those working at the core networks of industries and enterprises). Incorporating advanced technologies such as a 10G/40G interface, three-stage switching fabric, optical shelf interconnection for multi-chassis stack, network processors (NP) for forwarding engine, and the mature, stable VRP routing software, it can meet the availability requirements and the multi-service demands of carrier-class and large enterprise networks.

§

AR Series Routers. The AR Series Routers support multiple services, integrating data voice and video in one device. The BIMS system provides easy-to-use management tools. These routers offer VPN functionality (L2TP, GRE, IPSec and MPLS VPN) as well as support multiple security products including firewalls, IPS and Intrusion Detection Systems (IDS), ACL, Authentification, Authorization, and Accounting (AAA), CA, and Huawei Terminal Access Controller Access Control System (Huawei-TACAS+).

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§	Intelligent Multi-Service Enterprise Core Routers. The AR46 Intelligent Multi-Service Enterprise Core Routers are multi-service routers with high performance and reliability developed for enterprise, industry and carrier networks. AR46 routers can serve as central routers for carrier networks. The AR46 routers are designed to meet enterprise and carrier requirements for network performance, service integration, high reliability, high security and three-in-one solutions.
§	Modular Branch Routers. The AR28 Series are modular multi-service branch routers, providing flexible LAN and WAN options, comprehensive security and VPN solutions, and voice and data integration. The extended performance, high density, enhanced security and concurrent applications enable the AR28 Series to meet the growing demands of enterprises.
§	Fixed Port Branch Routers. The AR18 Series Access Routers are fixed-port products for small-sized enterprises and branch offices. They feature enhanced security, superior reliability and advanced QoS services.

Network Management System

The Quidview network management software is a suite of scalable tools for simplifying network management and maintenance. Quidview implements comprehensive IP-based network management applications, providing total and unified network management solutions, such as centralized network monitoring, fault management, performance monitoring, multi-vendor device management, device management and cluster management. It has the ability to construct effective network management solutions, network environments at all levels, according to user’s demands.

Comprehensive Access Management Server (CAMS)

CAMS is a comprehensive identity-based access control server for the network infrastructure of H3C switches, routers and security devices. As the enterprise network user management center, CAMS provides LAN, VPN, wireless access management, authentication, authorization and accounting. CAMS is at the heart of the integration and control layer, constructing a multiple service management, maintenance, and security control framework with high interoperability within existing enterprise systems.

Firewalls

SecPath Firewalls are new-generation firewalls designed to provide a flexible, high-performance security solution for large and medium-enterprise central sites and service providers. SecPath firewall series products integrate DoS, DDoS depth defense system, VPN and traffic management functionality and offer high levels of total throughput for firewall and VPN support.

VPN Gateways

SecPath VPN Gateways provide total VPN solutions from SOHO to large enterprise. They support all mainstream VPN technologies (such as Layer 2 Tunneling Protocol Virtual Private Network (L2TP VPN), Generic Router Encapsulation Virtual Private Network (GRE VPN), IP Security Virtual Private Network (IPSec VPN), Secure Socket Level Virtual Private Network (SSL VPN), Dynamic VPN and MPLS VPN), providing complete QoS and flow control ability, enabling users to deploy cost-effective remote access, extranet and intranet security.

IP Storage

The NeoOcean series of IP storage products are used in IPTV/ stream-media VOD/medical care/power supply/ social insurance/ taxation datacenters and disaster back-up centers.

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IP Video Surveillance

These newly developed products can be deployed in public security checkpoints, road safety monitoring spots, cashier checkout counters, hotels and private property monitor locations. Market demands are driven by metro-level applications, mass utilization and high resolution needs. The increase in national safety and public security concerns around the world has contributed to market demand for these products.

Services

H3C global service offerings cover key aspects of support that customers need to keep their data networking and voice solutions operating effectively, including telephone support, hardware replacement, software updates, dedicated on-site engineers and spare parts. H3C also offers high-end professional services and training to provide complete product plus service solutions for its customers. The portfolio of professional services includes assessment and design, project management, training and certifications, installation, and integration services that are especially important to customers that purchase higher-end switches, routers and IP telephony communications systems.

CUSTOMERS AND MARKETS

Through our SCN segment we have a global installed base of enterprise and small and medium-sized business customers. These organizations range across a number of vertical industries, including education, government, healthcare, manufacturing, finance, insurance and real estate. In addition to a growing number of enterprise customers (in areas such as government, finance, education, education, energy, communication, manufacturing, health and commercial buildings markets), H3C also has access to a strong, increasing base of carrier customers, primarily through OEM sales to Huawei.

H3C’s customers and end-users span across a wide range of enterprises and vertical markets. Huawei traditionally has sold H3C products primarily to the carrier markets in both China and overseas. Through channel partners in and outside of China and through other key strategic partners H3C maintains coverage of the IP networking and data communication market in most geographies and industries.

We target major customer groups that:

§	view their networks as mission-critical tools that help them to deliver mandatory and/or value-add differentiated services to their customers or constituents;
§	seek convergence-ready voice and data solutions and wireless solutions that are standards-based to reduce complexity and protect their investments; and
§	value networking solutions that are affordable to acquire, operate, maintain and expand.

SALES, MARKETING AND DISTRIBUTION

We use a broad distribution channel to bring our products and solutions to our customers. Our two-tier distribution channel comprises distributors and resellers.

Although a majority of our sales of enterprise networking products are made through our two-tier distribution channel, we also work with global systems integrators, service providers and direct marketers. Additionally, we maintain a field sales organization targeting small, medium and large enterprise accounts in conjunction with our partners.

COMPETITION

We compete in the networking infrastructure market, providing a broad portfolio of secure, converged voice and data networking products to small, medium, and large size organizations and, through our H3C segment’s OEM sales, carrier customers. The market for our products is competitive, fragmented and rapidly changing. We expect competition to continue to intensify. Many of our competitors are bringing new solutions to market, focusing on specific segments of our target markets and establishing alliances and original equipment manufacturers (OEM) relationships with larger companies, some of which are our partners as well.

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Our principal competitors include Avaya Inc., Cisco Systems, Inc., D-Link Systems, Inc., Enterasys Networks, Inc., Extreme Networks, Inc., F5 Networks, Inc., Foundry Networks, Inc., Hewlett-Packard Company, Internet Security Systems, Inc. (acquired by IBM), Juniper Networks, Inc, McAfee, Inc., Alcatel, Mitel Networks Corporation, NETGEAR, Inc., and Nortel Networks Corporation. In addition, H3C also competes with key regional competitors such as Allied Telsis, Inc. (formerly Allied Telesyn), Buffalo Inc., Digital China, Hitachi, Huawei, and ZTE Corporation. Many of our competitors are larger than us and possess greater financial resources.

We believe the primary competitive factors in the enterprise networking infrastructure market are as follows:

§	Maintain tier-one capability and presence. To maintain tier-one capability and presence, a provider must have a comprehensive distribution channel and a strong financial position. In addition, that provider must have a globally-recognized and preferred brand and provide strong service and support capabilities.
§	Offer innovative products and solutions. To be considered innovative, a provider must deliver a broad line of products and solutions and maintain a substantial intellectual property portfolio.

RESEARCH AND DEVELOPMENT

Our research and development approach focuses internal investments upon those core activities that are necessary to deliver differentiated products and solutions and drive reductions in product costs. Our current areas of focus include security, convergence, wireless networking, and advanced switching and routing solutions. For activities such as mature technologies or widely available product design components, we work with contract developers and third parties for sourcing these components. We believe this two-part approach increases our ability to bring products to market in a timely and cost effective manner and ensures that we are focused upon those product attributes that matter most to our customers and clearly differentiate the products we deliver.

Our SCN segment relies on H3C’s engineering talent for new product development of enterprise switches and routers and on certain third party developers for small and medium size networking offerings. Our SCN segment develops our voice and security offerings, including, TippingPoint’s Intrusion Prevention Systems and Digital Vaccine security products. H3C uses its own engineers to develop the H3C core product portfolio.

Our research and development expenditures were $215.6 million in fiscal 2007, $101.9 million in fiscal 2006, and $94.6 million in fiscal 2005.

SIGNIFICANT CUSTOMERS AND PRODUCTS

For information regarding customer and product concentration for each of the last three fiscal years, see Note 19 to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

FINANCIAL INFORMATION ABOUT SEGMENT, FOREIGN AND DOMESTIC OPERATIONS AND EXPORT

SALES

Segment financial data are set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7, and in Note 19 of the Notes to the Company’s Consolidated Financial Statements, which appears in Item 8 of this Annual Report on Form 10-K for the fiscal year ended May 31, 2007. A significant portion of our revenues are derived from overseas operations. The profitability of our segments is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies. See the Geographic Information portion of Note 20 for further information relating to sales and long-lived assets by geographic area and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We market our products in all significant global markets, primarily through subsidiaries, sales offices, sales representatives, and relationships with OEMs and distributors with local presence. Outside the U.S., we have several research and development groups, with the two most significant being in China and the U.K. We also use contract developers in India. We maintain sales offices in 35 countries outside the U.S.

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BACKLOG

Our backlog as of June 1, 2007, the last day of our 2007 fiscal year, was approximately $65.7 million (including $54.8 million of H3C backlog as of March 31, 2007), compared with backlog of approximately $69.8 million (including $45.9 million of H3C backlog as of March 31, 2006) as of June 2, 2006, the last day of our 2006 fiscal year. We include in our backlog purchase orders for which a delivery schedule has been specified for product shipment within one year. Generally, orders are placed by our customers on an as-needed basis and may be canceled or rescheduled by the customers without significant penalty to the customer. Accordingly, backlog as of any particular date is not necessarily indicative of our future sales.

SEASONALITY

Our H3C segment’s calendar first quarter generally experiences some seasonal effect on sales, due to the Chinese New Year which typically falls during that quarter. Our SCN segment revenues and earnings have not demonstrated consistent seasonal characteristics.

MANUFACTURING AND COMPONENTS

For the SCN segment we outsource the majority of our manufacturing and our supply chain management operations to contract manufacturers and original design manufacturer suppliers, with our H3C segment handling the remainder of these functions. This is part of our strategy to maintain global manufacturing capabilities and to reduce our costs. This subcontracting includes activities such as material procurement, assembly, test, shipment to our customers and repairs. We believe this approach enables us to reduce fixed costs and to quickly respond to changes in market demand. We have contract manufacturing arrangements with several companies, of which Jabil Circuits and Accton Technology Corp. were the two most significant during fiscal 2007 and Flextronics International and Jabil Circuits were the two most significant during fiscal 2006. Based on current and forecasted demand, our contract manufacturers are expected to have an adequate supply of components required for the production of our products.

We determine the components that are incorporated in our products and design the supply chain solution. Our suppliers manufacture based on rolling forecasts. Each of the suppliers procures components necessary to assemble the products in our forecast and test the products according to our specifications. Products are then shipped directly to our logistics provider. We generally do not own the components and our customers take title to our products upon shipment from the logistics provider or, in some cases, upon payment. In certain circumstances, we may be liable to our suppliers for carrying costs and obsolete material charges for excess components purchased based on our forecasts.

For the H3C segment, a significant portion of self-designed products are also manufactured by contract manufacturers, mainly Flextronics, System Integration Electronics and Flash Electronics. However, H3C does retain an in-house manufacturing capability and capacity for pilot run, low volume production, as well as special projects, and this capability includes a state-of-the-art SMT (surface mount technology) line, backend assembly and test lines and distribution facilities.

Although we have contracts with our manufacturers, those contracts set forth a framework within which the supplier may accept purchase orders from us. The contracts do not require them to manufacture our products on a long-term basis.

We use standard parts and components for our products where it is appropriate. We purchase certain key components used in the manufacture of our products from single or limited sources.

Purchase commitments with our single- or limited-source suppliers are generally on a purchase order basis. A number of vendors supply standard product integrated circuits and microprocessors for our products.

INTELLECTUAL PROPERTY AND RELATED MATTERS

Through our research and development activities over many years, we have developed a substantial portfolio of patents covering a wide variety of networking technologies. This ownership of core networking technologies creates opportunities to leverage our engineering investments and develop more integrated, powerful, and innovative networking solutions for customers.

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We rely on U.S. and foreign patents, copyrights, trademarks, and trade secrets to establish and maintain proprietary rights in our technology and products. We have an active program to file applications for and obtain patents in the U.S. and in selected foreign countries where potential markets for our products exist. Our general policy has been to seek to patent those patentable inventions that we expect to incorporate in our products or that we expect will be valuable otherwise. As of June 1, 2007, our SCN segment had 1,433 issued U.S. patents (including 1400 utility patents and 33 design patents) and 410 foreign issued patents. Numerous patent applications that relate to our research and development activities are currently pending in the U.S. and other countries. We also have patent cross license agreements with other companies. The H3C portfolio includes 104 issued Chinese patents, over 718 pending Chinese applications, and 17 pending foreign applications. During fiscal 2007, we continued our patent licensing program, through which we identify potential sources of licensing revenue, including investigation of situations in which we believe that other companies may be improperly using our patented technology.

Our SCN segment has 45 registered trademarks in the U.S. and has a total of 579 registered trademarks in 80 foreign countries. H3C has 6 registered trademarks in China and has a total of 62 registered trademarks in 8 foreign countries. Numerous applications for registration of domestic and foreign trademarks are currently pending for both our SCN and H3C segments.

EMPLOYEES

	Total
Sales and marketing		1,855
Customer service and supply chain operations		975
Research and development		2,829
General and administrative		650
Total		6,309

The SCN segment has 1,456 employees and the H3C segment has 4,853 employees.

Our employees are not represented by a labor organization and we consider our employee relations to be satisfactory. The SCN segment employee data is as of June 1, 2007 and the H3C segment employee data is as of March 31, 2007, the date of the H3C balance sheet we consolidated into our fiscal year 2007 balance sheet.

Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of certain restructuring actions affecting SCN employee headcount.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the names, ages and positions held by all executive officers of 3Com as of July 31, 2007. There are no family relationships between any director (or nominee) or executive officer and any other director (or nominee) or executive officer of 3Com.

Name	Age		Position
Edgar Masri		49	President and Chief Executive Officer, 3Com; Chief Executive Officer, H3C Technologies Co., Limited
Neal D. Goldman		56	Executive Vice President, Chief Administrative and Legal Officer and Secretary, 3Com
Jay Zager		57	Executive Vice President and Chief Financial Officer
Robert Dechant		45	Senior Vice President and General Manager, Data and Voice Business Unit
James Hamilton		43	President, TippingPoint Division
Dr. Shusheng Zheng		40	Chief Operating Officer, H3C Technologies Co., Limited

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In addition, Messrs. Masri, Goldman, Zager and Zheng serve on the Boards of Directors of various subsidiaries of 3Com.

Edgar Masri has been our President and Chief Executive Officer since August 2006. Mr. Masri is also Chief Executive Officer of H3C Technologies Co., Limited, our China-based networking equipment subsidiary. Mr. Masri joined our Board of Directors in September 2006. Before re-joining 3Com, Mr. Masri was a General Partner from 2000 to March 2006, and more recently an advisor, at Matrix Partners, a leading technology venture capital firm, where he made investments in the wireless, broadband and semiconductor industries. Mr. Masri was also Chief Operating Officer at Redline Communications, a leading provider of advanced broadband wireless access and backhaul solutions based in Canada, from April to August of 2006. Mr. Masri spent fifteen years as a senior manager at 3Com, from 1985 to 2000. During this time he served as Senior Vice President and General Manager of our Network Systems Business Unit and Premises Distribution Unit, President of 3Com Ventures and held senior roles in our marketing group. Mr. Masri holds a Master’s degree in electrical engineering and computer science and earned an MBA from Stanford University.

Neal D. Goldman has been 3Com’s Executive Vice President, Chief Administrative and Legal Officer and Secretary since March 2007, and he has served as our Senior Vice President, Management Services, General Counsel and Secretary since September 2003. Mr. Goldman also serves on the Board of H3C Technologies. Prior to joining 3Com, Mr. Goldman worked for Polaroid Corporation from August 1997 to September 2003. From March 2003 to September 2003, he was Executive Vice President, Business Development and Chief Legal Officer of Polaroid and prior to that Mr. Goldman served as Executive Vice President, Chief Administrative and Legal Officer from July 2001 to June 2002. From August 1997 to July 2001, Mr. Goldman held a number of senior management and executive positions at Polaroid, including Senior Vice President, General Counsel and Secretary and Deputy General Counsel. Before joining Polaroid, Mr. Goldman served as Vice President, General Counsel and Secretary at Nets, Inc. from March 1996 to June 1997. Before joining Nets, Inc., Mr. Goldman held a number of positions with Lotus Development Corporation, including Vice President and General Counsel from November 1995 to February 1996 and Deputy General Counsel and Assistant Secretary from April 1990 to November 1995.

Jay Zager has been our Executive Vice President and Chief Financial Officer since June 2007. Immediately prior to joining 3Com, Mr. Zager was an executive at Gerber Scientific, Inc., a leading international supplier of sophisticated automated manufacturing systems for sign making and specialty graphics, apparel and flexible materials, and ophthalmic lens processing. Mr. Zager joined Gerber in February 2005 as Senior Vice President and Chief Financial Officer and was appointed Executive Vice President and Chief Financial Officer in April 2006, a position he held until June 2007. As a member of the senior management team of Gerber, he was responsible for financial reporting, accounting, treasury operations, business planning, corporate development, investor relations, tax/pension administration and information technology. Prior to joining Gerber, Mr. Zager was Senior Vice President and Chief Financial Officer of Helix Technology Corp., a semiconductor equipment manufacturer, from February 2002 to February 2005. Earlier, from 2000 to 2001, he was Executive Vice President and Chief Financial Officer of Inrange Technologies Corp., a storage networking company. Before Inrange, he was with the Compaq/Digital Equipment organization for 14 years, holding a number of senior financial and business management positions including Vice President, Business Development and Vice President, Chief Financial Officer of Worldwide Engineering & Research. Mr. Zager received a Masters degree in Finance and Strategic Planning from Sloan School of Management, Massachusetts Institute of Technology and a Bachelor of Science degree in Operations Research from Massachusetts Institute of Technology.

Robert Dechant has been 3Com’s Senior Vice President and General Manager, Data and Voice Business Unit since October 2006, and was our Senior Vice President, Worldwide Sales and Marketing from April 2006 to October 2006. Prior to 3Com, from March 2003 to September 2004, Mr. Dechant was Executive Vice President of Sales and Marketing for Modus Media International where he led sales, marketing and client management on a global basis. Before Modus, Mr. Dechant served as Chief Operating Officer (from December 2001 to January 2003) and Senior Vice President of Sales and Marketing (from July 1997 to November 2001) at Stream International, Inc. He also held sales and marketing leadership positions with Software Support Inc. which was acquired by Convergys Corporation and Worldtek Travel, Inc. He also spent nine years in sales and marketing positions at IBM.

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James Hamilton has served as 3Com’s President of the TippingPoint Division since November 2005. From January to November of 2005, Mr. Hamilton served as TippingPoint’s Chief Operating Officer. At the time 3Com acquired TippingPoint in January 2005, Mr. Hamilton was President and COO of TippingPoint, a position he held from October 2003 to the date of acquisition. Prior to TippingPoint, Mr. Hamilton was President and Chief Executive Officer of Efficient Networks, Inc., a subsidiary of Siemens AG, from February 2002 to April 2003. From April 2001 to February 2002, Mr. Hamilton served in other senior roles at Efficient Networks. Prior to Efficient Networks’ acquisition by Siemens in April 2001, he served as Executive Vice President of Worldwide Sales and Marketing as well as General Manager of the company’s four products divisions from 1999 to 2001. Prior to Efficient Networks, Mr. Hamilton served as Vice President of Worldwide Sales and Service for Picazo Communications, Inc., an IP telephony company sold to Intel Corporation in late 1999. He has previous experience as Director of the Communications Products Group at Compaq Computer Corporation, Vice President of Sales at NetWorth, Inc., which was sold to Compaq in 1995, and managed the North American reseller channel at 3Com Corporation.

Dr. Shusheng Zheng has served as the Chief Operating Officer of our H3C Technologies Co., Limited subsidiary since its inception in the Fall of 2003. Previously, Dr. Zheng worked at Huawei Technologies from 1993 to 2003. At Huawei, Dr. Zheng held positions in the research and development department, was Director of Manufacturing and Customer Service, Head of Sales and Marketing for the datacom business, and finally president of Huawei’s switching business unit starting in 1998. Dr. Zheng holds a PhD in Telecommunication Science from Zhejiang University in China.

ITEM 1A RISK FACTORS

Risk factors may affect our future business and results. The matters discussed below could cause our future results to materially differ from past results or those described in forward-looking statements and could have a material adverse effect on our business, financial condition, results of operations and stock price.

Risks Related to Historical Losses, Financial Condition and Substantial Indebtedness

We have incurred significant net losses in recent fiscal periods, including $89 million for the year ended May 31, 2007, $101 million for the year ended May 31, 2006 and $196 million for year ended May 31, 2005, and we may not be able to return to profitability.

We cannot provide assurance that we will return to profitability. While we continue to take steps designed to improve our results of operations, we have incurred significant net losses in recent periods. We face a number of challenges that have affected our operating results during the current and past several fiscal years. Specifically, we have experienced, and may continue to experience, the following, particularly in our SCN segment:

• declining sales due to price competition and reduced incoming order rate;

• operating expenses that, as a percentage of sales, have exceeded our desired financial model;

• management changes;

• disruptions and expenses resulting from our workforce reductions, management changes and employee attrition;

• risk of increased excess and obsolete inventories; and

• interest expense resulting from our senior secured loan.

If we cannot overcome these challenges, reduce our expenses and/or increase our revenue, we may not become profitable.

We may not be able to compensate for lower sales or unexpected cash outlays with cost reductions sufficient to generate positive net income or cash flow.

If we do not increase our sales, we may need to further reduce costs in order to achieve profitability. As we have implemented significant cost reduction programs over the last several years, it may be difficult to make significant further cost reductions without in turn reducing our sales. If we are not able to effectively reduce our costs and expenses, particularly in our SCN segment, we may not be able to generate positive net income. If we continue to experience negative cash flow from operations from our SCN segment over a prolonged period of time or if we suffer unexpected cash outflows, our liquidity and ability to operate our business effectively could be adversely affected.

We are unable to predict the exact amount of increased sales and/or cost reductions required for us to generate positive net income because it is difficult to predict the amount of our future sales and gross margins. Moreover, the amount of our future sales depends, in part, on future economic and market conditions, which are difficult to forecast accurately.

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Efforts to reduce operating expenses have involved, and could involve further, workforce reductions, closure of offices and sales or discontinuation of businesses, leading to reduced sales and other disruptions in our business; if these efforts are not successful, we may experience higher expenses than we desire.

Our operating expenses as a percent of sales continue to be higher than our desired long-term financial model. We have taken, and will continue to take, actions to reduce these expenses. For example, in June 2006 we announced a restructuring plan which focused on reducing components of our SCN operating segment cost structure, including the closure of certain facilities, a reduction in workforce and focused sales, marketing and services efforts. Such actions have and may in the future include integration of businesses and regions, reductions in our workforce, closure of facilities, relocation of functions and activities to lower cost locations, the sale or discontinuation of businesses, changes or modifications in information technology systems or applications, or process reengineering. As a result of these actions, the employment of some employees with critical skills may be terminated and other employees have, and may in the future, leave our company voluntarily due to the uncertainties associated with our business environment and their job security. In addition, reductions in overall staffing levels could make it more difficult for us to sustain historic sales levels, to achieve our growth objectives, to adhere to our preferred business practices and to address all of our legal and regulatory obligations in an effective manner, which could, in turn, ultimately lead to missed business opportunities, higher operating costs or penalties. In addition, we may choose to reinvest some or all of our realized cost savings in future growth opportunities or in our H3C integration efforts. Any of these events or occurrences, including the failure to succeed in achieving net cost savings, will likely cause our expense levels to continue to be at levels above our desired model, which, in turn, could result in a material adverse impact on our ability to become profitable (and, if we become profitable, to sustain such profitability).

Our substantial debt could adversely affect our financial condition; and the related debt service obligations may adversely affect our cash flow and ability to invest in and grow our businesses.

We now have, and for the foreseeable future will continue to have, a significant amount of indebtedness. As of May 31, 2007, our total debt balance was $430 million, of which $94 million was classified as a current liability. These amounts represent borrowing under a senior secured loan incurred to finance a portion of the purchase price for the March 2007 acquisition of the remaining 49 percent equity interest in H3C. In addition, despite current debt levels, the terms of our indebtedness allow us or our subsidiaries to incur more debt, subject to certain limitations.

While our senior secured loan is outstanding, we will have annual debt service obligations (interest and principal) of between approximately $48 million and $172 million. The interest rate on this loan is floating based on the LIBOR rate; accordingly, if the LIBOR rate is increased, these amounts could be higher. The maturity date on this loan is September 28, 2012. We intend to fulfill our debt service obligations primarily from cash generated by our H3C segment operations, if any, and, to the extent necessary, from its existing cash and investments. Because we anticipate that a substantial portion of the cash generated by our operations will be used to service this loan during its term, such funds will not be available to use in future operations, or investing in our businesses. Further, a significant portion of the excess cash flow generated by our H3C segment, if any, must be used annually to prepay principal on the loan. The foregoing may adversely impact our ability to expand our businesses or make other investments. In addition, if we are unable to generate sufficient cash to meet these obligations and must instead use our existing cash or investments at our H3C or SCN segments, we may have to reduce, curtail or terminate other activities of our businesses.

Our indebtedness could have significant negative consequences to us. For example, it could:

• increase our vulnerability to general adverse economic and industry conditions;

• limit our ability to obtain additional financing;

• require the dedication of a substantial portion of any cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund growth, working capital, capital expenditures and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and our industry; and

• place us at a competitive disadvantage relative to our competitors with less debt.

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The restrictions imposed by the terms of our senior secured loan facility could adversely impact our ability to invest in and grow our H3C business.

Covenants in the agreements governing our senior secured loan materially restrict our H3C operations, including H3C’s ability to incur debt, pay dividends, make certain investments and payments, make acquisitions of other businesses and encumber or dispose of assets. These negative covenants restrict our flexibility in operating our H3C business. The agreements also impose affirmative covenants, including financial reporting obligations and compliance with law. In addition, in the event our H3C segment’s financial results do not meet our plans, the failure to comply with the financial covenants contained in the loan agreements could lead to a default if we are unable to amend such financial covenants. Our lenders may attempt to call defaults for violations of financial covenants (or other items, even if the underlying financial performance of H3C is satisfactory) in an effort to extract waiver or consent fees from us or to force a refinancing. A default and acceleration under one debt instrument or other contract may also trigger cross-acceleration under other debt instruments or other agreements, if any. An event of default, if not cured or waived, could have a material adverse effect on us because the lenders will be able to accelerate all outstanding amounts under the loan, foreclose on the collateral (which consists primarily of the assets of our H3C segment and could involve the lenders taking control over our H3C segment), and/or require 3Com Corporation, 3Com Holdings Limited or 3Com Technologies to use any of their substantial cash balances under their parental guarantees of this debt, if such guarantees have not yet been released by such time. Any of these actions would likely result in a material adverse effect on our business and financial condition.

An adverse change in the interest rates for our borrowings could adversely affect our financial condition.

Interest to be paid by us on our senior secured loan is at an interest rate based on the LIBOR rate, plus an applicable margin. The published LIBOR rate is subject to change on a periodic basis. Recently, interest rates have trended upwards in major global financial markets. If these interest rate trends continue, this will result in increased interest rate expense as a result of higher LIBOR rates. Continued increases in interest rates could have a material adverse effect on our financial position, results of operations and cash flows, particularly if such increases are substantial. In addition, interest rate trends could affect global economic conditions.

Rating downgrades may make it more expensive for us to refinance our debt or borrow money.

Moody’s Investors Service has assigned a Ba2 rating to our senior secured loans at H3C and a Ba2 corporate family rating (stable outlook) to H3C Holdings Limited, the borrower. Standard & Poor’s Ratings Services assigned these loans a ‘BB’ rating (with a recovery rating of ‘1’) and assigned a BB- corporate credit rating (stable outlook) to H3C Holdings Limited. We are required to maintain a rating from each of these agencies during the term of the loan. These credit ratings are subject to change at the discretion of the rating agencies. If our credit ratings are downgraded, it would likely make it more expensive for us to refinance our existing loan or raise additional capital in the future. Such refinancing or capital raising may be on terms that may not be acceptable to us or otherwise not available. Any future adverse rating agency actions with respect to our ratings could have an adverse effect on the market price of our securities, our ability to compete for new business and our ability to access capital markets.

Risks Related to H3C Segment and Dependence Thereon

We are significantly dependent on our H3C segment; if H3C is not successful we will likely experience a material adverse impact to our business, business prospects and operating results.

For the year ended May 31, 2007, H3C accounted for approximately 53 percent of our consolidated revenue and approximately 59 percent of our consolidated gross profit. H3C, which is domiciled in Hong Kong and has its principal operations in Hangzhou, China, is subject to all of the operational risks that normally arise for a technology company with global operations, including risks relating to research and development, manufacturing, sales, service, marketing, and corporate functions. Furthermore, H3C may not be successful in selling directly to Chinese customers, particularly those in the public sector, to the extent that such customers favor Chinese-owned competitors. Given the significance of H3C to our financial results, if H3C is not successful, our business will likely be adversely affected.

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Sales from our H3C segment, and therefore in China, constitute a material portion of our total sales, and our business, financial condition and results of operations will to a significant degree be subject to economic, political and social events in the PRC.

Our sales are significantly dependent on China, with approximately 46 percent of our consolidated revenues attributable to sales in China for the fiscal year ended May 31, 2007. We expect that a significant portion of our sales will continue to be derived from China for the foreseeable future. As a result, our business, financial condition and results of operations are to a significant degree subject to economic, political, legal and social developments and other events in China and surrounding areas. We discuss risks related to the PRC in further detail below.

Our H3C segment is dependent on Huawei Technologies in several material respects, including as an important customer; should Huawei reduce its business with H3C, our business will likely be materially adversely affected.

H3C derives a material portion of its sales from Huawei. In the twelve months ended May 31, 2007, Huawei accounted for approximately 35 percent of the revenue for our H3C segment and approximately 20 percent of our consolidated revenue. Huawei has no minimum purchase obligations with respect to H3C. Should Huawei reduce its business with H3C, H3C’s sales will suffer. On March 29, 2007 we acquired Huawei’s 49 percent interest in H3C for $882 million, giving us 100 percent ownership of H3C. Since Huawei is no longer an owner of H3C, it is possible that over time Huawei will purchase fewer products and services from H3C. We will need to continue to provide Huawei with products and services that satisfy its needs or we risk the possibility that it sources products from another vendor or internally develops these products. Further, we have and expect to continue to incur costs relating to transition matters with respect to support that Huawei previously provided for H3C when it was a shareholder. In addition, our China headquarters in Hangzhou, PRC is owned by Huawei and leased to us under a lease agreement that expires in December 2008; if we cannot renew this lease on terms favorable to us or find alternate facilities, we may suffer disruption in our H3C business. If any of the above risks occur, it will likely have an adverse impact on H3C’s sales and business performance.

We must execute on a global strategy to leverage the benefits of our H3C acquisition, including integration activities we determine to undertake; if we are not successful in these efforts, our business will suffer.

Our H3C acquisition presents unique challenges that we must address. We must successfully execute on managing our two business segments, and, to the extent we so choose, integrating these businesses, in order to fully benefit from this acquisition. As a joint venture owned by two separate companies, H3C operated in many ways independently from 3Com and Huawei. H3C’s business is largely based in the PRC and therefore significant cultural, language, business process and other differences exist between our SCN segment and H3C. In order to more closely manage and, to the extent we choose, integrate H3C, we expect to incur significant transition costs, including management retention costs and other related items. There may also be business disruption as management and other personnel focus on global management activities and integration matters.

In order to realize the full benefits of this acquisition, we will need to manage our two business segments and employ strategies to leverage H3C. These efforts will require significant time and attention of management and other key employees at 3Com and H3C. Depending on the decisions we make on various strategic alternatives available to us, we may develop new or adjusted global design and development initiatives, go-to-market strategies, branding tactics or other strategies that take advantage and leverage H3C’s and SCN’s respective strengths. If we are not successful at transitioning effectively to full ownership of H3C, or if we do not execute on a global strategy that enables us to leverage the benefits of this acquisition, our business will be substantially harmed.

Risks Related to Personnel

Our success is dependent on continuing to hire and retain qualified managers and other personnel, including at our H3C segment and reducing senior management turnover in our SCN segment; if we are not successful in attracting and retaining these personnel, our business will suffer.

Competition for qualified employees is intense. If we fail to attract, hire, or retain qualified personnel, our business will be harmed. We have experienced significant turnover in our senior management team in the last several years and we may continue to experience change at this level. If we cannot retain qualified senior managers, our business may not succeed.

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The senior management team at H3C has been highly effective since H3C’s inception in 2003. We need to continue to incentivize and retain H3C management. We cannot be sure that we will be successful in these efforts. If we are not successful, our H3C business may suffer, which, in turn, will have a material adverse impact on our consolidated business. Many of these senior managers, and other key H3C employees, originally worked for Huawei prior to the inception of H3C. Subject to non-competition agreements with us (if applicable), these employees could return to work for Huawei at any time. Huawei is not subject to any non-solicitation obligations in respect of H3C or 3Com. Further, former Huawei employees that work for H3C may retain financial interests in Huawei.

Risks Related to Competition

If we do not respond effectively to increased competition caused by industry volatility and consolidation our business could be harmed.

Our business could be seriously harmed if we do not compete effectively. We face competitive challenges that are likely to arise from a number of factors, including the following:

• industry volatility resulting from rapid product development cycles;

• increasing price competition due to maturation of basic networking technologies;

• industry consolidation resulting in competitors with greater financial, marketing, and technical resources; and

• the presence of existing competitors with greater financial resources together with the potential emergence of new competitors with lower cost structures and more competitive offerings.

Our competition with Huawei in the enterprise networking market could have a material adverse effect on our sales and our results of operations; and after a contractual non-compete period expires, Huawei can increase its level of competition, which would likely materially and adversely affect our business.

As Huawei expands its international operations, there could be increasing instances where we compete directly with Huawei in the enterprise networking market. As an OEM customer of H3C, Huawei has had, and continues to have, access to H3C’s products for resale. This access enhances Huawei’s current ability to compete directly with us. We could lose a competitive advantage in markets where we compete with Huawei, which in turn could have a material adverse effect on our sales and overall results of operations. In addition, Huawei’s obligation not to offer or sell enterprise class, and small-to-medium size business (or SMB), routers and switches that are competitive with H3C’s products continues until September 29, 2008. After that date, we are subject to the risk of increased competition from Huawei, which could materially harm our results of operations. More specifically, after the non-compete period expires, Huawei may offer and sell its own enterprise or SMB routers and switches, or resell products that it sources from our competitors. Huawei is not prohibited from developing (but not offering or selling) competing products during the non-compete period. Huawei is also not prohibited from currently selling products in ancillary areas—such as security, voice over internet protocol and storage products—that are also sold today by H3C.

Huawei’s incentive not to compete with H3C or us, and its incentive to assist H3C, may diminish now that Huawei does not own any interest in H3C. In addition, Huawei maintains a strong presence within China and the Asia Pacific region and has significant resources with which to compete within the networking industry, including the assets of Harbour Networks, a China-based competitor of H3C. We cannot predict whether Huawei will compete with us. If competition from Huawei increases, our business will likely suffer.

Finally, if any of H3C’s senior managers, and other key H3C employees that originally worked for Huawei prior to the inception of H3C, return to work for Huawei, the competitive risks discussed above may be heightened. Subject to non-competition agreements with us (if applicable), these employees could return to work for Huawei at any time. Huawei is not subject to any non-solicitation obligations in respect of H3C or 3Com. Further, former Huawei employees that work for H3C may retain financial interests in Huawei.

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Risks Related to Business and Technology Strategy

We may not be successful at identifying and responding to new and emerging market and product opportunities, or at responding quickly enough to technologies or markets that are in decline.

The markets in which we compete are characterized by rapid technology transitions and short product life cycles. Therefore, our success depends on our ability to do the following:

• identify new market and product opportunities;

• predict which technologies and markets will see declining demand;

• develop and introduce new products and solutions in a timely manner;

• gain market acceptance of new products and solutions, particularly in targeted emerging markets; and

• rapidly and efficiently transition our customers from older to newer enterprise networking technologies.

Our financial position or results of operations could suffer if we are not successful in achieving these goals. For example, our business would suffer if any of the following occurs:

• there is a delay in introducing new products;

• we lose certain channels of distribution or key partners;

• our products do not satisfy customers in terms of features, functionality or quality; or

• our products cost more to produce than we expect.

Because we will continue to rely on original design manufacturers to assist in product design of some of our products, we may not be able to respond to emerging technology trends through the design and production of new products as well as if we were working independently.

We expect to utilize strategic relationships and other alliances as key elements in our strategy. If we are not successful in forming desired ventures and alliances or if such ventures and alliances are not successful, our ability to achieve our growth and profitability goals could be adversely affected.

We have announced alliances with third parties, such as IBM and Trapeze Networks. In the future, we expect to evaluate other possible strategic relationships, including joint ventures and other types of alliances, and we may increase our reliance on such strategic relationships to broaden our sales channels, complement internal development of new technologies and enhancement of existing products, and exploit perceived market opportunities.

If we fail to form the number and quality of strategic relationships that we desire, or if such strategic relationships are not successful, we could suffer missed market opportunities, channel conflicts, delays in product development or delivery, or other operational difficulties. Further, if third parties acquire our strategic partners or if our competitors enter into successful strategic relationships, we may face increased competition. Any of these difficulties could have an adverse effect on our future sales and results of operations.

Our strategy of outsourcing functions and operations may fail to reduce cost and may disrupt our operations.

We continue to look for ways to decrease cost and improve efficiency by contracting with other companies to perform functions or operations that, in the past, we have performed ourselves. We have outsourced the majority of our manufacturing and logistics for our SCN products. We now rely on outside vendors to meet the majority of our manufacturing needs as well as a significant portion of our IT needs for the SCN segment. Additionally, we outsource certain functions for technical support and product return services. We are currently transitioning our outsourced customer service and support functions from a single vendor to a combination of vendors complemented by internal sources. During this transition period, and under our new support model, if we do not provide our customers with a high quality of service, we risk losing customers and/or increasing our support costs. To achieve future cost savings or operational benefits, we may expand our outsourcing activities to cover additional services which we believe a third party may be able to provide in a more efficient or effective manner than we could do internally ourselves.

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Although we believe that outsourcing will result in lower costs and increased efficiencies, this may not be the case. Because these third parties may not be as responsive to our needs as we would be ourselves, outsourcing increases the risk of disruption to our operations. In addition, our agreements with these third parties sometimes include substantial penalties for terminating such agreements early or failing to maintain minimum service levels. Because we cannot always predict how long we will need the services or how much of the services we will use, we may have to pay these penalties or incur costs if our business conditions change.

Our reliance on industry standards, technological change in the marketplace, and new product initiatives may cause our sales to fluctuate or decline.

The enterprise networking industry in which we compete is characterized by rapid changes in technology and customer requirements and evolving industry standards. As a result, our success depends on:

• the convergence of technologies, such as voice, data and video on single, secure networks;

• the timely adoption and market acceptance of industry standards, and timely resolution of conflicting U.S. and international industry standards; and

• our ability to influence the development of emerging industry standards and to introduce new and enhanced products that are compatible with such standards.

Slow market acceptance of new technologies, products, or industry standards could adversely affect our sales or overall results of operations. 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 or our overall results of operations could be adversely affected.

We focus on enterprise networking, and our results of operations may fluctuate based on factors related entirely to conditions in this market.

Our focus on enterprise networking may cause increased sensitivity to the business risks associated specifically with the enterprise networking market and our ability to execute successfully on our strategies to provide superior solutions for larger and multi-site enterprise environments. To be successful in the enterprise networking market, we will need to be perceived by decision making officers of large enterprises as committed for the long-term to the high-end networking business. Also, expansion of sales to large enterprises may be disruptive in a variety of ways, such as adding larger systems integrators that may raise channel conflict issues with existing distributors, or a perception of diminished focus on the small and medium enterprise market.

Risks Related to Operations and Distribution Channels

A significant portion of our SCN sales is derived from a small number of distributors. If any of these partners reduces its business with us, our business could be seriously harmed.

We distribute many of our products through two-tier distribution channels that include distributors, systems integrators and value added resellers, or VARs. A significant portion of our sales is concentrated among a few distributors; our two largest distributors accounted for a combined 35 percent of SCN sales and 18 percent of our consolidated revenue for the year ended May 31, 2007 and a combined 35 percent of SCN sales and 30 percent of our consolidated revenue for the year ended May 31, 2006. If either of these distributors reduces its business with us, our sales and overall results of operations could be adversely affected.

We depend on distributors who maintain inventories of our products. If the distributors reduce their inventories of our products, our sales could be adversely affected.

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. Our target range for channel inventory levels is between three and five weeks of supply on hand at our distributors. Partners with a below-average inventory level may incur “stock outs” that would adversely impact our sales. Our distribution agreements typically provide that our distributors may cancel their orders on short notice with little or no penalty. If our channel partners reduce their levels of inventory of our products, our sales would be negatively impacted during the period of change.

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If we are unable to successfully develop relationships with system integrators, service providers, and enterprise VARs, our sales may be negatively affected.

As part of our sales strategy, we are targeting system integrators, or SIs, service providers, or SPs, and enterprise value-added resellers, or eVARs. In addition to specialized technical expertise, SIs, SPs and eVARs typically offer sophisticated services capabilities that are frequently desired by larger enterprise customers. In order to expand our distribution channel to include resellers with such capabilities, we must be able to provide effective support to these resellers. If our sales, marketing or services capabilities are not sufficiently robust to provide effective support to such SIs, SPs, and eVARs, we may not be successful in expanding our distribution model and current SI, SP, and eVAR partners may terminate their relationships with us, which would adversely impact our sales and overall results of operations.

We may pursue acquisitions of other companies that, if not successful, could adversely affect our business, financial position and results of operations.

In the future, we may pursue acquisitions of companies to enhance our existing capabilities. There can be no assurances that acquisitions that we might consummate will be successful. If we pursue an acquisition but are not successful in completing it, or if we complete an acquisition but are not successful in integrating the acquired company’s technology, employees, products or operations successfully, our business, financial position or results of operations could be adversely affected.

We may be unable to manage our supply chain successfully, which would adversely impact our sales, gross margin and profitability.

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

• in the past, some key components have had limited availability;

• as integration of networking features on a reduced number of computer chips continues, we are increasingly facing competition from parties who are our suppliers;

• our ability to accurately forecast demand is diminished;

• our reliance on, and long-term arrangements with, third-party manufacturers places much of the supply chain process out of our direct control and heightens the need for accurate forecasting and reduces our ability to transition quickly to alternative supply chain strategies; and

• we may experience disruptions to our logistics.

Some of our suppliers are also our competitors. We cannot be certain that in the future our suppliers, particularly those who are also in active competition with us, will be able or willing to meet our demand for components in a timely and cost-effective manner.

There has been a trend toward consolidation of vendors of electronic components. Our reliance on a smaller number of vendors and the inability to quickly switch vendors increases the risk of logistics disruptions, unfavorable price fluctuations, or disruptions in supply, particularly in a supply-constrained environment.

Supplies of certain key components have become tighter as industry demand for such components has increased. If the resulting increase in component costs and time necessary to obtain these components persists, we may experience an adverse impact to gross margin.

If overall demand for our products or the mix of demand for our products is significantly different from our expectations, we may face inadequate or excess component supply or inadequate or excess manufacturing capacity. This would result in orders for products that could not be manufactured in a timely manner, or a buildup of inventory that could not easily be sold. Either of these situations could adversely affect our market share, sales, and results of operations or financial position.

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Our strategies to outsource the majority of our manufacturing requirements to contract manufacturers may not result in meeting our cost, quality or performance standards. The inability of any contract manufacturer to meet our cost, quality or performance standards could adversely affect our sales and overall results from operations.

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. We may not be able to provide contract manufacturers with product volumes that are high enough to achieve sufficient cost savings. If shipments fall below forecasted levels, we may incur increased costs or be required to take ownership of inventory. In addition, a significant component of maintaining cost competitiveness is the ability of our contract manufacturers to adjust their own costs and manufacturing infrastructure to compensate for possible adverse exchange rate movements. To the extent that the contract manufacturers are unable to do so, and we are unable to procure alternative product supplies, then our own competitiveness and results of operations could be adversely impacted.

In portions of our business we have implemented a program with our manufacturing partners to ship products directly from regional shipping centers to customers. Through this program, we are relying on these partners to fill customer orders in a timely manner. This program may not yield the efficiencies that we expect, which would negatively impact our results of operations. Any disruptions to on-time delivery to customers would adversely impact our sales and overall results of operations.

If we fail to adequately evolve our financial and managerial control and reporting systems and processes, including the management of our H3C segment, our ability to manage and grow our business will be negatively affected.

Our ability to successfully offer our products and implement our business plan in a rapidly evolving market depends upon an effective planning and management process. We will need to continue to improve our financial and managerial control and our reporting systems and procedures in order to manage our business effectively in the future. If we fail to implement improved systems and processes, our ability to manage our business and results of operations could be adversely affected. For example, now that we own all of H3C, we are spending additional time, resources and capital to manage its business, operations and financial results. If we are not able to successfully manage H3C, our business results could be adversely affected.

Risks Related to our Operations in the People’s Republic of China

China’s governmental and regulatory reforms and changing economic environment may impact our ability to do business in China.

As a result of the historic reforms of the past several decades, multiple government bodies are involved in regulating and administrating affairs in the enterprise networking industry in China. These government agencies have broad discretion and authority over all aspects of the networking, telecommunications and information technology industry in China; accordingly their decisions may impact our ability to do business in China. Any of the following changes in China’s political and economic conditions and governmental policies could have a substantial impact on our business:

• the promulgation of new laws and regulations and the interpretation of those laws and regulations;

• enforcement and application of rules and regulations by the Chinese government;

• the introduction of measures to control inflation or stimulate growth; or

• any actions that limit our ability to develop, manufacture, import or sell our products in China, or to finance and operate our business in China.

If China’s entry into the World Trade Organization, or the WTO, results in increased competition or has a negative impact on China’s economy, our business could suffer. Since early 2004, the Chinese government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

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Uncertainties with respect to the Chinese legal system may adversely affect us.

We conduct our business in China primarily through H3C, a Hong Kong entity which in turn owns several Chinese entities. These entities are generally subject to laws and regulations applicable to foreign investment in China. In addition, there are uncertainties regarding the interpretation and enforcement of laws, rules and policies in China. Because many laws and regulations are relatively new and the Chinese legal system is still evolving, the interpretations of many laws, regulations and rules are not always uniform. Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Finally, enforcement of existing laws or contracts based on existing law may be uncertain, and it may be difficult to obtain swift and equitable enforcement, or to obtain enforcement of a judgment by a court of another jurisdiction. Any litigation in China may be protracted and result in substantial costs and diversion of resources and management’s attention.

If PRC tax benefits available to H3C are reduced or repealed, our business could suffer.

If the PRC government changes, removes or withdraws any of the tax benefits currently enjoyed by our H3C segment, it will likely adversely affect our results of operations. For example, H3C enjoys preferential income tax rates due to its status as a newly-formed high technology enterprise headquartered within a high tech zone in Hangzhou, PRC. In March 2007 the People’s National Congress in the PRC approved a new tax reform law, effective on January 1, 2008, the broad intention of which is to align the tax regime applicable to foreign owned Chinese enterprises with that applicable to domestically-owned Chinese enterprises. If applicable to H3C, the effect of this new law would be to increase the statutory income tax rate for H3C in the PRC. It is proposed that some high-tech enterprises will be exempt from the increased rate; although much of the detail of the new law is yet to be issued in regulations, we currently believe that we will continue to qualify for the foreseeable future as a high-tech enterprise entitled to our existing tax concessions.

If H3C is not exempt from this new law, other tax benefits currently enjoyed by H3C are withdrawn or reduced, or new taxes are introduced which have not applied to H3C before, there would likely be a resulting increase to H3C’s statutory tax rates in the PRC. Increases to tax rates in the PRC, where our H3C segment is profitable, could adversely affect our results of operations.

H3C is subject to restrictions on paying dividends and making other payments to us.

Chinese regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with Chinese accounting standards and regulations. H3C does business primarily through a Chinese entity that is required to set aside a portion of its after-tax profits – currently 10 percent — according to Chinese accounting standards and regulations to fund certain reserves. The Chinese government also imposes controls on the conversion of Renminbi into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. These restrictions may in the future limit our ability to receive dividends or repatriate funds from H3C. In addition, the credit agreement governing our senior secured loan also imposes significant restrictions on H3C’s ability to dividend or make other payments to our SCN segment.

We are subject to risks relating to currency rate fluctuations and exchange controls and we do not hedge this risk in China.

A significant portion of our sales and a portion of our costs are made in China and denominated in Renminbi. At the same time, our senior secured bank loan – which we intend to service and repay primarily through cash flow from H3C’s PRC operations – is denominated in US dollars. In July 2005, China uncoupled the Renminbi from the U.S. dollar and let it float in a narrow band against a basket of foreign currencies. The move initially revalued the Renminbi by 2.1 percent against the U.S. dollar; however, it is uncertain what further adjustments may be made in the future. The Renminbi-U.S. dollar exchange rate could float, and the Renminbi could appreciate or depreciate relative to the U.S. dollar. Any movement of the Renminbi may materially and adversely affect our cash flows, revenues, operating results and financial position, and may make it more difficult for us to service our U.S. dollar-denominated senior secured bank loan. We do not currently hedge the currency risk in H3C through foreign exchange forward contracts or otherwise and China employs currency controls restricting Renminbi conversion, limiting our ability to engage in currency hedging activities in China. Various foreign exchange controls are applicable to us in China, and such restrictions may in the future make it difficult for H3C or us to repatriate earnings, which could have an adverse effect on our cash flows and financial position.

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Risks Related to Intellectual Property

If our products contain undetected software or hardware errors, we could incur significant unexpected expenses and could lose sales.

High technology products sometimes contain undetected software or hardware errors when new products or new versions or updates of existing products are released to the marketplace. Undetected errors could result in higher than expected warranty and service costs and expenses, and the recording of an accrual for related anticipated expenses. From time to time, such errors or component failures could be found in new or existing products after the commencement of commercial shipments. These problems may have a material adverse effect on our business by causing us to incur significant warranty and repair costs, diverting the attention of our engineering personnel from new product development efforts, delaying the recognition of revenue and causing significant customer relations problems. Further, if products are not accepted by customers due to such defects, and such returns exceed the amount we accrued for defect returns based on our historical experience, our operating results would be adversely affected.

Our products must successfully interoperate with products from other vendors. As a result, when problems occur in a network, it may be difficult to identify the sources of these problems. The occurrence of hardware and software errors, whether or not caused by our products, could result in the delay or loss of market acceptance of our products and any necessary revisions may cause us to incur significant expenses. The occurrence of any such problems would likely have a material adverse effect on our business, operating results and financial condition.

We may need to engage in complex and costly litigation in order to protect, maintain or enforce our intellectual property rights; in some jurisdictions, such as China, our rights may not be as strong as the rights we enjoy in the U.S.

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 because it may divert 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 and uncertain. In addition, such litigation may subject us to counterclaims or other retaliatory actions that could increase its costs, complexity, uncertainty and disruption to the business. Thus, the existence of this type of litigation, or any adverse determinations related to such litigation, could subject us to significant liabilities and costs. Any one of these factors could adversely affect our sales, gross margin, overall results of operations, cash flow or financial position.

In addition, the legal systems of many foreign countries do not protect or honor intellectual property rights to the same extent as the legal system of the United States. For example, in China, the legal system in general, and the intellectual property regime in particular, are still in the development stage. It may be very difficult, time-consuming and costly for us to attempt to enforce our intellectual property rights, and those of H3C, in these jurisdictions.

We may not be able to defend ourselves successfully against claims that we are infringing the intellectual property rights of others.

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 continues to be aggressive in assertion, licensing, and litigation of patents and other intellectual property rights.

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In the course of our business, we 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 to negotiate licenses or cross-licenses to incorporate or use the proprietary technologies, protocols, or specifications in our products, and whether we have rights of indemnification against our suppliers, strategic partners or licensors. 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 that must comply with industry standard protocols and specifications to be commercially viable, our financial position or results of operations could be adversely affected. In addition, if we are alleged to infringe the intellectual property rights of others, 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. Finally, even if we have indemnification rights in respect of such allegations of infringement from our suppliers, strategic partners or licensors, we may not be able to recover our losses under those indemnity rights.

OSN, our new open source strategy, subjects us to additional intellectual property risks, such as less control over development of certain technology that forms a part of this strategy and a higher likelihood of litigation.

We recently announced Open Services Networking, or OSN, a new networking strategy that uses open source software, or OSS, licenses. The underlying source code for OSS is generally made available to the general public with either relaxed or no intellectual property restrictions. This allows users to create user-generated software content through either incremental individual effort, or collaboration. The use of OSS means that for such software we do not exercise control over many aspects of the development of the open source technology. For example, the vast majority of programmers developing OSS used by us are neither our employees nor contractors. Therefore, we cannot predict whether further developments and enhancements to OSS selected by us would be available. Furthermore, rival OSS applications often compete for market share. Should our choice of application fail to compete favorably, its OSS development may wane or stop. In addition, OSS has few technological barriers to entry by new competitors and it may be relatively easy for new competitors, who have greater resources than us, to enter our markets and compete with us. Also, because OSS is often compiled from multiple components developed by numerous independent parties and usually comes “as is” and without indemnification, OSS is more vulnerable to third party intellectual property infringement claims. Finally, some of the more prominent OSS licenses, such as the GNU General Public License, are the subject of litigation. It is possible that a court could hold such licenses to be unenforceable or someone could assert a claim for proprietary rights in a program developed and distributed under them. Any ruling by a court that these licenses are not enforceable or that open source components of our product offerings may not be liberally copied, modified or distributed may have the effect of preventing us from selling or developing all or a portion of our products. If any of the foregoing occurred, it could cause a material adverse impact on our business.

Risks Related to the Trading Market

Fluctuations in our operating results and other factors may contribute to volatility in the market price of our stock.

Historically, our stock price has experienced volatility. We expect that our stock price may continue to experience volatility in the future due to a variety of potential factors such as:

• fluctuations in our quarterly results of operations and cash flow;

• changes in our cash and equivalents and short term investment balances;

• variations between our actual financial results and published analysts’ expectations; and

• announcements by our competitors.

In addition, over the past several years, the stock market has experienced significant price and volume fluctuations that have affected the stock prices of many technology companies. These factors, as well as general economic and political conditions or investors’ concerns regarding the credibility of corporate financial statements and the accounting profession, may have a material adverse affect on the market price of our stock in the future.

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Risks Related to Anti-takeover Mechanisms

We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’ ability to sell their shares for a premium in a change of control transaction.

Various provisions of our certificate of incorporation and bylaws and of Delaware corporate law may discourage, delay or prevent a change in control or takeover attempt of our company by a third party that is opposed by our management and board of directors. Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and board of directors. These provisions include:

• no cumulative voting for directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

• control by our board of directors of the size of our board of directors and our classified board of directors;

• prohibition on the ability of stockholders to call special meetings of stockholders;

• the ability of our board of directors to alter our bylaws without stockholder approval;

• prohibition on the ability of stockholders to take actions by written consent;

• advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by our stockholders at stockholder meetings;

• certain amendments to our certificate of incorporation and bylaws require the approval of holders of at least 66²/₃ percent of the voting power of all outstanding stock; and

• the ability of our board of directors to issue, without stockholder approval, preferred stock with rights that are senior to those of our common stock.

In addition, our board of directors has adopted a stockholder rights plan, the provisions of which could make it more difficult for a potential acquirer of 3Com to consummate an acquisition transaction. Also, Section 203 of the Delaware General Corporation Law may prohibit large stockholders, in particular those owning 15 percent or more of our outstanding voting stock, from merging or consolidating with us.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We lease properties in the United States and a number of foreign countries. For information regarding property, plant and equipment by geographic region for each of the last two fiscal years, see Note 20 to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

The following table summarizes our significant leased real estate properties as of June 1, 2007 (all facilities are for our SCN segment except where indicated otherwise):

Location	Sq. Ft.		Owned/Leased	Primary Use
United States—Boston Area		201,000	Leased	Corporate headquarters, office, research and development, and customer service.
United States—Austin Area		70,000	Leased	TippingPoint’s main office, research and development, and customer service.
United States—Chicago Area		43,000	Leased	Office, research and development, and customer service.
Europe—U.K.		39,000	Leased	Office, research and development, and customer service.
China—Hangzhou		1,682,000	Leased	Office, research and development, manufacturing, sales, and training. Used by our H3C segment. Lease expires January 2009.
China—Beijing		481,000	Leased	Research and development, training, sales and customer service. Used by our H3C segment.

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As part of our initiatives to maximize our efficiency, we are consolidating our operations wherever feasible and are actively engaged in efforts to dispose of excess facilities. As of June 1, 2007, we lease and sublease to third-party tenants approximately 49,000 square feet in various other facilities throughout North America and Europe. The facilities under sub-lease are leased facilities agreements that expire at various times between 2008 and 2009.

We believe that our facilities are adequate for our present needs in all material respects.

ITEM 3. LEGAL PROCEEDINGS

The material set forth in Note 22 to the Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K is incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the NASDAQ Global Select Market under the symbol COMS and has been quoted on NASDAQ since our initial public offering on March 21, 1984. The following table sets forth the high and low sale prices as reported on NASDAQ during the last two fiscal years. As of July 27, 2007, we had approximately 4,642 stockholders of record. We have not paid, and do not anticipate that we will pay, cash dividends on our common stock.

Fiscal 2007	High		Low		Fiscal 2006	High		Low
First Quarter	$	5.31	$	3.95	First Quarter	$	4.00	$	3.21
Second Quarter		5.24		3.95	Second Quarter		4.30		3.37
Third Quarter		4.24		3.73	Third Quarter		5.27		3.47
Fourth Quarter		4.79		3.60	Fourth Quarter		5.70		4.25

The following table summarizes repurchases of our stock, including shares returned to satisfy tax withholding obligations, in the quarter ended June 1, 2007:

						Total Number of		Approximate Dollar
						Shares Purchased as		Value of Shares
	Total Number			Average		Part of Publicly		that May Yet Be
	of Shares			Price Paid		Announced Plans or		Purchased Under the
Period	Purchased			per Share		Programs(1)		Plans or Programs
March 3, 2007 through March 30, 2007		396,751	(2)	$	3.89		—	$	100,000,000
March 31, 2007 through April 27, 2007		13,634	(2)		3.94		—		—
April 28, 2007 through June 1, 2007		12,082	(2)		4.17		—		—
Total		422,467		$	3.90		—	$	—

(1)

On March 23, 2005, our Board of Directors had approved a stock repurchase program providing for expenditures of up to $100.0 million through March 31, 2007, provided that all repurchases are pre-approved by the Audit and Finance Committee of the Board of Directors. We did not repurchase shares of our common stock pursuant to this authorization in the year ended May 31, 2007. The program has now expired.

(2)

Represents shares surrendered to us to satisfy tax withholding obligations that arose upon the vesting of restricted stock awards.

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COMPARISON OF STOCKHOLDER RETURN

Set forth on the next page is a line graph comparing the cumulative total return of our common stock with the cumulative total return of the Standard & Poor’s 500 Stock Index, our New Peer Group⁽¹⁾ and our Old Peer Group⁽¹⁾ for the period commencing on May 31, 2002 and ending on June 1, 2007 (fiscal year end)⁽²⁾⁽³⁾. We historically have constructed our peer group based on comparable market offerings, revenue composition and size. In re-evaluating our peer group this year, we removed one peer that is no longer publicly-traded. We also added one new peer; in light of the evolving nature of our business, we believe this addition to the peer group provides a more meaningful comparison in terms of competition in one of our important product offerings and other relevant factors. This information shall not be deemed to be “filed” with the Securities and Exchange Commission and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless we specifically incorporate it by reference.

(1)	Our New Peer Group consists of Avaya, Inc., Cisco Systems, Inc., Extreme Networks, Inc., Foundry Networks, Inc., McAfee, Inc. and Netgear Inc. Our Old Peer Group consists of Avaya, Inc., Cisco Systems, Inc., Extreme Networks, Inc., Foundry Networks, Inc. and Netgear Inc. Internet Security Systems Inc. was acquired in 2006 and has been removed from the Old Peer Group.
(2)	Assumes that $100.00 was invested on May 31, 2002 in our common stock and each index, and that all dividends were reinvested. No cash dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
(3)	3Com uses a 52-53 week fiscal year ending on the Friday nearest to May 31.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among 3Com Corporation, The S&P 500 Index,
A New Peer Group And An Old Peer Group

*	$100 invested on 5/31/02 in stock or index-including reinvestment of dividends. Index calculated on month-end basis.
Copyright © 2007, Standard & Poor’s, a division of The McGraw -Hill Companies, Inc. All rights reserved. w w w .researchdatagroup.com/S&P.htm

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DATA POINTS FOR PERFORMANCE GRAPH

	5/31/02		5/30/03		5/28/04		6/3/05		6/2/06		6/1/07
3Com Corporation		100.00		88.31		116.37		63.67		85.61		84.35
S&P 500		100.00		91.94		108.79		117.75		127.92		157.08
New Peer Group		100.00		103.16		141.66		123.05		130.39		172.01
Old Peer Group		100.00		104.12		142.98		122.20		130.38		171.23

ITEM 6. SELECTED FINANCIAL DATA

The data set forth below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Our fiscal year ends on the Friday closest to May 31. Fiscal 2007 consists of the 52 weeks ended June 1, 2007. Fiscal year 2006 consists of the 52 weeks ended June 3, 2006. Fiscal 2005 consisted of 53 weeks and ended on June 2, 2005. Fiscal years 2004 and 2003 each consisted of 52 weeks and fiscal 2004 ended on June 3, 2004, fiscal 2003 ended on May 30, 2003. For convenience, the consolidated financial statements have been shown as ending on the last day of the calendar month. The following balance sheet data and statements of operations data for each of the five years ended May 31, 2007 were derived from our audited consolidated financial statements. Consolidated balance sheets as of May 31, 2006 and 2005 and the related consolidated statements of operations and cash flows for each of the three years in the period ended May 31, 2007 and notes thereto appear elsewhere in this Annual Report on Form 10-K.

On May 23, 2003, we completed the sale of our CommWorks division. Accordingly, the information set forth in the table below is presented to reflect the CommWorks division as discontinued operations. On January 27, 2006 we acquired an additional 2 percent ownership in our H3C joint venture and became the majority shareholder (we have since acquired full ownership of H3C). Accordingly, the information set forth in the tables below is presented to reflect the consolidated results as of that date.

	Fiscal Year May 31,
(In thousands, except per share amounts)	2007			2006			2005			2004			2003
Sales	$	1,267,481		$	794,807		$	651,244		$	698,884		$	932,866
Net (loss)		(88,589	)		(100,675	)		(195,686	)		(349,263	)		(283,754	)
(Loss) from continuing operations before cumulative effect of accounting change		(88,589	)		(100,675	)		(195,686	)		(346,863	)		(230,093	)
(Loss) per share from continuing operations before cumulative effect of accounting change Basic and diluted	$	(0.22	)	$	(0.26	)	$	(0.51	)	$	(0.91	)	$	(0.64	)

The provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” are applicable to disposals occurring after our adoption of SFAS No. 144, effective June 1, 2002. In accordance with such provisions, the table below does not reflect the CommWorks division as a discontinued operation. Accordingly, the information set forth in the table below is presented to reflect the consolidated balances as of that date.

	Balances as of May 31,
(In thousands)	2007			2006			2005			2004			2003
Cash, equivalents and short-term investments	$	559,217		$	864,347		$	844,104		$	1,383,356		$	1,484,588
Total assets		2,151,092			1,861,361			1,592,967			1,820,818			2,062,360
Working capital, (1)		257,614			778,064			667,949			1,213,108			1,314,012
Deferred taxes and long-term obligations		23,725			13,788			8,484			15,135			4,595
Long term debt		336,000			—			—			—			—
Retained deficit		(1,176,406	)		(1,087,512	)		(967,952	)		(755,244	)		(405,981	)
Stockholders’ equity		1,151,299			1,202,362			1,274,923			1,499,114			1,718,597

(1) Working capital is defined as total current assets less total current liabilities.

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On November 15, 2006, 3Com initiated a bid process under a shareholders’ agreement for its H3C joint venture by submitting a bid to buy Huawei’s entire ownership interest in H3C. On November 27, 2006, Huawei accepted 3Com’s bid to buy its remaining 49 percent of H3C for $882 million. The transaction was approved by the PRC government.

On March 29, 2007, 3Com Technologies completed its purchase of the remaining 49 percent of H3C it did not already own at which time the purchase price was paid in full. Huawei-3Com Co., Limited is now known as H3C Technologies Co., Limited, or H3C. During fiscal 2006 we exercised our right to purchase an additional two percent ownership interest in H3C and entered into an agreement with Huawei for an aggregate purchase price of $28.0 million. We were granted regulatory approval by the Chinese government and subsequently completed this transaction on January 27, 2006 (date of acquisition). We consolidated H3C’s financial statements from the date of acquisition. The acquisition is being accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of May 31, 2006 using H3C’s March 31, 2006 balance sheet data. Because H3C follows a calendar year end, we report its results on a two-month lag. The operating results of H3C are included in the consolidated financial statements from the date of acquisition, resulting in the latter two months of H3C’s three months ended March 31, 2006 being included in our year ended May 31, 2006 statement of operations.

Our acquisition of TippingPoint on January 31, 2005 was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of May 31, 2005. The operating results of TippingPoint are included in the consolidated financial statements since the date of acquisition. Accordingly, fiscal 2006 contains a full year of TippingPoint’s results compared to five months of results in fiscal 2005.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8 of Part II of this Annual Report on Form 10-K.

BUSINESS OVERVIEW

We are incorporated in Delaware. A pioneer in the computer networking industry, we provide secure, converged networking solutions, as well as maintenance and support services, for enterprises and public sector organizations of all sizes. Headquartered in Marlborough, Massachusetts, we have worldwide operations, including sales, marketing, research and development, and customer service and support capabilities.

Our products and services can generally be classified in the following categories:

§	Networking;
§	Security;
§	Voice;
§	Services; and
§	Legacy Connectivity Products.

We have undergone significant changes in recent years, including:

§	forming the Huawei-3Com joint venture or H3C;
§	acquisition of majority ownership of H3C and subsequently purchasing Huawei’s remaining 49 percent ownership interest in H3C;
§	financing a portion of the purchase price for the acquisition of Huawei’s 49 percent ownership in H3C by entering into a $430 million senior secured credit agreement;
§	restructuring activities which included outsourcing of information technology, all manufacturing activity in our SCN segment, and significant headcount reductions in other functions, and selling excess facilities;
§	significant changes to our executive leadership;
§	acquiring TippingPoint Technologies, Inc.; and
§	realigning our SCN sales and marketing channels and expenditures.

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We believe an overview of these significant recent events is helpful to gain a clearer understanding of our operating results.

Significant Events

H3C

On November 17, 2003, we formed our joint venture, Huawei-3Com Co., Limited (now known as H3C Technologies Co., Limited) which is domiciled in Hong Kong and has its principal operating center in Hangzhou, China. We contributed $160.0 million in cash, assets related to our operations in China and Japan, and licenses to intellectual property related to those operations in exchange for a 49 percent ownership interest of the joint venture. During fiscal 2006, we exercised our right to purchase an additional two percent ownership interest in H3C and entered into an agreement with Huawei, our joint venture partner, for an aggregate purchase price of $28.0 million in cash. We were granted regulatory approval by the PRC, and subsequently completed this transaction on January 27, 2006 (date of acquisition). Consequently, we owned a majority interest in the joint venture and determined that the criteria of Emerging Issues Task Force No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights” was met. Accordingly, we consolidated H3C’s financial statements from the date of the acquisition of the additional two percent ownership interest.

Under the H3C shareholders’ agreement, both partners had the right to initiate a bid process to purchase all of the other partner’s ownership interest at any time after the third anniversary of H3C’s formation. We initiated the bidding process on November 15, 2006 to buy Huawei Technologies’ 49 percent stake in H3C, and our bid of $882 million was accepted by Huawei on November 27, 2006. The transaction closed on March 29, 2007.

We financed a portion of the purchase price for the acquisition of Huawei’s 49 percent ownership in H3C through a $430 million senior secured credit agreement with several lenders. Details of the borrowing are more fully discussed in the “Liquidity and Capital Resources” section below.

New Products

We have introduced multiple new products targeted at the small, medium and large enterprise markets, including modular switches and routers, as well as voice over IP, or VoIP, security, wireless and unified switching solutions. We also announced our Open Services Networking, or OSN, strategy.

Business Environment and Future Trends

Networking industry analysts and participants differ widely in their assessments concerning the prospects for near-term industry growth. Industry factors and trends also present significant challenges in the medium-term with respect to our goals for sales growth, gross margin improvement and profitability. Such factors and trends include:

§	Intense competition in the market for higher end, enterprise core routing and switching products;
§	Aggressive product pricing by competitors targeted at gaining share in market segments where we have had a strong position historically, such as the small to medium-sized enterprise market; and
§	The advanced nature and ready availability of merchant silicon, which allows low-end competitors to deliver competitive products and makes it increasingly difficult for us to differentiate our products.

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We believe that long-term success in this environment requires us to be a global technology leader. Now that we have closed our H3C transaction, we intend to leverage our global footprint to more effectively sell our products into expanding markets and to utilize cost-effective technology development strategies. We also believe that our long-term success is dependent on investing in the development of key technologies. Accordingly, our key focus of fiscal 2008 will continue to be to manage our H3C operating segment for expected continued long-term growth, to make targeted investments in the integration of sales efforts and back office functions between H3C and SCN, as well as to manage our SCN operating segment towards our goal of a return to profitability while maintaining investment levels in key technologies. In fiscal 2008, we also intend to continue investing in the H3C segment. This is expected to involve continued investment in research and development, increased focus on growth both inside and outside of China, growing the dedicated H3C infrastructure in concert with a global 3Com consolidated plan, and managing certain key aspects of employee retention as discussed below. In addition we may make certain targeted investments in the integration of the H3C and SCN operating segments designed to drive more profitable near and long-term growth of the business.

We continue to face significant challenges in the SCN segment with respect to sales growth, gross margin and profitability. We believe future sales growth for the SCN segment depends to a substantial degree on increased sales of our networking products, and we believe our best growth opportunity requires us to expand our product lines targeting small and medium businesses, or SMB, customers as well as selected medium-enterprise customers. These product enhancements are expected to be based in part upon leveraging open source and open architecture platforms to differentiate our networking offerings. These are also expected to be complemented by expanded security offerings such as the development of attack, access and application controls.

Finally, we intend to look to improve our channels to market on these products, especially through relationships with system integrators and service providers. In order to achieve our sales goals in the SCN segment for fiscal 2008, it is important that we continue to enhance the features and capabilities of our products in a timely manner in order to expand our addressable market opportunities, distribution channels and market competitiveness. Also, we expect a very competitive pricing environment for the foreseeable future; this will likely continue to exert downward pressure on our SCN sales, gross margin and profitability.

Another key priority will be the integration of H3C. Our integration focus will initially include:

§	Launching the second phase of our integration of our Asia Pacific Region sales models for data networking sales, especially in the medium-enterprise market; and
§	Integrating certain information technology (IT), supply chain and customer support functions to enable seamless go-to-market models and achieve synergies between our operating segments.

Other important factors in the continued success of our H3C business are expected to include: retaining key management and employees, continuing sales through Huawei as an OEM partner of H3C in the near to medium term, and continuing the year-over-year growth in H3C. H3C’s China sales growth has been historically strong, however we expect this growth to be closer to market rates in fiscal 2008. We intend to retain employees through a long-term retention and incentive structure at H3C.

We also currently have the intention to execute an initial public offering (IPO) of common stock of our wholly owned subsidiary TippingPoint, our business that develops, markets and sells security products and services, such as its intrusion prevention system appliances and its security protection updates through its Digital Vaccine service. Any sale of TippingPoint stock would be registered under the Securities Act of 1933, and such shares of common stock would only be offered and sold by means of a prospectus. This Annual Report does not constitute an offer to sell or the solicitation of any offer to buy any securities of TippingPoint, and there will not be any sale of any such securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state. We currently expect to file a registration statement related to the IPO by the end of the calendar year. We currently intend to remain a majority TippingPoint shareholder following the IPO and plan to reduce our ownership over time in subsequent transactions.

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BASIS OF PRESENTATION

Our fiscal year ends on the Friday closest to May 31. Fiscal 2007 consisted of 52 weeks and ended on June 1, 2007. Fiscal year 2006, consisted of 52 weeks ended on June 2, 2006, and fiscal year 2005 consisted of 53 weeks and ended on June 3, 2005. For convenience, the consolidated financial statements have been shown as ending on the last day of the calendar month.

During fiscal 2006 we exercised our right to purchase an additional two percent ownership interest in H3C and entered into an agreement with Huawei for an aggregate purchase price of $28.0 million. We were granted regulatory approval by the Chinese government and subsequently completed this transaction on January 27, 2006 (date of acquisition). Since that time, we have owned a majority interest in the joint venture and have determined that the criteria of Emerging Issues Task Force No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights” have been met. Accordingly, we consolidated H3C’s financial statements from the date of acquisition, and, until we became a 100 percent owner of H3C as described below, recorded Huawei’s proportionate share of the income of H3C as a minority interest in the income of consolidated joint venture.

Both joint venture partners had the right to initiate a bid process to purchase all of the other partner’s ownership interest at any time after the third anniversary of H3C’s formation. On November 15, 2006, 3Com initiated a bid process under the shareholders’ agreement by submitting a bid to buy Huawei’s entire ownership interest in H3C. On November 27, 2006, Huawei accepted 3Com’s last bid to buy Huawei’s remaining 49 percent share for $882 million. The transaction was approved by the PRC government and on March 29, 2007, 3Com Technologies completed its purchase at which time the purchase price was paid in full. Huawei-3Com Co., Limited is now known as H3C Technologies Co., Limited, or H3C.

On March 22, 2007, H3C Holdings Limited (the “Borrower”), an indirect wholly-owned subsidiary of 3Com Corporation, entered into a Credit and Guaranty Agreement dated as of March 22, 2007 among the 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 (“GSCP”), and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent (the “Existing Credit Agreement”). Under the Existing Credit Agreement, on March 28, 2007 the Borrower borrowed $430 million (the “Existing Loan”) to finance a portion of the purchase price for the March 29, 2007 acquisition (the “Acquisition”) of Huawei’s 49 percent stake in H3C.

On May 25, 2007, the parties amended and restated the Existing Credit Agreement in order to, among other things, convert the Existing Loan into two tranches with different principal amortization schedules and different interest rates (the “A&R Loans”). The other provisions of the Existing Credit Agreement, including covenants, collateral, temporary guarantees and other provisions, remain largely unchanged. The closing of the A&R Loans occurred on May 31, 2007.

Following the H3C 2 percent acquisition we determined that our chief decision making officer receives reports, manages, and operates our business as two separate units, the SCN business and the H3C business. As a result we currently report two operating segments, SCN and H3C. See footnote Note 19 of the Consolidated Financial Statements for additional information on our segments.

Prior to the additional 2 percent acquisition we accounted for our investment in H3C by the equity method. Under this method, we recorded our proportionate share of H3C’s net income or loss based on the most recently available quarterly financial statements of H3C under the caption “Equity interest in income (loss) of unconsolidated joint venture” in our consolidated financial statements.

Our acquisition of TippingPoint on January 31, 2005, was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of May 31, 2005. The operating results of TippingPoint are included in the consolidated financial statements since the date of acquisition. Accordingly, fiscal 2006 contains a full year of TippingPoint’s results compared to five months of results in fiscal 2005.

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CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are outlined in Note 2 to the Consolidated Financial Statements, which appear in Item 8 of Part II of this Annual Report on Form 10-K. Some of those accounting policies require us to make estimates and assumptions that affect the amounts reported by us. The following items require the most significant judgment and often involve complex estimation:

Revenue recognition: We recognize a sale when the product has been delivered and risk of loss has passed to the customer, collection of the resulting receivable is reasonably assured, persuasive evidence of an arrangement exists, and the fee is fixed or determinable. The assessment of whether the fee is fixed or determinable considers whether a significant portion of the fee is due after our normal payment terms. If we determine that the fee is not fixed or determinable, we recognize revenue at the time the fee becomes due, provided that all other revenue recognition criteria have been met. Also, sales arrangements may contain customer-specific acceptance requirements for both products and services. In such cases, revenue is deferred at the time of delivery of the product or service and is recognized upon receipt of customer acceptance.

For arrangements that involve multiple elements, such as sales of products that include maintenance or installation services, revenue is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element have been met. We use the residual method to recognize revenue when an arrangement includes one or more elements to be delivered at a future date and vendor-specific objective evidence of the fair value of all the undelivered elements exists. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of fair value of one or more undelivered elements does not exist, revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established.

We assess collectibility based on a number of factors, including general economic and market conditions, past transaction history with the customer, and the creditworthiness of the customer. If we determine that collection of the fee is not reasonably assured, then we defer the fee and recognize revenue upon receipt of payment. We do not typically request collateral from our customers. In the H3C segment, certain customers pay accounts receivable with bills receivable from Chinese banks with maturities less than six months. These are also referred to as “bankers’ acceptances”.

A significant portion of our sales is made to distributors and value added resellers (VARs). Revenue is generally recognized when title and risk of loss pass to the customer, assuming all other revenue recognition criteria have been met. Sales to these customers are recorded net of appropriate allowances, including estimates for product returns, price protection, and excess channel inventory levels. We maintain reserves for potential allowances and adjustments; if the actual level of returns and adjustments differ from the assumptions we use to develop those reserves, additional allowances and charges might be required.

For sales of products that contain software that is marketed separately, we apply the provisions of AICPA Statement of Position 97-2, “Software Revenue Recognition,” as amended. Sales of services, including professional services, system integration, project management, and training, are recognized upon delivery of performance. Other service revenue, such as that related to maintenance and support contracts, is recognized ratably over the contract term, provided that all other revenue recognition criteria have been met. Royalty revenue is generally recognized when we receive payment.

Allowance for doubtful accounts: We monitor payments from our customers on an on-going basis and maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. When we evaluate the adequacy of our allowances for doubtful accounts, we take into account various factors including our accounts receivable aging, customer creditworthiness, historical bad debts, and geographic and political risk. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.

Inventories: Inventory is stated at the lower of standard cost, which approximates cost, or net realizable value. We perform detailed reviews related to the net realizable value of inventory on an ongoing basis, for both inventory on hand and inventory that we are committed to purchase, giving consideration to deterioration, obsolescence, and other factors. If actual market conditions differ from those projected by management and our estimates prove to be inaccurate, additional write-downs or adjustments to cost of sales might be required; alternatively, we might realize benefits through cost of sales for sale or disposition of inventory that had been previously written off.

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Goodwill and intangible assets: Carrying values of goodwill and other intangible assets with indefinite lives are reviewed for possible impairment in accordance with the applicable accounting literature. We test our goodwill for impairment annually during our third fiscal quarter and in interim periods if certain events occur indicating that the carrying value of goodwill may be impaired. We review the value of our intangible assets in accordance with the applicable accounting literature for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. As of May 31, 2007, we had $766.4 million of goodwill and $371.3 million of net intangible assets remaining on our balance sheet, which we currently believe to be realizable based on the estimated fair value of these assets. We estimate fair value of goodwill using third-party valuation reports and the fair value of our intangible assets using estimated future cash flows of the associated products and technology. It is possible that the estimates and assumptions used in assessing the carrying value of these assets, such as future sales and expense levels, may need to be re-evaluated in the case of continued market deterioration, which could result in further impairment of these assets.

Equity securities and other investments: We account for non-marketable equity securities and other investments at historical cost or, if we have the ability to exert significant influence over the investee, by the equity method. Investments accounted for by the equity method include investments in limited partnership venture capital funds and, prior to the acquisition of majority ownership on January 27, 2006, the investment in H3C. In accounting for these investments by the equity method, we record our proportionate share of the fund’s net income or loss, or H3C’s net income or loss, based on the most recently available quarterly financial statements. Since H3C has adopted a calendar year basis of reporting, we reported our equity in H3C’s net income or loss based on H3C’s most recent quarterly financial statements, two months in arrears. For the year ended May 31, 2006 we accounted for H3C under the equity method for ten months of the year.

We review all of our investments for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investment may not be fully recoverable. The impairment review requires significant judgment to identify events or circumstances that would likely have a significant adverse effect on the fair value of the investment. Investments identified as having an indication of impairment are subject to further analysis to determine if the impairment is other than temporary; in the event that the investment impairment is other than temporary, we would write the investment down to its impaired value.

Stock-based Compensation. In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), which requires all stock-based compensation to employees (as defined in SFAS No. 123(R)), including grants of employee stock options, restricted stock awards, and restricted stock units, to be recognized in the financial statements based on their fair values.

Estimates of the fair value of equity awards in future periods will be affected by the market price of our common stock, as well as the actual results of certain assumptions used to value the equity awards. These assumptions include, but are not limited to, the expected volatility of the common stock, the expected term of options granted, and the risk free interest rate.

The fair value of stock options and employee stock purchase plan shares is determined by using the Black-Scholes option pricing model and applying the single-option approach to the stock option valuation. The options generally have vesting on an annual basis over a vesting period of four years. We estimate the expected option term by analyzing the historical term period from grant to exercise and also considers the expected term for those options that are outstanding. The expected term of employee stock purchase plan shares is the average of the remaining purchase periods under each offering period. For equity awards granted after June 1, 2006, the volatility of the common stock is estimated using the historical volatility. The risk-free interest rate used in the Black-Scholes option pricing model is determined by looking at historical U.S. Treasury zero-coupon bond issues with terms corresponding to the expected terms of the equity awards. In addition, an expected dividend yield of zero is used in the option valuation model, because we do not expect to pay any cash dividends in the foreseeable future. Lastly, in accordance with SFAS No. 123(R), we are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. In order to determine an estimated pre-vesting option forfeiture rate, we used historical forfeiture data, which yields a forfeiture rate of 27 percent. We believe this historical forfeiture rate to be reflective of our anticipated rate on a go-forward basis. This estimated forfeiture rate has been applied to all unvested options and restricted stock outstanding as of June 1, 2006 and to all options and restricted stock granted since June 1, 2006. Therefore, stock-based compensation expense is recorded only for those options and restricted stock that are expected to vest.

Restructuring charges: Over the last several years we have undertaken significant restructuring initiatives. These initiatives have required us to record restructuring charges related to severance and outplacement costs, lease cancellations, accelerated depreciation and write-downs of held for sale properties, write-downs of other long-term assets, and other restructuring costs.

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Given the significance of our restructuring activities and the time required for execution and completion of such activities, the process of estimating restructuring charges is complex and involves periodic reassessments of estimates made at the time the original decisions were made. The accounting for restructuring costs and asset impairments requires us to record charges when we have taken actions or have the appropriate approval for taking action, and when a liability is incurred. Our policies require us to periodically evaluate the adequacy of the remaining liabilities under our restructuring initiatives. As we continue to evaluate the business, we might be required to record additional charges for new restructuring activities as well as changes in estimates to amounts previously recorded.

Product Warranty: A limited warranty is provided on most of our products for periods ranging from 90 days to limited lifetime, depending upon the product, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires us to make estimates of product return rates and expected costs to repair or replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from our estimates, adjustments to recognize additional cost of sales might be required.

Income taxes: We are subject to income tax in a number of jurisdictions. A certain degree of estimation is required in recording the assets and liabilities related to income taxes, and it is reasonably possible that such assets may not be recovered and that such liabilities may not be paid or that payments in excess of amounts initially estimated and accrued may be required. We assess the likelihood that our deferred tax assets will be recovered from our future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. We consider historical taxable income, estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. Based on various factors, including our recent losses, retained deficit, operating performance in fiscal 2007, and estimates of future profitability, we have concluded that future taxable income will, more likely than not, be insufficient to recover our U.S. net deferred tax assets as of May 31, 2007. Accordingly, we have established an appropriate valuation allowance to offset such deferred tax assets. In addition to valuation allowances against deferred tax assets, we maintain reserves for potential tax contingencies arising in jurisdictions in which we do or have done business. Many of these contingencies arise from periods when we were a substantially larger company. Such reserves are based on our assessment of the likelihood of an unfavorable outcome and the expected potential loss from such contingency, and are monitored by management. These reserves are maintained until such time as the matter is settled or the statutory period for adjustment has passed. Adjustments could be required in the future if we determine that the amount to be realized is greater or less than the valuation allowance we have recorded or that our reserves for tax contingencies are inadequate. We have U.S. federal loss carryforwards of approximately $2.5 billion as of May 31, 2007 expiring between fiscal years 2008 and 2027, substantially all of which expire between fiscal years 2021 and 2027.

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RESULTS OF OPERATIONS
YEARS ENDED MAY 31, 2007, 2006, AND 2005

As a result of the acquisition of H3C, we currently report two operating segments, SCN and H3C, for the years ended May 31, 2007 and 2006. For the year ended May 31, 2005 we managed and reported our operations as a single, integrated business.

The following table sets forth, for the fiscal years indicated, the percentage of total sales represented by the line items reflected in our consolidated statements of operations.

	2007			2006			2005
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		54.4			58.7			64.0
Gross profit margin		45.6			41.3			36.0
Operating expenses:
Sales and marketing		25.2			34.6			37.4
Research and development		17.0			12.8			14.5
General and administrative		7.4			9.1			9.2
Amortization and write-down of intangible assets		3.4			2.6			1.4
In-process research and development		2.8			0.1			1.0
Restructuring charges		0.3			1.8			3.7
Total operating expenses		56.1			61.0			67.2
Operating loss		(10.5	)		(19.7	)		(31.2	)
Gain on investments, net		0.1			0.5			0.2
Interest income, net		3.2			3.6			3.3
Other income (expense), net		3.1			1.0			(0.7	)
Loss from operations before income taxes, equity interest in loss of unconsolidated joint venture and minority interest in income of consolidated joint venture		(4.1	)		(14.6	)		(28.4	)
Income tax (provision) benefit		(0.8	)		1.9			(0.5	)
Equity interest in income (loss) of unconsolidated joint venture		—			1.4			(1.1	)
Minority interest in income of consolidated joint venture		(2.1	)		(1.4	)		—
Net loss		(7.0	)%		(12.7	)%		(30.0	)%

Comparison of fiscal 2007 and 2006

During the year ended June 1, 2007 we continued to experience strong results in our H3C segment offset by declines in our SCN segment’s sales and we continued to reduce operating expenses in our SCN business segment, offset in part by continued investment in the TippingPoint security business.

Sales

The increase in sales from the 2006 fiscal year to the 2007 fiscal year was primarily due to the inclusion of full year H3C sales in the current period, as well as increased sales of TippingPoint security products. The increase was partially offset by decreases in networking revenues in our SCN segment.

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The following table shows our sales from products categories in absolute dollars and as a percentage of total sales for fiscal 2007 and fiscal 2006 (in millions):

	Fiscal Year
	2007				2006
Networking	$	1,028.1	81.1	%	$	577.0	72.6	%
Security		120.1	9.5			88.0	11.1
Voice		68.0	5.4			56.6	7.1
Services		35.9	2.8			33.4	4.2
Connectivity Products		15.4	1.2			39.8	5.0
Total	$	1,267.5			$	794.8

Networking revenue includes sales of our Layer 2 and Layer 3 stackable 10/100/1000 managed switching lines, our modular switching lines, routers, wireless switching offerings and our small to medium-sized enterprise market products. Sales of our networking products in fiscal 2007 increased 78 percent from fiscal 2006. The increase in sales was primarily driven by the inclusion of full year results from our H3C segment offset in part by decreases in SCN sales.

Security revenue includes our TippingPoint™ products and services, as well as other security products, such as virtual private network, or VPN, and network access control, or NAC, offerings. Sales of our security products in fiscal 2007 increased 36 percent from fiscal 2006. The increase is primarily attributable to organic growth in sales of security products in fiscal 2007 and the inclusion of H3C’s full year results of security product sales.

Voice revenue includes our VCX™ and NBX® voice-over-internet protocol, or VoIP, product lines, as well as voice gateway offerings. Sales of our VoIP telephony products in fiscal 2007 increased 20 percent from fiscal 2006. The increase was primarily driven by the inclusion of full year results from our H3C segment.

Services revenue includes professional services and maintenance contracts, excluding TippingPoint maintenance which is included in security revenue. Service revenue in fiscal 2007 increased 7 percent from fiscal 2006. The increase in sales was primarily driven by the inclusion of full year results from our H3C segment.

Connectivity Products revenue includes our legacy network interface card, personal computer card, and mini-peripheral component interconnect offerings. At the end of fiscal 2007 sales of these products are close to zero with continued revenue only expected to be from royalty arrangements.

Sales by geographic region are as follows (in millions):

	Fiscal Year
	2007				2006
North America	$	233.7	18.4	%	$	248.5	31.3	%
Latin and South America		70.4	5.6			72.2	9.1
Europe, Middle East, and Africa		272.8	21.5			298.5	37.5
Asia Pacific		103.5	8.2			91.4	11.5
China		587.1	46.3			84.2	10.6
Total	$	1,267.5			$	794.8

Sales information by geography to the extent available is reported based on the customer’s designated delivery point, except in the case of H3C’s OEM sales which are based on the hub locations of H3C’s OEM partners. China sales increased 597 percent primarily due to the inclusion of H3C results for the full year in fiscal 2007.

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Gross Profit Margin

Gross profit margin improved 4.3 percent to 45.6 percent in the twelve months ended June 1, 2007 from 41.3 percent in the same period in the previous fiscal year. Significant components of the improvement in gross profit margins were as follows:

	Twelve Months
	Ended
	June 1, 2007
1) Consolidation of H3C		6.5	%
2) SCN cost improvements		2.3	%
3) SCN product mix and selling price reductions		(3.3	%)
4) SCN volume impact		(1.2	%)
Total		4.3	%

1)	The increase is due to the consolidation of H3C results in the current period. The H3C segment generally has higher gross margins.
2)	The increase in the SCN margin was primarily the result of lower product material and delivery costs.
3)	The decrease in the SCN margin was the result of lower average selling prices and an unfavorable shift in product mix.
4)	The decrease in the SCN margin was the result of lower revenue on the portion of our costs that are fixed in nature.

Operating Expenses

Operating expenses in fiscal 2007 were $711.0 million, compared to $485.2 million in fiscal 2006, a net increase of $225.8 million. Included in the increase in operating expenses were H3C operating expenses of $354.0 million for the full year ended May 31, 2007 as compared to $36.6 million for the two months consolidated in 2006. In addition, the incurrence of the change-in-control portion of H3C’s EARP bonus program contributed compensation expenses of $51.5 million in the year ended May 31, 2007, which were not incurred in the previous fiscal year. This increase was partially offset by significant cost reduction in our SCN segment as compared to the previous year. The full year inclusion of H3C was the primary contributor to increases in sales and marketing expenses of $45.0 million, research and development expenses of $113.8 million, general and administrative expenses of $21.3 million, and amortization of intangibles of $21.6 million. Purchase accounting charges related to the acquisition of the remaining 49 percent interest of H3C was the main contributor to the increase in in-process research and development of $35.1 million. These increases were partially offset by the decrease of restructuring charges of $10.9 million.

As a percent of sales, total operating expenses in fiscal 2007 were 56.1 percent, compared to 61.0 percent in fiscal 2006. In aggregate, sales and marketing, research and development, and general and administrative expenses were 49.6 percent of sales in fiscal 2007, compared to 56.5 percent in fiscal 2006, and increased $180.0 million in fiscal 2007 compared to fiscal 2006. We believe that to a significant degree, these expenses are controllable and discretionary over time, but they are not directly variable with sales levels within a particular period. The most significant component of the increase of $180.0 was the inclusion of $292 million of H3C expenses for the entire fiscal year ended May 31, 2007 partially offset by significant cost reductions in our SCN segment.

A more detailed discussion of the factors affecting each major component of total operating expenses is provided below.

Sales and Marketing. Sales and marketing expenses in fiscal 2007 increased $45.0 million compared to fiscal 2006. This increase was due primarily to the inclusion of H3C expenses for the entire fiscal year ended May 31, 2007. In addition, the incurrence of the change-in-control portion of H3C’s EARP bonus program contributed compensation expenses of $17.7 million in our H3C segment in the year ended May 31, 2007. The expenses were not incurred in the previous fiscal year and were partially offset by a reduction in the SCN sales and marketing expenses. The reduction of the SCN sales and marketing expenses were primarily related to the reduction of programmatic marketing expenses, and a reduction in employee related expenses due to our restructuring efforts.

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Research and Development. Research and development expenses in fiscal 2007 increased $113.8 million compared to fiscal 2006. This increase was due primarily to the inclusion of H3C expenses for the entire fiscal year ended May 31, 2007. In addition, the incurrence of the change-in-control portion of H3C’s EARP bonus program contributed compensation expenses of $27.2 million in our H3C segment in the year ended May 31, 2007. These expenses were not incurred in the previous fiscal year and were partially offset by the reduction in SCN research and development expenses. The decrease in the SCN research and development costs was related to reduced non-recurring engineering projects and employee related expenses in the non-TippingPoint related portion of our SCN segment which was slightly offset by increased investment in TippingPoint research and development.

General and Administrative. General and administrative expenses in fiscal 2007 increased $21.3 million from fiscal 2006. This increase is primarily due to the inclusion of H3C expenses for the entire fiscal year ended May 31, 2007. In addition, the incurrence of the change-in-control portion of H3C’s EARP bonus program contributed compensation expenses of $6.6 million in our H3C segment in the year ended May 31, 2007. These expenses were not incurred in the previous fiscal year and were partially offset by a reduction in the SCN general and administrative expenses. The reduction of the SCN general and administrative expenses were primarily related to the reduced workforce-related expenses due to our restructuring initiatives and reduced IT and facilities-related expenses.

Amortization and Write-Down of Intangibles. Amortization and write-down of intangibles were $42.5 million in fiscal 2007 and $20.9 million in fiscal 2006, an increase of $21.6 million. Amortization and write-down of intangibles increased due primarily to the inclusion of H3C expenses for the entire fiscal year ended May 31, 2007. The amortization expense related to the March 29, 2007 purchase of 49 percent of H3C in 2007 is through March 31, 2007 as we record H3C results on a two month lag.

In-process research and development. $34.1 million of the total purchase price of 49 percent of the remaining minority interest in H3C has been preliminarily allocated to in-process research and development and was expensed in the fourth quarter of fiscal 2007. Projects that qualify as in-process research and development represent those that have not yet reached technological feasibility and which have no alternative future use. At the time of acquisition, H3C had multiple in-process research and development efforts under way for certain current and future product lines.

Restructuring Charges. Restructuring charges were $3.5 million in fiscal 2007 and $14.4 million in fiscal 2006. Restructuring charges in fiscal 2007 were composed primarily of charges for actions taken in fiscal 2007, including employee severance and outplacement costs of $12.1 million, and facilities-related credits of $7.5 million. Restructuring charges for fiscal 2007 were the result of reductions in workforce and continued efforts to consolidate and dispose of excess facilities.

Further actions may be taken if our business activity declines or additional cost reduction efforts are necessary.

Gain on Investments, Net

During fiscal 2007, net gains on investments were $1.1 million, primarily reflecting gains from sales of certain equity securities. During fiscal 2006, net gains on investments were $4.3 million, primarily reflecting gains from sales of certain equity securities.

Interest Income and Other Income (Expense), Net

Interest and other income, net, was $79.2 million in fiscal 2007, an increase of $41.9 million compared to $37.3 million in fiscal 2006. Contributing to the increase was $30.6 million of other income from H3C for an operating subsidy program by the Chinese VAT authorities in the form of a partial refund of VAT taxes collected by H3C from purchasers of software products. An increase in interest income accounted for $12.0 million of the increase, primarily attributable to higher interest rates applicable to short-term investments and the inclusion of a full year of results of H3C. Interest income and interest expense related to H3C are included through the period ended March 31, 2007. Thus, there is only three days of interest expense recorded related to the debt incurred on March 28, 2007. In fiscal 2006 our results reflected a quarterly VAT payment that was received during the two month period of H3C’s results that are in our consolidated financials. Future subsidy payments, which are funded by VAT receipts, are subject to the discretion of Chinese VAT authorities.

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Income Tax (Provision) Benefit

Our income tax provision was $10.2 million in fiscal 2007, compared to an income tax benefit of $14.8 million in fiscal 2006. The income tax provision for fiscal 2007 was the result of providing for taxes in certain state and foreign jurisdictions. The tax benefit for fiscal 2006 was the result of a $23.0 million benefit resulting from a tax settlement with foreign tax authorities in the second quarter of fiscal 2006, for which reserves had been provided in prior years and which have now been reversed into income upon reaching settlement. Partially offsetting the income tax benefit for fiscal 2006 was the provision of additional taxes in certain state and foreign jurisdictions.

Minority Interest of Huawei in the Income of Consolidated Huawei-3Com Joint Venture

In fiscal 2007, we recorded a charge of $26.2 million related to the acquisition of the 49 percent interest in H3C held by Huawei prior to our purchase. In fiscal 2006, we recorded a charge of $11.1 million representing Huawei’s 49 percent interest in the net income reported by the former H3C joint venture for the two month period included in our fiscal 2006.

Comparison of fiscal 2006 and 2005

Sales

The increase in sales from the 2005 fiscal year to the 2006 fiscal year was primarily due to the inclusion of two months of H3C sales in the fiscal 2006, as well as increased sales of TippingPoint security products and the inclusion of TippingPoint’s results for the full year. The increase was partially offset by decreases in networking revenues in our SCN segment.

The following table shows our sales from products categories in absolute dollars and as a percentage of total sales for fiscal 2006 and fiscal 2005 (in millions):

	Fiscal Year
	2006				2005
Networking	$	577.0	72.6	%	$	494.5	75.9	%
Security		88.0	11.1			25.8	4.0
Voice		56.6	7.1			44.9	6.9
Services		33.4	4.2			32.0	4.9
Connectivity Products		39.8	5.0			54.0	8.3
Total	$	794.8			$	651.2

Sales of networking products in fiscal 2006 increased 17 percent from fiscal 2005. Networking revenue includes sales of the H3C sourced enterprise products, our Layer 2 and Layer 3 stackable 10/100/1000 managed switching lines, wireless and OfficeConnect hardware, baseline branded small to medium-sized enterprise market products, and H3C’s router and switching products. The increase in sales was primarily driven by the inclusion of two months results from the H3C joint venture. We also saw growth from the introduction of the 5500 line of Layer 3 switches sourced from H3C as well as growth in our modular core and router products. This growth was partially offset by a decline in demand for Layer 2 switches and a reduction in average selling prices resulting from significant price competition, particularly for our 10/100 Mbps switching products as the industry migrates to gigabit switching solutions, and by a shift in mix towards lower-priced products.

Sales of security products in fiscal 2006 increased 241 percent from fiscal 2005. Security revenue includes our TippingPoint products and services, as well as other security products, such as our embedded firewall product. The increase is primarily attributable to the inclusion of TippingPoint’s sales for the full period and, to a lesser extent, organic growth in sales of security products in fiscal 2006 and the inclusion of H3C’s security product sales. Sales of our embedded firewall products increased in the year ended May 31, 2006.

VoIP Telephony revenue includes our VCX and NBX VoIP product lines. Sales of our VoIP telephony products in fiscal 2006 increased 26 percent from fiscal 2005. The increase in such sales was due largely to growth in the demand for our NBX products as well as a shift in focus to larger enterprise contracts. Incremental sales of VCX products and to a lesser extent, the inclusion of H3C’s voice products also contributed to the increase in VoIP telephony sales in fiscal 2006.

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Services revenue includes professional services and maintenance contracts, excluding TippingPoint maintenance which is included in security.

Connectivity Products revenue includes our legacy network interface card, personal computer card, and mini-peripheral component interconnect offerings. Sales of our connectivity products continue to decrease as these applications are integrated into other solutions, and these offerings continue to move toward the end of the product life cycle.

Sales by geographic region are as follows (in millions):

	Fiscal Year
	2006				2005
North America	$	248.5	31.3	%	$	214.1	32.9	%
Latin and South America		72.2	9.1			57.7	8.9
Europe, Middle East, and Africa		298.5	37.5			294.7	45.2
Asia Pacific		175.6	22.1			84.7	13.0
Total	$	794.8			$	651.2

Sales information by geography to the extent available is reported based on the customer’s designated delivery point, except in the case of H3C’s OEM sales which are based on the hub locations of H3C’s OEM partners. Asia Pacific sales increased 107 percent primarily due to the inclusion of H3C results for two months in fiscal 2006.

Gross Profit Margin

Gross profit margin as a percentage of sales improved 5.3 percentage points from 36.0 percent of sales in fiscal 2005 to 41.3 percent of sales in fiscal 2006. Significant components of the improvement in gross profit margin were as follows:

1) Increased sales of security products and inclusion of TippingPoint higher margin products for full current period	3.6	%
2) Consolidation of H3C higher margin products	2.1
3) SCN product mix and selling price reductions	(2.4	)
4) Royalty payment reductions	1.1
5) Other	0.9
Total	5.3	%

1)	The increase was the result of higher average selling prices and margin for TippingPoint’s security products compared to other SCN products as well as the inclusion of a full year of TippingPoint results in fiscal year 2006.
2)	The increase is due to the inclusion of two months of results of H3C which generally have higher gross margins.
3)	The decrease in the SCN margin was the result of lower average selling prices and an unfavorable shift in product mix. These declines were partially offset by product cost reductions.
4)	Fiscal year 2005 included final disbursements on two significant royalty payments.
5)	Other cost reduction activities included freight consolidation, and a reduction in the Connectivity Products business that consequently caused a decrease in unit shipment per revenue dollar which lowered variable costs.

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Operating Expenses

Operating expenses in fiscal 2006 were $485.2 million, compared to $437.8 million in fiscal 2005, a net increase of $47.4 million. Included in the increase in operating expenses were H3C operating expenses of $36.6 million for the two month period ended May 31, 2006 and the inclusion of a full year of TippingPoint operating expenses in fiscal 2006 as compared to five months in 2005. Both of these factors were the primary contributors to increases in sales and marketing expenses of $31.0 million, research and development expenses of $7.3 million, general and administrative expenses of $12.8 million, and amortization of intangibles of $11.9 million. The increase was partially offset by the decrease of in-process research and development of $6.1 million and restructuring charges of $9.5 million.

As a percent of sales, total operating expenses in fiscal 2006 were 61.0 percent, compared to 67.2 percent in fiscal 2005. In aggregate, sales and marketing, research and development, and general and administrative expenses were 56.5 percent of sales in fiscal 2006, compared to 61.1 percent in fiscal 2005, and increased $51.1 million in fiscal 2006 compared to fiscal 2005. We believe that to a significant degree, these expenses are controllable and discretionary over time, but they are not directly variable with sales levels within a particular period. The most significant component of the increase of $51.1 was the inclusion of $30.2 million of H3C expenses for the two months ended May 31, 2006.

A more detailed discussion of the factors affecting each major component of total operating expenses is provided below.

Sales and Marketing. Sales and marketing expenses in fiscal 2006 increased $31.0 million compared to fiscal 2005. This increase was due primarily to the inclusion of H3C expenses for the two months ended May 31, 2006 and TippingPoint’s expenses for the entire 2006 fiscal period. In addition, our investment in our branding campaign and the incurrence of performance related compensation expenses in the year ended May 31, 2006, which were not incurred in the previous fiscal year, contributed to the increase. Employee incentive compensation is aligned to the accomplishment of specific financial objectives and certain of these objectives were met in the current fiscal year, whereas these objectives were not met in the previous fiscal year. Partially offsetting these increases were reduced headcount and related expenses in fiscal 2006, compared to the same period in fiscal 2005.

Research and Development. Research and development expenses in fiscal 2006 increased $7.3 million compared to fiscal 2005. This increase was due primarily to the inclusion of H3C expenses for the two months ended May 31, 2006 and the inclusion of TippingPoint’s expenses in the 2006 fiscal period. In addition, a $4.2 million charge resulting from the impairment of licensed software was incurred for which we had no alternative future use. The increase was offset by reduced workforce expenses as a result of restructuring activities and reduced project spending in the current year.

General and Administrative. General and administrative expenses in fiscal 2006 increased $12.8 million from fiscal 2005. This increase is due to H3C expenses for the two months ended May 31, 2006 and the inclusion of TippingPoint’s expenses in the 2006 fiscal period and $4.6 million related to executive transition costs in the current year. In addition, we incurred performance related compensation expenses in the year ended May 31, 2006, which were not incurred in the previous fiscal year.

Amortization and Write-Down of Intangibles. Amortization and write-down of intangibles were $20.9 million in fiscal 2006 and $9.0 million in fiscal 2005, an increase of $11.9 million. Amortization and write-down of intangibles increased due to $132.6 million of purchased intangibles acquired in the acquisition of 2 percent of the equity of H3C in fiscal 2006 that are being amortized on a straight-line basis over their estimated useful lives of between three and five years. Partially offsetting this increase was a reduction in impairment charges.

In-process research and development. $0.7 million of the total purchase price of 2 percent of the equity of H3C has been preliminarily allocated to in-process research and development and was expensed in the fourth quarter of fiscal 2006. Projects that qualify as in-process research and development represent those that have not yet reached technological feasibility and which have no alternative future use. At the time of acquisition, H3C had multiple in-process research and development efforts under way for certain current and future product lines.

Restructuring Charges. Restructuring charges were $14.4 million in fiscal 2006 and $23.9 million in fiscal 2005. Restructuring charges in fiscal 2006 were composed primarily of charges for actions taken in fiscal 2006, including employee severance and outplacement costs of $9.6 million, and facilities-related charges of $1.6 million. Restructuring charges for fiscal 2006 were the result of reductions in workforce and continued efforts to consolidate and dispose of excess facilities.

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We announced in June 2006 a multi-faceted SCN restructuring. The plan focuses on reducing components of the SCN operating segment cost structure in order to achieve our goal of future profitability. The plan includes: the closure of approximately 21 facilities around the world; a reduction in workforce of approximately 250 full-time employees, equating to approximately 15 percent of our SCN headcount; and focusing our sales, marketing, and services effort. Further actions may be taken if our business activity declines and additional cost reduction efforts are necessary.

Gain on Investments, Net

During fiscal 2006, net gains on investments were $4.3 million, primarily reflecting gains from sales of certain equity securities. During fiscal 2005, net gains on investments were $1.6 million, reflecting $2.2 million of recognized gains from the sale of an investment in a privately-held company and public traded securities partially offset by a net loss of $0.6 million due to fair value adjustments of investments in limited partnership venture capital funds.

Interest Income and Other Income (Expense), Net

Interest and other income, net, was $37.3 million in fiscal 2006, an increase of $20.7 million compared to $16.6 million in fiscal 2005. An increase in interest income accounted for $7.7 million of this increase, primarily attributable to higher interest rates applicable to short-term investments and the inclusion of two months of H3C results. Also contributing to the increase was $7.4 million of other income from H3C for an operating subsidy program by the Chinese VAT authorities in the form of a partial refund of VAT taxes collected by H3C from purchasers of software products, and a reduction in interest expense due to the expiration of our revolving credit facility in November 2004 according to its terms. Our results reflect a quarterly payment that was received during the two month period of H3C’s results that are in our consolidated financials.

Income Tax (Provision) Benefit

Our income tax benefit was $14.8 million in fiscal 2006, compared to an income tax provision of $3.5 million in fiscal 2005. The tax benefit for fiscal 2006 was the result of a $23.0 million benefit resulting from a tax settlement with foreign tax authorities in the second quarter of fiscal 2006, for which reserves had been provided in prior years and have now been reversed into income upon reaching settlement. Partially offsetting income tax benefit for fiscal 2006 was the provision of additional taxes in certain state and foreign jurisdictions. Our income tax provision for fiscal 2005 was the result of providing for taxes in certain state and foreign jurisdictions, partially offset by the favorable resolution of an income tax audit in a foreign jurisdiction.

Equity Interest in Income (Loss) of Unconsolidated Joint Venture

As described more fully above, we accounted for our investment in H3C by the equity method prior to the acquisition of majority ownership on January 27, 2006. In fiscal 2006 we recorded income of $11.0 million representing our share of the net income from operations generated by H3C from April 1, 2005 through January 31, 2006. In fiscal 2005 we recorded a charge of $7.0 million representing our share of the net loss from operations incurred by H3C from April 1, 2004 through March 31, 2005.

Minority Interest of Huawei in the (Income) of Consolidated Huawei-3Com Joint Venture

In fiscal 2006, we recorded a charge of $11.1 million representing Huawei 49 percent interest in the net income reported by the H3C joint venture for the two month period included in our fiscal 2006.

47

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents and short-term investments as of May 31, 2007 were $559.2 million, a decrease of approximately $305.1 million compared to the balance of $864.3 million as of May 31, 2006. These balances were comprised of the following (in millions):

	2007		2006		2005
Cash and equivalents	$	559.2	$	501.1	$	268.5
Short-term investments		—		363.2		575.6
Cash and equivalents and short term investments	$	559.2	$	864.3	$	844.1

The May 31, 2007 balance included cash and equivalents in our H3C segment of $328.7 million.

The following table shows the major components of our consolidated statements of cash flows for the last three fiscal years:

	Years Ended May 31,
(in millions)	2007			2006			2005
Cash and equivalents, beginning of period	$	501.1		$	268.5		$	476.3
Net cash provided by (used in) operating activities		165.5			(86.2	)		(135.6	)
Net cash provided by (used in) investing activities		(505.9	)		300.8			(12.7	)
Net cash provided by (used in) financing activities		387.9			15.7			(59.4	)
Other		10.6			2.3			(0.1	)
Cash and equivalents, end of period	$	559.2		$	501.1		$	268.5

Net cash provided by operating activities was $165.5 million for fiscal 2007. The increase in cash was largely due to non-cash adjustments to our net loss which included $75.0 million of depreciation and amortization, $35.8 million of IPR&D charges, the minority interest in H3C income of $26.2 million and $20.1 million of stock based compensation, as well as significant reductions in inventories and other liabilities, which were partially offset by our net loss. Based on current business conditions and our current operating and financial plans, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to satisfy our anticipated cash and debt payment requirements for at least the next 12 months.

Significant commitments that will require the use of cash in future periods include obligations under debt, lease, contract manufacturing and outsourcing agreements, as shown in the following table (in millions):

	Payments Due by Period
			Less than						More than
Contractual Obligations (1)	Total		one year		1-3 years		3-5 years		5 years
Operating leases	$	47.2	$	27.7	$	19.5	$	—	$	—
Purchase commitments with contract manufacturers (2)		70.3		70.3		—		—		—
Long term debt (3)		430.0		94.0		144.0		192.0		—
Outsourcing agreements (4)		12.0		12.0		—		—		—
Total	$	559.5	$	204.0	$	163.5	$	192.0	$	—

(1)

Includes SCN segment obligations as of May 31, 2007 and H3C segment obligations as of March 31, 2007. Does not include EARP payment requirements described below.

(2)

We have entered into purchase agreements with our contract manufacturers. Pursuant to these agreements, if our actual orders and purchases fall below forecasted levels, we may be required to purchase finished goods inventory manufactured to meet our requirements. In addition, we may be required to purchase raw material and work in process inventory on-hand that is unique to our products, and we may be required to compensate the contract manufacturers with respect to their non-cancelable purchase orders for such inventory. The amount shown in the table above represents our estimate of inventory held by contract manufacturers that we could be required to purchase within the next 12 months. We do not expect any such required purchases to exceed our requirements for inventory to meet expected sales of our products to our customers.

48

(3)

Represents required principal and interest payments on our senior secured loan, but does not include “excess cash flow” payments which are dependent on whether H3C generates any excess cash flow, as defined in the A&R Loans.

(4)

Under our customer service, IT outsourcing agreements and research and development agreement we are subject to service level commitments and contractor commitments levels providing for annual minimum payments that vary depending on the levels we choose. The amounts shown in the table above represent the amounts that would be payable, based on current levels, through the expiration of the agreements. However, our IT agreement may be terminated at any time upon 120 days notice and the payment of a termination fee ranging from approximately $1.1 million to $1.5 million, and our research and development agreement may be terminated at any time with a $0.8 million payment. Our customer service agreement with Siemens expires in 2011 but we have communicated that we are terminating the contract for convenience on the third anniversary date, which is in October of 2007. We currently expect to incur approximately $1.7 million of termination fees.

We have no material commitments for capital expenditures as of May 31, 2007 other than ordinary course of business purchases of computer hardware, software and leasehold improvements.

Net cash used in investing activities was $505.9 million for fiscal 2007, including $898.5 million used to purchase the remaining 49 percent interest in H3C and the purchase of the assets of Roving Planet, and $28.3 million of outflows related to the purchase of property and equipment. We made investments totaling $225.0 million in fiscal 2007 and $421.3 million in fiscal 2006, in municipal and corporate bonds, government agency instruments and equity securities. Proceeds from maturities and sales of municipal and corporate bonds, government agency instruments and equity securities were $609.3 million in fiscal 2007 and $629.0 million in fiscal 2006. We also had $36.6 million of proceeds from the sale of the Santa Clara facility and insurance proceeds for the previously disclosed damage to our Hemel Hemstead facility. In September 2006 we sold all of our remaining venture portfolio and generated cash of approximately $1.3 million with a loss on sale of investments of $0.7 million. In August 2006, we sold certain limited partnership interests and generated cash of approximately $17.0 million with a gain on sale of investment of $2.4 million and eliminated our future capital call requirements.

Net cash provided by financing activities was $387.9 million for fiscal 2007, which includes $415.8 million of proceeds from the A&R Loans partially offset by $80.0 million of H3C return of capital to 3Com and Huawei, its two shareholders at the time. Accordingly, our consolidated cash balance was reduced by $40.8 million for Huawei’s share of the distribution. During fiscal 2007, we also repurchased shares of restricted stock valued at $13.5 million upon vesting of awards from employees consisting of shares to satisfy the tax withholding obligations that arise in connection with such vesting. This was offset by proceeds of $23.6 million from issuances of our common stock upon exercise of stock options. During fiscal 2005, we entered a new agreement facilitating the issuance of standby letters of credit and bank guarantees required in the normal course of business. As of May 31, 2007, such bank-issued standby letters of credit and guarantees totaled $5.9 million, including $5.0 million relating to potential foreign tax, custom, and duty assessments.

During fiscal 2007, we issued approximately 7.2 million shares of our common stock in connection with our employee stock purchase and option plans with total proceeds from such issuances of $14.9 million. As of May 31, 2007, our outstanding stock options as a percentage of outstanding shares were 13 percent.

On March 22, 2007, H3C Holdings Limited (the “Borrower”), an indirect wholly-owned subsidiary of 3Com Corporation, entered into a Credit and Guaranty Agreement with various lenders (the “Credit Agreement”). On March 28, 2007, the Borrower borrowed $430 million under the Credit Agreement in the form of a senior secured term loan to finance a portion of the purchase price for 3Com’s acquisition of 49 percent of H3C.

On May 25, 2007, the parties amended and restated the Credit Agreement in order to, among other things, convert the facility into two tranches with different principal amortization schedules and different interest rates, as further described below (the “A&R Loans”). The parties closed the A&R Loans on May 31, 2007. The A&R Loans are subject to the terms and conditions of an Amended and Restated Credit and Guaranty Agreement dated as of May 25, 2007 and effective as of May 31, 2007 (the “A&R Credit Agreement”).

As amended, borrowings under the Credit Agreement consist of two tranches with different principal amortization schedules and different interest rates. We are required to maintain a rating from Moody’s and S&P during the term of the A&R Loans.

49

Interest on borrowings is payable semi-annually on March 28 and September 28, commencing on September 28, 2007. All amounts outstanding under the Tranche A Term Facility will bear interest, at the Borrower’s option, at the (i) LIBOR, or (ii) Base Rate (i.e., prime rate), in each case plus the applicable margin percentage set forth in the table below, which is based on a “leverage ratio” of consolidated indebtedness of the Borrower and its subsidiaries to EBITDA (as defined in the A&R Credit Agreement, and calculated to exclude certain one-time nonrecurring charges) for the relevant twelve-month period:

Leverage Ratio	LIBOR +			Base Rate +
>3.0:10		2.25	%		1.25	%
< 3.0:1.0 but > 2.0:1.0		2.00	%		1.00	%
< 2.0:1.0 but > 1.0:1.0		1.75	%		0.75	%
< 1.0:1.0		1.50	%		0.50	%

All amounts outstanding under the Tranche B Term Facility will bear interest, at the Borrower’s option, at the (i) LIBOR plus 3.00 percent or (ii) Base Rate (i.e., prime rate) plus 2.00 percent. We have elected to use LIBOR as the reference rate for borrowings to date, and expect to do so for the foreseeable future. In addition, the applicable margin for the Tranche A Term Facility is 2.00 percent at May 31, 2007.

A default rate shall apply on all obligations in the event of default under the A&R Loans at a rate per annum of 2 percent above the applicable interest rate.

The Borrower’s principal asset is 100 percent of the shares of H3C. Covenants and other restrictions under the A&R Credit Agreement generally apply to the Borrower and its subsidiaries, which we refer to as the “H3C Group.” 3Com’s SCN segment is not generally subject to the terms of the A&R Credit Agreement, other than through parental guarantees. Required payments under the loan are generally expected to be serviced by cash flows from the H3C Group and the loan is secured by assets at the H3C level, as well as the parental guarantees (which are expected to be released after H3C effects a successful capital reduction).

The A&R Loans may be prepaid in whole or in part without premium or penalty. The Borrower will be required to make mandatory prepayments using net proceeds from H3C Group (i) asset sales, (ii) insurance proceeds and (iii) equity offerings or debt incurrence. In addition, the Borrower will be required to make annual prepayments in an amount equal to 75 percent of “excess cash flow” of the H3C Group. This percentage will decrease to the extent that the Borrower’s leverage ratio is lower than specified amounts. Any excess cash flow amounts not required to prepay the loan may be distributed to and used by the Company’s SCN segment, provided certain conditions are met.

H3C and all other existing and future subsidiaries of the Borrower (other than PRC subsidiaries or small “excluded subsidiaries”) will guarantee all obligations under the A&R Loans and are referred to as “Guarantors.” Additionally, 3Com Corporation, 3Com Holdings Limited and 3Com Technologies, will also guarantee all obligations under the A&R Loans until H3C effects a successful capital reduction; these entities are not considered “Guarantors.” The loan obligations will be secured by (1) first priority security interests in all assets of the Borrower and the Guarantors, including their bank accounts, and (2) a first priority security interest in 100 percent of the capital stock of the Borrower and H3C and the PRC subsidiaries of H3C.

The Borrower must maintain a minimum debt service coverage, minimum interest coverage, maximum capital expenditures and a maximum total leverage ratio. Negative covenants restrict, among other things, (i) the incurrence of indebtedness by the Borrower and its subsidiaries, (ii) the making of dividends and distributions to 3Com’s SCN segment, (iii) the ability to make investments including in new subsidiaries, (iv) the ability to undertake mergers and acquisitions and (v) sales of assets. Also, cash dividends from the PRC subsidiaries to H3C, and H3C to the Borrower, will be subject to restricted use pending payment of principal, interest and excess cash flow prepayments. Standard events of default apply.

50

Payments of principal on the A&R Loans are due as follows on September 28, for fiscal years ending May 31 (in thousands):

	Tranche A		Tranche B
2008	$	92,000	$	2,000
2009		46,000		2,000
2010		46,000		2,000
2011		46,000		2,000
2012		—		20,000
2013		—		172,000

The closing of the remaining 49 percent acquisition of H3C triggered a bonus program for substantially all of H3C’s approximately 4,800 employees. This program, which was implemented by Huawei and 3Com in a prior period, is called the Equity Appreciation Rights Plan, or EARP, and funds a bonus pool based upon a percentage of the appreciation in H3C’s value from the initiation of the program to the time of the closing of the Acquisition. A portion of the program is also based on cumulative earnings of H3C. The total value of the EARP is expected to be approximately $180 million. Approximately $94 million related to cumulative earnings and change-in-control was accrued by March 31, 2007, and about $86 million is expected to vest in future periods. The first cash pay-out under the program is currently expected to occur within 3Com’s first fiscal quarter of 2007, and we expect this payment to be approximately $94 million. We expect the unvested portion will be accrued in our H3C operating segment over the next 4 fiscal years serving as a continued retention and incentive program for H3C employees. The only stipulation for payout is that the participants remain employed with the Company on the date of the payout which is required to be made within a specified period after the anniversary date of our 49 percent H3C acquisition on March 29, 2007.

Cash payment requirements under the Equity Appreciation Rights Plan for fiscal years ending May 31 are approximately as follows (in thousands):

2008	$	94,000
2009		39,000
2010		30,000
2011		17,000

It is expected that we will have significant cash outflows in fiscal 2008 of $108 million of loan payments for principal and interest and approximately $94 million for EARP commitments.

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For additional information regarding recently issued accounting pronouncements, see Note 2 to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Disclosures. The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates, foreign currency exchange rates, and equity security price risk. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Sensitivity. Interest to be paid by us on our senior secured loan is at an interest rate based, at our option, on either the LIBOR or the prime rate, plus an applicable margin. We expect the base interest rate generally to be based on the published LIBOR rate, which is subject to change on a periodic basis. Recently, interest rates have trended upwards in major global financial markets. If these interest rate trends continue, this will result in increased interest rate expense as a result of higher LIBOR rates. Continued increases in interest rates could have a material adverse effect on our financial position, results of operations and cash flows, particularly if such increases are substantial. In addition, interest rate trends could affect global economic conditions.

51

Foreign Currency Exchange Risk. Our risk management strategy currently uses forward contracts to hedge certain foreign currency exposures. The intent is to offset gains and losses that occur on the underlying exposures with gains and losses resulting from the forward contracts that hedge these exposures. We attempt to reduce the impact of foreign currency fluctuations on corporate financial results by hedging existing foreign currency exposures and anticipated foreign currency transactions expected to occur within one month. Anticipated foreign currency transaction exposures with a maturity profile in excess of one month may be selectively hedged. Translation exposures are not hedged. Due to the limitations on converting Renminbi, we are limited in our ability to engage in currency hedging activities in China. Although the impact of currency fluctuations of Renminbi to date has been slight, fluctuations in currency exchange rates in the future may have a material adverse effect on our cash flow and results of operations.

Gains and losses on the forward contracts are largely offset by gains and losses on the underlying exposure. A hypothetical ten percent appreciation of the U.S. Dollar from May 31, 2007 market rates would increase the unrealized value of our forward contracts by $2.0 million. Conversely, a hypothetical ten percent depreciation of the U.S. Dollar from May 31, 2007 market rates would decrease the unrealized value of our forward contracts by $2.0 million. The gains or losses on the forward contracts are largely offset by the gains or losses on the underlying transactions and consequently we believe that a sudden or significant change in foreign exchange rates would not have a material impact on future net income or cash flows.

Equity Security Price Risk. We hold publicly traded equity securities that are subject to market price volatility. Equity security price fluctuations of plus or minus 50 percent would not have had a material impact on our financial statements as of May 31, 2007.

52

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm		54
Consolidated Statements of Operations for the years ended May 31, 2007, 2006, and 2005		55
Consolidated Balance Sheets as of May 31, 2007 and 2006		56
Consolidated Statements of Stockholders’ Equity for the years ended May 31, 2007, 2006, and 2005		57
Consolidated Statements of Cash Flows for the years ended May 31, 2007, 2006, and 2005		58
Notes to Consolidated Financial Statements		59
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts and Reserves		105

All other schedules are omitted, because they are not required, are not applicable, or the information is included in the consolidated financial statements and notes thereto.

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of 3Com Corporation
Marlborough, Massachusetts:

We have audited the accompanying consolidated balance sheets of 3Com Corporation and subsidiaries (3Com or the “Company”) as of June 1, 2007 and June 2, 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended June 1, 2007. Our audits also included the consolidated financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of 3Com’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of 3Com at June 1, 2007 and June 2, 2006, and the results of its operations and its cash flows for each of the three years in the period ended June 1, 2007 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised), Share-Based Payment, effective June 3, 2006.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of June 1, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 31, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
July 31, 2007

54

3COM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Years Ended May 31,
	2007			2006			2005
Sales	$	1,267,481		$	794,807		$	651,244
Cost of sales		689,027			466,743			416,916
Gross profit		578,454			328,064			234,328
Operating expenses:
Sales and marketing		319,696			274,745			243,700
Research and development		215,632			101,870			94,584
General and administrative		93,875			72,596			59,833
Amortization and write-down of intangible assets		42,525			20,903			8,989
In-process research and development		35,753			650			6,775
Restructuring charges		3,494			14,403			23,922
Total operating expenses		710,975			485,167			437,803
Operating loss		(132,521	)		(157,103	)		(203,475	)
Gain on investments, net		1,143			4,333			1,580
Interest income, net		40,863			29,085			21,406
Other income (expense), net		38,291			8,235			(4,785	)
Loss from operations before income taxes, equity interest in income (loss) of unconsolidated joint venture, and minority interest in income of consolidated joint venture		(52,224	)		(115,450	)		(185,274	)
Income tax (provision) benefit		(10,173	)		14,833			(3,490	)
Equity interest in income (loss) of unconsolidated joint venture		—			11,016			(6,922	)
Minority interest in income of consolidated joint venture		(26,192	)		(11,074	)		—
Net loss	$	(88,589	)	$	(100,675	)	$	(195,686	)
Basic and diluted net loss per share:
Net loss	$	(0.22	)	$	(0.26	)	$	(0.51	)
Shares used in computing per share amounts:
Basic and diluted		393,894			386,801			382,309

The accompanying notes are an integral part of these consolidated financial statements.

55

3COM CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	May 31,
	2007			2006
ASSETS
Current assets:
Cash and equivalents	$	559,217		$	501,097
Short-term investments		—			363,250
Notes receivable		77,368			63,224
Accounts receivable, less allowance for doubtful accounts of $15,292 and $16,422, respectively		102,952			115,120
Inventories		107,988			148,819
Other current assets		50,157			57,835
Total current assets		897,682			1,249,345
Property and equipment, less accumulated depreciation and amortization of $234,554 and $232,944, respectively		76,460			89,109
Goodwill		766,444			354,259
Intangible assets, net		371,289			111,845
Deposits and other assets		39,217			56,803
Total assets	$	2,151,092		$	1,861,361
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	110,430		$	153,245
Current portion of long-term debt		94,000			—
Accrued liabilities and other		435,638			318,036
Total current liabilities		640,068			471,281
Deferred taxes and long-term obligations		23,725			13,788
Long-term debt		336,000			—
Minority interest		—			173,930
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; none outstanding		—			—
Common stock, $0.01 par value, 990,000 shares authorized; shares issued: 399,064 and 393,442 respectively		2,323,356			2,300,396
Unamortized stock-based compensation		—			(7,565	)
Retained deficit		(1,176,406	)		(1,087,512	)
Accumulated other comprehensive income (loss)		4,349			(2,957	)
Total stockholders’ equity		1,151,299			1,202,362
Total liabilities and stockholders’ equity	$	2,151,092		$	1,861,361

The accompanying notes are an integral part of these consolidated financial statements.

56

3COM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

																			Accumulated
													Unamortized						Other
	Common Stock						Treasury Stock						Stock-based			Retained			Comprehensive
	Shares			Amount			Shares			Amount			Compensation			Deficit			Income (Loss)			Total
Balances, May 31, 2004		392,738		$	2,262,223			—		$	—		$	(2,577	)	$	(755,244	)	$	(5,288	)	$	1,499,114
Components of comprehensive loss:
Net loss																	(195,686	)					(195,686	)
Unrealized loss on available-for-sale securities, net of tax																				(213	)		(213	)
Net unrealized loss on derivative instruments, net of tax																				(81	)		(81	)
Accumulated translation adjustments																				99			99
Total comprehensive loss																							(195,881	)
Repurchase of common stock		(36	)		(181	)		(14,983	)		(73,364	)											(73,545	)
Common stock issued under stock plans, net of cancellations		675			3,698			6,848			33,543			(4,760	)		(17,022	)					15,459
Stock-based compensation expense					395									2,446									2,841
Stock issued in connection with acquisition					36,055									(9,120	)								26,935
Balances, May 31, 2005		393,377			2,302,190			(8,135	)		(39,821	)		(14,011	)		(967,952	)		(5,483	)		1,274,923
Components of comprehensive loss:
Net loss																	(100,675	)					(100,675	)
Unrealized gain on available-for-sale securities, net of tax																				300			300
Accumulated translation adjustments																				2,226			2,226
Total comprehensive loss																							(98,149	)
Repurchase of common stock		(588	)		(2,848	)		(864	)		(4,228	)											(7,076	)
Common stock issued under stock plans, net of cancellations		653			2,230			8,999			44,049			(4,593	)		(18,885	)					22,801
Stock-based compensation expense					199									9,664									9,863
Reduction of shares reserved for issuance of options in connection with acquisition					(1,375	)								1,375									—
Balances, May 31, 2006		393,442			2,300,396			—			—			(7,565	)		(1,087,512	)		(2,957	)		1,202,362
Elimination of unamortized stock-based compensation					(7,565	)								7,565									—
Components of comprehensive loss:
Net loss																	(88,589	)					(88,589	)
Unrealized gain on available-for-sale securities, net of tax																				2,310			2,310
Accumulated translation adjustments																				4,996			4,996
Total comprehensive loss																							(81,283	)
Repurchase of common stock		(2,359	)		(9,041	)		(870	)		(4,259	)					(163	)					(13,463	)
Common stock issued under stock plans, net of cancellations		7,981			19,471			870			4,259						(142	)					23,588
Stock-based compensation expense					20,095																		20,095
Balances, May 31, 2007		399,064		$	2,323,356			—		$	—		$	—		$	(1,176,406	)	$	4,349		$	1,151,299

The accompanying notes are an integral part of these consolidated financial statements.

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3COM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended May 31,
	2007			2006			2005
Cash flows from operating activities:
Net loss	$	(88,589	)	$	(100,675	)	$	(195,686	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		74,990			44,685			51,852
Write-down of intangibles		—			—			1,404
Gain on property and equipment disposals		(14,714	)		(646	)		(4,741	)
Minority interest		26,192			11,074			—
Stock-based compensation expense		20,095			9,863			2,841
Gain on investments, net		(1,417	)		(235	)		(1,580	)
Deferred income taxes		(10,487	)		121			3,044
In-process research and development		35,753			650			6,775
Equity interest in (income) loss of unconsolidated joint venture		—			(11,016	)		6,922
Changes in assets and liabilities:
Accounts receivable		(24,677	)		5,913			4,708
Inventories		50,589			(23,047	)		(9,629	)
Other assets		32,368			1,891			748
Accounts payable		(34,760	)		3,430			19,224
Other liabilities		100,195			(28,172	)		(21,476	)
Net cash provided by (used in) operating activities		165,538			(86,164	)		(135,594	)
Cash flows from investing activities:
Purchases of investments		(225,005	)		(421,279	)		(618,320	)
Proceeds from maturities and sales of investments		609,342			629,036			931,122
Purchases of property and equipment		(28,331	)		(17,404	)		(21,121	)
Businesses acquired in purchase transactions, net of cash acquired		(898,529	)		110,407			(355,686	)
Proceeds from sale of property and equipment		36,580			—			51,300
Net cash (used in) provided by investing activities		(505,943	)		300,760			(12,705	)
Cash flows from financing activities:
Issuances of common stock		23,588			22,801			15,459
Repurchases of common stock		(13,463	)		(7,076	)		(73,545	)
Proceeds from long term debt		415,811			—			—
Repayments of borrowings		—			—			(1,308	)
Dividend paid to minority interest shareholder		(40,785	)		—			—
Other, net		2,787			—			—
Net cash provided by (used in) financing activities		387,938			15,725			(59,394	)
Effect of exchange rate changes on cash and equivalents		10,587			2,241			(46	)
Net change in cash and equivalents during period		58,120			232,562			(207,739	)
Cash and equivalents, beginning of period		501,097			268,535			476,274
Cash and equivalents, end of period	$	559,217		$	501,097		$	268,535
Other cash flow information
Interest paid	$	5,596		$	212		$	528
Income tax (payments) refunds received, net		(18,970	)		(2,230	)		10,402
Inventory transferred to property and equipment		8,814			16,995			7,996

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Business

We are incorporated in Delaware. A pioneer in the computer networking industry, we provide secure, converged networking solutions, as well as maintenance and support services, for enterprises and public sector organizations of all sizes. Headquartered in Marlborough, Massachusetts, we have worldwide operations, including sales, marketing, research and development, and customer service and support capabilities.

Note 2: Significant Accounting Policies

Fiscal year

Our fiscal year ends on the Friday closest to May 31. Fiscal 2007 consisted of 52 weeks and ended on June 1, 2007. Fiscal 2006 consisted of the 52 weeks ended on June 2, 2006 and Fiscal 2005 consisted of the 53 weeks ended on June 3, 2005. For convenience, the consolidated financial statements have been shown as ending on the last day of the calendar month.

Use of estimates in the preparation of consolidated financial statements

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales, costs and expenses during the reporting periods. Such management assumptions and estimates include allowances for doubtful accounts receivable, product returns, rebates and price protection; provisions for inventory to reflect net realizable value; estimates of fair value for investments in privately held companies, goodwill and other intangible assets, estimation of fair value of acquired businesses, and properties held for sale; valuation allowances against deferred income tax assets; and accruals for severance costs, compensation, product warranty, other liabilities, and income taxes, among others. Actual results could materially differ from those estimates and assumptions.

Basis of presentation

The consolidated financial statements include the accounts of 3Com and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. As discussed in Notes 3 and 5, we accounted for our investment in the H3C joint venture by the equity method until fiscal 2006, when we exercised our right to purchase an additional 2 percent equity to give us a 51 percent majority ownership in H3C and we entered into an agreement with Huawei, the other shareholder, for an aggregate purchase price of $28.0 million. We were granted regulatory approval by the Chinese government and subsequently completed this transaction on January 27, 2006 (date of acquisition). Since that time, we have owned a majority interest in the joint venture and have determined that the criteria of Emerging Issues Task Force No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights” have been met. Accordingly, we consolidate H3C’s financial statements beginning February 1, 2006, a date used under the principle of convenience close. H3C follows a calendar year basis of reporting and therefore, H3C is consolidated on a two-month lag.

Segment reporting

As of May 31, 2007, we were organized in two reportable segments: Secured Converged Networking (“SCN”) and H3C. The SCN reportable segment was comprised of all business activities outside of our wholly-owned subsidiary, H3C, in China. The H3C segment was comprised of operations of our wholly-owned subsidiary in China. Prior to 2006 we had one reportable segment.

Cash equivalents

Cash equivalents consist of highly liquid investments in debt securities with maturities of three months or less when purchased.

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Short-term investments

Short-term investments primarily consist of investments in debt securities acquired with maturities exceeding three months but less than one year. Our intent is to hold our investments in debt securities to maturity. However, consistent with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” all investments in debt securities and all investments in equity securities that have readily determinable fair values have been classified as available-for-sale, since the sale of such investments may be required prior to maturity to implement management strategies. Our short-term investments are reported at fair value, with unrealized gains or losses excluded from earnings and included in other comprehensive income (loss). Short-term investments are evaluated quarterly for other than temporary declines in fair value, which are reported in earnings as identified. The cost of investments sold is based on the specific identification method.

Allowance for doubtful accounts

We monitor payments from our customers on an on-going basis and maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. When we evaluate the adequacy of our allowances for doubtful accounts, we take into account various factors including our accounts receivable aging, customer creditworthiness, historical bad debts, and geographic and political risk. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.

Notes receivable

Notes receivable represent bills receivable from fourteen Chinese banks to our H3C wholly-owned subsidiary that have maturities of less than six months. These notes originate from customers who settle their commitments to H3C by providing us these bills issued by the Chinese banks. The Chinese banks are responsible to pay H3C. The notes are also referred to as “bankers’ acceptances”.

Non-marketable equity securities and other investments

Non-marketable equity securities and other investments consist primarily of direct investments in private companies and investments in limited partnership venture capital funds. Non-marketable equity securities and other investments are accounted for at historical cost or, if we had significant influence over the investee, by the equity method. Cost basis investments are evaluated quarterly for other than temporary declines in fair value, which are reported in earnings as identified. Investments accounted for by the equity method include investments in limited partnership venture capital funds. The net income or loss of limited partnership venture capital funds, and the fair values of the funds, are obtained from the funds’ most recently issued financial statements. We record our proportionate share of the net income or loss of the funds, and adjustments reflecting changes in the fair values of the funds, in gain on investments, net. Net investment gains and losses recorded as a result of sales of our investments in the limited partnership venture capital funds are based on the difference between the net sales proceeds and the carrying value of the investment at the time of sale. Generally, in connection with such sales and with the approval of the applicable fund’s general partners, we are released from all obligations with respect to future capital calls associated with the investment sold except as otherwise required by applicable law.

Concentration of credit risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and equivalents, short-term investments, notes receivable and accounts receivable. For our cash and equivalents and notes receivable in China we maintain a minimum BB+ rating and for the period ended March 31, 2007 the average rating was A+.

Inventories

Inventories are stated at the lower of standard cost or market, which approximates actual cost. Cost is determined using the first-in, first-out method.

Property and equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization. Equipment under capital leases is stated at the lower of fair market value or the present value of the minimum lease payments at the inception of the lease. We capitalize eligible costs related to the application development phase of software developed internally or obtained for internal use. Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful lives of the assets, which range from two to five years; the amounts charged to amortization expense were $0.4 million in fiscal 2007, $0.7 million in fiscal 2006, and $1.0 million in fiscal 2005.

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Long-lived assets

Long-lived assets and certain identifiable intangible assets to be held and used are subject to periodic amortization and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Depreciation and amortization

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of property and equipment are generally 2-15 years, except for buildings for which the useful lives are 25-40 years. Depreciation and amortization of leasehold improvements are computed using the shorter of the remaining lease terms or estimated useful life.

Goodwill and purchased intangible assets

SFAS No. 142, “Goodwill and Other Intangible Assets”, requires goodwill to be tested for impairment on an annual basis and between annual tests when events or circumstances indicate a potential impairment. We test our goodwill for impairment annually during our third fiscal quarter. There was no impairment of goodwill in fiscal 2007, 2006, or 2005. Furthermore, SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally
27 years.

Revenue recognition

We recognize the majority of product revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and Staff Accounting Bulletin No. 104, “Revenue Recognition.” Specifically, product revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and risk of loss has passed to the customer, the fee is fixed or determinable, and collectibility is reasonably assured. In instances where the customer specifies final acceptance of the product or service, revenue and related costs are deferred until all acceptance criteria have been met. For sales of products that contain software that is marketed separately, we apply the provisions of AICPA Statement of Position 97-2 “Software Revenue Recognition,” as amended.

A significant portion of our sales are made to distributors and resellers through a two-tier distribution channel. Revenue related to such sales is reduced for allowances for product returns, price protection, rebates and other offerings established in our sales agreements. We allow for product return rights that are generally limited to a percentage of sales over a one to three month period.

Sales of services, including professional services, system integration, project management, and training, are recognized upon completion of performance. Other service revenue, such as that related to maintenance and support contracts, is recognized ratably over the contract term, provided that all other revenue recognition criteria have been met. Royalty revenue is generally recognized when we receive payment.

For arrangements that involve multiple elements, such as sales of products that include maintenance or installation services, revenue is allocated to each respective element based on its relative fair value and recognized when the revenue recognition criteria for each element have been met. We use the residual method to recognize revenue when an arrangement includes one or more elements to be delivered at a future date and objective and reliable evidence of the fair value of all the undelivered elements exists. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue for the delivered elements, provided that all other revenue recognition criteria have been met. If objective and reliable evidence of fair value of one or more undelivered elements does not exist, revenue is deferred and recognized when delivery of those elements occurs or when fair value can be established.

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Product warranty

We provide limited warranty on most of our products for periods ranging from 90 days to the lifetime of the product, depending upon the product. The warranty generally includes parts, labor and service center support. We estimate the costs that may be incurred under our warranty obligations and record a liability in the amount of such costs at the time sales are recognized. Factors that affect our warranty liability include the number of installed units, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

Advertising

Costs associated with cooperative advertising programs are estimated and recorded as a reduction of revenue at the time the related sales are recognized. All other advertising costs are expensed as incurred in sales and marketing.

Restructuring charges

In recent fiscal years, we have undertaken several initiatives involving significant changes in our business strategy and cost structure. In connection with these initiatives, we have recorded significant restructuring charges, as more fully described in Note 4. Generally, costs associated with an exit or disposal activity are recognized when the liability is incurred. Costs related to employee separation arrangements requiring future service beyond a specified minimum retention period are recognized over the service period.

Foreign currency remeasurement and translation

Our foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs. The majority of our SCN sales transactions are denominated in U.S. dollars. The majority of our H3C sales are denominated in Renminbi. For foreign operations with the local currency as the functional currency, local currency denominated assets and liabilities are translated at the year-end exchange rates, and sales, costs and expenses are translated at the average exchange rates during the year. Gains or losses resulting from foreign currency translation are included as a component of accumulated other comprehensive loss in the consolidated balance sheets. For foreign operations with the U.S. dollar as the functional currency, foreign currency denominated assets and liabilities are remeasured at the year-end exchange rates except for property and equipment which are remeasured at historical exchange rates. Foreign currency denominated sales, costs and expenses are recorded at the average exchange rates during the year. Gains or losses resulting from foreign currency remeasurement are included in other income (expense), net, in the consolidated statements of operations.

Our risk management strategy uses forward contracts to hedge certain foreign currency exposures. The intent is to offset gains and losses that occur on the underlying exposures with gains and losses resulting from the forward contracts that hedge these exposures. In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, these contracts are recorded at fair value, and fair value changes are expensed in the current period in other income (expense), net. In addition, we enter into foreign exchange forward contracts to hedge exposures related to anticipated foreign currency cash flows. Due to the limitations on converting Renmimbi we do not engage in currency hedging activities in China. These contracts, designated as cash flow hedges, also are recorded at fair value. The gain or loss from the effective portion of the hedge is reported in the consolidated statement of operations in the same period or periods and manner as the hedged transaction. The gain or loss from the ineffective portion of the hedge is recognized in other income (expense), net, during the period of change. We do not enter into derivatives for trading or other speculative purposes, nor do we use leveraged financial instruments.

Other income (expense), net included net foreign currency losses of $1.2 million in fiscal 2007 and $1.5 million in fiscal 2006 and 2005.

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Income taxes:

We are subject to income tax in a number of jurisdictions. A certain degree of estimation is required in recording the assets and liabilities related to income taxes, and it is reasonably possible that such assets may not be recovered and that such liabilities may not be paid or that payments in excess of amounts initially estimated and accrued may be required. We assess the likelihood that our deferred tax assets will be recovered from our future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. We consider historical taxable income, estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. Based on various factors, including our recent losses, retained deficit, operating performance in fiscal 2007, and estimates of future profitability, we have concluded that future taxable income will, more likely than not, be insufficient to recover our U.S. net deferred tax assets as of May 31, 2007. Accordingly, we have established an appropriate valuation allowance to offset such deferred tax assets. In addition to valuation allowances against deferred tax assets, we maintain reserves for potential tax contingencies arising in jurisdictions in which we do or have done business. Many of these contingencies arise from periods when we were a substantially larger company. Such reserves are based on our assessment of the likelihood of an unfavorable outcome and the expected potential loss from such contingency, and are monitored by management. These reserves are maintained until such time as the matter is settled or the statutory period for adjustment has passed. Adjustments could be required in the future if we determine that the amount to be realized is greater or less than the valuation allowance we have recorded or that our reserves for tax contingencies are inadequate. We have U.S. federal loss carryforwards of approximately $2.5 billion as of May 31, 2007 expiring between fiscal years 2008 and 2027, substantially all of which expire between fiscal years 2021 and 2027.

Comprehensive income (loss)

We account for comprehensive income (loss) in accordance with the provisions of SFAS No.130, “Reporting Comprehensive Income.” SFAS No. 130 is a financial statement presentation standard that requires us to disclose non-owner changes included in equity but not included in net income or loss. Comprehensive income (loss) presented in the financial statements consists of foreign currency translation and unrealized gains (losses) on available-for-sale securities.

An analysis of accumulated other comprehensive income (loss) follows (in thousands):

							Accumulated
				Accumulated			Other
	Unrealized			Translation			Comprehensive
	Gain (Loss)			Adjustment			Income (Loss)
Balance as of May 31, 2004	$	(2,107	)	$	(3,181	)	$	(5,288	)
Change in period		(294	)		99			(195	)
Balance as of May 31, 2005		(2,401	)		(3,082	)		(5,483	)
Change in period		300			2,226			2,526
Balance as of May 31, 2006		(2,101	)		(856	)		(2,957	)
Change in period		2,310			4,996			7,306
Balance as of May 31, 2007	$	209		$	4,140		$	4,349

Stock-based Compensation

Prior to fiscal 2007, we accounted for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25 “Accounting for Stock Issued to Employees”. As described in Note 14, effective June 3, 2006, we adopted the fair value method of accounting for stock-based compensation under Statement of Financial Accounting Standards (SFAS) 123(R) “Share-Based Payment”. Under the intrinsic value method, compensation cost associated with a stock award was measured as the difference between the fair value of the common stock underlying the award and the amount, if any, that as employee was required to pay for the award; measurement generally occurred on the date of grant, which was the date on which the number of shares and price to be paid was apparent. Under the fair value method, compensation cost associated with a stock award is measured based on the estimated fair value of the award itself, determined using established valuation models and principles, and is generally measured as on the date of grant. The amounts measured under either method are generally recognized as expense over the requisite service period, which is typically the vesting period.

Estimates of the fair value of equity awards in future periods will be affected by the market price of our common stock, as well as the actual results of certain assumptions used to value the equity awards. These assumptions include, but are not limited to, the expected volatility of the common stock, the expected term of options granted, the risk free interest rate and dividend yield.

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The fair value of stock options and employee stock purchase plan shares is determined by using the Black-Scholes option pricing model and applying the single-option approach to the stock option valuation. The options generally have vesting on an annual basis over a vesting period of four years. We estimate the expected option term by analyzing the historical term period from grant to exercise and also consider the expected term for those options that are outstanding. The expected term of employee stock purchase plan shares is the average of the remaining purchase periods under each offering period. The volatility of the common stock is estimated using historical volatility.

The risk-free interest rate used in the Black-Scholes option pricing model is determined by looking at historical U.S. Treasury zero-coupon bond issues with terms corresponding to the expected terms of the equity awards. In addition, an expected dividend yield of zero is used in the option valuation model, because we do not expect to pay any cash dividends in the foreseeable future. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. In order to determine an estimated pre-vesting option forfeiture rate, we used historical forfeiture data, which yields a forfeiture rate of 27 percent. We believe this historical forfeiture rate to be reflective of our anticipated rate on a go-forward basis. This estimated forfeiture rate has been applied to all unvested options and restricted stock outstanding as of June 1, 2006 and to all options and restricted stock granted since June 1, 2006. Therefore, stock-based compensation expense is recorded only for those options and restricted stock that are expected to vest.

Net loss per share

Basic earnings per share is computed using the weighted-average number of common shares outstanding. Diluted earnings per share is computed using the weighted-average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of employee stock options and restricted stock, and are excluded from the diluted earnings per share computation in periods where net losses were incurred.

Recently issued accounting pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return, including a decision whether or not to file a return in a particular jurisdiction. Under this new guidance, the financial statements will reflect expected future tax consequences including interest and penalties of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. This guidance also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of unrecognized tax benefits. We are currently evaluating the impact of adopting FIN 48 and its impact on our financial position.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and is required to be adopted by 3Com in the first quarter of fiscal 2009. We have not yet determined the impact, if any, that the implementation of SFAS No. 157 will have on our results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards which require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or services. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, e.g., debt issue costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007 and is required to be adopted by 3Com in the first quarter of fiscal 2009. 3Com currently is determining whether fair value accounting is appropriate for any of its eligible items and cannot estimate the impact, if any, which SFAS 159 will have on its consolidated results of operations and financial condition.

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In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, which expresses the staff’s views regarding the process of quantifying financial statement misstatements. The Bulletin is effective at our fiscal year end 2008. The Company believes the implementation will have no impact on our results of operations, cash flow or financial position.

Note 3: Acquisitions

H3C

On November 17, 2003, we formed H3C, formerly known as the Huawei-3Com joint venture, with a subsidiary of Huawei Technologies, Ltd. (Huawei). H3C is domiciled in Hong Kong, and has its principal operating center in Hangzhou, China.

At the time of formation, we contributed cash of $160.0 million, assets related to our operations in China and Japan, and licenses related to certain intellectual property in exchange for a 49 percent ownership interest. We recorded our initial investment in H3C at $160.1 million, reflecting our carrying value for the cash and assets contributed. Huawei contributed its enterprise networking business assets — including Local Area Network (LAN) switches and routers; engineering, sales and marketing resources and personnel; and licenses to its related intellectual property — in exchange for a 51 percent ownership interest. Huawei’s contributed assets were valued at $178.2 million at the time of formation.

Two years after formation of H3C, we had the one-time option to purchase an additional two percent ownership interest from Huawei. On October 28, 2005, we exercised this right and entered into an agreement to purchase an additional 2 percent ownership interest in H3C from Huawei for an aggregate purchase price of $28.0 million. We were granted regulatory approval by the Chinese government and subsequently completed this transaction on January 27, 2006 (date of acquisition). Since then, we have owned a majority interest in the joint venture and determined that the criteria of Emerging Issues Task Force No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights” were met and, therefore, consolidated H3C’s financial statements beginning February 1, 2006, a date used under the principle of a convenience close. As H3C reports on a calendar year basis, we consolidate H3C based on H3C’s most recent financial statements, two months in arrears.

Three years after formation of H3C, we and Huawei each had the right to initiate a bid process to purchase the equity interest in H3C held by the other. 3Com initiated the bidding process on November 15, 2006 to buy Huawei’s 49 percent stake in H3C and our bid of $882 million was accepted by Huawei on November 27, 2006. The transaction closed on March 29, 2007, at which time the purchase price was paid in full.

The acquisition transactions were all accounted for as purchases, and accordingly, the purchase price was allocated to the assets purchased and liabilities assumed based on their estimated fair values. Subsequent to obtaining control, the operating results of H3C for the period February 1, 2006 to March 31, 2006 are included in the consolidated financial statements, resulting in the latter two months of H3C’s three months ended March 31, 2006 being included in our year ended May 31, 2006 statement of operations.

The purchase prices for our various transactions are shown below (in millions):

					2007
	2003		2006		Purchase
	Investment		Purchase		(Preliminary)
Cash paid for common stock	$	160.0	$	28.0	$	882.0
Assets contributed		0.1		—
Acquisition direct costs		0.0		0.2		8.7
Total purchase price	$	160.1	$	28.2	$	890.7

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In accordance with SFAS No. 141, “Business Combinations,” the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, including in-process research and development, based on their estimated fair values. The excess purchase price over those values is recorded as goodwill. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, and other information compiled by management. Goodwill recorded as a result of these acquisition is not deductible for tax purposes. In accordance with SFAS No. 142, goodwill is not amortized but will be reviewed at least annually for impairment. Purchased intangibles with finite lives will be amortized on a straight-line basis over their respective estimated useful lives. The total purchase price has been allocated as follows (in millions):

	2003			2006		2007
	Investment			Purchase		Purchase
Net tangible assets assumed				$	7.4	$	148.6
Amortizable intangible assets:
Existing technology	$	111.7			17.8		180.6
Trade name and trademarks							55.5
Non-compete agreement with Huawei							33.0
Distributor agreements		2.7			0.4		29.1
Total amortizable intangible assets		114.4			18.2		298.2
Amortization prior to the 2006 acquisition		(65.7	)		—		—
Net intangible assets		48.7			18.2		298.2
In-process research and development		24.7			0.7		34.0
Goodwill		43.2			1.9		409.9
Total preliminary purchase price allocation				$	28.2	$	890.7

The preliminary allocation of the 2007 purchase price was based upon a preliminary valuation and our estimates and assumptions are subject to change upon the finalization of the valuation.

Intangible assets include amounts recognized for the fair value of existing technology, maintenance agreements, trade name and trademarks, distributor agreements and non-compete agreement. These intangible assets have a weighted-average useful life of approximately five years.

In-process research and development (IPR&D) represents incomplete H3C research and development projects that had not reached technological feasibility and had no alternative future use as of the acquisition dates. Technological feasibility is established when an enterprise has completed all planning, designing, coding, and testing activities that are necessary to establish that a product can be produced to meet its design specifications including functions, features, and technical performance requirements. At the dates of acquisition, H3C had multiple IPR&D efforts under way for certain current and future product lines. Purchased IPR&D relates primarily to projects associated with the H3C routers and switch products, which had not yet reached technological feasibility as of the acquisition date and have no alternative future use.

Of the total estimated purchase price paid to gain full control in 2007, a preliminary estimate of approximately $148.6 million was allocated to net assets acquired. Net assets were valued at their respective carrying amounts, which management believes approximate fair value, except for adjustments to inventory and deferred revenue. Inventory was adjusted by an increase of $11.1 million in the consolidated balance sheet as of June 2, 2007, to adjust inventory to the actual fair value less direct selling expense. Deferred revenues were reduced by $0.5 million in the consolidated balance sheet as of June 2, 2007, to adjust deferred revenue to the estimated cost plus an appropriate profit margin to perform the support and maintenance services.

Approximately $298.2 million of the 2007 purchase price was allocated to acquired identifiable intangible assets. Existing core technology is comprised of products that have reached technological feasibility, which includes most of H3C’s technology. The remainder of intangible assets is associated with maintenance agreements, trademarks, and non-compete agreements. One day worth of the amortization expense related to the amortizable intangible assets is reflected in the audited consolidated statements of operations for the year ended June 2, 2007.

Of the total estimated 2007 purchase price, approximately $409.9 million was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. In the event that we determine that the value of the goodwill has become impaired, an accounting charge for the amount of the impairment will be incurred in the quarter in which such determination is made.

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TippingPoint

On January 31, 2005, we completed our acquisition of 100 percent of the outstanding common shares of TippingPoint Technologies, Inc. for consideration of $430.0 million. This amount excludes the cost of integration, as well as other costs related to the transaction. TippingPoint is a provider of networked-based intrusion prevention systems. The acquisition enabled us to expand our portfolio of secure, converged voice and data networking solutions.

The TippingPoint acquisition was accounted for as a purchase, and accordingly, the assets purchased and liabilities assumed are included in the consolidated balance sheet as of May 31, 2006 and 2005. The operating results of TippingPoint are included in the consolidated financial statements since the date of acquisition.

The purchase price categories are shown below (in millions):

Cash paid for common stock	$	389.5
Fair value of outstanding stock options assumed		36.1
Acquisition direct costs		4.4
Total purchase price	$	430.0

In accordance with SFAS No. 141, “Business Combinations,” the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, including in-process research and development, based on their estimated fair values, while the associated deferred stock compensation was recorded based on intrinsic value. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, and other information compiled by management, including valuations that utilize established valuation techniques appropriate for the high technology industry. Goodwill recorded as a result of this acquisition is not deductible for tax purposes. In accordance with SFAS No. 142, goodwill is not amortized but will be reviewed at least annually for impairment. Purchased intangibles with finite lives will be amortized on a straight-line basis over their respective estimated useful lives. The total purchase price has been allocated as follows (in millions):

Net tangible assets assumed	$	37.4
Amortizable intangible assets:
Existing technology		39.1
Maintenance agreements		19.0
Other		11.8
Total amortizable intangible assets		69.9
In-process research and development		5.1
Deferred compensation on unvested stock options		9.4
Goodwill		308.2
Total purchase price	$	430.0

During the three months ended August 31, 2005, we revised the purchase price allocation by increasing net tangible assets assumed and reducing goodwill by $1.3 million. This adjustment related to the revision of an estimate for a contingent liability assumed in the acquisition and has been incorporated into the purchase price allocation above. As of February 28, 2006 the purchase price has been finalized.

Intangible assets include amounts recognized for the fair value of existing technology, maintenance agreements, trade name and trademarks, and non-competition agreements. These intangible assets have a weighted-average useful life of approximately five years.

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IPR&D represents incomplete TippingPoint research and development projects that had not reached technological feasibility and had no alternative future use as of the acquisition date. Technological feasibility is established when an enterprise has completed all planning, designing, coding, and testing activities that are necessary to establish that a product can be produced to meet its design specifications including functions, features, and technical performance requirements. At the time of acquisition, TippingPoint had multiple IPR&D efforts under way for certain current and future product lines. The value assigned to IPR&D was determined by considering the importance of each project to our overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D projects. Purchased IPR&D relates primarily to projects associated with the TippingPoint UnityOne^® products and Software Management System product, which had not yet reached technological feasibility as of the acquisition date and have no alternative future use. We utilized the multi-period excess earnings method to value the IPR&D, using a discount rate of 20 percent. At the time of acquisition, it was estimated that these development efforts would be completed over the next twelve months at an estimated cost of approximately $10 million. As of February 28, 2006, these projects had been completed.

Pro forma Results of Operations

The following unaudited pro forma financial information presents the consolidated results of operations of 3Com and H3C as if the acquisition of full control of H3C had occurred as of the beginning of the periods presented below. Preliminary adjustments, which reflect the amortization of purchased intangible assets, in-process research and development and charges to cost of sales for inventory write-ups, have been made to the consolidated results of operations. We also eliminate the inter-company activity between the parties in the consolidated results. The unaudited proforma financial information is not intended, and should not be taken as representative of our future consolidated results of operations or financial condition or the results that would have occurred had the acquisition occurred as of the beginning of the earliest period.

	Fiscal Year
(in millions, except per share amounts)	2007			2006
Net sales	$	1,267.5		$	1,146.8
Net loss		(201.3	)		(102.2	)
Basic and diluted net loss per share	$	(0.51	)	$	(0.26	)

Our 2006 consolidated statements of cash flows reflect $110.4 million of the line item businesses acquired in purchase transactions, net of cash acquired. This reflects acquired cash of $138.4 million on January 31, 2006 offset by the purchase price payment of $28.0 million for an additional 2 percent ownership of H3C.

Roving Planet Acquisition

On December 5, 2006, the Company acquired certain assets and liabilities of Roving Planet, Inc. (“Roving Planet”) to support our strategy of extending our appliance-based intrusion prevention system (“IPS”) business to include network access control (“NAC”) features. Under the terms of the definitive agreement the Company acquired the Roving Planet assets for $8.0 million in cash, plus assumption of liabilities of approximately $0.2 million.

The consolidated financial statements include the operating results of Roving Planet from the date of acquisition, as part of the Company’s SCN operating segment. Pro forma results for the Roving Planet acquisition have not been presented because the effects of the acquisitions were not material to the Company’s financial results.

The Company’s methodology for allocating the purchase price for purchase acquisitions to in-process research and development, purchased intangible assets and goodwill is determined through established valuation techniques. In-process research and development is expensed upon acquisition because technological feasibility has not been established and no future alternative uses exist.

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Based upon these established valuation techniques the Company assigned the purchase price for the acquisition in the following manner (in millions):

	2007
	Preliminary Purchase		Useful Life for Purchased
	Price Allocation		Intangible Assets
In-process research and development	$	1.7		—
Purchased core technology		3.1	3 years
Goodwill		3.2		—
Other		0.2		—
Total acquisition value	$	8.2		—

The purchase price and related allocation are preliminary and may be revised as a result of adjustments made to the purchase price, additional information regarding liabilities assumed, including revisions of preliminary estimates of fair values made at the date of purchase.

Note 4: Restructuring Charges

In recent fiscal years, we have undertaken several initiatives involving significant changes in our business strategy and cost structure.

In fiscal 2001, we began a broad restructuring of our business to enhance the focus and cost effectiveness of our business units in serving their respective markets. These restructuring efforts continued through fiscal 2004. We took the following specific actions in fiscal 2001, 2002, 2003, and 2004 (the “Fiscal 2001, 2002, 2003, and 2004 Actions”):

§	announced the integration of the support infrastructure of two of our business units to leverage a common infrastructure in order to drive additional costs out of the business;
§	organized around independent businesses that utilized shared central services;
§	outsourced the manufacturing of certain high volume desktop, mobile and server connectivity products in a contract manufacturing arrangement;
§	entered into an agreement to outsource certain information technology (IT) functions;
§	outsourcing of our remaining manufacturing operations in Dublin, Ireland;
§	reduced our workforce; and
§	continued efforts to consolidate and dispose of excess facilities.

During fiscal 2005 (the “Fiscal 2005 Actions”), we took the following additional measures to reduce costs:

§	Reductions in workforce; and
§	continued efforts to consolidate and dispose of excess facilities.

During fiscal 2006 (the “Fiscal 2006 Actions”), we took the following additional measures to reduce costs:

§	Reductions in workforce; and
§	continued efforts to consolidate and dispose of excess facilities.

During fiscal 2007 (the “Fiscal 2007 Actions”), we took the following additional measures to reduce costs:

§	Further reductions in workforce; and
§	continued efforts to consolidate and dispose of excess facilities.

Restructuring charges related to these various initiatives were $3.5 million in fiscal 2007, $14.4 million in fiscal 2006, and $23.9 million in fiscal 2005. Such charges were net of credits of $13.3 million in fiscal 2007, $0.1 million in fiscal 2006, and $7.6 million in fiscal 2005, related primarily to revisions of previous estimates of employee separation expenses, lease obligation costs and values on held for sale properties.

Accrued liabilities associated with restructuring charges are included in the caption “Accrued liabilities and other” in the accompanying consolidated balance sheets. These liabilities are classified as current because we expect to satisfy such liabilities in cash within the next 12 months.

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Fiscal 2007 Actions

Activity and liability balances related to the fiscal 2007 restructuring actions are as follows (in thousands):

	Employee			Facilities-			Other
	Separation			related			Restructuring
	Expense			Charges			Costs			Total
Balance as of June 1, 2006	$	—		$	—		$	—		$	—
Provisions		12,134			(7,501	)		247			4,880
Payments and non-cash charges		(10,804	)		7,765			(247	)		(3,286	)
Balance as of May 31, 2007	$	1,330		$	264		$	—		$	1,594

Employee separation expenses include severance pay, outplacement services, medical and other related benefits. The reduction in workforce affected employees involved in research and development, sales and marketing, customer support, and general and administrative functions. Through May 31, 2007, the total reduction in workforce associated with actions initiated during fiscal 2007 included approximately 233 employees who had been separated or were currently in the separation process and approximately 15 additional employees who had been notified but had not yet worked their last day.

We believe that the all remaining actions will be completed by the end of fiscal 2008.

Fiscal 2006 Actions

Activity and liability balances related to the fiscal 2006 restructuring actions are as follows (in thousands):

	Employee			Facilities-
	Separation			related
	Expense			Charges			Total
Balance as of June 1, 2005	$	—		$	—		$	—
Provisions		9,558			1,635			11,193
Payments and non-cash charges		(4,681	)		(744	)		(5,425	)
Balance as of May 31, 2006		4,877			891			5,768
Provisions		(688	)		(136	)		(824	)
Payments and non-cash charges		(4,189	)		(619	)		(4,808	)
Balance as of May 31, 2007	$	—		$	136		$	136

Employee separation expenses include severance pay, outplacement services, medical and other related benefits. The reduction in workforce affected employees involved in research and development, sales and marketing, customer support, and general and administrative functions. Through May 31, 2007, the total reduction in workforce associated with actions initiated during fiscal 2006 included approximately 227 employees who had been separated or were currently in the separation process and approximately 41 additional employees who had been notified but had not yet worked their last day.

We believe that the all remaining actions will be completed by the end of fiscal 2008.

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Fiscal 2005 Actions

Activity and liability balances related to the fiscal 2005 restructuring actions are as follows (in thousands):

	Employee			Long-term			Facilities-			Other
	Separation			Asset			related			Restructuring
	Expense			Write-downs			Charges			Costs			Total
Balance as of June 1, 2004	$	—		$	—		$	—		$	—		$	—
Provisions		23,391			1,021			468			768			25,648
Payments and non-cash charges		(15,186	)		(766	)		(80	)		(755	)		(16,787	)
Balance as of May 31, 2005		8,205			255			388			13			8,861
Provisions		1,873			221			32			364			2,490
Payments and non-cash charges		(8,235	)		(221	)		(420	)		(364	)		(9,240	)
Balance as of May 31, 2006		1,843			255			—			13			2,111
Provisions		(1,395	)		(255	)		32			(13	)		(1,631	)
Payments and non-cash charges		(145	)		—			(32	)		—			(177	)
Balances as of May 31, 2007	$	303		$	—		$	—		$	—		$	303

Employee separation expenses include severance pay, outplacement services, medical and other related benefits. The reduction in workforce affected employees involved in research and development, sales and marketing, customer support, general and administrative, and manufacturing functions. Through May 31, 2007, the total reduction in workforce associated with actions initiated during fiscal 2005 included approximately 397 employees who had been separated or were currently in the separation process and approximately 3 additional employees who had been notified but had not yet worked their last day. The provision of $1.9 million recorded in fiscal 2006 relates to employees separation costs for employees that were not notified or had not worked their last day until fiscal 2006. For the year ended May 31, 2007, 2006 and 2005, total separation payments associated with actions initiated during fiscal 2005 were approximately $0.1 million, $8.2 million and $15.2 million, respectively.

Long-term asset write-downs were associated with assets that no longer support our continuing operations. The provision of $1.0 million was related to capitalized software licenses with no future benefit ($0.5 million) and leasehold improvements in vacated facilities ($0.5 million).

Facilities-related charges included write-downs and accelerated depreciation of properties, including properties that were classified as held for sale prior to fiscal 2005, as well as expenses related to lease obligations.

Other restructuring costs of $0.4 million and $0.8 million for the years ended May 31, 2006 and 2005, respectively, included payments to suppliers and contract termination fees.

We believe that the all remaining actions will be completed by the end of fiscal 2008.

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Fiscal 2001, 2002, 2003 and 2004 Actions

Activity and liability balances related to the fiscal 2001, 2002, 2003 and 2004 restructuring actions are as follows (in thousands):

	Employee			Long-term			Facilities-			Other
	Separation			Asset			related			Restructuring
	Expense			Write-downs			Charges			Costs			Total
Balance as of May 31, 2004	$	5,529		$	—		$	9,819		$	82		$	15,430
Provisions		(2,829	)		12			813			278			(1,726	)
Payments and non-cash charges		(2,700	)		(12	)		(1,891	)		(355	)		(4,958	)
Balance as of May 31, 2005		—			—			8,741			5			8,746
Provisions		—			90			609			—			699
Payments and non-cash charges		—			(90	)		(3,709	)		—			(3,799	)
Balance as of May 31, 2006		—			—			5,641			5			5,646
Provisions		—			—			1,053			16			1,069
Payments and non-cash charges		—			—			(5,351	)		(21	)		(5,372	)
Balance as of May 31, 2007	$	—		$	—		$	1,343		$	—		$	1,343

The reductions in workforce affected employees involved in sales, customer support, product development, and general and administrative positions. During fiscal 2005, we recorded a net benefit related to revisions of previous estimates of employee separation expenses.

Facilities-related charges included accelerated depreciation of buildings, write-downs of land and buildings held for sale, losses on sales of facilities, and lease obligations.

Other restructuring costs included payments to suppliers and contract termination fees.

We believe that the all remaining actions will be completed by the end of fiscal 2008.

Note 5: Investment in Unconsolidated Joint Venture

As described in Note 3 we formed the Huawei-3Com joint venture (H3C) with a subsidiary of Huawei Technologies, Ltd. (Huawei).

At the time of formation, we contributed cash of $160.0 million, assets related to our operations in China and Japan, and licenses related to certain intellectual property in exchange for a 49 percent ownership interest. We recorded our initial investment in H3C at $160.1 million, reflecting our carrying value for the cash and assets contributed. Huawei contributed its enterprise networking business assets - including Local Area Network (LAN) switches and routers; engineering, sales, marketing resources and personnel; and licenses to its related intellectual property - in exchange for a 51 percent ownership interest. Huawei’s contributed assets were valued at $178.2 million at the time of formation.

Prior to the acquisition we accounted for our investment by the equity method. Under this method, we recorded our proportionate share of H3C’s net income or loss based on the most recently available quarterly financial statements. Since H3C follows a calendar year basis of reporting, we reported our equity in H3C’s net loss for H3C’s fiscal period from April 1, 2005 through January 31, 2006 for the fiscal year 2006, April 1, 2004 through March 31, 2005 for the fiscal year 2005 in our results of operations for fiscal 2006 and 2005. This represents reporting two months in arrears.

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Summarized information from the balance sheet and statement of operations for H3C for the ten month period ended January 31, 2006, and for the year ended March 31, 2005 (in thousands):

	January 31,		March 31,
	2006		2005
Balance Sheet
Current assets	$	404,068	$	259,369
Non-current assets		132,130		149,571
Current liabilities		210,853		109,097
Non-current liabilities		8,866		8,866
Statement of Operations:
Sales	$	399,612	$	297,977
Gross profit		181,553		120,498
Income (loss) from operations		10,132		(17,064	)
Net income (loss)		22,487		(14,125	)

In determining our share of the net loss of H3C certain adjustments are made to H3C’s reported results. These adjustments are made primarily to recognize the value and the related amortization expense associated with Huawei’s contributed assets, as well as to defer H3C’s sales and gross profit on sales of products sold to us that remained in our inventory at the end of the accounting period. We recorded our equity interest in income (loss) of $11.0 million in fiscal 2006 (prior to the acquisition of majority ownership on January 27, 2006) for the period April 1, 2005 through January 31, 2006 and, ($6.9) million in fiscal 2005 for the period April 1, 2004 through March 31, 2005 as our share of H3C’s net income (loss); this income (loss) is included in our results of operations under the caption “Equity interest in income (loss) of unconsolidated joint venture.”

3Com and H3C are parties to agreements for the sale of certain products between the two companies. During the ten months ended January 31, 2006 (date of the 2 percent acquisition) we recorded sales to H3C of approximately $10.6 million and made purchases of approximately $53.8 million. During fiscal 2005, we recorded sales to H3C of approximately $13.2 million and made purchases of approximately $26.9 million.

Note 6: Investments

Available-for-sale securities consist of (in thousands):

	May 31, 2007
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Publicly traded corporate equity securities	$	257	$	210	$	—	$	467
Total	$	257	$	210	$	—	$	467

	May 31, 2006
			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
State and municipal securities	$	22,816	$	—	$	(96	)	$	22,720
U.S. Government and agency securities		136,317		13		(486	)		135,844
Corporate debt securities		205,793		13		(1,120	)		204,686
Short-term investments		364,926		26		(1,702	)		363,250
Publicly traded corporate equity securities		309		93		—			402
Total	$	365,235	$	119	$	(1,702	)	$	363,652

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The total cost and carrying value of corporate equity securities consist of (in thousands):

	May 31, 2007
	Carrying Value
Publicly traded corporate equity securities	$	467
Total corporate equity securities	$	467

	May 31, 2006
	Initial Cost		Carrying Value
Investments in limited partnership venture capital funds	$	25,498	$	15,794
Direct investments in private companies		12,262		91
Total private equity investments	$	37,760		15,885
Publicly traded corporate equity securities				402
Total corporate equity securities			$	16,287

Publicly traded corporate equity securities are included in other current assets. Private equity instruments are included in deposits and other assets.

The following table provides gross realized gains and losses related to our investments (in thousands):

	Years Ended May 31,
	2007			2006			2005
Gross realized gains	$	3,560		$	5,499		$	3,594
Gross realized losses		(2,417	)		(1,166	)		(2,014	)
Total	$	1,143		$	4,333		$	1,580

Note 7: Inventories

Inventories consist of (in thousands):

	May 31,
	2007		2006
Finished goods	$	61,857	$	69,386
Work-in-process		7,143		12,777
Raw materials		38,988		66,656
Total	$	107,988	$	148,819

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Note 8: Property and Equipment

Property and equipment, net, consists of (in thousands):

	May 31,
	2006			2006
Land	$	1,724		$	6,999
Buildings and improvements		—			11,122
Machinery and equipment		231,886			202,407
Software		31,387			63,814
Furniture and fixtures		20,217			21,161
Leasehold improvements		17,201			13,667
Construction in progress		8,599			2,883
Total		311,014			322,053
Accumulated depreciation and amortization		(234,554	)		(232,944	)
Property and equipment, net	$	76,460		$	89,109

Significant property and equipment transactions

For the Year Ended May 31, 2007. We continue to carry the Hemel Hempstead land as held for use, which was damaged in December of 2005, on our balance sheet. Based on the size of the experienced damage, our insurance policy administrator paid us a reimbursement value of approximately $28 million. Furthermore, with no feasible business necessity to keep this property, we are soliciting offers from prospective buyers to acquire the building and land. Any sale would be contingent on UK government agencies allowing reconstruction of the building. We believe this process will take more than one year and as a result we have kept the land classified as held for use. In the first fiscal quarter we received $16.0 million of proceeds from the sale of our Santa Clara facility.

For the Year Ended May 31, 2006. On December 11, 2005, our Europe, Middle East and Africa headquarters facility in Hemel Hempstead, United Kingdom was damaged by explosions at a third-party oil depot facility which occurred approximately one quarter mile from our facility. Approximately 300 employees and contractors worked at our Hemel campus, primarily in our sales, marketing and product operations groups. The incident occurred during non-business hours and no employee casualties or injuries were reported. We activated our back-up systems and established business operations at alternative facilities to ensure business continuity and minimize disruption to our customers. We believe we have sufficient insurance and recourse against third parties so that any loss incurred by us in connection with these explosions should not have a material adverse effect on our results of operations. The building is currently not being used for operations and the carrying amount of $16.2 million has been reclassified from property and equipment to other non-current assets and the associated depreciation has been ceased.

For the Year Ended May 31, 2005. In February 2005, we completed the sale of certain properties in Hemel Hempstead, U.K. that were classified as held for sale. This property, consisting of approximately 111,000 square feet of office and research and development space, previously had been used for our administrative and research and development activities. Net proceeds from the sale resulted in a gain on the sale of $0.1 million that was recorded in restructuring charges in the third quarter of fiscal 2005.

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Note 9: Intangible Assets

Intangible assets consist of (in thousands):

	May 31, 2007							May 31, 2006
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
Existing technology	$	387,233	$	(148,641	)	$	238,592	$	203,946	$	(114,235	)	$	89,711
Trademark		55,500		—			55,500		—		—			—
Huawei non-compete agreement		33,000		(61	)		32,939		—		—			—
OEM agreement		23,800		(22	)		23,778		—		—			—
Maintenance contracts		19,000		(7,389	)		11,611		19,000		(4,222	)		14,778
Other		21,924		(13,055	)		8,869		15,301		(7,945	)		7,356
Total	$	540,457	$	(169,168	)	$	371,289	$	238,247	$	(126,402	)	$	111,845

During fiscal 2007, we recorded approximately $298.2 million and $3.1 million of intangible assets related to the H3C acquisition and the Roving Planet acquisition, respectively (See Note 3). These amounts were recognized for the fair value of existing technology, maintenance agreements, trade name and trademarks, distributor agreements and non-competition agreements. These intangible assets have a weighted-average useful life of approximately four years.

During fiscal 2007, we reclassed $0.9 million of goodwill that no longer has an indefinite life to intangible assets.

During fiscal 2006, we recorded approximately $132.6 million of intangible assets related to the H3C acquisition and our consolidation of H3C (See Note 3). These amounts were recognized for the fair value of existing technology, maintenance agreements, trade name and trademarks, and non-competition agreements. These intangible assets have a weighted-average useful life of approximately four years.

During fiscal 2005, we recorded approximately $69.9 million of intangible assets related to the TippingPoint acquisition (See Note 3). These amounts were recognized for the fair value of existing technology, maintenance agreements, trade name and trademarks, and non-competition agreements. These intangible assets have a weighted-average useful life of approximately five years.

Annual amortization expense related to intangible assets is expected to be as follows for each of the following five succeeding fiscal years (in thousands):

	2008		2009		2010		2011		2012
Amortization expense	$	103,431	$	81,240	$	60,337	$	36,206	$	15,163

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Note 10: Accrued Liabilities and Other

Accrued liabilities and other consist of (in thousands):

	May 31,
	2007		2006
Accrued payroll and related expenses	$	81,791	$	88,305
EARP Accrual		94,563		16,960
Accrued rebates and other marketing		67,446		60,301
Deferred revenue		54,034		57,050
Accrued product warranty		40,596		41,791
Income and other taxes payable		36,365		25,759
Advance from customers		8,300		—
Restructuring		3,376		13,525
Other		49,167		14,345
Total	$	435,638	$	318,036

Note 11: Accrued Warranty and Other Guarantees

Most products are sold with varying lengths of warranty ranging from 90 days to limited lifetime. Allowances for estimated warranty obligations are recorded in the period of sale, based on historical experience related to product failure rates and actual warranty costs incurred during the applicable warranty period and are recorded as part of cost of goods sold. Also, on an ongoing basis, we assess the adequacy of our allowances related to warranty obligations recorded in previous periods and may adjust the balances to reflect actual experience or changes in future expectations.

The following table summarizes the activity in the allowance for estimated warranty costs (in thousands):

	Years Ended May 31,
	2007			2006			2005
Accrued warranty, beginning of period	$	41,791		$	41,782		$	43,825
Cost of warranty claims		(46,950	)		(32,958	)		(32,910	)
Accrual for warranties issued during the period		46,406			28,424			30,867
Adjustments to preexisting warranties		(651	)		—			—
Reserves related to H3C at date of 2 percent acquisition		—			4,543			—
Accrued warranty, end of period	$	40,596		$	41,791		$	41,782

Note 12: Long-Term Debt

On March 22, 2007, H3C Holdings Limited (the “Borrower”), an indirect wholly-owned subsidiary of 3Com Corporation, entered into the 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 (“GSCP”), and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent (the “Credit Agreement”). On March 28, 2007, the Borrower borrowed $430 million under the Credit Agreement in the form of a senior secured term loan to finance a portion of the purchase price for 3Com’s acquisition of 49 percent of H3C Technologies Co., Limited, or H3C.

On May 25, 2007, the parties amended and restated the Credit Agreement in order to, among other things, convert the facility into two tranches with different principal amortization schedules and different interest rates, as further described below (the “A&R Loans”). The parties closed the A&R Loans on May 31, 2007.

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The A&R Loans are subject to the terms and conditions of an Amended and Restated Credit and Guaranty Agreement dated as of May 25, 2007 and effective as of May 31, 2007 among H3C Holdings Limited, as Borrower, 3Com Corporation, 3Com Holdings Limited and 3Com Technologies, as Holdco Guarantors, H3C, as a Guarantor, various Lenders, GSCP, as Mandated Lead Arranger, Bookrunner, Administrative Agent and Syndication Agent, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent (the “A&R Credit Agreement”).

As amended, borrowings under the Credit Agreement consist of two tranches with different principal amortization schedules and different interest rates. The first tranche, the “Tranche A Term Facility,” matures in 2010 and its aggregate principal amount of $230 million is payable as to 40 percent in year one and then evenly (20 percent per year) over the succeeding three years. The second tranche, the “Tranche B Term Facility,” matures in 2012 and its $200 million principal amount is payable primarily in its fourth (10 percent) and fifth (86 percent) years. Moody’s Investors Service has assigned a Ba2 rating to the A&R Loans and a Ba2 corporate family rating (stable outlook) to H3C Holdings Limited. Standard & Poor’s Ratings Services assigned the A&R Loans a ‘BB’ rating (with a recovery rating of ‘1’) and assigned a BB- corporate credit rating (stable outlook) to H3C Holdings Limited. We are required to maintain a rating from each of these agencies during the term of the A&R Loans.

Interest on borrowings is payable semi-annually on March 28 and September 28, commencing on September 28, 2007. All amounts outstanding under the Tranche A Term Facility will bear interest, at the Borrower’s option, at the (i) LIBOR, or (ii) Base Rate (i.e., prime rate), in each case plus the applicable margin percentage set forth in the table below, which is based on a “leverage ratio” of consolidated indebtedness of the Borrower and its subsidiaries to EBITDA (as defined in the A&R Credit Agreement, and calculated to exclude certain one-time nonrecurring charges) for the relevant twelve-month period:

Leverage Ratio	LIBOR +			Base Rate +
>3.0:10		2.25	%		1.25	%
< 3.0:1.0 but > 2.0:1.0		2.00	%		1.00	%
< 2.0:1.0 but > 1.0:1.0		1.75	%		0.75	%
< 1.0:1.0		1.50	%		0.50	%

All amounts outstanding under the Tranche B Term Facility will bear interest, at the Borrower’s option, at the (i) LIBOR plus 3.00 percent or (ii) Base Rate (i.e., prime rate) plus 2.00 percent. We have elected to use LIBOR as the reference rate for borrowings to date, and expect to do so for the foreseeable future. In addition, the applicable margin for the Tranche A Term Facility is 2.00 percent at May 31, 2007.

A default rate shall apply on all obligations in the event of default under the A&R Loans at a rate per annum of 2 percent above the applicable interest rate.

The Borrower’s principal asset is 100 percent of the shares of H3C. Covenants and other restrictions under the A&R Credit Agreement generally apply to the Borrower and its subsidiaries, which we refer to as the “H3C Group.” 3Com’s SCN segment is not generally subject to the terms of the A&R Credit Agreement, other than through parental guarantees. Required payments under the loan are generally expected to be serviced by cash flows from the H3C Group and the loan is secured by assets at the H3C level, as well as the parental guarantees (which are expected to be released after H3C effects a successful capital reduction).

The A&R Loans may be prepaid in whole or in part without premium or penalty. The Borrower will be required to make mandatory prepayments using net proceeds from H3C Group (i) asset sales, (ii) insurance proceeds and (iii) equity offerings or debt incurrence. In addition, the Borrower will be required to make annual prepayments in an amount equal to 75 percent of “excess cash flow” of the H3C Group. This percentage will decrease to the extent that the Borrower’s leverage ratio is lower than specified amounts. Any excess cash flow amounts not required to prepay the loan may be distributed to and used by the Company’s SCN segment, provided certain conditions are met.

H3C and all other existing and future subsidiaries of the Borrower (other than PRC subsidiaries or small “excluded subsidiaries”) will guarantee all obligations under the A&R Loans and are referred to as “Guarantors.” Additionally, 3Com Corporation, 3Com Holdings Limited and 3Com Technologies, will also guarantee all obligations under the A&R Loans until H3C effects a successful capital reduction; these entities are referred to as “Parent Guarantors” and are not considered “Guarantors.” The loan obligations will be secured by (1) first priority security interests in all assets of the Borrower and the Guarantors, including their bank accounts, and (2) a first priority security interest in 100 percent of the capital stock of the Borrower and H3C and the PRC subsidiaries of H3C.

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The Borrower must maintain a minimum debt service coverage, minimum interest coverage, maximum capital expenditures and a maximum total leverage ratio. Negative covenants restrict, among other things, (i) the incurrence of indebtedness by the Borrower and its subsidiaries, (ii) the making of dividends and distributions to 3Com’s SCN segment, (iii) the ability to make investments including in new subsidiaries, (iv) the ability to undertake mergers and acquisitions and (v) sales of assets. Also, cash dividends from the PRC subsidiaries to H3C, and H3C to the Borrower, will be subject to restricted use pending payment of principal, interest and excess cash flow prepayments. Standard events of default apply.

Payments of principal on the A&R Loans are due as follows on September 28, for fiscal years ending May 31 (in thousands):

	Tranche A		Tranche B
2008	$	92,000	$	2,000
2009		46,000		2,000
2010		46,000		2,000
2011		46,000		2,000
2012		—		20,000
2013		—		172,000

Note 13: Borrowing Arrangements and Commitments

During fiscal 2005, our revolving credit facility was allowed to expire according to its terms in November 2004, and we entered into a new arrangement to facilitate the issuance of standby letters of credit and bank guarantees required in the normal course of business. Since we provide collateral for any standby letters of credit and bank guarantees issued under this agreement, the availability of additional issuances is restricted by the amount of cash and short-term investments that we can provide as collateral. As of May 31, 2007, these facilities were backed by collateral of $5.9 million provided to the respective banks.

We lease certain of our facilities under operating leases. Leases expire at various dates from 2008 to 2012, and certain leases have renewal options with rentals based upon changes in the Consumer Price Index or the fair market rental value of the property. We also sublet certain of our leased and owned facilities to third party tenants. The sublease agreements expire at various dates from 2008 to 2011.

Future operating lease commitments and future rental income as of May 31, 2007 are as follows (in thousands):

	Future Lease		Future Rental
Fiscal year	Payments		Income
2008	$	27,671	$	2,341
2009		15,486		838
2010		3,647		541
2011		383		70
2012		42		—
Total	$	47,229	$	3,790

Rent expense was approximately $27.7 million in fiscal 2007, $16.3 million in fiscal 2006, and $16.5 million in fiscal 2005. Rental income, which includes rents received for both owned and leased property, was $5.5 million in fiscal 2007, $6.8 million in fiscal 2006, and $6.0 million in fiscal 2005, and is recorded as an offset to operating expenses.

In September 2006 we sold all of our remaining venture portfolio and generated cash of approximately $1.3 million with a loss on sale of investments of $0.7 million. In August 2006, we sold certain limited partnership interests and generated cash of approximately $17.0 million with a gain on sale of investment of $2.4 million and eliminated our future capital call requirements.

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Note 14: Stock Based Compensation Plans

In December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment”, which requires all stock-based compensation expense to employees (as defined in SFAS No. 123(R)), including grants of employee stock options, restricted stock awards, restricted stock units, and employee stock purchase plan shares to be recognized in the financial statements based on their fair values. We adopted SFAS No. 123(R) on June 3, 2006 using the modified prospective transition method and accordingly, prior period amounts have not been restated. In order to determine the fair value of stock options and employee stock purchase plan shares, we use the Black-Scholes option pricing model and apply the single-option valuation approach to the stock option valuation. In order to determine the fair value of restricted stock awards and restricted stock units we use the closing market price of 3Com common stock on the date of grant. We recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards for options granted following the adoption of SFAS No. 123(R) for time vested awards. We recognize compensation expense for performance based restricted stock in the fiscal quarter when an event makes the probability that performance will more than likely be achieved. For unvested stock options outstanding as of May 31, 2006, we will continue to recognize stock-based compensation expense using the accelerated amortization method prescribed in FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans”.

Estimates of the fair value of equity awards in future periods will be affected by the market price of our common stock, as well as the actual results of certain assumptions used to value the equity awards. These assumptions include, but are not limited to, the expected volatility of the common stock price, the expected term of options granted, and the risk free interest rate.

As noted above, the fair value of stock options and employee stock purchase plan shares is determined by using the Black-Scholes option pricing model and applying the single-option approach to the stock option valuation. The options generally vest on an annual basis over a period of four years. We estimate the expected option term by analyzing the historical term period from grant to exercise and also consider the expected term for those options that are still outstanding. The expected term of employee stock purchase plan shares is the average of the remaining purchase periods under each offering period. For equity awards granted after May 31, 2006, the volatility of the common stock is estimated using the historical volatility. We believe that historical volatility represents the best information currently available for projecting future volatility.

The risk-free interest rate used in the Black-Scholes option pricing model is based on the historical U.S. Treasury zero-coupon bond issues with terms corresponding to the expected terms of the equity awards. In addition, an expected dividend yield of zero is used in the option valuation model because we do not expect to pay any cash dividends in the foreseeable future. In accordance with SFAS No. 123(R), we are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods based upon new information. In order to determine an estimated pre-vesting option forfeiture rate, we used historical forfeiture data, which currently yields an expected forfeiture rate of 27 percent. This estimated forfeiture rate has been applied to all unvested options and restricted stock outstanding as of May 31, 2006 and to all options and restricted stock granted since May 31, 2006. Therefore, stock-based compensation expense is recorded only for those options and restricted stock that are expected to vest.

The Company’s policy is to issue new shares, or reissue shares from treasury stock, upon settlement of share based payments.

The following table summarizes the incremental effects of the share-based compensation expense resulting from the application of SFAS No. 123(R) to the stock options, restricted stock and employee stock purchase plan:

(In thousands, except per share data)	May 31, 2007
Cost of sales	$	1,576
Sales and marketing		5,756
Research and development		4,621
General and administrative		8,142
Incremental share-based compensation effect of SFAS No. 123(R) on net loss	$	20,095

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As of May 31, 2007, total unrecognized stock-based compensation expense relating to unvested employee stock options, restricted stock and employee stock purchase plan, adjusted for estimated forfeitures, was $20.1 million. This amount is expected to be recognized over a weighted-average period of 2.7 years. If actual forfeitures differ from current estimates, total unrecognized stock-based compensation expense will be adjusted for future changes in estimated forfeitures.

Prior to June 1, 2006, we accounted for stock options using the intrinsic value method, pursuant to the provisions of Accounting Principles Board (“APB”) No. 25. Under this method, stock-based compensation expense was measured as the difference between the option’s exercise price and the market price of the Company’s common stock on the date of grant.

Pro forma information required under SFAS No. 123 for the prior fiscal years, as if we had applied the fair value recognition provisions of SFAS No. 123 to awards granted under our equity incentive plans, was as follows:

(In thousands, except per share amounts)	May 31, 2006			May 31, 2005
Net loss as reported	$	(100,675	)	$	(195,686	)
Add: Stock-based compensation included in reported net loss		9,846			2,841
Deduct: Total stock-based compensation determined under the fair value-based method, net of related tax effects		(25,496	)		(16,203	)
Adjusted net loss	$	(116,325	)	$	(209,048	)
Net loss per share-basic and diluted:
As reported	$	(0.26	)	$	(0.51	)
Adjusted	$	(0.30	)	$	(0.55	)

There were 1.4 million shares of common stock issued under the employee stock purchase plan during the year ended May 31, 2007. Employee stock purchases normally occur only in the quarters ended November 30 and May 31.

Share-based compensation recognized in the year ended May 31, 2007 as a result of the adoption of SFAS No. 123(R) as well as pro forma disclosures according to the original provisions of SFAS No. 123 for periods prior to the adoption of SFAS No. 123(R) use the Black-Scholes option pricing model for estimating the fair value of options granted under the company’s equity incentive plans. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The underlying weighted-average assumptions used in the Black-Scholes model and the resulting estimates of fair value per share were as follows for options granted during the years ended May 31, 2007, May 31, 2006 and May 31, 2005:

	2007			20061			20051
Employee stock options:
Volatility		42.7	%		41.9	%		53.2	%
Risk-free interest rate		4.7	%		4.3	%		3.5	%
Dividend yield		0.0	%		0.0	%		0.0	%
Expected life (years)		4.0			4.0			4.0
Fair value per option	$	1.67		$	1.52		$	1.89
Employee Stock Purchase Plan:
Volatility		39.2	%		38.1	%		39.2	%
Risk-free interest rate		5.1	%		4.4	%		2.6	%
Dividend yield		0.0	%		0.0	%		0.0	%
Expected life (years)		0.5			0.5			0.5
Fair value per option	$	1.10		$	1.20		$	1.04

1 – Assumptions used in the calculation of fair value according to the provisions of SFAS No. 123.

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As of May 31, 2007, our outstanding stock options as a percentage of outstanding shares were approximately 13 percent. Stock option detail activity for the period June 1, 2006 to May 31, 2007 was as follows (shares in thousands):

	Number of			Weighted-Average
	shares			Exercise Price
Outstanding, May 31, 2004		56,885		$	7.18
Granted		10,002			4.22
TippingPoint options assumed		13,886			1.31
Exercised		(4,273	)		2.01
Canceled		(13,141	)		6.90
Outstanding, May 31, 2005		63,359			5.83
Granted		21,974			4.22
Exercised		(5,467	)		2.07
Canceled		(18,445	)		5.83
Outstanding, May 31, 2006		61,421		$	5.71
Granted		24,285			4.71
Exercised		(2,527	)		3.00
Canceled		(30,899	)		5.94
Outstanding, May 31, 2007		52,280		$	5.23
Exercisable		22,174		$	6.20
Weighted-average grant-date fair value of options granted				$	1.67

Additional information about employee options outstanding and exercisable at December 31, 2006 is included in the following table:

	Outstanding Options as of May 31, 2007						Exercisable as of May 31, 2007
Range of	Number of		Weighted-Average		Weighted-Average		Number of		Weighted-Average
Exercise Prices	Shares		Exercise Price		Remaining Contractual Life				Shares Exercise Price
	(in thousands)				(in years)		(in thousands)
$0.00 - $4.00		11,101	$	2.87		5.5		5,360	$	2.33
4.01 - 5.00		21,172		4.47		5.7		4,421		4.52
5.01 - 6.00		12,664		5.52		4.8		5,238		5.51
6.01 - 7.00		1,363		6.21		2.4		1,242		6.21
7.01 - 8.00		403		7.35		2.6		354		7.36
8.01 - 22.00		5,577		11.84		2.6		5,559		11.85
Total		52,280	$	5.23		5.0		22,174	$	6.20

As of May 31, 2007, there were approximately 22.2 million options exercisable with a weighted-average exercise price of $6.20 per share. By comparison, there were approximately 32.5 million options exercisable as of May 31, 2006 with a weighted-average price of $6.96 per share.

During the year ended May 31, 2007 approximately 2.5 million options were exercised at an aggregate intrinsic value of $4.5 million. The intrinsic value above is calculated as the difference between the market value on exercise date and the option price of the shares. The closing market value per share as of June 1, 2007 was $4.69 as reported by the NASDAQ Global Select Market. The aggregate intrinsic value of options outstanding and options exercisable as of May 31, 2007 was $25.4 million and $13.6 million respectively. The aggregate intrinsic value is calculated as the difference between the market value as of June 1, 2007 and the option price of the shares.

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Options outstanding that are vested and expected to vest as of May 31, 2007 are as follows:

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
	Number of		Option		Contractual		Intrinsic Value
	Shares		Price		Life (in years)		(in thousands)
Vested and expected to vest at May 31, 2007		38,248,782	$	5.46		4.60	$	21,103

Restricted stock awards activity during the year ended May 31, 2007 and restricted stock awards outstanding as of May 31, 2007, were as follows (shares in thousands):

	Number of			Weighted-
	Shares			Average Grant-
	(unvested)			Date Fair Value
Outstanding, May 31, 2004		723		$	4.97
Granted		1,484			4.23
Exercised		(154	)		5.31
Canceled		(316	)		4.90
Outstanding, May 31, 2005		1,737			4.32
Granted		2,419			3.84
Exercised		(854	)		4.07
Canceled		(1,185	)		3.96
Outstanding, May 31, 2006		2,117		$	4.07
Granted		2,380			4.45
Exercised		(1,151	)		4.13
Canceled		(943	)		4.30
Outstanding, May 31, 2007		2,403		$	4.33

During the year ended May 31, 2007 approximately 1.2 million restricted award shares with an aggregate fair value of $4.9 million became vested.

Restricted stock unit activity during the year ended May 31, 2007 and restricted stock units outstanding as of May 31, 2007, were as follows (shares in thousands):

						Weighted-
						Average		Aggregate
	Number of			Weighted-		Remaining		Intrinsic
	Shares			Average		Contractual		Value (in
	(unvested)			Purchase Price		Term (Years)		thousands)
Outstanding June 1, 2006		—		$	—		—	$	—
Granted		4,356			—		—		—
Vested		(836	)		—		—		3,319
Forfeited		(409	)		—		—		—
Outstanding May 31, 2007		3,111		$	—		1.19	$	14,591

During the year ended May 31, 2007 approximately 0.8 million restricted share units with an aggregate fair value of $3.3 million became vested.

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Employee Stock Purchase Plan. We have an employee stock purchase plan (ESPP) under which eligible employees may authorize payroll deductions of up to ten percent of their compensation, as defined, to purchase common stock at a price of 85 percent of the lower of the fair market value as of the beginning or the end of the six-month offering period. In September 2003, our stockholders approved an increase of five million shares available for issuance under the ESPP. We recognized $1.6 million of stock-based compensation expense in the year ended May 31, 2007.

Preferred Shares Rights Plan. In September 1989, the Board of Directors approved a common stock purchase rights plan, which was amended and restated in December 1994, and again in March 2001. In November 2002, the Board of Directors approved a Third Amended and Restated Preferred Shares Rights Plan (the Preferred Shares Rights Plan), which replaced the March 2001 Plan. The Preferred Shares Rights Plan provides that the preferred share rights (the Rights) will become exercisable only following the acquisition by a person or a group of 15 percent or more of the outstanding common stock or ten days following the announcement of a tender or exchange offer for 15 percent or more of the outstanding common stock (the Distribution Date). After the Distribution Date, each Right will entitle the holder to purchase for $55.00 (the Exercise Price), one-one thousandth of a share of our Series A Participating Preferred Stock (or cash, stock or other assets approved by the Board of Directors) with economic terms similar to that of one share of our common stock. Upon a person or a group acquiring 15 percent or more of the outstanding common stock, each Right will allow the holder (other than the acquirer) to purchase common stock or securities of 3Com having a then current market value of two times the Exercise Price of the Right. In the event that following the acquisition of 15 percent of the common stock by an acquirer, we are acquired in a merger or other business combination or 50 percent or more of our assets or earning power is sold, each Right will entitle the holder to purchase for the Exercise Price, common stock or securities of the acquirer having a then current market value of two times the Exercise Price. In certain circumstances, the Rights may be redeemed by us at a redemption price of $0.001 per Right. If not earlier exchanged or redeemed, the Rights will expire on March 8, 2011.

Stock Reserved for Issuance. As of May 31, 2007 we had reserved common stock for issuance as follows (in thousands):

Stock option and restricted stock plans for granted shares	55,391
Stock option and restricted stock plans for future grants	14,918
Employee stock purchase plan	3,510
Total shares reserved for issuance	73,819

In addition, as of May 31, 2007 we had 0.4 million shares of preferred stock reserved for issuance under our Preferred Shares Rights Plan.

Stock Repurchase and Option Programs. During the fourth quarter of fiscal 2005, the Board of Directors approved a new stock repurchase program that authorizes expenditures of up to $100.0 million during a two-year period which expired March 31, 2007, provided that all repurchases are pre-approved by the Audit and Finance Committee of the Board of Directors. Our prior stock repurchase program was announced on March 19, 2003 and permitted expenditures up to $100.0 million through March 2005.

Pursuant to these authorizations, we did not repurchase any shares during fiscal 2007 or fiscal 2006. We repurchased 15.0 million shares of our common stock during fiscal 2005 at a cost of $73.5 million.

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Note 15: Financial Instruments

The following summary disclosures concerning our financial instruments are made in accordance with the provisions of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” which requires the disclosure of fair value information about both on- and off-balance sheet financial instruments where it is practicable to estimate the value. Fair value is defined in SFAS No. 107 as the amount at which an instrument could be exchanged in a current transaction between willing parties, rather than in a forced or liquidation sale.

	May 31, 2007				May 31, 2006
	Carrying		Estimated		Carrying		Estimated
(in thousands)	Amount		Fair Value		Amount		Fair Value
Cash and equivalents	$	559,217	$	559,217	$	501,097	$	501,097
Short-term investments		—		—		363,250		363,250
Corporate equity securities		257		467		16,287		16,174

The following methods and assumptions were used in estimating the fair values of financial instruments:

Cash and equivalents. The carrying amounts reported in the consolidated balance sheets for cash and equivalents approximate their estimated fair values.

Short-term investments. The fair values of short-term investments are based on market prices.

Corporate equity securities. Fair value of publicly traded corporate equity securities is based on quoted market prices. Fair value of privately held corporate equity securities is based on all available information. For these non-quoted investments, our policy is to regularly review the assumptions underlying the financial performance of the privately held companies in which the investments are maintained. If and when a determination is made that a decline in fair value below the cost basis is other than temporary, the related investment is written down to its estimated fair value.

Foreign exchange contracts. We enter into foreign exchange forward contracts to hedge certain balance sheet exposures and intercompany balances against future movements in foreign exchange rates. In addition, we enter into foreign exchange forward contracts to hedge exposures related to anticipated foreign currency cash flows other than in China. We do not use foreign forward exchange contracts for speculative or trading purposes.

Our foreign exchange forward contracts require the exchange of foreign currencies for U.S. Dollars or vice versa, and generally mature in one month or less. We had outstanding foreign exchange forward contracts with aggregate notional amounts of $42.8 million as of May 31, 2007 and $39.0 million as of May 31, 2006, that had remaining maturities of one month or less. The fair value of foreign exchange forward contracts is based on prevailing financial market information. The carrying amounts, which were also the estimated fair values, of foreign exchange forward contracts were not significant as of May 31, 2007 and 2006. See Note 2 for information concerning our significant accounting policies for foreign exchange forward contracts.

Because SFAS No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements, any aggregation of the fair value amounts presented in the table above would not necessarily represent the underlying value of all of our financial instruments.

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Note 16: Interest and Other Income (Expense), Net

Interest and other income (expense), net, consists of (in thousands):

	Years Ended May 31,
	2007			2006			2005
Interest income	$	41,310		$	29,297		$	22,807
Interest expense		(447	)		(212	)		(1,401	)
Interest income, net	$	40,863		$	29,085		$	21,406
Other income (expense), net	$	38,291		$	8,235		$	(4,785	)

Other income (expense), net includes $30.6 million and $7.3 million in fiscal year 2007 and 2006, respectively, of other income from H3C for an operating subsidy program by the Chinese VAT authorities in the form of a partial refund of VAT taxes collected by H3C from purchasers of software products. Other income also includes a gain from the insurance proceeds from our Hemel facility in fiscal 2007. In 2005, other income (expense), net includes a provision of $2.4 million for unrecoverable value added tax for prior years that was recorded in fiscal 2005 as a result of an unfavorable tax authority ruling, $1.5 million loss on foreign exchange, and $0.9 million of bank charges.

Note 17: Income Taxes

The provision (benefit) for income taxes consists of the following (in thousands):

	Years Ended May 31,
	2007			2006			2005
Current:
Federal	$	—		$	—		$	—
State		530			200			308
Foreign		19,640			(14,421	)		138
Total current		20,170			(14,221	)		446
Deferred
Federal		—			—			—
State		—			—			—
Foreign		(9,997	)		(612	)		3,044
Total deferred		(9,997	)		(612	)		3,044
Total	$	10,173		$	(14,833	)	$	3,490

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The components of net deferred tax assets consist of the following (in thousands):

	May 31, 2007			May 31, 2006
Gross deferred tax assets:
Operating loss carryforwards	$	1,003,569		$	975,506
Amortization and depreciation		33,478			42,725
Tax credit carryforwards		55,618			60,075
Capital loss carryforwards		25,828			10,979
Unrealized losses on private investments, net		—			19,053
Royalty and purchased research and development		3,639			9,916
Other		1,270			5,769
Gross deferred tax assets		1,123,402			1,124,023
Gross deferred tax liabilities:
Reserves recognized in different periods for tax purposes		(144,486	)		(146,565	)
Acquired intangibles		(59,115	)		(25,375	)
Other		—			(1,021	)
Gross deferred tax liabilities		(203,601	)		(172,961	)
Valuation allowance		(937,075	)		(942,758	)
Net deferred tax (liabilities) assets	$	(17,274	)	$	8,304

Deferred tax assets and liabilities as of May 31, 2007, related to the acquisition of H-3C, TippingPoint and Roving Planet, and May 31, 2006, related to the acquisition of H-3C and TippingPoint, include the tax effect of temporary differences and tax attributes related to these acquisitions. A valuation allowance was recorded as the realization of the TippingPoint and Roving Planet deferred tax assets was uncertain so that the impact on the net deferred tax assets was zero.

We have net operating loss carryforwards related to the following income tax jurisdictions and expiration periods: U.S. federal loss carryforwards of approximately $2.5 billion expiring between fiscal years 2008 and 2027, substantially all of which expire between fiscal years 2021 and 2027; various state loss carryforwards of approximately $1.2 billion expiring between 2008 and 2027; and various foreign loss carryforwards with $15.1 million expiring between 2008 and 2014, and $18.6 million with an unlimited carryforward period. We also have capital loss carryforwards estimated at approximately $73.8 million expiring between fiscal years 2009 and 2012; a U.S. federal research credit carryforward of $25.2 million expiring between 2008 and 2027; a U.S. federal foreign tax credit carryforward of $6.2 million expiring between 2008 and 2012; and a U.S. federal alternative minimum tax credit carryforward of $10.7 million that has an unlimited carryforward period.

SFAS No. 109, “Accounting for Income Taxes,” requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The valuation allowance relates to net operating loss and credit carryforwards and temporary differences for which we believe that realization is uncertain. The valuation allowance decreased $5.7 million in fiscal 2007, and increased $30.6 million in fiscal 2006, and $92.5 million in fiscal 2005. The total valuation allowance of $937.1 million includes $143.5 million attributable to the tax benefit of stock option deductions, which, if recognized, will be allocated directly to paid-in-capital. In addition, the valuation allowance includes approximately $59.3 million for acquired net operating loss carryforwards which, if realized, would result in a decrease in goodwill.

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The provision (benefit) for income taxes differs from the amount computed by applying the federal statutory income tax rate to income before taxes as follows:

	Years Ended May 31,
	2007			2006			2005
Tax computed at federal statutory rate		(35.0	)%		(35.0	)%		(35.0	)%
State income taxes, net of federal effect		17.1			(2.1	)		(2.5	)
Provision for combined foreign and U.S. taxes on certain foreign income at rates greater than U.S. rates		31.7			15.2			10.9
Valuation allowance		(3.1	)		24.1			27.5
Income tax benefit arising from settlement of foreign tax audit		—			(19.9	)		—
Non-deductible purchased in-process technology and merger-related charges		7.0			3.2			0.9
Other		1.8			1.7			0.1
Total		19.5	%		(12.8	)%		1.9	%

Loss before income taxes includes foreign losses of $20.0 million in fiscal 2007, $29.9 million in fiscal 2006 and $47.9 million in fiscal 2005. We have not provided for federal tax on approximately $293.2 million of undistributed earnings of our foreign subsidiaries because we consider these earnings to be indefinitely reinvested in foreign subsidiary operations.

During fiscal 2006, we settled a tax audit with foreign tax authorities regarding issues covering multiple years. This transaction resulted in the release of $24.3 million of our tax reserves which were previously reported under the caption “Accrued liabilities and other” on our balance sheet. The release of the reserves resulted in the following amounts being included in the statement of operations; a tax benefit of $23.0 million included in the caption “Income tax benefit” and a related foreign exchange gain of $1.3 million included in the caption “Other income (expense), net”.

We have certain other domestic and foreign income tax audits that are currently in progress. The outcome of these examinations cannot be predicted with certainty and, should unfavorable rulings be made, assessments against us could be significant. Many of these contingencies arise from periods when we were substantially larger. Reserves for contingencies are based on an assessment of the likelihood of an unfavorable outcome and the expected potential loss from such contingency, and are monitored by management. These reserves are maintained until such time as the matter is settled or the statutory period for adjustment has passed. Adjustments could be required in the future if we determine that the reserves for tax contingencies are inadequate. However, we believe that amounts currently provided for such matters are adequate and that the ultimate resolution of the examinations is not expected to have a material adverse effect on our consolidated financial position or results of operations. As of May 31, 2007, our reserves for such income tax contingencies are $22.5 million.

H3C is located in the Hangzhou High-tech Zone and obtained a preferential tax rate from the Municipal Tax Bureau because we qualified as a high-and-new technology company. H3C was entitled to tax concessions beginning in 2004 whereby it was exempted from the PRC income tax for two consecutive years and is entitled to a 50% reduction in income tax in the following three years. Consequently the H3C statutory tax rate is 7.5% in respect of calendar 2006, 2007 and 2008. Effective calendar 2009, we expect the H3C statutory rate to be 15%. In March 2007 the PRC enacted a Tax Reform Law, the broad objective of which is to standardize the tax treatment of foreign-owned enterprises with that of domestic-owned enterprises. One of the effects of the new law is that there will be a unified PRC corporate income tax rate of 25%. It is proposed that some high-tech enterprises will be exempt from the increased rate, and although much of the detail of the new law is yet to be issued in regulations, we believe that we will continue to qualify as a high-tech enterprise and therefore that these tax concessions will continue to be available for the foreseeable future.

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Note 18: Net Loss per Share

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

	Years Ended May 31,
	2007			2006			2005
Net loss	$	(88,589	)	$	(100,675	)	$	(195,686	)
Weighted-average shares — Basic		393,894			386,801			382,309
Effect of dilutive securities:
Employee stock options		—			—			—
Restricted stock		—			—			—
Weighted-average shares – Diluted		393,894			386,801			382,309
Net loss per share – Basic and Diluted
Net loss	$	(0.22	)	$	(0.26	)	$	(0.51	)

Employee stock options and restricted stock totaling 57.8 million shares in fiscal 2007, 63.5 million shares in fiscal 2006 and 65.1 million shares in fiscal 2005, were not included in the computation of diluted earnings per share as the net loss for these periods would have made their effect anti-dilutive.

Note 19: Segment Information

Based on the information provided to our chief operating decision-maker (CODM) for purposes of making decisions about allocating resources and assessing performance, prior to February 1, 2006, we reported one operating segment, 3Com.

Following the acquisition of a majority and controlling interest in H3C, we have two segments that provide information to the CODM. The operating structure is aligned along the SCN business and the acquired H3C business. Each of these segments has designated management teams with direct responsibility over the operations of the respective segments. Accordingly, our CODM now focuses primarily on information and analysis for purposes of making decisions about allocating resources and assessing performance. As a result, we currently report two operating segments, SCN and H3C.

Management evaluates segment performance based on segment net revenue, operating income (loss), net income (loss), and net assets.

Summarized financial information of our continuing operations by segment in 2007 and 2006 is as follows (in thousands).

	Year Ended May 31, 2007
	SCN			H3C			Eliminations			Total
Revenue	$	642,816		$	731,132		$	(106,467	)	$	1,267,481
Gross profit		239,245			339,209			—			578,454
Sales and marketing, research and development, and general and administrative		337,523			291,680			—			629,203
Restructuring, amortization, and in-process research and development		19,493			62,279			—			81,772
Operating loss		(117,771	)		(14,750	)		—			(132,521	)
Net (loss) income	$	(81,446	)	$	19,049		$	(26,192	)	$	(88,589	)
Total expenditures for additions to property, plant and equipment	$	11,686		$	16,645			—		$	28,331
Assets	$	1,408,214		$	1,394,199		$	(651,321	)	$	2,151,092
Goodwill	$	311,380		$	455,064			—		$	766,444

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	Year Ended May 31, 2006
	SCN			H3C		Eliminations			Total
Revenue	$	705,339		$	108,290	$	(18,822	)	$	794,807
Gross profit		276,627			51,437		—			328,064
Sales and marketing, research and development, and general and administrative		419,008			30,203		—			449,211
Restructuring, amortization, and in-process research and development		29,579			6,377		—			35,956
Operating (loss) income		(171,960	)		14,857		—			(157,103	)
Net (loss) income	$	(114,420	)	$	21,568	$	(7,823	)	$	(100,675	)
Total expenditures for additions to property, plant and equipment	$	14,426		$	2,978		—		$	17,404
Assets	$	1,482,670		$	406,981	$	(28,290	)	$	1,861,361
Goodwill	$	309,918		$	44,341		—		$	354,259

Certain product groups accounted for a significant portion of our sales. Sales from these product groups as a percentage of total sales for the past three fiscal years were as follows (in thousands):

	Years Ended May 31,
	2007				2006				2005
Networking	$	1,028,090	81.1	%	$	577,038	72.6	%	$	494,492	75.9	%
Security		120,053	9.5			88,012	11.1			25,760	4.0
Voice		68,033	5.4			56,632	7.1			44,950	6.9
Services		35,871	2.8			33,357	4.2			32,062	4.9
Connectivity Products		15,434	1.2			39,768	5.0			53,980	8.3
Total	$	1,267,481			$	794,807			$	651,244

Sales from significant customers as a percentage of total consolidated sales for the past three fiscal years were as follows:

	Years Ended May 31,
Customer	2007			2006			2005
Huawei Technologies Co.		20	%		4	%		—	%
Ingram Micro, Inc.		11	%		19	%		21	%
Tech Data (1)		*			11	%		13	%
Total		31	%		34	%		34	%

(1) - Customer does meet the 10 percent threshold in fiscal 2007

Huawei Technologies Co, Ltd. (a customer of our H3C segment and the former minority shareholder of H3C) represented approximately 20 percent of our accounts receivable balance as of May 31, 2007. Ingram Micro, Inc (a customer of our SCN segment. represented approximately 24 percent of our accounts receivable balance as of May 31, 2007, compared to 16 percent for the previous fiscal year.

Note 20: Geographical Information

Sales by geographic region are as follows (in thousands):

	Years Ended May 31,
Sales	2007		2006		2005
Americas	$	233,691	$	248,532	$	214,051
Latin and South America		70,419		72,164		57,717
Europe, Middle East, and Africa		272,826		298,545		294,753
Asia Pacific		103,501		91,396		84,723
China		587,044		84,170		—
Total	$	1,267,481	$	794,807	$	651,244

Sales information by geography is reported based on the customer’s designated delivery point.

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The growth in our international operations, which is due primarily to our acquisition of H3C, has increased our exposure to foreign currency fluctuations. Primary currencies of the revenue is U.S. dollars and Chinese Renminbi; expenses include Euros, Singapore Dollars, British Pounds, and Chinese Renminbi. The income statements of our international operations whose functional currencies are the local currencies, are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenues and operating expenses. Conversely, our revenues and operating expenses will decrease when the U.S. dollar strengthens against foreign currencies.

Property and equipment by geographic region are as follows (in thousands):

	May 31,		May 31,
	2007		2006
Property and Equipment:
United States	$	30,104	$	41,186
United Kingdom		7,843		10,325
China		32,070		32,859
Other		6,443		4,739
Total	$	76,460	$	89,109

Property and equipment by geography is based on the physical location of the assets at the end of the fiscal year. As of May 31, 2007 and May 31, 2006, property and equipment in the United States, the United Kingdom and China exceeded ten percent of total property and equipment, as shown in the table above.

During fiscal 2006 our Europe, Middle East and Africa headquarters facility in Hemel Hempstead, United Kingdom was damaged by explosions at a third-party oil depot facility which occurred approximately one quarter mile from our facility. Approximately 300 employees and contractors worked at our Hemel campus, primarily in our sales, marketing and product operations groups. The incident occurred during non-business hours and no employee casualties or injuries were reported. We activated our back-up systems and established business operations at alternative facilities to ensure business continuity and minimize disruption to our customers. We believe we have sufficient insurance and recourse against third parties so that any loss incurred by us in connection with these explosions should not have a material adverse effect on our results of operations. During fiscal 2007 we have received approximately $28 million of insurance proceeds while the net book value of the building has been written off resulting in a gain of $8.0 million recorded in other income (expense), net. We are in the process of determining the feasibility of selling the Hemel land. We talked with prospective buyers and negotiations are underway. Before any potential sale can be completed the UK government must assess the ability to rebuild on the land. Since it is not believed that this process will be completed within the year we are still categorizing the land as held for use.

Note 21: Employee Benefit Plan and EARP

We have adopted a plan known as the 3Com 401(k) Plan (the 401(k) Plan) to provide retirement benefits to domestic employees. As allowed under Section 401(k) of the Internal Revenue Code, the 401(k) Plan provides tax-deferred salary deductions for eligible employees. Participants may elect to contribute from one percent to 22 percent of their annual compensation to the 401(k) Plan each calendar year, limited to a maximum annual amount as set periodically by the Internal Revenue Service. In addition, the 401 (k) Plan provides for contributions as determined by the Board of Directors. We match 50 percent for each dollar on the first six percent of eligible annual compensation contributed by the employee. Employees become vested in our matching contributions according to a three-year vesting schedule based on initial date of hire. Matching contributions to the 401 (k) Plan totaled $1.8 million in fiscal 2007, $2.2 million in fiscal 2006, and $2.2 million in fiscal 2005.

The closing of the acquisition triggered a bonus program for substantially all of H3C’s approximately 4,800 employees. This program, which was implemented by Huawei and 3Com in a prior period, is called the Equity Appreciation Rights Plan, or EARP, and funds a bonus pool based upon a percentage of the appreciation in H3C’s value from the initiation of the program to the time of the closing of the acquisition. A portion of the program is based on cumulative earnings of H3C. The total value of the EARP is expected to be approximately $180 million. Approximately $37 million was accrued by December 31, 2006. H3C recorded an incremental charge of approximately $57 million just prior to the closing of the acquisition. At May 31, 2007 the $57 million of the change-in-control was accrued for on the balance sheet and is expected to be paid in the first quarter of fiscal 2008. H3C expects the unvested portion amounting to $86 million to be accrued in H3C’s operating results over the next three years serving as a continued retention and incentive program for employees.

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Note 22: Litigation

We are a party to lawsuits in the normal course of our business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. We believe that we have meritorious defenses in the matters set forth below in which we are named as a defendant. An unfavorable resolution of the lawsuits described below could adversely affect our business, financial position, or results of operations. We cannot estimate the loss or range of loss that may be reasonably possible as a result of these litigations and, accordingly, we have not recorded any associated liability in our consolidated balance sheets.

On December 5, 2001, TippingPoint and two of its current and former officers and directors, as well as the managing underwriters in TippingPoint’s initial public offering, were named as defendants in a purported class action lawsuit filed in the United States District Court for the Southern District of New York. The lawsuit, which is part of a consolidated action that includes over 300 similar actions, is captioned In re Initial Public Offering Securities Litigation, Brian Levey vs. TippingPoint Technologies, Inc., et al. (Civil Action Number 01-CV-10976). The principal allegation in the lawsuit is that the defendants participated in a scheme to manipulate the initial public offering and subsequent market price of TippingPoint’s stock (and the stock of other public companies) by knowingly assisting the underwriters’ requirement that certain of their customers had to purchase stock in a specific initial public offering as a condition to being allocated shares in the initial public offerings of other companies. In relation to TippingPoint, the purported plaintiff class for the lawsuit is comprised of all persons who purchased TippingPoint stock from March 17, 2000 through December 6, 2000. The suit seeks rescission of the purchase prices paid by purchasers of shares of TippingPoint common stock. On September 10, 2002, TippingPoint’s counsel and counsel for the plaintiffs entered into an agreement pursuant to which the plaintiffs dismissed, without prejudice, TippingPoint’s former and current officers and directors from the lawsuit. In May 2003, a memorandum of understanding was executed by counsel for the plaintiffs, the issuer-defendants and their insurers setting forth the terms of a settlement that would result in the termination of all claims brought by the plaintiffs against the issuer-defendants and the individual defendants named in the lawsuit. In August 2003, TippingPoint’s Board of Directors approved the settlement terms described in the memorandum of understanding. In May 2004, TippingPoint signed a settlement agreement on behalf of itself and its current and former directors and officers with the plaintiffs. This settlement agreement formalizes the previously approved terms of the memorandum of understanding and, subject to certain conditions, provides for the complete dismissal, with prejudice, of all claims against TippingPoint and its current and former directors and officers. Any direct financial impact of the settlement is expected to be borne by TippingPoint’s insurers. On August 31, 2005, the District Court issued its preliminary approval of the settlement terms. The settlement remains subject to numerous conditions, including final approval by the District Court. On December 5, 2006, the U.S. Court of Appeals for the Second Circuit held that the District Court erred in granting class-action status to six “focus cases” of the consolidated class action lawsuits that comprise the action. The impact of this decision on the settlement is uncertain. The Plaintiffs petitioned the Second Circuit to hear this case en banc, but the appeals court rejected the petition. The matter is now back before the District Court. If the settlement does not occur for any reason and the litigation against TippingPoint continues, we intend to defend this action vigorously, and to the extent necessary, to seek indemnification and/or contribution from the underwriters in TippingPoint’s initial public offering pursuant to its underwriting agreement with the underwriters. However, there can be no assurance that indemnification or contribution will be available to TippingPoint or enforceable against the underwriters.

On December 22, 2006, Australia’s Commonwealth Scientific and Research Organization (CSIRO) filed suit in the United States District Court for the Eastern District of Texas (Tyler Division) against several manufacturers and suppliers of wireless products, including 3Com, seeking money damages and injunctive relief. The complaint alleges that the manufacture, use, and sale of wireless products compliant with the IEEE 802.11(a) or 802.11(g) wireless standards infringes on CSIRO’s patent, U.S. Patent No. 5,487,069. On March 9, 2007, 3Com filed its Answer, denying infringement and claiming invalidity and unenforceability of the CSIRO patent, among other defenses. The case is in the discovery phase of litigation. The majority of 3Com’s wireless products are supplied to the Company under OEM Purchase and Development Agreements that impose substantial intellectual property indemnifications obligations upon 3Com’s suppliers. We cannot make any predictions as to the outcome of this litigation and intend to vigorously defend the matter.

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Note 23: Impairment Charge

During the closing process for the three months ended February 28, 2006, management decided to discontinue certain development plans utilizing a purchased technology license for which we did not have an alternative use. Management believed this decision indicated that the carrying value of the related asset may have been impaired and that an impairment analysis should be performed. In performing the analysis for recoverability, management estimated the future cash flows expected to result from this license. We recorded a $4.2 million impairment charge based on this recoverability analysis. The impaired asset was fully written off and recorded in research and development as of February 28, 2006. There were no impairment charges recorded in 2007.

Note 24: Quarterly Results of Operations (Unaudited)

	Fiscal 2007												Fiscal 2006
	First			Second			Third			Fourth			First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
Sales	$	300,144		$	332,976		$	323,441		$	310,920		$	177,636		$	184,332		$	177,563		$	255,276
Gross profit		136,429			150,151			153,437			138,437			70,066			74,315			72,406			111,277
Gross profit margin %		45.5	%		45.1	%		47.4	%		44.5	%		39.4	%		40.3	%		40.8	%		43.6	%
Operating loss		(20,868	)		(9,380	)		(8,935	)		(93,338	)		(46,685	)		(42,226	)		(47,272	)		(20,920	)
Net loss		(14,068	)		(3,516	)		(4,779	)		(66,226	)		(42,041	)		(10,700	)		(32,760	)		(15,174	)
Basic and diluted loss per share	$	(0.04	)	$	(0.01	)	$	(0.01	)	$	(0.17	)	$	(0.11	)	$	(0.03	)	$	(0.08	)	$	(0.04	)

We acquired majority (51 percent) ownership of Huawei-3Com Co., Ltd. (“H3C”), a China-based joint venture, on January 27, 2006 and determined it was then appropriate to consolidate H3C’s results. For convenience of close purposes we consolidated the results of H3C beginning February 1, 2006. H3C follows a calendar year basis of reporting and therefore results are consolidated on a two-month time lag. On November 27, 2006, the shareholders agreed that 3Com buy Shenzhen Huawei’s 49 percent shares of the Company for $882 million. The transaction was approved by the Chinese government. On March 29, 2007, 3Com Technologies completed its purchase at which time the purchase price was paid in full. Huawei-3Com Co., Limited is now known as H3C Technologies Co., Limited, or H3C.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-K pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of June 1, 2007, our disclosure controls and procedures were effective.

The term “disclosure controls and procedures,” as defined under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended June 1, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our management has assessed the effectiveness of our internal control over financial reporting as of June 1, 2007. Management’s evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(1)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
(2)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and
(3)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on the COSO criteria and our management’s evaluation, our management has concluded that our internal control over financial reporting was effective as of June 1, 2007.

Our independent registered public accounting firm, Deloitte & Touche LLP, has audited the financial statements included in this Annual Report on Form 10-K and has issued an attestation report on management’s assessment of our internal control over financial reporting as well as on the effectiveness of our internal control over financial reporting. This report appears in this Annual Report on Form 10-K.

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Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
3Com Corporation
Marlborough, Massachusetts

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, included in Item 9A of the Annual Report on Form 10-K, that 3Com Corporation and its subsidiaries (3Com or the “Company”) maintained effective internal control over financial reporting as of June 1, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of June 1, 2007 is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 1, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 1, 2007 of the Company and our report dated July 31, 2007 expressed an unqualified opinion on those financial statements and financial statement schedule, and includes an explanatory paragraph regarding the Company’s adoption of Statement of Financial Accounting Standards No. 123(Revised), Share-Based Payment.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
July 31, 2007

96

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

(a) Directors

Incorporated herein by reference is the information appearing under the caption “Nominees and Other Directors” in our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders (Proxy Statement).

(b) Executive Officers

Incorporated herein by reference is the information appearing under the caption “Executive Officers of the Registrant” in Part I of Item I of this Annual Report on Form 10-K.

(c) Section 16(a) Beneficial Ownership Reporting Compliance

Incorporated herein by reference is the information appearing under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement.

(d) Code of Ethics

We have adopted a Code of Ethics and Business Conduct that applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer and persons performing similar functions. Our Code of Ethics and Business Conduct, which is available on our website at http://www.3com.com, complies with the rules of the SEC and the listing standards of the NASDAQ Stock Market. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K, regarding an amendment to or waiver from our code of ethics, by posting the required information on our Internet website at http://www.3com.com and will send a paper copy to any shareholder who submits a request in writing to our Secretary.

(e) Corporate Governance

Incorporated herein by reference is the information appearing under the caption “Corporate Governance” in our Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 of this Annual Report on Form 10-K is incorporated by reference from the information contained in the sections captioned “Executive Compensation”, “Employment, Severance and Change-of-Control Arrangements”, “Director Compensation”,” Compensation Discussion and Analysis”, “Compensation Committee Report” and “Corporate Governance/Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 of this Annual Report on Form 10-K is incorporated by reference from the information appearing under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 of this Annual Report on Form 10-K is incorporated by reference from the information contained in the sections captioned “Related Person Transactions” and “Corporate Governance” in the Proxy Statement.

97

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 of this Annual Report on Form 10-K is incorporated by reference from the information contained in the section captioned “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)		(1	)	Financial Statements — See Index to Consolidated Financial Statements and Financial Statement Schedule at page 53 of this Form 10-K.
		(2	)	Financial Statement Schedule — See Financial Statement Schedule at page 105 of this Form 10-K.
		(3	)	Exhibits — See Exhibit Index at page 98 of this Form 10-K.
(b)	See Exhibit Index at page 98 of this Form 10-K.
(c)	See Index to Consolidated Financial Statements and Financial Statement Schedule at page 53 of this Form 10-K.

EXHIBIT INDEX

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
2.1	Master Separation and Distribution Agreement between the Registrant and Palm, Inc. effective as of December 13, 1999	10-Q	002-92053		2.1	4/4/00
2.2	Indemnification and Insurance Matters Agreement between the Registrant and Palm, Inc.	10-Q	002-92053		2.11	4/4/00
2.3	Agreement and Plan of Merger, dated December 13, 2004, by and among the Registrant, Topaz Acquisition Corporation and TippingPoint Technologies, Inc.	8-K	000-12867		2.1	12/16/04
2.4	Securities Purchase Agreement by and among 3Com Corporation, 3Com Technologies, Huawei Technologies Co., Ltd. and Shenzhen Huawei Investment & Holding Co., Ltd., dated as of October 28, 2005	8-K/A	000-12867		2.1	3/30/06
2.5	Stock Purchase Agreement by and between Shenzhen Huawei Investment & Holding Co., Ltd. and 3Com Technologies, dated as of December 22, 2006	8-K	000-12867		10.1	12/27/06
3.1	Corrected Certificate of Merger filed to correct an error in the Certificate of Merger	10-Q	002-92053		3.4	10/8/99
3.2	Registrant’s Bylaws, as amended on March 23, 2005	8-K	000-12867		3.1	3/28/05
3.3	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock	10-Q	000-12867		3.6	10/11/01
4.1	Third Amended and Restated Preferred Shares Rights Agreement, dated as of November 4, 2002	8-A/A	000-12867		4.1	11/27/02

98

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.1	3Com Corporation 1983 Stock Option Plan, as amended and restated effective September 30, 2001*	10-Q	000-12867		10.1	1/11/02
10.2	3Com Corporation 1984 Employee Stock Purchase Plan, as amended and restated as of July 15, 2003*	10-K	000-12867		10.3	8/1/03
10.3	3Com Corporation Director Stock Option Plan, as amended*	10-Q	000-12867		10.4	10/10/03
10.4	3Com Corporation Restricted Stock Plan, as amended July 1, 2001*	10-K	000-12867		10.6	8/2/02
10.5	3Com Corporation 1994 Stock Option Plan, as amended and restated effective April 30, 2002*	10-K	000-12867		10.7	8/2/02
10.6	3Com Corporation 2003 Stock Plan, as amended*	8-K	000-12867		10.1	10/3/05
10.7	Stand Alone Stock Option Agreement dated January 25, 2006 by and between R. Scott Murray and 3Com Corporation *	10-Q	000-12867		10.8	4/10/06
10.8	Stand Alone Stock Option Agreement dated September 5, 2006 by and between Edgar Masri and 3Com Corporation *	10-Q	000-12867		10.2	10/10/06
10.9	Stand Alone Stock Option Agreement dated July 3, 2007 by and between Jay Zager and 3Com Corporation *	S-8	333-144322		10.2	7/3/07
10.10	Stand Alone Restricted Stock Agreement dated July 3, 2007 by and between Jay Zager and 3Com Corporation *	S-8	333-144322		10.3	7/3/07
10.11	Form of Stock Option Agreement for 2003 Stock Plan (Non-Employee Directors)	10-K	000-12867		10.7	8/5/05
10.12	Form of Stock Option Agreement for 2003 Stock Plan (Employees)*	10-K	000-12867		10.8	8/5/05
10.13	Form of Performance Accelerated Vesting Restricted Stock Agreement*	10-K	000-12867		10.9	8/5/05
10.14	Form of Performance Vesting Restricted Stock Agreement*	10-Q	000-12867		10.6	4/10/06
10.15	Form of Restricted Stock Grant Agreement – Standard 4-Year Vesting*	10-K	000-12867		10.10	8/5/05
10.16	Form of Restricted Stock Agreement (Time-Based Vesting)*	8-K	000-12867		10.2	11/17/05
10.17	Form of Restricted Stock Unit Grant Award Agreement*	10-Q	000-12867		10.3	10/10/06
10.18	R. Scott Murray Employment Agreement, amended and restated as of February 2, 2006, between the registrant and R. Scott Murray *	8-K/A	000-12867		10.1	2/6/06
10.19	Performance Vesting Restricted Stock Agreement dated January 25, 2006 by and between R. Scott Murray and 3Com Corporation *	10-Q	000-12867		10.7	4/10/06
10.20	Edgar Masri Employment Agreement, dated as of August 8, 2007, between the registrant and Edgar Masri *	8-K	000-12867		10.1	8/9/06
10.21	Employment Agreement, effective as of March 29, 2007, between H3C and Shusheng Zheng*						X
10.22	Offer Letter dated May 9, 2007 between the Registrant and Jay Zager*	8-K	000-12867		10.1	5/10/07

99

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.23	Offer Letter dated June 19, 2004 between the Registrant and Donald M, Halsted III*	10-K	000-12867		10.16	8/11/06
10.24	Offer Letter dated September 12, 2003 between the Registrant and Neal D. Goldman*	10-K	000-12867		10.17	8/11/06
10.25	Offer Letter dated November 2, 2005 between the Registrant and Marc Willebeek-LeMair*	10-K	000-12867		10.18	8/11/06
10.26	Offer Letter dated April 11, 2006 between the Registrant and Robert Dechant*	8-K	000-12867		10.1	4/17/06
10.27	Offer Letter dated November 2, 2005 between the Registrant and James Hamilton*						X
10.28	Severance Benefits Agreement dated February 28, 2007, between the Registrant and James Hamilton*						X
10.29	Robert Y. L. Mao Employment Agreement, dated as of August 7, 2006, between the registrant and Robert Mao*						X
10.30	Summary of Executive Officer Fiscal 2008 Compensation	8-K	000-12867	Text of Item 5.02(e)		7/27/07
10.31	Summary of Equity Appreciation Rights Plan (H3C Technologies)*						X
10.32	3Com Corporation Section 16 Officer Severance Plan, amended and restated effective September 11, 2006 *	10-Q	000-12867		10.3	1/09/07
10.33	Above Grade Severance Plan effective September 11, 2006 *						X
10.34	Form of Severance Benefits Agreement between the Registrant and each of the officers or former officers named in our proxy statement (other than Messrs. Masri and Mao)*	8-K	000-12867		10.3	4/4/06
10.35	Form of Management Retention Agreement between the Registrant and each of the following officers or former officers named in our proxy statement: Messrs. Goldman, Halsted, Hamilton and Willebeek-LeMair*	10-K	000-12867		10.15	8/5/05
10.36	Form of Management Retention Agreement between the Registrant and the following officers or former officers named in our proxy statements: Messrs. Dechant, Zheng and Zager and future executive officers*						X
10.37	3Com Corporation Deferred Compensation Plan*	10-K	000-12867		10.23	8/9/04
10.38	Form of Indemnity Agreement between the Registrant and its officers and directors	S-3/A	333-102591		10.1	4/9/03
10.39	3Com Corporation Consultant Services Agreement made as of August 8, 2006 by and between 3Com Corporation and Anik Bose*	8-K	000-12867		10.1	8/11/06
10.40	Office Lease, dated as of November 26, 2002, by and between Marlborough Campus Limited Partnership and the Registrant	10-K	000-12867		10.20	8/9/04
10.41	First Amendment to Lease, dated as of November 26, 2002, by and between Marlborough Campus Limited Partnership and the Registrant	10-K	000-12867		10.17	8/5/05

100

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.42	Second Amendment to Lease, dated as of July 18, 2005, by and between 3Com Corporation and Marlborough Campus Limited Partnership	10-Q	000-12867		10.2	4/5/05
10.43	Third Amendment to Lease, dated as of July 18, 2005, by and between 3Com Corporation and Marlborough Campus Limited Partnership	8-K	000-12867		10.1	7/22/05
10.44	Fourth Amendment to Lease dated as of December 12, 2005 by and between Marlborough Campus Limited Partnership and 3Com Corporation	10-Q	000-12867		10.1	1/09/07
10.45	Fifth Amendment to Lease dated as of October 27, 2006 by and between Bel Marlborough I LLC and 3Com Corporation	10-Q	000-12867		10.2	1/09/07
10.46	Agreement for the Lease of Hangzhou Real Property between Huawei Technologies Co. Ltd. and Hangzhou Huawei-3Com Technology Co., Ltd. dated January 1, 2004	10-Q	000-12867		10.7	10/10/06
10.47	Purchase and Sale Agreement made as of July 24, 2006 by and between 3Com Corporation and SSC II, L.P.	8-K	000-12867		10.1	7/26/06
10.48	Shareholders’ Agreement by and among Shenzhen Huawei Investment & Holding Co. Ltd., 3Com Technologies and Huawei-3Com Co., Ltd. (the “Shareholders’ Agreement”) dated as of November 15, 2003 (Certain Portions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.33	8/11/06
10.49	Amendment No. 1 to the Shareholders‘ Agreement dated as of July 31, 2004 (Certain Potions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.34	8/11/06
10.50	Amendment No. 2 to the Shareholders’ Agreement dated as of January 27, 2006 (Certain Portions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.35	8/11/06
10.51	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	8-K	000-12867		10.1	3/23/07
10.52	Amended and Restated Credit and Guaranty Agreement dated as of May 25, 2007 and effective as of May 31, 2007 among H3C Holdings Limited, as Borrower, 3Com Corporation, 3Com Holdings Limited and 3Com Technologies, as Holdco Guarantors, H3C Technologies Co., Limited, as Guarantor, 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	8-K	000-12867		10.1	5/25/07

101

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.53	Borrower Share Charge dated March 22, 2007 among 3Com Technologies, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.54	Borrower Fixed and Floating Charge dated March 22, 2007 among H3C Holdings Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.55	Borrower Charge Over Bank Accounts dated March 22, 2007 among H3C Holdings Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.56	H3C Fixed and Floating Charge dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.57	H3C Share Mortgage dated March 30, 2007 among H3C Holdings Limited, as Mortgagor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.58	H3C Equitable Share Charge dated March 29, 2007 among 3Com Technologies, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.59	Deed of Charge in relation to the 100% equity interests in WFOE dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.60	Deed of Charge in relation to the 100% equity interests in Queenhive dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.61	Deed of Release made March 30, 2007 by Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent, in favour of 3Com Technologies						X
10.62	Commitment Letter, dated as of December 20, 2006, by and between 3Com Technologies and Goldman Sachs Credit Partners L.P.	10-Q	000-12867		10.1	4/09/07

102

		Incorporated by Reference
Exhibit						Filed
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Herewith
21.1	Subsidiaries of Registrant					X
23.1	Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP					X
31.1	Certification of Principal Executive Officer					X
31.2	Certification of Principal Financial Officer					X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X

* Indicates a management contract or compensatory plan or arrangement

103

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the 31st day of July, 2007.

3COM CORPORATION (Registrant)
By:	/s/                Edgar Masri
	Edgar Masri
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 31st day of July, 2007.

Signature	Title
	President, Chief Executive Officer
/s/     Edgar Masri	and Director
(Edgar Masri)	(Principal Executive Officer)
	Executive Vice President, Finance
/s/     Jay Zager	and Chief Financial Officer
(Jay Zager)	(Principal Financial and Accounting Officer)
/s/     Eric A. Benhamou	Chairman of the Board
(Eric A. Benhamou)
/s/     Gary T. DiCamillo	Director
(Gary T. DiCamillo)
/s/     James R. Long	Director
(James R. Long)
/s/     Robert Mao	Director
(Robert Mao)
/s/     Raj Reddy	Director
(Raj Reddy)
/s/     Dominique Trempont	Director
(Dominique Trempont)
/s/     Paul G. Yovovich	Director
(Paul G. Yovovich)

104

SCHEDULE II

3Com Corporation
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended May 31, 2005, 2006, and 2007
(In thousands)

			Additions
	Balance at		Charged to									Balance at
	Beginning of		Costs and									End of
Description	Period		Expenses			Other			Deductions			Period
Year ended May 31, 2005:
Allowance for doubtful accounts	$	16,276	$	(2,251	)	$	793	(2)	$	(272)	(1)	$	15,090
Allowance for product returns		5,917		20,578			—			21,443			5,052
Accrued product warranty		43,825		30,867			—			32,910			41,782
Year ended May 31, 2006:
Allowance for doubtful accounts	$	15,090	$	1,000		$	165	(3)	$	(167)	(1)	$	16,422
Allowance for product returns		5,052		15,288			6,768	(3)		18,416			8,692
Accrued product warranty		41,782		28,424			4,543	(3)		32,958			41,791
Year ended May 31, 2007:
Allowance for doubtful accounts		16,422	$	(586	)	$	—		$	544	(1)	$	15,292
Allowance for product returns		8,692		13,963			—			16,614			6,041
Accrued product warranty		41,791		46,406			—			47,601			40,596

(1)	Accounts written off — net of recoveries
(2)	Represents reserves related to the TippingPoint acquisition
(3)	Represents reserves related to the H3C acquisition

105

EXHIBIT INDEX

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
2.1	Master Separation and Distribution Agreement between the Registrant and Palm, Inc. effective as of December 13, 1999	10-Q	002-92053		2.1	4/4/00
2.2	Indemnification and Insurance Matters Agreement between the Registrant and Palm, Inc.	10-Q	002-92053		2.11	4/4/00
2.3	Agreement and Plan of Merger, dated December 13, 2004, by and among the Registrant, Topaz Acquisition Corporation and TippingPoint Technologies, Inc.	8-K	000-12867		2.1	12/16/04
2.4	Securities Purchase Agreement by and among 3Com Corporation, 3Com Technologies, Huawei Technologies Co., Ltd. and Shenzhen Huawei Investment & Holding Co., Ltd., dated as of October 28, 2005	8-K/A	000-12867		2.1	3/30/06
2.5	Stock Purchase Agreement by and between Shenzhen Huawei Investment & Holding Co., Ltd. and 3Com Technologies, dated as of December 22, 2006	8-K	000-12867		10.1	12/27/06
3.1	Corrected Certificate of Merger filed to correct an error in the Certificate of Merger	10-Q	002-92053		3.4	10/8/99
3.2	Registrant’s Bylaws, as amended on March 23, 2005	8-K	000-12867		3.1	3/28/05
3.3	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock	10-Q	000-12867		3.6	10/11/01
4.1	Third Amended and Restated Preferred Shares Rights Agreement, dated as of November 4, 2002	8-A/A	000-12867		4.1	11/27/02
10.1	3Com Corporation 1983 Stock Option Plan, as amended and restated effective September 30, 2001*	10-Q	000-12867		10.1	1/11/02
10.2	3Com Corporation 1984 Employee Stock Purchase Plan, as amended and restated as of July 15, 2003*	10-K	000-12867		10.3	8/1/03
10.3	3Com Corporation Director Stock Option Plan, as amended*	10-Q	000-12867		10.4	10/10/03
10.4	3Com Corporation Restricted Stock Plan, as amended July 1, 2001*	10-K	000-12867		10.6	8/2/02
10.5	3Com Corporation 1994 Stock Option Plan, as amended and restated effective April 30, 2002*	10-K	000-12867		10.7	8/2/02
10.6	3Com Corporation 2003 Stock Plan, as amended*	8-K	000-12867		10.1	10/3/05
10.7	Stand Alone Stock Option Agreement dated January 25, 2006 by and between R. Scott Murray and 3Com Corporation *	10-Q	000-12867		10.8	4/10/06
10.8	Stand Alone Stock Option Agreement dated September 5, 2006 by and between Edgar Masri and 3Com Corporation *	10-Q	000-12867		10.2	10/10/06
10.9	Stand Alone Stock Option Agreement dated July 3, 2007 by and between Jay Zager and 3Com Corporation *	S-8	333-144322		10.2	7/3/07

106

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.10	Stand Alone Restricted Stock Agreement dated July 3, 2007 by and between Jay Zager and 3Com Corporation *	S-8	333-144322		10.3	7/3/07
10.11	Form of Stock Option Agreement for 2003 Stock Plan (Non-Employee Directors)	10-K	000-12867		10.7	8/5/05
10.12	Form of Stock Option Agreement for 2003 Stock Plan (Employees)*	10-K	000-12867		10.8	8/5/05
10.13	Form of Performance Accelerated Vesting Restricted Stock Agreement*	10-K	000-12867		10.9	8/5/05
10.14	Form of Performance Vesting Restricted Stock Agreement*	10-Q	000-12867		10.6	4/10/06
10.15	Form of Restricted Stock Grant Agreement – Standard 4-Year Vesting*	10-K	000-12867		10.10	8/5/05
10.16	Form of Restricted Stock Agreement (Time-Based Vesting)*	8-K	000-12867		10.2	11/17/05
10.17	Form of Restricted Stock Unit Grant Award Agreement*	10-Q	000-12867		10.3	10/10/06
10.18	R. Scott Murray Employment Agreement, amended and restated as of February 2, 2006, between the registrant and R. Scott Murray *	8-K/A	000-12867		10.1	2/6/06
10.19	Performance Vesting Restricted Stock Agreement dated January 25, 2006 by and between R. Scott Murray and 3Com Corporation *	10-Q	000-12867		10.7	4/10/06
10.20	Edgar Masri Employment Agreement, dated as of August 8, 2007, between the registrant and Edgar Masri *	8-K	000-12867		10.1	8/9/06
10.21	Employment Agreement, effective as of March 29, 2007, between H3C and Shusheng Zheng*						X
10.22	Offer Letter dated May 9, 2007 between the Registrant and Jay Zager*	8-K	000-12867		10.1	5/10/07
10.23	Offer Letter dated June 19, 2004 between the Registrant and Donald M, Halsted III*	10-K	000-12867		10.16	8/11/06
10.24	Offer Letter dated September 12, 2003 between the Registrant and Neal D. Goldman*	10-K	000-12867		10.17	8/11/06
10.25	Offer Letter dated November 2, 2005 between the Registrant and Marc Willebeek-LeMair*	10-K	000-12867		10.18	8/11/06
10.26	Offer Letter dated April 11, 2006 between the Registrant and Robert Dechant*	8-K	000-12867		10.1	4/17/06
10.27	Offer Letter dated November 2, 2005 between the Registrant and James Hamilton*						X
10.28	Severance Benefits Agreement dated February 28, 2007, between the Registrant and James Hamilton*						X
10.29	Robert Y. L. Mao Employment Agreement, dated as of August 7, 2006, between the registrant and Robert Mao*						X
10.30	Summary of Executive Officer Fiscal 2008 Compensation	8-K	000-12867	Text of Item 5.02(e)		7/27/07
10.31	Summary of Equity Appreciation Rights Plan (H3C Technologies)*						X

107

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.32	3Com Corporation Section 16 Officer Severance Plan, amended and restated effective September 11, 2006 *	10-Q	000-12867		10.3	1/09/07
10.33	Above Grade Severance Plan effective September 11, 2006 *						X
10.34	Form of Severance Benefits Agreement between the Registrant and each of the officers or former officers named in our proxy statement (other than Messrs. Masri and Mao)*	8-K	000-12867		10.3	4/4/06
10.35	Form of Management Retention Agreement between the Registrant and each of the following officers or former officers named in our proxy statement: Messrs. Goldman, Halsted, Hamilton and Willebeek-LeMair*	10-K	000-12867		10.15	8/5/05
10.36	Form of Management Retention Agreement between the Registrant and the following officers or former officers named in our proxy statements: Messrs. Dechant, Zheng and Zager and future executive officers*						X
10.37	3Com Corporation Deferred Compensation Plan*	10-K	000-12867		10.23	8/9/04
10.38	Form of Indemnity Agreement between the Registrant and its officers and directors	S-3/A	333-102591		10.1	4/9/03
10.39	3Com Corporation Consultant Services Agreement made as of August 8, 2006 by and between 3Com Corporation and Anik Bose*	8-K	000-12867		10.1	8/11/06
10.40	Office Lease, dated as of November 26, 2002, by and between Marlborough Campus Limited Partnership and the Registrant	10-K	000-12867		10.20	8/9/04
10.41	First Amendment to Lease, dated as of November 26, 2002, by and between Marlborough Campus Limited Partnership and the Registrant	10-K	000-12867		10.17	8/5/05
10.42	Second Amendment to Lease, dated as of July 18, 2005, by and between 3Com Corporation and Marlborough Campus Limited Partnership	10-Q	000-12867		10.2	4/5/05
10.43	Third Amendment to Lease, dated as of July 18, 2005, by and between 3Com Corporation and Marlborough Campus Limited Partnership	8-K	000-12867		10.1	7/22/05
10.44	Fourth Amendment to Lease dated as of December 12, 2005 by and between Marlborough Campus Limited Partnership and 3Com Corporation	10-Q	000-12867		10.1	1/09/07
10.45	Fifth Amendment to Lease dated as of October 27, 2006 by and between Bel Marlborough I LLC and 3Com Corporation	10-Q	000-12867		10.2	1/09/07
10.46	Agreement for the Lease of Hangzhou Real Property between Huawei Technologies Co. Ltd. and Hangzhou Huawei-3Com Technology Co., Ltd. dated January 1, 2004	10-Q	000-12867		10.7	10/10/06
10.47	Purchase and Sale Agreement made as of July 24, 2006 by and between 3Com Corporation and SSC II, L.P.	8-K	000-12867		10.1	7/26/06

108

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.48	Shareholders’ Agreement by and among Shenzhen Huawei Investment & Holding Co. Ltd., 3Com Technologies and Huawei-3Com Co., Ltd. (the “Shareholders’ Agreement”) dated as of November 15, 2003 (Certain Portions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.33	8/11/06
10.49	Amendment No. 1 to the Shareholders‘ Agreement dated as of July 31, 2004 (Certain Potions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.34	8/11/06
10.50	Amendment No. 2 to the Shareholders’ Agreement dated as of January 27, 2006 (Certain Portions Omitted; Confidential Treatment Requested)	10-K	000-12867		10.35	8/11/06
10.51	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	8-K	000-12867		10.1	3/23/07
10.52	Amended and Restated Credit and Guaranty Agreement dated as of May 25, 2007 and effective as of May 31, 2007 among H3C Holdings Limited, as Borrower, 3Com Corporation, 3Com Holdings Limited and 3Com Technologies, as Holdco Guarantors, H3C Technologies Co., Limited, as Guarantor, 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	8-K	000-12867		10.1	5/25/07
10.53	Borrower Share Charge dated March 22, 2007 among 3Com Technologies, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.54	Borrower Fixed and Floating Charge dated March 22, 2007 among H3C Holdings Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.55	Borrower Charge Over Bank Accounts dated March 22, 2007 among H3C Holdings Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X

109

		Incorporated by Reference
Exhibit							Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
10.56	H3C Fixed and Floating Charge dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.57	H3C Share Mortgage dated March 30, 2007 among H3C Holdings Limited, as Mortgagor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.58	H3C Equitable Share Charge dated March 29, 2007 among 3Com Technologies, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.59	Deed of Charge in relation to the 100% equity interests in WFOE dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.60	Deed of Charge in relation to the 100% equity interests in Queenhive dated April 3, 2007 among Huawei-3Com Co., Limited, as Chargor, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent						X
10.61	Deed of Release made March 30, 2007 by Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent, in favour of 3Com Technologies						X
10.62	Commitment Letter, dated as of December 20, 2006, by and between 3Com Technologies and Goldman Sachs Credit Partners L.P.	10-Q	000-12867		10.1	4/09/07
21.1	Subsidiaries of Registrant						X
23.1	Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP						X
31.1	Certification of Principal Executive Officer						X
31.2	Certification of Principal Financial Officer						X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002						X

* Indicates a management contract or compensatory plan or arrangement

110

EX-10.21

                                                                   Exhibit 10.21

                              EMPLOYMENT AGREEMENT

     This Employment Agreement (the "Agreement") is entered into as of the
closing date of the share purchase transaction between 3Com Technologies and
Shenzhen Huawei Investment & Holding Co., Ltd. (the "Effective Date"), by and
between Huawei-3Com Co., Ltd. ("H3C"), a subsidiary of 3Com Corporation ("3Com")
(together with H3C, the "Company") and Shusheng Zheng (the "Employee"). H3C is
incorporated under the laws of Hong Kong with a principal place of business in
Hangzhou, the People's Republic of China ("PRC").

     In consideration of the mutual covenants and promises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

     1. Employment.

     The Company hereby agrees to employ the Employee and the Employee hereby
accepts employment with H3C, on the terms and conditions set forth herein. The
Employee shall have the title of Chief Operating Officer of H3C and will work
primarily out of the Company's Hangzhou facility. At the Company's discretion
and subject to the approval of the 3Com Board of Directors, the Employee may be
designated by the Company as a Section 16 officer of 3Com, and thus would be
subject to the reporting requirements of Section 16 of the U.S. Securities
Exchange Act of 1934 and the regulations relating thereto. The Company reserves
the right to change the Employee's employing entity, title, responsibilities,
reporting relationship, and work location pursuant to the Company's business
needs.

     The Employee understands and agrees that his position with Company is and
will be a position of importance and trust. The Employee further understands and
agrees that, in the course of and due to his employment with H3C, he will
develop and/or have access to and responsibility for the Company's business
secrets and proprietary and confidential information.

     During the Employee's period of employment with H3C, the Employee agrees to
devote his full business efforts, time and attention to the business and
interests of the Company and the Employee will fulfill his duties to the best of
his abilities. The Employee understands and agrees to act in accordance with
each of the Company's code of conduct, corporate guidance and ethics guidelines,
conflict of interest policies and other Company policies and practices.

     The Employee hereby warrants that he is not a party to any contract,
understanding, agreement or policy, written or otherwise, that would be breached
by the Employee's entering into, or performing services under, this Agreement.

     2. Term of Employment. The Company hereby agrees to employ the Employee,
and the Employee agrees to be employed by the Company, for a period of two (2)
years from the Effective Date (the "Employment Term"), unless terminated earlier
in accordance with the provisions below. Notwithstanding the above, the
Employee's employment with the Company shall terminate upon the occurrence of
any of the following:

          (a) The expiration of the Employment Term, unless the parties mutually
agree in writing to continue the employment relationship;


                                        1



          (b) At the election of the Company based on a Valid Reason (as that
term is defined in Section 5 below);

          (c) Immediately upon the Employee's death; or

          (d) At the election of either party upon not less than three (3)
months' prior written notice of termination (or, if at the Company's election,
pay in lieu thereof), subject to the provisions of Section 5 below.

     3. Compensation.

          (a) Base Salary. The Company will pay the Employee a base salary of
2,400,000 RMB annualized. The Company will pay the base salary periodically in
accordance with H3C's normal payroll practices, subject to the applicable taxes,
withholdings and deductions. The Employee's salary shall be subject to periodic
review and adjustment by 3Com.

          (b) Annual Bonus. The Employee will be eligible to participate in
H3C's discretionary bonus plan (the "Bonus Plan"), with an annualized bonus
opportunity of 1,600,000 RMB. In 2007, the Bonus Plan shall be structured in a
substantially similar way to the way it was structured by H3C in 2006. Payments
under the Bonus Plan are discretionary and are based on various factors,
including H3C and individual performance, and subject to approval by 3Com.
Except as provided herein, the Bonus Plan is and will be subject to amendment or
termination at any time at the Company's discretion.

          (c) Long-Term Incentive Plan. The Employee will be eligible to
participate in a long-term incentive plan ("LTI Plan") to be designed by the
Company. The provision of benefits under the LTI Plan will be discretionary and
will be based on various factors, including Company and individual performance.
At the Company's discretion, benefits under the LTI Plan may be payable in cash
or 3Com equity.

          (d) Benefits. The Employee shall be eligible to participate in the H3C
benefit programs that the Company establishes, the coverage and benefit levels
of which will be substantially similar to those the Company makes available to
its senior employees. All H3C benefit programs are subject to change, including
termination, at the Company's discretion. As applicable to the benefit plans for
which the Employee is eligible, and to the extent permitted under the provisions
of those plans, the Employee's first day of employment with H3C will be used to
determine his service period and the level of benefits for which the Employee is
eligible.

          (e) Expenses. The Company will reimburse the Employee for reasonable
travel, entertainment and other expenses incurred by the Employee in the
furtherance of the performance of his duties on behalf of the Company, in
accordance with the Company's business expense reimbursement policy, subject to
amendment at the Company's discretion.

          (f) 3Com Equity. The Employee will receive a grant of 200,000
Restricted Stock Units of 3Com Corporation subject to the applicable Company
policies and the necessary approvals (including the approval of the 3Com Board
of Directors). If approved, the effective date of the grant will be the first
Tuesday of the calendar month immediately following the Effective Date of this
Agreement or, if the applicable NASDAQ market is closed on that date, the first
trading day following that date. However, the grant shall not be deemed to have
been accepted until the Employee has signed 3Com's standard grant agreement, the
form and language of which shall be determined by 3Com in its sole discretion.
The grant will be scheduled to vest in three (3) annual installments, with the
initial vesting


                                        2



date on the first anniversary of the effective date of the grant, and the grant
shall be subject to the terms and conditions of the 3Com Corporation 2003 Stock
Plan, as amended.

          (g) Section 16 Officer Benefits. If designated as a Section 16 officer
of 3Com, the Employee will be eligible to participate in benefit programs
available to the Company's Section 16 officers including, without limitation,
the Company's Section 16 Officer Severance Plan (the "Section 16 Plan"). In that
event, on or about the effective date of the Employee's designation as a Section
16 Officer, the Employee will receive and be invited to execute (1) a Severance
Benefits Agreement confirming his eligibility for severance benefits under the
Section 16 Plan and a copy of the Section 16 Plan, and (2) a Management
Retention Agreement ("MRA") confirming his eligibility for severance benefits in
the event of a Change of Control of the Company, as defined under the MRA. Any
benefits payable under the Section 16 Plan or the MRA will be offset and reduced
by any severance benefits for which the Employee is eligible under this
Agreement.

     4. Termination of Employment. In the event that the Employee's employment
with the Company terminates for any reason, the Employee will be entitled to any
(a) unpaid base salary earned through the Employee's last day of employment; (b)
pay for accrued but unused annual leave; and (c) reimbursement for approved but
unreimbursed business expenses. In addition, if the termination is at the
Company's election without a Valid Reason, the Employee will be entitled to the
severance benefits specified in Section 5, as well as vesting and payout of any
remaining shares distributed pursuant to the Equity Appreciation Rights Plan
adopted in October 2004 and modified in October 2005 by the H3C Board of
Directors (the "EARP"), on the same terms and conditions as payable to other
participants of the EARP. If the Employee terminates his employment with the
Company voluntarily or the Company terminates his employment for a Valid Reason,
the Employee shall not be eligible for any benefits under the EARP other than
the shares, if any, vested pursuant to the terms and conditions of the EARP.

     5. Severance.

          (a) Termination Without Valid Reason. If the Company terminates the
Employee's employment without a Valid Reason (as defined below), then the
Employee shall be entitled to receive a severance payment equal to one (1) month
of the Employee's base salary (not including incentive or other compensation)
for each year of service with the Company, pro-rated for any period of service
less than one (1) year; provided that the Employee signs and does not revoke an
agreement (the "Release Agreement") which will include, without limitation: (i)
a release of claims against the Company, its affiliates and representatives, and
(ii) a non-disparagement provision. The form and language of the Release
Agreement shall be determined by the Company in its sole discretion. The
severance payment will be paid in a lump sum in accordance with the Company's
normal payroll policies and subject to applicable taxes and withholdings after
the effective date of the Release Agreement. The Employee shall not be eligible
for severance under this Agreement in the event that he voluntarily terminates
employment with the Company or the Company terminates the Employee's employment
for a Valid Reason. Any severance benefits the Employee is entitled to under
this Section 5 shall be offset and reduced by any severance benefits that the
Employee is entitled to under applicable statutory law.

          (b) For purposes of this Agreement, "Valid Reason" will mean:

               (i) The Employee's serious breach of the labor disciplines or
other internal rules of the Company which are promulgated by the Company in
accordance with applicable law;

               (ii) Any act of personal dishonesty taken by the Employee in
connection with his responsibilities as an employee of the Company that the
Company, in its sole discretion, believes has or will have a material
detrimental effect on the Company's reputation or business;


                                        3



               (iii) Any prosecution of the Employee for a criminal offense;
and/or

               (iv) A breach of any fiduciary duty owed to the Company by the
Employee that the Company, in its sole discretion, believes has or will have a
material detrimental effect on the Company's reputation or business.

     6. Restrictive Covenant Agreement. In his work for the Company, the
Employee will be given access to and/or will create confidential and proprietary
information of the Company. The use of such information outside the scope of the
Company's reasonable business needs or the disclosure of such information to
persons, including other Company employees, without a valid business reason and
appropriate protective measures could substantially harm the Company. Therefore,
the Employee understands and agrees that, as a condition of his employment with
the Company, he will be required to sign and abide by the terms and conditions
of the Company's standard Restrictive Covenant Agreement, governing
confidentiality, non-disclosure, inventions, and non-solicitation of employees,
customers and vendors.

     7. Non-Competition and Non-Hire/Solicit. The Employee hereby understands
and agrees that he shall be prohibited from (i) working for a Competitor (as
defined below), (ii) soliciting to hire or hiring, directly or indirectly, any
employee of the Company and/or (iii) engaging in business in competition with
the business of the Company with any client, customer, account, distributor or
vendor for a period of one (1) year following the termination of the Employee's
employment with the Company for any reason (the "Restrictive Period").

     The Employee understands and agrees that, during the Restrictive Period, he
will not (i) serve as an advisor, agent, consultant, director, employee,
officer, partner, principal, director, licensor, proprietor or in any other
capacity, whether paid or unpaid, of, (ii) have any ownership interest in
(except for passive ownership of one percent (1%) or less of any entity whose
securities are publicly traded) or (iii) participate in the organization,
financing, operation, management or control of, any Competitor in any region in
which the Company conducts business. For purposes of this Agreement,
"Competitor" shall be defined as any business in competition with the Company's
business, including any planned or reasonably foreseeable business, product or
service, of the Company, as conducted during the course of the Employee's
employment with the Company, including, without limitation, Huawei Technologies
Co., Ltd., ZTE Corporation, Cisco Systems, Inc., Nortel Networks, Inc., Juniper
Networks, Inc., and their respective subsidiaries and affiliates.

     In consideration for the Employee's promises and obligations under this
Section 7, the Company will pay to the Employee an amount equal to one (1) year
of the Employee's base salary (not including incentive or other compensation) in
effect as of the Employee's last day of employment with the Company. Payment of
the amount referenced above shall be made periodically in accordance with the
Company's normal payroll practices, subject to the applicable taxes and
withholdings, over the one (1) year Restrictive Period.

     The Employee understands and agrees that if he breaches any of the
preceding provisions of this Section 7, the Restrictive Period shall be tolled
and shall be extended by the period of time during which the Employee remains in
breach, in addition to any other rights and powers of the Company under this
Agreement. The Employee understands and agrees the obligations not to compete,
solicit, or hire contained in this Section 7 may be necessary to protect the
Company's confidential and proprietary information and to preserve the Company's
value and goodwill. The Employee further acknowledges that the time, geographic
and scope limitations of the obligations under this Section 7 are reasonable,
especially in light of the Company's desire to protect its confidential and
proprietary information, and that the Employee will not be precluded from
gainful employment if he is required not to compete with the


                                        4



Company as described above. If the scope of any restriction contained in this
provision is found by any court of competent jurisdiction to be too long or
broad, it shall be interpreted to the maximum extent enforceable.

     8. Assignment. This Agreement may not be assigned without the written
consent of both parties, except that the Company may assign its rights and
obligations under this Agreement to its successor upon its division, or upon its
merger with or acquisition by another company. This Agreement will be binding
upon and inure to the benefit of the parties' heirs, executors and successors.

     9. Severability. If any provision hereof becomes or is declared by a court
of competent jurisdiction to be illegal, unenforceable, or void, this Agreement
will continue in full force and effect without said provision.

     10. Integration. This Agreement, together with the Restrictive Covenant
Agreement, constitutes the entire agreement and understanding between the
parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral, including, without
limitation, any prior offer letters issued to the Employee by the Company. No
waiver, alteration, or modification of any of the provisions of this Agreement
will be binding unless in writing and signed by duly authorized representatives
of the parties hereto. In entering into this Agreement, no party has relied on
or made any representation, warranty, inducement, promise, or understanding that
is not in this Agreement.

     11. Translation; English Version Controls. In the event that this
Agreement, or any portion hereof, is translated into a language other than
English by any person, and there is any conflict, disagreement, and/or
misunderstanding regarding the meaning of any word(s) or provision(s) in this
Agreement, the parties understand and agree that the English version of the
Agreement shall be deemed the official version and shall control any such
dispute.

     12. Survival. The Restrictive Covenant Agreement and the Company's and
Employee's responsibilities under Sections 5 and 7, respectively, will survive
the termination of this Agreement and the Employee's employment with the
Company.

     13. Acknowledgment. The Employee acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from legal counsel,
has had sufficient time to read, and has carefully read and fully understands
all the provisions of this Agreement, and is knowingly and voluntarily entering
into this Agreement.

     14. Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.

     15. Governing Law. This Agreement shall be governed by the laws and
regulations at the location of the employee's service to the Company in the PRC.
Any dispute arising from or in connection with this Agreement shall be resolved
or adjudicated in accordance with the labor dispute resolution mechanism
prescribed by relevant PRC law.


                                        5



     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by a duly authorized officer, as of the day and year written
below.

HUAWEI - 3COM CO., LTD.                 SHUSHENG ZHENG


/s/ Neal D. Goldman                     /s/ Shusheng Zheng
- -------------------------------------   ----------------------------------------
Neal D. Goldman
Director, Huawei-3Com Co., Ltd.
Senior Vice President,
Chief Administrative and
Legal Officer and Secretary,
3Com Corporation

3/5/07                                  3/5/07
DATE                                    DATE


                                        6

EX-10.27

                                                                   Exhibit 10.27

(3COM(R) LOGO)

     3Com Corporation
     350 Campus Drive, Marlborough, MA 01752-3064

November 2, 2005

James Hamilton
[PERSONAL INFORMATION OMITTED FOR SECURITY REASONS]

Dear James:

It is my pleasure to confirm your new position with 3Com Corporation ("3Com" or
the "Company") as Senior Vice President and President, TippingPoint Division.
Because of your expanded duties and responsibilities, you will become a Section
16 officer of the Company, subject to the reporting requirements of Section 16
of the Securities Exchange Act of 1934, as amended. You will continue to work
out of 3Com's Austin, Texas office, reporting directly to the Company's
President and Chief Executive Officer. The effective date of your promotion is
November 2, 2005 (the "Effective Date"). This letter agreement confirms the
revised terms and conditions of your employment with the Company.

Your base salary will be $14,583.33 paid semi-monthly in accordance with the
Company's regular payroll practices ($350,000 annualized). You will be eligible
to participate in the Company's discretionary bonus plan, 3Bonus. Your
annualized 3Bonus target amount will be 65% of your base salary, payable
semi-annually. Payments under the 3Bonus plan are discretionary and shall be
determined based on the achievement of Company and individual objectives
established by the Company in its discretion.

You will receive an employee stock option grant of 1,000,000 shares of 3Com
common stock subject to the necessary approvals; provided, however, that the
grant of stock options shall not be deemed to have been accepted until you have
confirmed your acceptance of the Company's stock option agreement. The option
price for the shares subject to this grant will be the closing stock price of
3Com common stock on the NASDAQ national market on the Effective Date or, if the
NASDAQ national market is closed on the Effective Date, the closing stock price
on the first trading day following the Effective Date. The stock option grant is
subject to the terms and conditions of the 3Com Corporation 2003 Stock Plan (the
"2003 Stock Plan") and shall vest in equal amounts annually over four (4) years
from the grant date.

You will be entitled to accelerated vesting of your outstanding grant of 25,000
shares of 3Com restricted stock, awarded to you by the Company on March 23,
2005. Notwithstanding the provisions of your Performance Accelerated Vesting
Restricted Stock (PAVRS) Agreement effective March 23, 2005 (the "Restricted
Stock Agreement"), the Company's reacquisition rights shall expire and the
25,000 shares shall become fully vested on February 1, 2006. Other than the
modification to the vesting schedule provided above, the restricted stock grant
shall remain subject to the terms and conditions of the Restricted Stock
Agreement and the 2003 Stock Plan.



James Hamilton
November 2, 2005
Page 2


You will continue to be eligible to participate in the Company's standard
benefit plans, including Company-sponsored insurance plans, the Company's
Employee Stock Purchase Program, and the Company's 401(k) plan, subject to the
terms and conditions of the policies and/or plan documents governing the
Company's benefit programs. In addition, the Company will increase your housing
allowance to $4,000 per month for reimbursement of housing expenses until the
earlier of: (i) October 31, 2006, (ii) your relocation to Austin, Texas or
Marlborough, Massachusetts (or the vicinity thereof), or (iii) the termination
of your employment with 3Com for any reason. In the event of your relocation to
Austin or Marlborough, you will be eligible for relocation assistance in
accordance with the Company's domestic relocation program. As a Section 16
officer of the Company, you will be eligible to participate in the 3Com
Corporation Section 16 Officer Severance Plan (the "Plan"). The Company reserves
the right to amend, modify and/or terminate its benefit programs at its
discretion, subject to all applicable laws and regulations.

You will be eligible for certain benefits as a result of the termination of your
employment relating to a Change of Control of the Company pursuant to the terms
and conditions of the Company's Management Retention Agreement, a copy of which
is provided to you with this letter for your signature.

While we are confident that we will have a mutually beneficial employment
relationship, your employment with 3Com is on an at-will basis. This means that
both you and 3Com can terminate the employment relationship at any time, for any
reason or no reason, without notice. Nothing in this offer letter is intended to
or shall be construed as a contract of employment for any fixed time period.

The terms and conditions of this offer letter supersede any previous written or
oral representations concerning conditions of employment, including, without
limitation, your 3Com offer letter dated February 1, 2005 and your Employment
Agreement with TippingPoint Technologies, Inc. ("TPTI") dated September 10,
2003, as amended; provided however, that the Inducement Restricted Stock
Agreement between you and TPTI dated September 15, 2003, as amended, shall
remain in full force and effect. In addition, you understand and agree that the
Restrictive Covenant and Non-Competition Agreement between you and the Company
effective February 21, 2005 shall remain in full force and effect and its terms
and conditions are incorporated herein.

This letter agreement may not be modified, supplemented or superseded unless by
means of a written document signed by you and a duly authorized 3Com
representative. You and 3Com agree that this letter agreement will be governed
by the laws of the Commonwealth of Massachusetts, excluding its laws relating to
the choice of laws, and that any legal action to enforce or interpret this
letter agreement shall be filed in the state or federal courts of the
Commonwealth of Massachusetts.

Let me close by reaffirming our belief that your skills will be instrumental to
the future success of the Company. 3Com believes that the single most important
factor in our success has been our people. I look forward to working with you in
your new role.

Sincerely,


/s/ Susan H. Bowman
- ------------------------------------
Susan H. Bowman
Senior Vice President, Human Resources



James Hamilton
November 2, 2005
Page 3


I accept 3Com's offer of continued employment based on the terms and conditions
described in this letter agreement.


/s/ James Hamilton                     12/10/05
- ------------------------------------   Date
James Hamilton

EX-10.28

                                                                   Exhibit 10.28

                          SEVERANCE BENEFITS AGREEMENT

     This Severance Benefits Agreement (the "Agreement") is made and entered
into by and between James Hamilton (the "Executive") and 3Com Corporation
("3Com" or the "Company"), effective as of the date of the Executive's signature
below (the "Effective Date"). 3Com and the Executive shall each individually be
referred to herein as a "Party" and together as the "Parties."

     WHEREAS, the Executive is currently employed by the Company as its
President, TippingPoint Division and is eligible to receive severance benefits
pursuant to the Company's Above Grade Severance Plan (as amended, the "Plan");
and

     WHEREAS, the Executive's Severance Benefit Agreement dated February 3, 2006
is scheduled to terminate by its express terms on February 2, 2007; and

     WHEREAS, the Company seeks to renew and reconfirm the Executive's
eligibility for severance benefits to ensure the continued dedication and
objectivity of the Executive and to provide the Executive with additional
financial security.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree to the terms and
conditions set forth in this Agreement.

     1. Interpretation/Administration. The terms of this Agreement shall be
governed by and administered pursuant to the provisions of the Plan. To the
extent that there is any conflict between this Agreement and the terms of the
Plan, the Plan provisions shall supersede and control; provided however that,
notwithstanding the current Plan provisions or any amendments to the Plan after
the Effective Date, the terms of eligibility and the severance benefits for
which the Executive is eligible shall not be less than those set forth in this
Agreement.

     2. Term of Agreement. This Agreement shall be effective as of the Effective
Date and shall terminate upon the Executive's last date of employment with the
Company (the "Termination Date").

     3. Eligibility to Receive Severance Benefits. The Company shall provide the
Executive with the severance benefits described in Section 4 below upon the
Company's involuntary termination of the Executive's employment with 3Com
without Cause or the Executive's Voluntary Termination for Good Reason, as such
terms are defined under the Plan, provided that the Executive signs and does not
revoke an agreement (the "Release Agreement") including, without limitation: (i)
a release of claims against the Company, its affiliates and representatives,
(ii) a non-solicitation provision prohibiting the Executive's solicitation or
hire of any Company employee, business opportunity, client, customer, account,
distributor or vendor for a period of one (1) year following the Termination
Date, (iii) a non-competition provision prohibiting the Executive from directly
or indirectly engaging in, participating in or having a material ownership
interest in a business in competition with the Company for a period of one (1)
year following the Termination Date, and (iv) a non-disparagement provision. The
form and language of the Release Agreement shall be determined by the Company in
its sole discretion.

     4. Severance Benefits. If the conditions provided in Section 3 above are
fully satisfied, the Executive will be entitled to receive the following
severance benefits:


                                        1



          A. Severance Amounts.

               1. One (1) year of the Executive's annualized base salary as of
the Termination Date, subject to all applicable taxes and withholdings, paid
through the Company's regular payroll practices for twelve (12) months, provided
that the Executive has executed and has not revoked the Release Agreement and
the Executive continues to comply with all terms and conditions of the Release
Agreement during the twelve (12) month period; and

               2. A pro-rated amount of the Executive's earned incentive bonus
for the bonus period in which the Termination Date occurs, to be calculated by
multiplying the earned bonus amount (based on the Company's actual attainment of
applicable performance metrics) by a fraction, the numerator of which shall be
the number of calendar days between the beginning of the applicable bonus period
and the Termination Date and the denominator of which shall be the number of
calendar days within the applicable bonus period, payable through the Company's
regular bonus payment practices and subject to all applicable taxes and
withholdings.

          B. Health, Dental & Vision Benefits. Continuation of coverage under
the Company's health, dental, and vision insurance plans ("Health Care Plans")
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
at the same level of coverage as was provided to and elected by the Executive as
of the Termination Date. If the Executive timely and properly elects to continue
coverage under the Company's Health Care Plans in accordance with COBRA, the
Company shall continue to pay the Company-paid portion of the premiums for the
Executive's elected coverage under the Health Care Plans until the earlier of:
(i) one (1) year from the Termination Date, or (ii) the date upon which the
Executive becomes eligible for coverage under another employer's group health,
dental, or vision insurance plan(s). The Executive will remain obligated to pay
the unsubsidized portion of the applicable premium(s) in order to continue
Company-sponsored coverage. The Company-paid portion of any premium(s) is
subject to change at the Company's discretion. To be eligible for continuation
of coverage under the Health Care Plans, the Executive must be actively enrolled
in the applicable Health Care Plan(s) as of the Termination Date. For purposes
of Title X of COBRA, the date of the "qualifying event" for the Executive and
his covered dependents shall be the Termination Date, and each month of
Company-sponsored coverage continuation provided hereunder shall offset a month
of coverage continuation otherwise due under COBRA. Upon the expiration of the
one (1) year period, the Executive will be required to pay 102% of the premium
to continue Company-sponsored coverage. Any continuation of Company-sponsored
coverage shall be governed by COBRA and the terms and conditions of the
applicable plan documents.

          C. Life Insurance. Conversion of the Executive's basic term life
insurance in effect immediately prior to the Termination Date to continue
coverage until the earlier of (i) one (1) year from the Termination Date, or
(ii) the date upon which the Executive becomes eligible for coverage under
another employer's life insurance plan.

          D. Equity Compensation.

               1. Six (6) months of accelerated vesting of outstanding stock
options, restricted stock, and restricted stock units issued to the Executive
that are subject to time-based vesting. The accelerated vesting provided for
herein will be effective as of the Termination Date.

               2. Extension of the exercise period for vested stock options
issued to the Executive to the earlier of: (i) one hundred and sixty-five (165)
calendar days from the Termination Date; or (ii) the original term of the stock
option grant.


                                        2



All other compensation (including, without limitation, salary, bonuses and
commissions) and employee benefits (including, without limitation, short-term
and long-term disability insurance, Paid Time Off accrual, and vesting of equity
compensation) will cease on the Executive's Termination Date. The payments
provided for in Section 4(A) above will not be subject to 401(k) or Employee
Stock Purchase Plan deductions. Except as provided herein, all equity
compensation grants and awards are subject to the terms and conditions of the
applicable plan document(s).

     5. Voluntary Resignation. Notwithstanding the conditions set forth in
Section 3 above, the Company shall provide the Executive with the severance
benefits set forth in Sections 5(A) through 5(C) below if the Executive
voluntary resigns from employment with the Company for any reason with an
effective date between August 1, 2007 and August 31, 2007, upon written notice
received by the Company's President and Chief Executive Officer within a
reasonable period prior to the Executive's Termination Date, and the Executive
signs and does not revoke the Release Agreement (amended pursuant to Section
5(D) below). The resignation period referenced above may be changed to the
period between November 1, 2007 and November 30, 2007 at the Company's
discretion upon written notice issued to the Executive on or before July 2,
2007.

          A. Severance Payment. A severance payment in the gross amount of: (1)
six (6) months of the Executive's annualized base salary as of the Termination
Date and (2) one-half (1/2) of the Executive's annualized target bonus as of the
Termination Date. The payment shall be subject to all applicable taxes and
withholdings, paid through the Company's regular payroll practices for six
months, provided that the Executive has executed and has not revoked the Release
Agreement and the Executive continues to comply with all terms and conditions of
the Release Agreement during the six (6) month period beginning after the
effective date of the Executive's Release Agreement.

          B. Health, Dental & Vision Benefits. Continuation of coverage under
the Company's health, dental, and vision insurance plans ("Health Care Plans")
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
at the same level of coverage as was provided to and elected by the Executive as
of the Termination Date. If the Executive timely and properly elects to continue
coverage under the Company's Health Care Plans in accordance with COBRA, the
Company shall pay the full premiums for the Executive's elected coverage under
the Health Care Plans until the earlier of: (i) six (6) months from the
Termination Date, or (ii) the date upon which the Executive becomes eligible for
coverage under another employer's group health, dental, or vision insurance
plan(s). To be eligible for continuation of coverage under the Health Care
Plans, the Executive must be actively enrolled in the applicable Health Care
Plan(s) as of the Termination Date. For purposes of Title X of COBRA, the date
of the "qualifying event" for the Executive and his covered dependents shall be
the Termination Date, and each month of Company-sponsored coverage continuation
provided hereunder shall offset a month of coverage continuation otherwise due
under COBRA. Upon the expiration of the six (6) month period, the Executive will
be required to pay 102% of the premium to continue Company-sponsored coverage.
Any continuation of Company-sponsored coverage shall be governed by COBRA and
the terms and conditions of the applicable plan documents.

          C. Equity Compensation.

               1. Six (6) months of accelerated vesting of outstanding stock
options, restricted stock, and restricted stock units issued to the Executive by
the Company that are subject to


                                        3



time-based vesting. The accelerated vesting provided for herein will be
effective as of the Termination Date.

               2. Accelerated vesting of 12.5% of each grant or award of stock
options, restricted stock, and restricted stock units issued to the Executive by
the Company that are not subject to time-based vesting (other than cliff
vesting), such as PAVRS.

          D. Release Agreement Amendment. If the conditions set forth above are
satisfied and the Executive is eligible for severance benefits under this
Section 5, the Release Agreement shall be amended to provide that the
non-competition and non-solicitation periods shall be reduced to six (6) months
from the Termination Date. The non-competition and non-solicitation provisions
of the Release Agreement shall supersede Section 7
(Non-Competition/Non-Solicitation) of the Restrictive Covenant and
Non-Competition Agreement that the Executive signed for the benefit of the
Company effective February 21, 2005 (the "Restrictive Covenant Agreement");
provided, however, that the Restrictive Covenant Agreement shall be otherwise
unmodified and shall remain in full force and effect.

All other compensation (including, without limitation, salary, bonuses and
commissions) and employee benefits (including, without limitation, short-term
and long-term disability insurance, Paid Time Off accrual, and vesting of equity
compensation) will cease on the Executive's Termination Date. The payments
provided for in Sections 5(A) above will not be subject to 401(k) or Employee
Stock Purchase Plan deductions. Except as provided herein, all equity
compensation grants are subject to the terms and conditions of the applicable
plan document(s). In the event that the Executive is eligible for severance
benefits under Section 4 above and this Section 5, the Executive shall receive
only the severance benefits under Section 4 above.

     6. Internal Revenue Code Section 409A. Notwithstanding any other provisions
of this Agreement, if the Company reasonably determines in its discretion that
Section 409A of the Internal Revenue Code, as amended, will result in the
imposition of supplemental taxes or any penalties based on the payments provided
under Sections 4(A) or 5(A) above within the first six (6) months following the
Termination Date, the Company will modify the payment schedule to provide that
the payment(s) will begin (or occur, as applicable) on the first regularly
scheduled payroll date following the expiration of six (6) months and one (1)
day after the Termination Date.

     7. At-Will Employment. The Company and the Executive hereby acknowledge and
agree that this Agreement is not intended to be and shall not be considered a
contract for a term of employment. The Parties further acknowledge and agree
that the Executive's employment with 3Com is and shall continue to be at-will,
except to the extent limited under applicable law, and may be terminated by
either Party at any time, for any reason or no reason, with or without notice.
If the Executive's employment terminates for any reason other than the
conditions specified in Sections 3 and 5 of this Agreement, then the Executive
shall not be entitled to receive severance or other benefits under this
Agreement or any severance and/or benefit plans sponsored by the Company;
provided, however, that the Executive's Management Retention Agreement effective
November 2, 2005 (the "MRA") shall remain in full force and effect.

     8. Entire Agreement/Integration. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either Party with respect to the subject matter hereof. This Agreement
represents the entire understanding of the Parties hereto with respect to the
Executive's eligibility to receive severance benefits from the Company and
supersedes all prior arrangements and understandings regarding such benefits,
including, without limitation, the Executive's Severance Benefits Agreements
dated February 3, 2006 and April 16, 2006, respectively; provided, however, that
the terms


                                        4



and conditions of the Plan and the MRA shall remain in full force and effect. If
the Executive is eligible for any benefits under the MRA, he will not be
eligible for any benefits under this Agreement.

     9. Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the federal Executive
Retirement Income Security Act of 1974 ("ERISA"). To the extent not governed by
ERISA, the Agreement shall be interpreted under laws of the Commonwealth of
Massachusetts. The Parties hereby agree and consent to the jurisdiction of the
state and federal courts of Massachusetts, sitting in Boston, Massachusetts, as
the exclusive venue for settling any disputes arising hereunder.

     10. Amendments. This Agreement may not be modified, amended, supplemented
or superseded unless by means of a written document signed by the Executive and
the Company's President and Chief Executive Officer or Chief Administrative and
Legal Officer and all notices issued hereunder on behalf of the Company shall be
issued by the Company's President and Chief Executive Officer or Chief
Administrative and Legal Officer.

     11. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.

IN WITNESS WHEREOF, the Parties have read this Agreement, have carefully
considered its provisions, have had an opportunity to discuss it with their
attorneys, and attest that they are fully competent to execute this Agreement
and that they fully understand and knowingly accept its terms and conditions in
their entirety and without reservation.

3COM CORPORATION                       JAMES HAMILTON


/s/ Neal D. Goldman                    /s/ James Hamilton
- ------------------------------------   -----------------------------------------
Neal D. Goldman
Chief Administrative and Legal
Officer

3/13/07                                2/28/07
DATE                                   DATE


                                        5

EX-10.29

                                                                   Exhibit 10.29

                                3COM CORPORATION

                              EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is by and between 3Com Corporation
(the "Company) and Robert Y. L. Mao ("Executive") and is as of August 7, 2006.

1. Duties and Scope of Employment.

     (a) Positions and Duties. As of August 18, 2006 (the "Effective Date"),
Executive will serve as the Company's Executive Vice President, Corporate
Development and shall report directly to the Chief Executive Officer. As soon as
reasonably practicable thereafter, Executive will be appointed to the Board of
Directors of Huawei-3Com Co., Ltd. "H3C"). Executive's principal place of
employment will be in Beijing, China with regular travel to Hangzhou, China.
Executive shall render such business and professional services in the
performance of his duties, consistent with the terms of this Agreement and
Executive's position within the Company, as will reasonably be assigned to him
by the Chief Executive Officer. The period Executive is employed by the Company
under this Agreement is referred to herein as the "Employment Term."

     (b) Obligations. During the Employment Term, Executive will devote
Executive's full business efforts and time to the Company and will use good
faith efforts to discharge Executive's obligations under this Agreement to the
best of Executive's ability and in accordance with each of the Company's
corporate guidance and ethics guidelines, conflict of interests policies and
code of conduct. For the duration of the Employment Term, Executive agrees not
to actively engage in any other employment, occupation, or consulting activity,
including membership of boards of directors, for any direct or indirect
remuneration without the prior approval of the Board (which approval will not be
unreasonably withheld); provided, however, that Executive may (i) serve on the
boards of directors of or continue to hold an interest in the companies
previously disclosed and submitted to the Company in writing prior to the
Effective Date and (ii) without the approval of the Board, serve in any capacity
with any civic, educational, or charitable organization, provided such services
do not interfere with Executive's obligations to Company.

          (i) Executive hereby represents and warrants to the Company that
Executive is not party to any contract, understanding, agreement or policy,
written or otherwise, that would be breached (subject to the possible exception
referenced in Section 17 of this Agreement) by Executive's entering into, or
performing services under, this Agreement. Executive further represents that as
of the date of this Agreement there are no threatened, pending, or actual claims
against Executive of which he is aware as a result of his employment with his
current employer (or any other previous employer) or his membership on any
boards of directors.

     (c) Other Entities. Executive agrees to serve and may be appointed, without
additional compensation, as an officer and director for each of the Company's


                                       1



subsidiaries, partnerships, joint ventures, limited liability companies and
other affiliates, including entities in which the Company has a significant
investment as determined by the Company. As used in this Agreement, the term
"affiliates" will include any entity controlled by, controlling, or under common
control of the Company.

2. At-Will Employment. Executive and the Company agree that Executive's
employment with the Company constitutes "at-will" employment. Executive and the
Company acknowledge that this employment relationship may be terminated at any
time, upon written notice to the other party, with or without Cause or Good
Reason (as each such term is defined in Section 10 below), at the option either
of the Company or the Executive. However, as described in this Agreement,
Executive may be entitled to severance benefits depending upon the circumstances
of Executive's termination of employment.

3. Compensation.

     (a) Base Salary. As of the Effective Date, the Company will pay Executive
an annual salary of $400,000.00 as compensation for his services (such annual
salary, as is then effective, to be referred to herein as "Base Salary"). The
Base Salary will be paid periodically in accordance with the Company's normal
payroll practices and be subject to the usual, required withholdings.

     (b) Annual Incentive. Executive will be eligible to receive annual cash
incentives payable for the achievement of performance goals established by the
Board of Directors of the Company (the "Board") or by the Compensation Committee
of the Board (the "Committee"). During the Employment Term, Executive's target
annual incentive ("Target Annual Incentive") will be not less than 100% of Base
Salary, with a maximum potential opportunity of 200% of Base Salary, subject to
the terms of the bonus plan approved by the Committee except that the terms of
this Agreement shall control to the extent that this Agreement provides for more
favorable terms with respect to the annual incentive as it applies to Executive.
The actual earned annual cash incentive, if any, payable to Executive for any
performance period will depend upon the extent to which the applicable
performance goal(s) specified by the Committee are achieved or exceeded and will
be adjusted for under- or over-performance. Any incentive earned during the
first half of fiscal 2007 will be pro-rated based on the Effective Date
(calculated by multiplying any incentive earned by Executive by a fraction with
a numerator equal to the number of days between the Effective Date and the close
of the first half of the fiscal year and a denominator equal to 182). The
Company will notify Executive of the performance goals in respect of fiscal 2007
within 60 days after the Effective Date.

     (c) Stock Options.

          (i) In connection with his initial service Executive will be granted
nonstatutory stock options to purchase 2,000,000 shares of Company common stock.
The exercise price of the first tranche of 1,000,000 options will be at a per
share exercise price equal to the closing price per share of Company common
stock on Nasdaq Global


                                       2



Select Market ("Nasdaq") on the first Tuesday in the month immediately
succeeding the month in which Executive commences employment with the Company
(the "First Tuesday Exercise Price"). The second tranche of 1,000,000 options
will be awarded as soon as practicable after Executive becomes CEO of H3C in
accordance with the equity grant policy in effect at the time. No stock options
shall be deemed to have been accepted until Executive has signed the Company's
form of stock option agreement. The stock option grant described above will be
granted under and subject to the terms, definitions and provisions of the
Company's 2003 Stock Plan, as amended (the "2003 Plan"), and the Company's form
of stock option agreement, except that the terms of this Agreement shall control
to the extent that this Agreement provides for more favorable terms with respect
to the stock option grant. The stock option grant will be scheduled to vest at a
rate of 25% on each anniversary of the grants over four (4) years assuming
Executive's continued employment with the Company on each scheduled vesting
date, and will have the maximum term permitted in the 2003 Plan.

4. Employee Benefits.

     (a) Generally. Executive will be eligible to participate in accordance with
the terms of all Company employee benefit plans, policies and arrangements that
are applicable to other executive officers of the Company, as such plans,
policies and arrangements may exist from time to time.

     (b) Vacation. Executive will be entitled to receive paid annual vacation in
accordance with Company policy for other senior executive officers. In no event
will Executive receive less than four (4) weeks of paid vacation time per
calendar year.

5. Expenses. The Company will reimburse Executive for reasonable travel,
entertainment and other expenses incurred by Executive in the furtherance of the
performance of Executive's duties hereunder, in accordance with the Company's
expense reimbursement policy as in effect from time to time. Executive will be
provided access to a car and driver for his daily travel in connection with his
employment with the Company.

6. Term and Termination of Employment. In the event Executive's employment with
the Company terminates for any reason, Executive will be entitled to any (a)
unpaid Base Salary accrued up to the effective date of termination; (b) unpaid,
but earned and accrued annual incentive for any completed fiscal year as of his
termination of employment; (c) pay for accrued but unused vacation; (d) benefits
or compensation as provided under the terms of any employee benefit and
compensation agreements or plans applicable to Executive; (e) unreimbursed
business expenses required to be reimbursed to Executive; and (f) rights to
indemnification Executive may have under the Company's Articles of
Incorporation, Bylaws, the Agreement, or separate indemnification agreement, as
applicable. In addition, if the termination is by the Company without Cause or
Executive resigns for Good Reason, Executive will be entitled to amounts and
benefits specified in Section 8.


                                       3



7. Survival of Covenants.

     (a) Non-solicitation and Non-competition. The Executive agrees that during
the Employment Term and for twelve (12) months thereafter, Executive will not
(i) solicit any employee of the Company (other than Executive's personal
assistant) for employment other than at the Company or one of its subsidiaries
or affiliates, or (ii) directly or indirectly sell products competitive to those
of 3Com (including H3C) to any person or entity with whom Executive had contact
while at 3Com; provided, however, that if Executive terminates his employment
for Good Reason pursuant to Section 10(d)(vii), or is terminated without Cause
prior to April 1, 2007 then the provisions of this section 7(a)(ii) shall not
apply.

     (b) Nondisparagement. During the Employment Term and for twelve (12) months
thereafter, Executive will not knowingly and materially disparage, criticize, or
otherwise make any derogatory statements regarding the Company, and the members
of the Chief Executive staff and the Board will not knowingly and materially
disparage, criticize, or otherwise make any derogatory comments regarding
Executive. Notwithstanding the foregoing, nothing contained in this Agreement
will be deemed to restrict Executive, the Company or any of the Company's
current or former officers and/or directors from providing information to any
governmental or regulatory agency (or in any way limit the content of any such
information) to the extent they are requested or required to provide such
information pursuant to applicable law or regulation.

     (c) Confidentiality. During the Employment Term and thereafter, Executive
will continue to comply with the terms of the Restrictive Covenant Agreement.

8. Severance.

     (a) Termination Without Cause or Resignation for Good Reason other than in
Connection with a Change of Control. If Executive's employment is terminated by
the Company without Cause or if Executive resigns for Good Reason, and such
termination is not in Connection with a Change of Control, then, subject to
Section 8(d), Executive will receive: (i) continued payment of the aggregate of
executive's Base Salary plus the Target Annual Incentive for the year in which
the termination occurs (less applicable tax withholdings) for twelve (12)
months, such amounts to be paid out bi-weekly in accordance with the Company's
normal payroll policies; (ii) twelve (12) months accelerated vesting with
respect to Executive's then outstanding, unvested equity awards, other than
performance-based awards, (iii) extension of the exercise period for all
Executive's outstanding stock options to the earlier of 165 calendar days from
the date of termination or the expiration date of the stock options (iv)
reimbursement for premiums paid for continued health benefits for Executive (and
any eligible dependents) under the Company's health plans until the earlier of
(x) eighteen (18) months, payable when such premiums are due (provided Executive
validly elects to continue coverage under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA")), or (y) the date upon which Executive and
Executive's eligible dependents become covered under similar plans, and (v)
conversion of the Executive's basic term life insurance in effect


                                       4



immediately prior to the date of termination to continue coverage until the
earlier of (x) one (1) year from the date of termination or (y) the date upon
which the Executive becomes eligible for coverage under another employer's life
insurance plan.

     (b) Termination Without Cause or Resignation for Good Reason in Connection
with a Change of Control. If Executive's employment is terminated by the Company
without Cause or by Executive for Good Reason, and the termination is in
Connection with a Change of Control, then, subject to Section 8(d), Executive
will receive: (i) continued payment of two (2) year's Base Salary, less
applicable tax withholdings, in accordance with the Company's normal payroll
policies; (ii) two (2) payments each equal to 100% of Executive's Target Annual
Incentive for the year in which the termination occurs, less applicable tax
withholdings, paid in two equal annual installments in accordance with the
Company's normal schedule for the payment of annual cash incentives; (iii) full
vesting with respect to Executive's then outstanding unvested equity awards,
other than performance-based awards; (iv) extension of the exercise period for
all Executive's outstanding stock options to the earlier of 165 calendar days
from the date of termination or the expiration date of the stock options (v)
reimbursement for premiums paid for continued health benefits for Executive (and
any eligible dependents) under the Company's health plans until the earlier of
(x) eighteen (18) months, payable when such premiums are due (provided Executive
validly elects to continue coverage under COBRA), or (y) the date upon which
Executive and Executive's eligible dependents become covered under similar
plans, and (vi) conversion of the Executive's basic term life insurance in
effect immediately prior to the date of termination to continue coverage until
the earlier of (x) one (1) year from the date of termination or (y) the date
upon which the Executive becomes eligible for coverage under another employers
life insurance plan.

     (c) Voluntary Termination Without Good Reason or Termination for Cause. If
Executive's employment is terminated voluntarily, including due to death or
Disability, without Good Reason or is terminated for Cause by the Company, then,
except as provided in Section 6, (i) all further vesting of Executive's
outstanding equity awards will terminate immediately; (ii) all payments of
compensation by the Company to Executive hereunder will terminate immediately,
and (iii) Executive will be eligible for severance benefits only in accordance
with the Company's then established plans.

     (d) Separation Agreement and Release of Claims. The receipt of any
severance or other benefits pursuant to this Section 8 will be subject to
Executive signing and not revoking a separation agreement and release of claims
appended hereto as Exhibit A. No severance or other benefits will be paid or
provided until the separation agreement and release agreement becomes effective.

     (e) No Duty to Mitigate. Executive will not be required to mitigate the
amount of any payment contemplated by this Agreement, nor will any earnings that
Executive may receive from any other source reduce any such payment.


                                       5



9. Excise Tax Gross-Up. In the event that the benefits provided for in this
Agreement constitute "parachute payments" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and will be subject
to the excise tax imposed by Section 4999 of the Code, then Executive will
receive (i) a payment from the Company sufficient to pay such excise tax, and
(ii) an additional payment from the Company sufficient to pay the federal and
state and local income and employment taxes and additional excise taxes arising
from the payments made to Executive by the Company pursuant to this sentence.
However the Company may elect not to make payments under the preceding sentence
to the extent it reasonably determines that (a) the "parachute payments" arise
from the acceleration of options with exercise prices exceeding the price at
which the underlying shares could be sold on the date of the Change in Control
and (b) any payments under the preceding sentence would not significantly
benefit the Executive. Unless Executive and the Company agree otherwise in
writing, the determination of Executive's excise tax liability, if any, and the
amount, if any, required to be paid under this Section 9 will be made in writing
by a certified public accounting firm selected by the Company and reasonably
acceptable to the Executive (the "Accountants"). For purposes of making the
calculations required by this Section 9, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. Executive and the Company agree to furnish such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 9. The Company will bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 9.

10. Definitions.

     (a) Cause. For purposes of this Agreement, "Cause" will mean:

          (i) Executive's willful and continued failure to perform the duties
and responsibilities of his position after there has been delivered to Executive
a written demand for performance from the Board which describes in reasonable
detail the basis for the Board's belief that Executive has not substantially
performed his duties and provides Executive the opportunity to present to the
Board his good faith reasons for not so performing and, if the Board does not
agree with such reasons, with thirty (30) days to take corrective action;

          (ii) Any act of personal dishonesty taken by Executive in connection
with his responsibilities as an employee of the Company with the intention or
reasonable expectation that such action may result in the substantial personal
enrichment of Executive;

          (iii) Executive's conviction of, or plea of nolo contendere to, a
felony that the Board reasonably believes has had or will have a material
detrimental effect on the Company's reputation or business;


                                       6



          (iv) A breach of any fiduciary duty owed to the Company by Executive
that has a material detrimental effect on the Company's reputation or business;

          (v) Executive being found liable in any Securities and Exchange
Commission or other civil or criminal securities law action or entering any
cease and desist order with respect to such action (regardless of whether or not
Executive admits or denies liability); or

          (vi) Executive (A) obstructing or impeding; (B) endeavoring to
influence, obstruct or impede, or (C) failing to materially cooperate with, any
investigation authorized by the Board or any governmental or self-regulatory
entity (an "Investigation"). However, Executive's failure to waive
attorney-client privilege relating to communications with Executive's own
attorney in connection with an Investigation will not constitute "Cause".

     (b) Change of Control. For purposes of this Agreement, "Change of Control"
will mean the occurrence of any of the following events:

          (i) The consummation by the Company or by H3C of a merger or
consolidation with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company or the voting power
of H3C, as the case may be, outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company or the voting power of H3C
or such surviving entity outstanding immediately after such merger or
consolidation;

          (ii) The approval by the stockholders of the Company or H3C, or if
stockholder approval is not required, approval by the Board, of a plan of
complete liquidation of the Company or H3C or an agreement for the sale or
disposition by the Company or H3C of all or substantially all of the Company's
or H3C's assets;

          (iii) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) becoming the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company or H3C representing 50% or more of the total voting
power represented by the Company's or H3C's then outstanding voting securities;
or

          (iv) A change in the composition of the Board within any twelve (12)
month period during the Term and pursuant to a plan in which the proponent
proposes alternative directors to the Board, and as a result of which fewer than
a majority are Incumbent Directors. "Incumbent Directors" will mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of those directors whose election or nomination was not in
connection with any transactions described in


                                       7



subsections (i), (ii), or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company.

     (c) Disability. For purposes of this Agreement, "Disability" will mean
Executive's absence from his responsibilities with the Company on a full-time
basis for 120 calendar days in any consecutive twelve (12) month period as a
result of Executive's mental or physical illness or injury.

     (d) Good Reason. For purposes of this Agreement, "Good Reason" means the
occurrence of any of the following, without Executive's express written consent:

          (i) A significant reduction of Executive's duties, position, or
responsibilities, relative to Executive's duties, position, or responsibilities
in effect immediately prior to such reduction;

          (ii) A substantial reduction by the Company of the facilities and
perquisites (including office space and location) available to Executive
immediately prior to such reduction;

          (iii) A material reduction in the kind or level of employee benefits
to which Executive is entitled immediately prior to such reduction with the
result that Executive's overall benefits package is significantly reduced other
than pursuant to a reduction that also is applied to substantially all other
executive officers of the Company and that reduces the level of employee
benefits by a percentage reduction that is no greater than 15%;

          (iv) A reduction in Executive's Base Salary or annual cash incentive
as in effect immediately prior to such reduction other than pursuant to a
reduction that also is applied to substantially all other executive officers of
the Company and which reduction reduces the Base Salary and/or annual cash
incentive by a percentage reduction that is no greater than 15%;

          (v) The relocation of Executive to a facility or location more than
fifty (50) miles from Beijing, China;

          (vi) The failure of the Company to obtain the assumption of the
employment agreement by a successor and an agreement that Executive will retain
the same role and responsibilities in the merged or surviving parent company as
he had prior to the merger under Section 1 of this Agreement or, if more
favorable, the same role and responsibilities that Executive had immediately
prior to the merger; or

          (vii) The failure of the Company to cause the appointment of Executive
as Chief Executive Officer of H3C by April 1, 2007; provided however for
purposes of this section 10 (d)(vii) only Executive's sole and exclusive benefit
shall be the payment to him by the Company of $800,000, payable in a lump sum by
May 1, 2007.


                                       8



     (e) In Connection with a Change of Control. For purposes of this Agreement,
a termination of Executive's employment with the Company is "in Connection with
a Change of Control" if Executive's employment is terminated within three (3)
months prior or twelve (12) months following a Change of Control.

11. Indemnification. Subject to applicable law, Executive will be provided
indemnification to the maximum extent permitted by the Company's Articles of
Incorporation or Bylaws, including, if applicable, any directors and officers
insurance policies, with such indemnification to be on terms determined by the
Board or any of its committees, but on terms no less favorable than provided to
any other Company executive officer or director and subject to the terms of any
separate written indemnification agreement.

12. Confidential Information. Executive will execute the Company's standard form
of confidential information, intellectual property, non-competition and
non-solicitation agreement, appended hereto as Exhibit B (the "Restrictive
Covenant Agreement").

13. Assignment. This Agreement will be binding upon and inure to the benefit of
(a) the heirs, executors and legal representatives of Executive upon Executive's
death, and (b) any successor of the Company. Any such successor of the Company
will be deemed substituted for the Company under the terms of this Agreement for
all purposes. For this purpose, "successor" means any person, firm, corporation,
or other business entity which at any time, whether by purchase, merger, or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company. None of the rights of Executive to receive
any form of compensation payable pursuant to this Agreement may be assigned or
transferred except by will or the laws of descent and distribution. Any other
attempted assignment, transfer, conveyance, or other disposition of Executive's
right to compensation or other benefits will be null and void.

14. Notices. All notices, requests, demands and other communications called for
hereunder will be in writing and will be deemed given (a) on the date of
delivery if delivered personally; (b) one (1) day after being sent overnight by
a well-established commercial overnight service, or (c) four (4) days after
being mailed by registered or certified mail, return receipt requested, prepaid
and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:

     If to the Company:

     Attn: Chairman of the Compensation Committee c/o Corporate Secretary
     3Com Corporation
     350 Campus Drive
     Marlborough, MA 01752-3064


                                       9



If to Executive:

at the last residential address known by the Company

With a copy to:

     Linda E. Rappaport
     Shearman & Sterling LLP
     599 Lexington Avenue
     New York, NY 10022

15. Severability. If any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable, or void, this Agreement
will continue in full force and effect without said provision.

16. Arbitration.

     (a) Except as provided below, any dispute arising out of or relating to
this Agreement or the breach, termination or validity hereof shall be finally
settled by binding arbitration conducted expeditiously in accordance with the
J.A.M.S./Endispute Streamlined Arbitration Rules and Procedures (the "J.A.M.S.
Rules"). The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof. The place of
arbitration shall be Boston, Massachusetts.

     (b) The parties covenant and agree that the arbitration shall commence
within 60 days of the date on which a written demand for arbitration is filed by
either party hereto. The parties (or their legal representatives) will promptly
confer to select a single arbitrator mutually acceptable to both parties. The
arbitrator must be a licensed attorney, primarily engaged as a practicing lawyer
in the field of employment law and related litigation for at least ten (10)
years, or primarily engaged in the practice of arbitrating or mediating
executive employment law disputes for at least ten (10) years, and must not have
any existing or prior relationship with the Company or any of its subsidiaries
or affiliates, on the one hand, or Executive, on the other hand.

If the parties are unable to agree upon an arbitrator, one will be selected,
meeting the above criteria, in accordance with the J.A.M.S. Rules. In connection
with the arbitration proceeding, the arbitrator shall have the power to order
the production of documents by each party and any third-party witnesses. In
addition, each party may take up to three (3) depositions as of right, and the
arbitrator may in his or her discretion allow additional depositions upon good
cause shown by the moving party. However, the arbitrator shall not have the
power to order the answering of interrogatories or the response to requests for
admission. In connection with any arbitration, each party shall provide to the
other, no later than seven (7) business days before the date of the arbitration,
the identity of all persons that may testify at the arbitration and a copy of
all documents that may be introduced at the arbitration or considered or used by
a party's witness or expert. The


                                       10



arbitrator's decision and award shall be made and delivered within six (6)
months of the selection of the arbitrator. The arbitrator's decision shall set
forth a reasoned basis for any award of damages or finding of liability. The
arbitrator shall not have power to award damages in excess of actual
compensatory damages and shall not multiply actual damages or award punitive
damages or any other damages that are specifically excluded under this
Agreement, and each party hereby irrevocably waives any claim to such damages.

     (c) The parties covenant and agree that they will participate in the
arbitration in good faith. This Section 16 applies equally to requests for
temporary, preliminary or permanent injunctive relief, except that in the case
of temporary or preliminary injunctive relief any party may proceed in court
without prior arbitration for the limited purpose of avoiding immediate and
irreparable harm.

     (d) Each of the parties hereto (i) hereby irrevocably submits to the
jurisdiction of any United States District Court of competent jurisdiction for
the purpose of enforcing the award or decision in any such proceeding, (ii)
hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution (except as protected
by applicable law), that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court, and hereby waives and agrees not to seek any review by any court of
any other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its or his submission to
jurisdiction and its or his consent to service of process by mail is made for
the express benefit of the other party hereto. Final judgment against either
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction.

17. Tax Equalization, Home Leave and Equity Claw-back Indemnification. Executive
shall be entitled to receive reimbursement, annually, for the cost of one round
trip business class airline ticket on the airline of the Executive's reasonable
choice for Executive, his spouse and one additional family member for home leave
purposes. The Company shall indemnify and reimburse Executive for tax
equalization purposes as set forth on Exhibit C. The Company will also reimburse
Executive for reasonable tax preparation expenses up to an annual cap of
$10,000.00. The Company shall indemnify Executive for any losses Executive may
incur as a result of equity "clawbacks" stemming from his prior employment due
to his employment with the Company or 1-13C, provided that Executive submits
appropriate documentation to verify any losses, provided further that the
Company has the right but not the obligation to control the defense of any such
claim, and provided further that such indemnification shall not exceed
$750,000.00.


                                       11



18. Integration. This Agreement, together with the Restrictive Covenant
Agreement and the standard forms of equity award agreement that describe
Executive's outstanding equity awards, except as otherwise provided herein,
represents the entire agreement and understanding between the parties as to the
subject matter herein and, except as otherwise provided herein, supersedes all
prior or contemporaneous agreements whether written or oral, including but not
limited to, the Company's Section 16 Officer Severance Plan and the Company's
form of Management Retention Agreement. No waiver, alteration, or modification
of any of the provisions of this Agreement will be binding unless in writing and
signed by duly authorized representatives of the parties hereto. In entering
into this Agreement, no party has relied on or made any representation,
warranty, inducement, promise, or understanding that is not in this Agreement.
To the extent that any provisions of this Agreement conflict with those of any
other agreement, including but not limited to the standard Restrictive Covenant
Agreement to be signed upon Executive's hire, the bonus plan referred to in
Section 3(b), and the Company's 2003 Stock Plan and corresponding agreement to
be signed by Executive in conjunction with his option grants, the terms in this
Agreement will prevail.

19. Waiver of Breach. The waiver of a breach of any term or provision of this
Agreement, which must be in writing, will not operate as or be construed to be a
waiver of any other previous or subsequent breach of this Agreement.

20. Survival. The Restrictive Covenant Agreement and Sections 6 through 13, 15,
16, 18 through 23, and 26 will survive the termination of this Agreement.

21. Headings. All captions and Section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.

22. Tax Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.

23. Governing Law. This Agreement will be governed by the laws of the
Commonwealth of Massachusetts without regard to its conflict of laws provisions.

24. Acknowledgment. Executive acknowledges that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.

25. Conditions. This offer is conditioned upon Executive providing to Company
references relating to Executive's employment in a form acceptable to the
Company, and Company's satisfactory review of such references.

26. Code Section 409A. Notwithstanding anything to the contrary in this
Agreement, if the Company reasonably determines that Section 409A of the Code
will result in the imposition of additional tax to an earlier payment of any
severance or other benefits otherwise due to Executive on or within the six (6)
month period following Executive's


                                       12



termination, the severance benefits will accrue during such six (6) month period
and will become payable in a lump sum payment on the date six (6) months and one
(1) day following the date of Executive's termination. All subsequent payments,
if any, will be payable as provided in this Agreement. Additionally, if any
other provision of this Agreement contravenes 409A of the Code, the regulations
promulgated thereunder or any related guidance issued by the U.S. Treasury
Department, the Company, after consultation with the Executive, will reform this
Agreement or any provision hereof to maintain to the maximum extent practicable
the original intent of the provision without violating the provisions of 409A of
the Code.

27. Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of the day and year written
below.

COMPANY:

3COM CORPORATION


By: /s/ Neal D. Goldman                 Date: 8/7, 2006
    ---------------------------------


EXECUTIVE:


/s/ Robert Mao                          Date: 8/7, 2006
- -------------------------------------


                                       13

EX-10.31

                                                                   Exhibit 10.31

          Summary of Equity Appreciation Rights Plan - H3C Technologies

On October 13, 2004, the Board of Directors (the "Board") of H3C Technologies
Co., Limited (formerly Huawei-3Com Co. Limited ), or H3C, established an Equity
Appreciation Rights Plan (the "EARP") for the purpose of attracting and
retaining high quality personnel by offering individual incentives linked to the
success of H3C. At the time the EARP was approved, H3C was a China-based joint
venture between Huawei Technologies, or Huawei, and 3Com Corporation, or 3Com.
On March 29, 2007, H3C became a wholly-owned subsidiary of 3Com when 3Com bought
the remaining 49% stake it did not then own in H3C from Huawei (the "Buyout").
The Board amended the EARP on October 21, 2005 and again on March 29, 2007. The
material terms of the EARP, as amended, are as follows:

     -    Eligibility. All employees (except assemblers) and consultants of H3C
          during calendar years 2004 through 2006 were eligible to participate
          in the EARP. Dr. Shusheng Zheng, a current executive officer of 3Com
          and the Chief Operating Officer of H3C, was eligible to participate in
          the EARP.

     -    Pool. There are two components to the EARP, which was intended to be a
          limited duration incentive. The first element was designed to reward
          H3C employees based on increases in the value of H3C from plan
          inception to the date on which one of the shareholders bought out the
          other (also known as a "liquidity event"). A liquidity event under the
          EARP occurred on March 29, 2007, as described above, due to the Buyout
          transaction. The second element was intended to reward employees for
          positive cash flow generation, or earnings before interest and taxes
          (also known as "EBIT"). More specifically, the funding pool for the
          EARP consists of 10% of the appreciated value of H3C at the time of
          liquidity (the "Liquidity Pool") plus 15% of accumulated EBIT for
          calendar years 2004 through 2006 (the "EBIT Pool"). The Liquidity Pool
          was calculated to be $155,996,920 and the EBIT Pool was calculated to
          be $27,557,416.

     -    Share Grants. Grants of shares in the Liquidity Pool were made to
          participants for calendar years 2004, 2005 and 2006. The EBIT Pool was
          allocated to participants in 2007 based upon the level of their
          participation in the Liquidity Pool. Both the Liquidity Pool and EBIT
          Pool shares were distributed under terms and procedures approved by
          the Board, which approved and ratified the share distribution on March
          29, 2007.

     -    Vesting/Liquidity Pool. The vesting schedule of the shares from the
          Liquidity Pool is as follows: the 2004 shares vested 75% on the date
          of the closing of the Buyout, March 29, 2007, and the remaining 25%
          will vest on the first anniversary; the 2005 shares vested 50% on
          March 29, 2007, and 25% will vest on each of the next two
          anniversaries; and the 2006 shares vested 25% on March 29, 2007, and
          25% will vest on each of the next three anniversaries. Vesting of EARP
          shares on the anniversaries of the Buyout, or Liquidity Event, is
          contingent upon the continued employment of the participant through
          such anniversary dates. However, certain key executives and managers,
          including Dr. Zheng, continue to vest in the EARP if they are no
          longer employed by H3C but



          if, and only if, they are terminated at the Company's election without
          a "Valid Reason," as that term is defined in their employment
          contracts.

     -    EBIT Pool. The EBIT Pool was payable after the close of calendar year
          2006.

     -    Reserve Pool. A portion of the Liquidity Pool was reserved for
          distribution prior to the initial payout of the EARP, subject to the
          approval of certain executives of 3Com (the "Reserve Pool"). The
          Reserve Pool vests on the same terms as the 2006 Liquidity Pool
          shares. 3Com's Chief Legal and Administrative Officer approved the
          Reserve Pool distribution recommendations of Dr. Zheng on April 20,
          2007, except for the Reserve Pool shares allotted to Dr. Zheng. On
          April 23, 2007 the Compensation Committee of the 3Com Board of
          Directors approved an award of shares in the Reserve Pool to Dr.
          Zheng.

The EBIT Pool was paid in substantial part to participants on April 19, 2007;
the Liquidity Event installments of the Liquidity Pool vested upon the closing
of the 3Com buyout of Huawei's interest in H3C on March 29, 2007, and were paid
in substantial part on May 31, 2007.

EX-10.33

                                                                   Exhibit 10.33

                                3COM CORPORATION
                           ABOVE GRADE SEVERANCE PLAN
                   PLAN DOCUMENT AND SUMMARY PLAN DESCRIPTION

                Amended and Restated Effective September 11, 2006

This Plan Document and Summary Plan Description ("Summary Plan Description") is
for all employees of 3Com Corporation ("3Com" or the "Company") who are eligible
under the terms of the 3Com Above Grade Severance Plan, formerly known as the
Executive Team Severance Plan (the "Above Grade Plan"). All rights to
participate in and receive benefits from the Above Grade Plan are governed
solely by the terms and conditions of this Summary Plan Description. This
Summary Plan Description supersedes and replaces all prior plan documents and
summary plan descriptions governing the Above Grade Plan.

I.   EFFECTIVE DATE

The Above Grade Plan is hereby amended and restated effective September 11,
2006.

II.  ELIGIBILITY TO PARTICIPATE

Participation in the Above Grade Plan is restricted to active 3Com employees who
are in position with a U.S. Salary Grade higher than 24 (or the international
equivalent) and have not been designated by the Company as being subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended ("Executives").

III. ELIGIBILITY TO RECEIVE BENEFITS

Executives who are employed by the Company are eligible to receive benefits upon
the termination of their employment with 3Com under following circumstances: (a)
an involuntary termination without Cause; or (b) a Voluntary Termination for
Good Reason. The receipt of benefits under the Above Grade Plan will be
conditioned upon the Executive's execution of and compliance with an agreement
(the "Release Agreement") including, but not limited to, (i) a release of claims
against the Company, its affiliates and representatives; (ii) a non-solicitation
provision prohibiting the Executive's solicitation of any Company employee,
business opportunity, client, customer, account, distributor or vendor for a
period of one (1) year following the Termination Date; and (iii) a
non-competition provision prohibiting the Executive from directly or indirectly
engaging in, participating in or having a material ownership interest in a
business in competition with the Company. The form and language of the Release
Agreement shall be determined by the Company in its sole discretion.

IV.  BENEFITS

Executives who are eligible to receive benefits under the Above Grade Plan will
be entitled to receive the following upon their execution of the Release
Agreement:

     A. Severance Amounts.

          1. One (1) year of the Executive's annualized base salary as of the
Termination Date, subject to all applicable taxes and withholdings; and

          2. A pro-rated amount of the Executive's earned incentive bonus for
the bonus period in which the Termination Date occurs, to be calculated by
multiplying the earned bonus amount (based on the Company's actual attainment of
applicable performance metrics) by a fraction, the numerator of which shall be
the number of calendar days between the beginning of the applicable bonus period
to the Termination Date and the denominator of which shall be the number of
calendar days within

3Com Corporation Above Grade Severance Plan         Amended and Restated 9/11/06


                                        1



the applicable bonus period, payable through the Company's regular bonus payment
practices and subject to all applicable taxes and withholdings.

     B. Health, Dental & Vision Benefits. Continuation of coverage under the
Company's health, dental, and vision insurance plans ("Health Care Plans")
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
at the same level of coverage as was provided to and elected by the Executive as
of the Termination Date. If the Executive timely and properly elects to continue
coverage under the Company's Health Care Plans in accordance with COBRA, the
Company shall continue to pay the Company-paid portion of the premiums for the
Executive's elected coverage under the Health Care Plans until the earlier of:
(i) one (1) year from the Termination Date, or (ii) the date upon which the
Executive becomes eligible for coverage under another employer's group health,
dental, or vision insurance plan(s). The Executive will remain obligated to pay
the unsubsidized portion of the applicable premium(s) in order to continue
Company-sponsored coverage. The Company-paid portion of any premium(s) is
subject to change at the Company's discretion. To be eligible for continuation
of coverage under the Health Care Plans, an Executive must be actively enrolled
in the applicable Health Care Plan(s) as of the Termination Date. For purposes
of Title X of COBRA, the date of the "qualifying event" for the Executive and
his/her covered dependents shall be the Termination Date, and each month of
Company-sponsored coverage continuation provided hereunder shall offset a month
of coverage continuation otherwise due under COBRA. Upon the expiration of the
one (1) year period, the Executive will be required to pay 102% of the premium
to continue Company-sponsored coverage. Any continuation of Company-sponsored
coverage shall be governed by COBRA and the terms and conditions of the
applicable plan documents.

     C. Life Insurance. Conversion of the Executive's basic term life insurance
in effect immediately prior to the Termination Date to continue coverage until
the earlier of (i) one (1) year from the Termination Date, or (ii) the date upon
which the Executive becomes eligible for coverage under another employer's life
insurance plan.

     D. Equity Compensation. Six (6) months of accelerated vesting of
outstanding stock options, restricted stock, and restricted stock units issued
to the Officer that are subject to time-based vesting.

All other compensation (including, without limitation, salary, bonuses and
commissions) and employee benefits (including, without limitation, short-term
and long-term disability insurance, Paid Time Off accrual, and vesting of equity
compensation) will cease on the Executive's Termination Date. Payments under
this Plan will not be subject to 401(k) or Employee Stock Purchase Plan
deductions. Except as provided herein, all equity compensation grants are
subject to the terms and conditions of the applicable plan document(s).

V.   DEFINITIONS

     A. "Cause" shall mean (i) an act of theft, embezzlement or intentional
dishonesty by the Executive in connection with his/her employment; (ii) the
Executive being convicted of a felony, (iii) a willful act by the Executive
which constitutes gross misconduct and which is injurious to the Company, or
(iv) following delivery to the Executive of a written demand for performance
from the Company which describes the basis for the Company's reasonable belief
that the Executive has not substantially performed his/her duties, continued
violation(s) of the Executive's obligations to the Company which are
demonstrably willful and deliberate on the Executive's part.


                                        2



     B. "Termination Date" shall mean the Executive's last date of employment
with 3Com Corporation.

     C. "Voluntary Termination for Good Reason" shall mean the Executive's
voluntary resignation within thirty (30) days after the occurrence of any of the
following events without the Executive's consent: (i) a material reduction of
the Executive's material duties or title, relative to the Executive's material
duties or title as in effect immediately prior to such reduction; (ii) a
material reduction by the Company in the base salary of the Executive as in
effect immediately prior to such reduction, other than a reduction generally
applicable to other Executives; or (iii) the permanent relocation of the
Executive to a work location more than fifty (50) miles from the Executive's
then present work location; provided, however, that no grounds for Voluntary
Termination for Good Reason shall exist hereunder unless the Executive provides
3Com with thirty (30) days' advance written notice of his/her resignation,
specifying the purported grounds for the Voluntary Termination for Good Reason,
and provides the Company with the opportunity to cure the above-referenced
event(s) on which the resignation based.

VI.  FORM OF PAYMENT

The severance amount provided for in Section IV(A)(1) above shall be paid
through the Company's regular, bi-weekly payroll practices and shall continue
for twelve (12) months, provided that the Executive has executed and has not
revoked his/her signature to the Release Agreement and the Executive continues
to comply with all terms and conditions of the Release Agreement during the
twelve (12) month period.

VII. INTERNAL REVENUE CODE SECTION 409A

Notwithstanding any other provisions of this Summary Plan Description, if the
Company reasonably determines in its discretion that Section 409A of the
Internal Revenue Code, as amended, will result in the imposition of additional
taxes or penalties based on the payment of the benefit provided under Section
IV(A) above to an Executive within the first six (6) months following the
Termination Date, the Company will modify the payment schedule to provide that
the payments will begin on the first regularly scheduled payroll date following
the expiration of six (6) months and one (1) day after the Termination Date. If
the payment schedule is modified pursuant to this Section VII, the Executive
will receive the one (1) year of annualized salary paid through the Company's
regular payroll practices over the twelve (12) payroll dates immediately
following the expiration of six (6) months and one (1) day after the Termination
Date.

VIII. FUNDING

Benefits provided pursuant to the Above Grade Plan shall be paid solely out of
3Com's general assets. 3Com shall not be required to fund or otherwise provide
for the payment of benefits provided hereunder in any other manner.

IX.  CLAIMS AND REVIEW PROCEDURES

If an Executive believes that he/she is entitled to a benefit under the Above
Grade Plan, or a benefit in an amount greater than he/she has received, the
Executive may file a claim by writing to the Above Grade Plan Administrator. The
Above Grade Plan Administrator is the named fiduciary that has the discretionary
power and authority to act with respect to any appeal from a denial of a claim
for benefits under the Above Grade Plan by performing a full and fair review of
the denial, and such actions shall be final and binding on all persons. Benefits
under the Above Grade Plan shall be payable only if the Above Grade Plan
Administrator determines, in its sole discretion, that an eligible Executive is
entitled to them. Any claim must be filed no later than forty-five (45) days
after the Executive's Termination Date.

     A. Initial Claim. The Above Grade Plan Administrator will notify the
Executive in writing within ninety (90) days (or 180 days if special
circumstances require an extension of time for processing


                                        3



the claim) of receipt of the claim as to whether the claim is granted or denied.
Note that if an extension is necessary, the Above Grade Plan Administrator will
provide the Executive with written notice of the extension (including the
circumstances requiring extension and date by which a decision is expected to be
rendered) before the initial ninety (90) day period expires. If the claim is
denied, the Executive will be given (1) specific reasons for the denial, (2)
specific reference to the Above Grade Plan provision(s) on which the denial is
based, (3) a description of any information or material necessary to support the
claim and an explanation of why such information or material is necessary, (4)
an explanation of the Above Grade Plan's claim appeal procedure (including a
statement of the Executive's right to bring a civil action under the Employee
Retirement Income Security Act of 1974 ("ERISA") following a denial of the claim
upon appeal), and (5) a statement that the Executive is entitled to receive,
upon request and free of charge, reasonable access to, and copies of all
documents, records or other information relevant (as defined by Department of
Labor regulation section 2560.503-1(m)) to the claim.

     B. Appeals. If the claim is denied, the Executive has sixty (60) days after
notice of the denial to file a written appeal with the Above Grade Plan
Administrator. During the review process, the Executive has the right to submit
written comments, documents, records, and other information relating to the
claim for benefits, which will be considered without regard to whether such
items were considered in the initial benefit determination. Also, the Executive
may, upon request and free of charge, have reasonable access to, and copies of,
all documents, records and other information relevant (as defined by Department
of Labor regulation section 2560.503-1(m)) to the claim for benefits.

     The Above Grade Plan Administrator will notify the Executive in writing
within sixty (60) days (or 120 days if special circumstances require an
extension of time for processing the appeal) of receipt of the appeal as to its
decision on review, unless the Above Grade Plan Administrator determines that
special circumstances exist requiring an extension of time. If the Above Grade
Plan Administrator determines that an extension is necessary, the Above Grade
Plan Administrator will provide the Executive with written notice (including the
circumstances requiring the extension and date by which a decision is expected
to be rendered) before the initial sixty (60) day period expires.

     If the Above Grade Plan Administrator denies the appeal, it will provide a
written denial of the claim upon appeal. The written denial shall include the
specific reason or reasons for the denial, specific references to the Above
Grade Plan provisions on which the denial is based, a statement that the
Executive is entitled to receive, upon request and free of charge, reasonable
access to, and copies of all documents, records or other information relevant
(as defined in Department of Labor regulation section 2560.503-1(m)) to the
claim, and a statement of the Executive's right to bring an action under Section
502(a) of ERISA.

     All determinations, interpretations, rules, and decisions of the Above
Grade Plan Administrator or its delegate shall be conclusive and binding upon
all persons having or claiming to have any interest or right under the Above
Grade Plan and shall be given deference in any judicial or other proceeding.

     C. Exhaustion of Claims Procedures. In no event shall an Executive or any
other person be entitled to challenge a decision of the Above Grade Plan
Administrator in court or in any other administrative proceeding unless and
until the claim and appeal procedures described above have been fully complied
with and exhausted.

X.   ADMINISTRATION

The Above Grade Plan Administrator administers the Above Grade Plan. The Above
Grade Plan Administrator is exclusively authorized to interpret the provisions
of this Summary Plan Description. The Above Grade Plan Administrator's
interpretation and/or application of any term or provision of the Above


                                        4



Grade Plan shall be final and binding. The Above Grade Plan Administrator shall
have full and unfettered authority and responsibility for administration of the
Above Grade Plan, including the discretionary authority to determine eligibility
for benefits and amounts of benefit entitlements and to interpret the terms of
the Above Grade Plan.

XI.  AMENDMENT AND TERMINATION

The Company reserves the right to amend or terminate the Above Grade Plan at any
time, with or without notice. All material changes to the Above Grade Plan must
be approved by the 3Com Corporation Board of Directors (the "Board") or the
Compensation Committee of the Board.

Information Required By ERISA:

     Plan Name

     3Com Above Grade Severance Plan

     Plan Sponsor

     3Com Corporation
     350 Campus Drive
     Marlborough, MA 01752-3064

     Plan Administrator

     The Above Grade Plan Administrator shall be the Compensation Committee of
     the Board. Communications with the Above Grade Plan Administrator must be
     in writing and addressed to:

          Senior Vice President, Human Resources
          3Com Corporation
          350 Campus Drive
          Marlborough, MA 01752-3064

     Type of Plan

     The Above Grade Plan is a welfare plan providing for severance benefits.

     Employer Identification Number

     The 3Com Employer Identification Number is 94-2605794. When writing about
     the Above Grade Plan, an Executive should include this number.

     Plan Number

     For the purpose of identification, 3Com has assigned the Above Grade Plan
     the number 517. All communications concerning the Above Grade Plan should
     include this reference number.

     Service of Legal Process

     Service of legal process may be made on the Above Grade Plan Administrator
     at the address above.

XII. ENTIRE PLAN; AMENDMENTS

This Summary Plan Description contains all the terms, conditions and benefits
relating to the Above Grade Plan. No employee, officer, or director of the
Company has the authority to alter, vary or modify the terms of the Above Grade
Plan, other than by means of an authorized written amendment to the Above Grade
Plan approved by the Above Grade Plan Administrator. No oral or written
representations


                                        5



contrary to the terms of the Above Grade Plan and its written amendments shall
be binding upon the Above Grade Plan, the Above Grade Plan Administrator or the
Company.

XIII. NO CONTRACT OF EMPLOYMENT

Nothing herein is intended to or shall be considered a contract of employment or
for any period of employment or a guarantee of future employment with the
Company.

XIV. NO ASSIGNMENT OF RIGHTS

No eligible Executive shall have the right to assign, delegate or otherwise
transfer, either in full or in part, any of his/her rights or obligations under
the Above Grade Plan and any such assignment, delegation or other such transfer
shall be void.

XV.  APPLICABLE LAW; VENUE

Except where preempted by ERISA, the Above Grade Plan shall be construed in
accordance with, and all disputes hereunder shall be governed by, the laws of
the Commonwealth of Massachusetts without regard to its conflict of laws rules.
All legal actions arising under or relating to the Above Grade Plan shall be
subject to the jurisdiction and venue of the United States District Court for
the District of Massachusetts sitting in Boston, Massachusetts.

XVI. ERISA RIGHTS

If you are an eligible Executive who is a participant in the Above Grade Plan,
you are entitled to certain rights and protections under ERISA.

Receive Information About Your Plan and Benefits. ERISA provides that you are
entitled to:

     (1)  Examine, without charge, at the office of the Above Grade Plan
          Administrator or its delegate all Above Grade Plan documents,
          including copies of any documents filed by the Above Grade Plan with
          the U.S. Department of Labor, such as Above Grade Plan descriptions.

     (2)  Obtain copies of all Above Grade Plan documents and other Above Grade
          Plan information upon written request to the Above Grade Plan
          Administrator. The Above Grade Plan Administrator may impose a
          reasonable charge for the copies.

     (3)  Receive a copy of the Above Grade Plan's financial report, if any. The
          Above Grade Plan Administrator may be required by law to furnish each
          participant with a copy of the summary annual report.

Prudent Actions By Fiduciaries. In addition to creating rights for the Above
Grade Plan participants, ERISA imposes duties upon the people who are
responsible for the operation of the Above Grade Plan. The people who operate
the Above Grade Plan, called "fiduciaries" of the Above Grade Plan, have a duty
to do so prudently and in the interest of you and other Above Grade Plan
participants and beneficiaries.

No one may fire you or otherwise discriminate against you in any way to prevent
you from obtaining a benefit or exercising your rights under ERISA.

Enforce Your Rights. If your claim for any Above Grade Plan benefit is denied or
ignored, in whole or in part, you have a right to know why this was done, to
obtain copies of documents relating to the decision without charge, and to
appeal any denial, all within certain time schedules.


                                        6



Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Above Grade Plan and do not receive
them within thirty (30) days, you may file suit in a federal court. In such
case, the court may require the Above Grade Plan Administrator to provide the
materials and pay you up to $110 a day until you receive the materials, unless
the materials were not sent because of reasons beyond the control of the Above
Grade Plan Administrator.

If you have a claim for a benefit that is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Above Grade Plan fiduciaries misuse the Above Grade Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor or you may file suit in a federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees, for example, if it
finds your claim is frivolous.

Assistance With Your Questions. If you have questions about the statements made
in this summary or your rights under ERISA, you should contact the Above Grade
Plan Administrator or the nearest Area Office of the Employee Benefits Security
Administration, U.S. Department of Labor, listed in your telephone directory, or
the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits
Administration, U.S. Department of Labor, 200 Constitution Avenue, Washington,
D.C. 20210.


                                        7

EX-10.36

                                                                  Exhibit 10.36

                                3COM CORPORATION

                         MANAGEMENT RETENTION AGREEMENT

     This Management Retention Agreement (the "Agreement") is made and entered
into by and between [NAME] (the "Executive") and 3Com Corporation (together with
its subsidiaries and affiliates, "3Com" or the "Company"), effective as of
[DATE]. 3Com and the Executive shall each individually be referred to herein as
a "Party" and together as the "Parties."

                                    RECITALS

     A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Executive and can cause the Executive
to consider alternative employment opportunities. The Board has determined that
it is in the best interests of the Company and its stockholders to assure that
the Company will have the continued dedication and objectivity of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.

     B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Executive with an incentive to continue his/her
employment and to motivate the Executive to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

     C. The Board believes that it is imperative to provide the Executive with
severance benefits upon the termination of the Executive's employment under the
circumstances set forth herein within three (3) months prior to or within twelve
(12) months following a Change of Control, which provides the Executive with
enhanced financial security and provides incentive and encouragement to the
Executive to remain with the Company notwithstanding the possibility of a Change
of Control.

     D. Certain capitalized terms used in this Agreement are defined in Section
5 below.

     The Parties hereto agree as follows:

     1. Term of Agreement. This Agreement shall terminate upon the date that all
obligations of the Parties hereto with respect to this Agreement have been
satisfied.

     2. At-Will Employment. The Company and the Executive acknowledge that the
Executive's employment with 3Com is and shall continue to be at-will, as defined
under applicable law, and may be terminated by either Party at any time, for any
reason or no reason, with or without notice. If the Executive's employment
terminates for any reason other than that specified in Section 3(a) of this
Agreement, then the Executive shall not be entitled to receive severance or
other benefits under this Agreement and shall only be eligible to receive those
severance or other benefits (if any) as may then be established under the
Company's then existing and applicable severance and/or benefit plans or
pursuant to other written agreements with the Company.

MRA 2007


                                       1



     3. Change of Control Severance Benefits.

          (a) Involuntary Termination other than for Cause, death or Disability
or Voluntary Termination for Good Reason Within Three (3) Months Prior to or
Within Twelve (12) Months Following a Change of Control. The Executive shall be
entitled to receive the severance benefits provided below if, within three (3)
months prior to or within twelve (12) months following a Change of Control (as
defined herein), the Executive's employment is terminated (i) involuntarily by
the Company other than for Cause, death or Disability (as such capitalized terms
are defined herein) or (ii) by the Executive pursuant to a Voluntary Termination
for Good Reason (as defined herein). The Executive's receipt of the severance
benefits provided below shall be conditioned upon the Executive's execution of
and compliance with an agreement (the "Release Agreement") which shall include,
without limitation, (i) a release of claims against the Company, its affiliates
and representatives; (ii) a non-solicitation provision prohibiting the
Executive's solicitation of any Company employee, business opportunity, client,
customer, account, distributor or vendor for a period of one (1) year following
the Executive's Termination Date; (iii) a non-competition provision prohibiting
the Executive from directly or indirectly engaging in, participating in or
having a material ownership interest in a business in competition with the
Company for a period of one (1) year following the Executive's Termination Date;
and (iv) a non-disparagement provision. The form and language of the Release
Agreement shall be determined by the Company in its sole discretion. The
severance benefits for which the Executive is eligible include the following:

               (i) Severance Payments. One hundred percent (100%) of the
Executive's Annual Compensation, subject to all legally required taxes and
withholdings, paid through the Company's regular payroll practices and
continuing for twelve (12) months following the effective date of the
Executive's Release Agreement, provided that the Executive continues to comply
with all terms and conditions of the Release Agreement during the twelve (12)
month period;

               (ii) Pro-Rated Bonus Payment. A pro-rated amount of the
Executive's earned incentive bonus for the bonus period in which the Termination
Date occurs, to be calculated by multiplying the earned bonus amount (based on
the Company's actual attainment of applicable performance metrics) by a
fraction, the numerator of which shall be the number of calendar days from the
beginning of the applicable bonus period to the Termination Date and the
denominator of which shall be the number of calendar days within the applicable
bonus period; provided, however, that if a qualifying termination of employment
occurs and the Termination Date is within three (3) months prior to a Change of
Control, the numerator shall be the number of calendar days from the beginning
of the applicable bonus period to the effective date of the Change of Control.
The pro-rated bonus referenced herein shall be paid through the Company's
regular bonus payment practices (but no earlier than the effective date of the
Executive's Release Agreement) and subject to all applicable taxes and
withholdings.

               (iii) Health, Dental & Vision Benefits. Continuation of coverage
under the Company's health, dental, and vision insurance plans ("Health Care
Plans") pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") at the same level of coverage as was provided to and elected by the
Executive as of the Termination Date. If the Executive timely and properly
elects to continue coverage under the Company's Health Care


                                       2



Plans in accordance with COBRA, the Company shall continue to pay the
Company-paid portion of the premiums for the Executive's elected coverage under
the Health Care Plans until the earlier of: (i) two (2) years from the
Executive's last date of employment, or (ii) the date upon which the Executive
becomes eligible for coverage under another employer's group health, dental, or
vision insurance plan(s). The Executive will remain obligated to pay the
unsubsidized portion of the applicable premium(s) in order to continue
Company-sponsored coverage. The Company-paid portion of any premium(s) is
subject to change at the Company's discretion; provided, however, that the
Company-paid portion of Executive's premium shall not be changed to be
proportionately less than the Company-paid portion of then-current employees. To
be eligible for continuation of coverage under the Health Care Plans, the
Executive must be actively enrolled in the applicable Health Care Plan(s) as of
the Termination Date. For purposes of Title X of COBRA, the date of the
"qualifying event" for the Executive and his/her covered dependents shall be the
Termination Date, and each month of Company-sponsored coverage continuation
provided hereunder shall offset a month of coverage continuation otherwise due
under COBRA. Upon the expiration of the one (1) year period, the Executive will
be required to pay 102% of the premium to continue Company-sponsored coverage.
Any continuation of Company-sponsored coverage shall be governed by COBRA and
the terms and conditions of the applicable plan documents.

               (iv) Life Insurance. Conversion of the Executive's basic term
life insurance in effect immediately prior to the Termination Date to continue
coverage until the earlier of (i) two (2) years from the Termination Date, or
(ii) the date upon which the Executive becomes eligible for coverage under
another employer's life insurance plan.

               (v) Equity Compensation Accelerated Vesting. One hundred percent
(100%) of the unvested portion of any stock option, restricted stock or other
Company equity compensation issued by the Company to the Executive shall
automatically be accelerated in full so as to become completely vested;
provided, however, that if a qualifying termination of employment occurs and the
Termination Date is within three (3) months prior to a Change of Control, such
acceleration shall become effective upon the effective date of the Change of
Control; and

               (vi) Extension of Stock Option and Stock Appreciation Right
Post-Termination Exercisability. The post-termination exercise period of any
outstanding Company stock options and stock appreciation rights held by the
Executive shall be extended to the lesser of (A) one hundred and sixty-five
(165) calendar days from the Executive's Termination Date, or (B) the original
term of the award.

          (b) Voluntary Resignation; Termination For Cause. If the Executive's
employment terminates by reason of the Executive's voluntary resignation (and is
not a Voluntary Termination for Good Reason), or if the Executive is terminated
for Cause, then the Executive shall not be entitled to receive severance or
other benefits under this Agreement and shall only be eligible to receive those
severance or other benefits (if any) as may then be established under the
Company's then existing severance and/or benefits plans or pursuant to other
written agreements with the Company.


                                       3



          (c) Disability; Death. If the Executive's employment with the Company
terminates as a result of the Executive's Disability, or if Executive's
employment is terminated due to the death of the Executive, then the Executive
shall not be entitled to receive severance or other benefits under this
Agreement and shall only be eligible to receive those severance or other
benefits (if any) as may then be established under the Company's then existing
and applicable severance and/or benefit plans or pursuant to other written
agreements with the Company.

          (d) Termination Apart from Change of Control. In the event the
Executive's employment is terminated for any reason, either prior to three (3)
months before the occurrence of a Change of Control or after the twelve (12)
month period following a Change of Control, then the Executive shall not be
entitled to receive severance or other benefits under this Agreement and shall
only be eligible to receive those severance or other benefits (if any) as may
then be established under the Company's then existing and applicable severance
and/or benefit plans or pursuant to other written agreements with the Company.

     4. Golden Parachute Excise Taxes

          (a) Parachute Payments of Less than 3.59 x Base Amount. In the event
that the benefits provided for in this Agreement or otherwise payable to the
Employee (i) constitute "parachute payments" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) would be
subject to the excise tax imposed by Section 4999 of the Code, and (iii) the
aggregate value of such parachute payments, as determined in accordance with
Section 280G of the Code and the proposed Treasury Regulations thereunder (or
the final Treasury Regulations, if they have then been adopted) is less than the
product obtained by multiplying 3.59 by the Employee's "base amount" within the
meaning of Code Section 280G(b)(3), then such benefits shall be reduced to the
extent necessary (but only to that extent) so that no portion of such benefits
will be subject to excise tax under Section 4999 of the Code.

          (b) Parachute Payments Equal to or Greater than 3.59 x Base Amount. In
the event that the benefits provided for in this Agreement or otherwise payable
to the Employee (i) constitute "parachute payments" within the meaning of
Section 280G of the Code, (ii) would be subject to the excise tax imposed by
Section 4999 of the Code, and (iii) the aggregate value of such parachute
payments, as determined in accordance with Section 280G of the Code and the
proposed Treasury Regulations thereunder (or the final Treasury Regulations, if
they have then been adopted) is equal to or greater than the product obtained by
multiplying 3.59 by the Employee's "base amount" within the meaning of Code
Section 280G(b)(3), then the Employee shall receive (i) a payment from the
Company sufficient to pay such excise tax, plus (ii) an additional payment from
the Company sufficient to pay the excise tax and federal and state income and
employment taxes arising from the payments made by the Company to the Employee
pursuant to this sentence.

          (c) 280G Determinations. Unless the Company and the Employee otherwise
agree in writing, the determination of the Employee's excise tax liability and
the amount required to be paid or reduced under this Section 4 shall be made in
writing by the Company's independent auditors who are primarily used by the
Company immediately prior to the Change of Control (the "Accountants"). For
purposes of making the calculations required by this


                                       4



Section 4, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 4. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.

     5. Internal Revenue Code Section 409A. Notwithstanding any other provisions
of this Agreement, if the Company reasonably determines in its discretion that
Section 409A of the Internal Revenue Code, as amended, will result in the
imposition of additional taxes or penalties based on the payment of the benefits
provided hereunder to the Executive within the first six (6) months following
the Termination Date, the Company will modify the payment schedule to provide
that the payments will begin on the first regularly scheduled payroll date
following the expiration of six (6) months and one (1) day after the Termination
Date. If the payment schedule is modified pursuant to this Section 5, the
Executive will receive the one (1) year of Annual Compensation paid through the
Company's regular payroll practices over the six (6) month period immediately
following the expiration of six (6) months and one (1) day after the Termination
Date.

     6. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:

          (a) Annual Compensation. "Annual Compensation" shall mean an amount
equal to the sum of (i) the Executive's annualized base salary as in effect
immediately preceding the Change of Control and (ii) the Executive's Target
Bonus.

          (b) Cause. "Cause" shall mean (i) an act of theft, embezzlement or
intentional dishonesty by the Executive in connection with his/her employment;
(ii) the Executive being convicted of a felony, (iii) a willful act by the
Executive which constitutes gross misconduct and which is injurious to the
Company, or (iv) following delivery to the Executive of a written demand for
performance from the Company which describes the basis for the Company's
reasonable belief that the Executive has not substantially performed his/her
duties, continued violations by the Executive of the Executive's obligations to
the Company which are demonstrably willful and deliberate on the Executive's
part.

          (c) Change of Control. "Change of Control" means the occurrence of any
of the following events:

               (i) Any Person becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or

               (ii) The consummation of the sale or disposition by the Company
of all or substantially all the Company's assets; or


                                       5



               (iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation.

          (d) Disability. "Disability" shall mean that the Company, in its
discretion, has deemed the Executive's employment to have been voluntarily
terminated because of the Executive's absence from his/her responsibilities with
the Company on a full-time basis for 120 calendar days in any consecutive twelve
(12) month period as a result of the Executive's mental or physical illness or
injury.

          (e) Person. "Person" shall have the same meaning accorded to such term
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.

          (f) Target Bonus. "Target Bonus" shall mean the Executive's target
bonus under the operative discretionary bonus plan (i.e., 3Bonus, Management
Incentive Plan, etc., which shall not include any other variable compensation
such as commission), assuming "on target" satisfaction of all objective or
subjective performance goals.

          (g) Termination Date. "Termination Date" shall mean the Executive's
last date of employment with 3Com Corporation.

          (h) Voluntary Termination for Good Reason. "Voluntary Termination for
Good Reason" shall mean the Executive's voluntarily resignation after the
occurrence of any of the following events without the Executive's consent: (i) a
material reduction of the Executive's material duties or title, relative to the
Executive's material duties or title as in effect immediately prior to such
reduction; (ii) a material reduction by the Company in the base salary of the
Executive as in effect immediately prior to such reduction, other than a
reduction generally applicable to other Executives; or (iii) the permanent
relocation of the Executive to a work location more than fifty (50) miles from
the Executive's then-present work location; provided, however, that no grounds
for Voluntary Termination for Good Reason shall exist hereunder unless the
Executive provides 3Com with thirty (30) days' advance written notice of his/her
resignation, specifying the purported grounds for the Voluntary Termination for
Good Reason, and provides the Company with the opportunity to cure the
above-referenced event(s) on which the resignation is based.

     7. Successors.

          (a) Company's Successors. Any successor to the Company (whether direct
or indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and/or assets which executes and
delivers the


                                       6



assumption agreement described in this Section 7(a) or which becomes bound by
the terms of this Agreement by operation of law.

          (b) Executive's Successors. The terms of this Agreement and all rights
and obligations of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

     8. Notice

          (a) General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or one day following mailing via Federal Express or similar
overnight courier service. In the case of the Executive, mailed notices shall be
addressed to him/her at his/her home address on file with the Company as of the
date of the notice. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its General Counsel.

          (b) Notice of Termination. Any termination by the Company for Cause or
by the Executive pursuant to a Voluntary Termination for Good Reason shall be
communicated by a notice of termination to the other Party hereto given in
accordance with Section 8(a) of this Agreement. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not less than thirty (30) days after the giving of such
notice). The failure by the Executive to include in the notice any fact or
circumstance which contributes to a showing of Voluntary Termination for Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his/her rights
hereunder.

     9. Miscellaneous Provisions.

          (a) No Duty to Mitigate. The Executive shall not be required to
mitigate the value of any benefits contemplated by this Agreement, nor shall any
such benefits be reduced by any earnings or benefits that the Executive may
receive from any other source.

          (b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Executive and by Company's President and Chief
Executive Officer or General Counsel. No waiver by either Party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other Party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.

          (c) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either Party with
respect to the subject matter hereof. This Agreement represents the entire
understanding of the Parties hereto with respect to


                                       7



the subject matter hereof and supersedes all prior arrangements and
understandings regarding same.

          (d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts. The Parties hereby agree and consent to the jurisdiction of
the state and federal courts of the Commonwealth of Massachusetts as the
exclusive jurisdiction for settling any disputes arising hereunder.

          (e) Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.

          (f) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

IN WITNESS WHEREOF, each of the Parties has executed this Agreement, in the case
of the Company by its duly authorized officer.

3COM CORPORATION


By:
    -----------------------------------
    EDGAR MASRI
    President & Chief Executive Officer


EXECUTIVE


By:
    -----------------------------------
[NAME]
       --------------------------------
[TITLE]
        -------------------------------


                                       8

EX-10.53

                                                                   Exhibit 10.53

                                                                  CONFORMED COPY

THIS SHARE CHARGE is made as a deed on 22 March 2007

BETWEEN:

(1)  3COM TECHNOLOGIES, a company incorporated under the laws of the Cayman
     Islands whose registered office is at Maples and Calder, Attorneys-at-Law,
     Ugland House, South Church Street, George Town, Grand Cayman, Cayman
     Islands (the "CHARGOR"); and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a limited liability
     company incorporated under the laws of Hong Kong whose registered office
     located at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in
     its capacity as collateral agent, the "COLLATERAL AGENT", which expression
     shall, wherever the context so admits, include such entity and all other
     persons from time to time acting in such capacity).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Borrower upon the terms and subject to the conditions contained
     therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor has agreed to enter into this Deed.

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  DEFINITIONS

     In this Deed, unless the context otherwise requires:

     "ACCOUNT BANK" means Industrial and Commercial Bank of China (Asia) Limited
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong;

     "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which
     banks are generally open for business in Hong Kong;

     "CHARGE" means the security from time to time constituted by or pursuant to
     this Deed (or intended to be constituted by or pursuant to this Deed) or
     any part thereof;

     "CHARGED PROPERTY" means any or all of the rights, title and interest,
     present and future, in and to the Shares, Further Shares and Derived Assets
     expressed to be subject to the security created under Clause 3 (Charge) of
     this Deed;

     "DERIVED ASSETS" means all shares, rights or other property of a capital
     nature which accrue or are offered, issued or paid at any time (by way of
     bonus, rights, redemption, conversion, exchange, substitution,
     consolidation, subdivision, preference, warrant, option, purchase or
     otherwise) in respect of:

Borrower Share Charge



     (A)  the Shares; or

     (B)  any Further Shares; or

     (C)  any shares, rights or other property previously accruing, offered,
          issued or paid as mentioned in this definition;

     "DIVIDENDS" means all dividends, interest and other income paid or payable
     in respect of the Shares, any Further Shares or any Derived Assets;

     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Borrower, the Chargor and the Collateral Agent as amended, supplemented
     and/or restated from time to time in any manner whatsoever;

     "FURTHER SHARES" means all shares (other than the Shares and any shares
     comprised in any Derived Assets) which the Chargor and the Collateral Agent
     may at any time agree shall be subject to the Charge;

     "RECEIVER" means a receiver appointed by or on behalf of the Collateral
     Agent under this Deed or pursuant to the Collateral Agent's statutory
     powers, and includes more than one such receiver and substituted receiver;

     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Chargor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Chargor under or in connection with
     the Facility Agreement; and

     "SHARES" means the shares comprising all the existing issued capital of the
     Borrower as more particularly described in schedule 1 (Particulars of
     Shares) and all and any other shares, warrants and other securities of any
     kind (including loan capital) of the Borrower now or at any time in the
     future beneficially owned by the Chargor or in which the Chargor has any
     interest (including any equity of redemption) and all rights, benefits and
     advantages now or at any time in the future deriving from or incidental to
     any such shares, warrants and other securities.



1.2  DEFINITIONS IN THE FACILITY AGREEMENT

     Unless a contrary indication appears, a term used in the Facility Agreement
     has the same meaning when used in this Deed. Any references to statutes
     are, unless otherwise specified, references to statutes of the Cayman
     Islands (and such reference shall be taken to be to the short title
     applicable to such statute) and include any statutory modification or
     re-enactment thereof for the time being in force.

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Chargor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time and in the manner
     provided for in the Facility Agreement and the Chargor hereby creates the
     Charge in the Charged Property in the manner and on the terms set out in
     Clause 3 (Charge).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each transfer, assignment, mortgage and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or Clause 1.2 (Definitions in the Facility Agreement), any
     reference in this Deed to the Chargor, the Collateral Agent or any Secured
     Party shall be construed so as to include their respective successors and
     permitted assigns or transferees.

2.3  LIMITED RECOURSE

     The maximum liability of the Chargor hereunder shall be limited to an
     amount equal to the amount recovered through the enforcement of the
     security over the Charged Property provided by the Chargor hereunder, and
     if the amount so recovered is less than the aggregate amount otherwise
     payable by the Chargor to the Secured Parties and the Collateral Agent
     hereunder, the liability of the Chargor shall be limited to such amounts
     recovered and the Collateral Agent shall have no rights to sue the Chargor
     for payment of any amount expressed to be payable under Clause 2.1 hereof
     or otherwise under this Deed except to the extent necessary for such
     enforcement.

3.   CHARGE

3.1  The Chargor, as beneficial owner and as continuing security for the payment
     and discharge of all Secured Indebtedness, charges all its rights, title
     and interest in and to the Charged Property by way of first fixed charge in
     favour of the Collateral Agent.

3.2  Notwithstanding anything to the contrary contained in this Deed, the
     Borrower shall be entitled to repurchase Shares from the Chargor pursuant
     to Section 6.4(a) of the Facility Agreement, and simultaneously with such
     purchase the security existing over those Shares created by



     this Deed will be immediately discharged and the Chargor will be entitled
     to the entire proceeds of such purchase, free and clear from the security
     created by this Deed.

4.   COVENANT TO DEPOSIT AND FURTHER ASSURANCES

4.1  THE SHARES AND FURTHER SHARES

     The Chargor shall, immediately after the execution of this Deed (or such
     longer period as the Collateral Agent may allow) in the case of the Shares,
     and within two Business Days (or such longer period as the Collateral Agent
     may allow) of each occasion on which the Collateral Agent and the Chargor
     agree that any Shares shall become Further Shares, deposit with the
     Collateral Agent:-

     (A)  all share certificates, documents of title and other documentary
          evidence of ownership in relation to such shares;

     (B)  transfers of such shares duly executed by the Chargor or its nominee
          with the name of the transferee left blank or, if the Collateral Agent
          so requires, duly executed by the Chargor or its nominee in favour of
          the Collateral Agent (or the Collateral Agent's nominee) and stamped
          in the form provided in schedule 2 (Share Transfer) (or as otherwise
          approved by the Collateral Agent), and such other documents as the
          Collateral Agent may require to enable the Collateral Agent (or the
          Collateral Agent's nominee) or, after the Charge becomes enforceable,
          any purchaser to be registered as the owner of, or otherwise to obtain
          legal title to, such shares;

     (C)  an executed and undated letter of resignation and authorisation from
          each director of the Borrower in the form provided in schedule 3
          (Letter of Resignation) (or as otherwise approved by the Collateral
          Agent);

     (D)  a memorandum signed by a director of the Borrower concerning the
          endorsement of a note of this Charge on the Register of Members of the
          Borrower in the form provided in schedule 4 (Directors' Memorandum)
          (or as otherwise approved by the Collateral Agent); and

     (E)  a notice of charge addressed by the Chargor to the Borrower in the
          form provided in schedule 5 (Notice Of Charge) (or as otherwise
          approved by the Collateral Agent).

4.2  DERIVED ASSETS

     The Chargor shall, within three Business Days of the accrual, offer, issue
     or payment of any Derived Assets, deliver or pay to the Collateral Agent or
     procure the delivery or payment to the Collateral Agent of:-

     (A)  all such Derived Assets or the share certificates, renounceable
          certificates, letters of allotment, documents of title and other
          documentary evidence of ownership in relation to them; and



     (B)  transfers of any shares comprised in such Derived Assets duly executed
          by the Chargor or its nominee with the name of the transferee left
          blank or, if the Collateral Agent so requires, duly executed by the
          Chargor or its nominee in favour of the Collateral Agent (or the
          Collateral Agent's nominee) and stamped, and such other documents as
          the Collateral Agent may require to enable the Collateral Agent (or
          the Collateral Agent's nominee) or, after the Charge becomes
          enforceable, any purchaser to be registered as the owner of, or
          otherwise to obtain legal title to, the shares comprised in such
          Derived Assets.

4.3  FURTHER ASSURANCES

     In addition to and without prejudice to anything else contained in this
     Deed, the Chargor shall, at its own cost, promptly execute and do all such
     deeds, instruments, transfers, renunciations, proxies, notices, documents,
     assurances, acts and things in such form as the Collateral Agent may from
     time to time require:-

     (A)  for converting the Charge to a legal mortgage over the Charged
          Property pursuant to an exercise of the Collateral Agent's right under
          clause 10.1(A) of this Deed;

     (B)  for perfecting, preserving or protecting the Charge or the priority of
          the Charge; and

     (C)  for facilitating the realisation of the Charge or the exercise of any
          Rights vested in the Collateral Agent.

4.4  REGISTRATION

     Without limitation to the generality of the Clause 4.3 (Further
     Assurances), the Chargor shall make all filings and registrations as may be
     required by applicable laws or requested in writing by the Collateral Agent
     from time to time as may be necessary to perfect, preserve and protect the
     Charge.

5.   REDEMPTION

     (A)  Subject always to Clause 11.9 (Discharge Conditional), if the
          Collateral Agent is satisfied, acting reasonably, that:

          (i)  all Secured Indebtedness have been unconditionally and
               irrevocably paid or discharged in full and the Facility Agreement
               has been terminated; or

          (ii) security or a guarantee for the Secured Indebtedness, in each
               case acceptable to the Collateral Agent, has been provided in
               substitution for this Deed,

          then, the Collateral Agent shall, at the request and cost of the
          Chargor, promptly discharge, release and/or re-assign, or, as
          appropriate, transfer the benefit of so much of the Charged Property
          as has not been applied by the Collateral Agent in or towards
          satisfaction of the Secured Indebtedness to the Chargor or as the
          Chargor may direct and, thereafter, the Chargor shall have no future
          obligation hereunder.



     (B)  The execution of a discharge, release, re-assignment, transfer or
          partial discharge by the Collateral Agent shall be a good and valid
          release or discharge of the Charge constituted by this Clause 3
          (Charge) or the relevant part thereof (as the case may be) and the
          obligations (or the relevant part thereof, as the case may be) of the
          Chargor from this Deed without the need for the Chargor to be a party
          thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Chargor, do all such things and execute all such documents
          and procure that its nominees do all such things and execute all such
          documents as may be reasonably necessary to give effect to the
          discharge, release, re-assignment, transfer or partial discharge
          referred to in Sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment, transfer or partial
          discharge pursuant to and in accordance with Sub-clause (A), the
          Collateral Agent shall, at the request and cost of the Chargor:

          (i)  promptly procure the redelivery to the Chargor, if it requests
               the same, of all deeds, instruments, certificates and other
               documents delivered to or deposited with or to the order of the
               Collateral Agent pursuant to Clause 4 (Covenant to Deposit and
               Further Assurances); and

          (ii) promptly give notice to each person (if any) who has received
               notice of the Charge pursuant to this Deed of such release,
               discharge, re-assignment and/or transfer,

          in each case to the extent the same relates to such release,
          discharge, re-assignment, transfer or partial discharge.

6.   THE SHARES

6.1  CHARGOR TO PAY CALLS AND OTHER PAYMENTS

     The Chargor shall pay all calls or other payments due in respect of any
     part of the Charged Property, and in any case of default by the Chargor in
     this respect the Collateral Agent may (but shall not be obliged) if it
     thinks fit make any such payment on behalf of the Chargor in which event
     any sums so paid shall be reimbursed on demand by the Chargor to the
     Collateral Agent and shall, until reimbursed, bear interest at the rate
     provided in section 2.10 of the Facility Agreement.

7.   REPRESENTATIONS AND WARRANTIES

     The Chargor represents and warrants to the Collateral Agent that:-

     (A)  subject only to this Charge, it is the sole beneficial owner of the
          Shares;

     (B)  no Lien (other than Permitted Liens) exists on, over or with respect
          to any of the Charged Property;



     (C)  it has not sold, transferred, lent, assigned, parted with its interest
          in, disposed of, granted any option in respect of or otherwise dealt
          with any of its rights, title and interest in and to the Charged
          Property, or agreed to do any of the foregoing (otherwise than
          pursuant to this Deed or as permitted by the Facility Agreement);

     (D)  the Shares, any Further Shares and any shares comprised in any Derived
          Assets are fully paid and there are no moneys or liabilities
          outstanding in respect of any of them;

     (E)  subject to the memorandum and articles of association of the Borrower,
          the Shares, any Further Shares and any shares comprised in any Derived
          Assets have been duly authorised and validly issued and are free from
          any restrictions on transfer or rights of pre-emption;

     (F)  it is duly incorporated and in good standing under the laws of the
          jurisdiction in which it is incorporated and has and will at all times
          have the necessary power to enter into and perform its obligations
          under this charge and has duly authorised the execution and delivery
          of this Deed;

     (G)  it has the power to enter into, and perform and comply with its
          obligations under, this Deed, and to create the Charge;

     (H)  all actions, conditions and things required to be taken, fulfilled and
          done (including the obtaining of any necessary consents) in order to
          (i) enable it lawfully to enter into, and perform and comply with its
          obligations under, this Deed, (ii) ensure that those obligations are
          valid, legal, binding and enforceable, (iii) permit the creation of
          the Charge and ensure that (subject to all necessary registrations
          thereof being made) the Charge is a valid, legal, binding and
          enforceable first fixed security interest over the Charged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Chargor, and (iv) make this Deed admissible in
          evidence in the courts of the Cayman Islands, Hong Kong and any other
          relevant jurisdiction, have been taken, fulfilled and done;

     (I)  the obligations of the Chargor under this Deed and (subject to all
          necessary registrations thereof being made) the Charge are and will be
          until fully discharged valid, legal, binding and enforceable and the
          Charge constitutes a first fixed security interest over the Charged
          Property ranking in priority to the interests of any liquidator,
          administrator or creditor of the Chargor; and

     (J)  each of the above representations and warranties are made on the date
          of this Charge and are deemed repeated by the Chargor, with reference
          to the facts and circumstances then existing, on each day following
          the date of this Charge until the termination of the Facility
          Agreement, or this Charge, whichever is the later.



8.   COVENANTS AND UNDERTAKINGS

8.1  COVENANTS AND UNDERTAKINGS OF THE CHARGOR

     The Chargor covenants and undertakes with the Collateral Agent that, except
     with the written consent of the Collateral Agent:

     (A)  it shall not sell, transfer, lend, assign, exchange, dispose of, grant
          any option in respect of or otherwise deal with the whole or any of
          its rights, title and interest in the Charged Property or agree to do
          any of the foregoing other than as expressly permitted or provided for
          in the Facility Agreement or pursuant to this Deed (and for the
          avoidance of doubt a disposal of Shares by the Chargor to the Borrower
          pursuant to section 6.4 (a) of the Facility Agreement will not be
          prohibited);

     (B)  other than as provided in the Facility Agreement or pursuant to this
          Deed it shall not, nor shall it attempt to, create, incur or permit to
          subsist any Lien on the Charged Property;

     (C)  it shall at all times give to the Collateral Agent such information as
          the Collateral Agent may reasonably require in respect of the Charged
          Property for the purpose of the discharge of the trusts, powers,
          rights, duties, authorities and discretions vested in it hereunder or
          by operation of law;

     (D)  it shall take all action within its power to procure, maintain in
          effect and comply in all material respects with all the terms and
          conditions of all approvals, authorisations, consents and
          registrations necessary or appropriate for anything provided for on
          its part in this Deed;

     (E)  it shall take all reasonable steps as may be required by the
          Collateral Agent to allow the Collateral Agent to sell or dispose of
          the Charged Property on or after the Charge becomes enforceable;

     (F)  it shall not do or cause or permit to be done, or omit to do anything
          which may in any way adversely prejudice, affect or diminish the value
          of any of the Charged Property;

     (G)  it shall ensure that there are no moneys or liabilities outstanding in
          respect of any of the Charged Property;

     (H)  without prejudice to Sub-clause (G), it shall punctually pay all
          calls, subscription moneys and other moneys payable on or in respect
          of any of the Charged Property and indemnify and keep indemnified the
          Collateral Agent (and the Collateral Agent's nominees) against any
          cost, liabilities or expenses which it or they may suffer or incur as
          a result of any failure by the Chargor to pay the same;

     (I)  it shall ensure that the Shares, any Further Shares and any shares
          comprised in any Derived Assets are free from any restriction on
          transfer or rights of pre-emption;



     (J)  it shall ensure that the Charge will at all times be a legally valid
          and binding first fixed security interest over the Charged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Chargor; and

     (K)  it shall deliver to the Collateral Agent a copy of every circular,
          notice, report, set of accounts or other document received by the
          Chargor in respect of or in connection with any of the Charged
          Property forthwith upon receipt by the Chargor of such document.

8.2  POWER OF COLLATERAL AGENT TO REMEDY FAILURES

     If at any time the Chargor shall fail to comply with or perform any of the
     covenants contained in this Deed or any Credit Document, the Collateral
     Agent shall have the power on behalf of or in the name of the Chargor, but
     shall not be under any obligation, to perform the covenants and to take
     such steps which the Collateral Agent may in its discretion, consider
     appropriate with a view to remedying, or mitigating the consequences of
     such failure but so that the exercise of this power or the failure to
     exercise it shall, in no circumstances, prejudice the other rights of the
     Collateral Agent under this Deed or any Credit Document. The Chargor shall
     on demand reimburse to the Collateral Agent all proper costs, expenses and
     losses incurred or sustained by the Collateral Agent in connection with
     such steps and until such costs, expenses and losses are reimbursed the
     outstanding sums shall carry interest in accordance with section 2.10 of
     the Facility Agreement from the date when payment is due to the date of
     reimbursement and such outstanding sums including any accrued interest
     shall form part of the Secured Indebtedness. No exercise by the Collateral
     Agent of its powers under this Clause 8.2 (Power of Collateral Agent to
     Remedy Failures) shall render the Collateral Agent liable to account as a
     mortgagee in possession.

8.3  FURTHER SHARES

     It is agreed between the Chargor and the Collateral Agent that the Chargor
     may at any time and from time to time procure the Borrower to issue further
     shares to it, provided that all such shares issued shall constitute Further
     Shares for the purposes of this Deed and shall be subject to the Charge.

9.   DEFAULT PROCEDURE

     The Charge shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          Excluded Subsidiaries).



10.  EFFECTS OF THE CHARGE BECOMING ENFORCEABLE

10.1 EFFECTS

     After the Charge (or the relevant part thereof) shall have become
     enforceable and without prejudice to the powers of the Collateral Agent to
     appoint a Receiver pursuant to Clause 13 (Appointment of Receiver):

     (A)  the Collateral Agent shall be entitled to convert the Charge to a
          legal mortgage over the Charged Property by completing the transfer of
          the Charged Property to the Collateral Agent (or its nominee) and to
          have its name (or the name of its nominee) entered onto the relevant
          register of members;

     (B)  the Chargor's rights or power to deal with the Charged Property
          (whether statutory or otherwise) shall cease and the Collateral Agent
          shall be entitled to deal with, collect in and realise the same in
          such manner as the Collateral Agent thinks fit;

     (C)  the Collateral Agent may sell, realise or otherwise dispose of, for
          such consideration (whether payable immediately or by instalments) as
          it shall in its absolute discretion think fit (whether by private sale
          or otherwise), the whole or any part of the Charged Property in
          respect of which the security hereby constituted has become
          enforceable and the Collateral Agent may to the extent that it has not
          already done so, take possession of and hold all or any part of the
          Charged Property and accordingly register, or cause to be registered
          all or any of the Charged Property constituting shares in its own name
          or in the name of the Collateral Agent's nominee or assignee or in the
          name of any purchaser thereof and apply any of the Charged Property
          constituting dividends or other distributions in cash as if they were
          proceeds of sale of the Charged Property;

     (D)  the Charge shall become immediately enforceable and the statutory
          power of sale and other powers of sale and appointing a Receiver shall
          become immediately exercisable without any juridical or other
          formality or any presentment, demand, protest or other notice of any
          kind on or at any time after the Charge becomes enforceable;

     (E)  without prejudice to the foregoing and subject to Clause 10.11
          (Inconsistency and Conflict), the Collateral Agent may in addition to
          any powers granted it by applicable law, upon and from the Charge
          becoming enforceable and upon and subject to the terms and conditions
          of the Facility Agreement) do all such other acts and things it may
          consider necessary or expedient for the realisation or preservation of
          the Charged Property or incidental to the exercise of any of the
          rights conferred on it under or in connection with this Deed and to
          concur in the doing of anything which it has the right to do and to do
          any such thing jointly with any other person, including to date and
          deliver the documents delivered to it pursuant to this charge hereof
          as it considers appropriate in order to take all steps to register the
          Charged Property in the name of the Collateral Agent or its nominee or
          nominees and to assume control as registered owner of the Charged
          Property.



10.2 RIGHTS OF CHARGOR PRIOR TO ENFORCEMENT

     At any time before the Charge has become enforceable:

     (A)  all Dividends shall be paid to and retained by the Chargor, free and
          clear from the security created by this Deed; and

     (B)  all voting and other rights relating to the Charged Property belong to
          and are exercisable by the Chargor.

10.3 OBLIGATIONS OF CHARGOR AFTER ENFORCEMENT

     After the Charge has become enforceable:-

     (A)  all Dividends shall be paid to and retained by the Collateral Agent,
          and any such moneys which may be received by the Chargor shall,
          pending such payment, be segregated from any other property of the
          Chargor and held in trust for the Collateral Agent; and

     (B)  the Chargor shall procure that all voting and other rights relating to
          the Charged Property are exercised in accordance with such
          instructions (if any) as may from time to time be given to the Chargor
          by the Collateral Agent, and the Chargor shall deliver to the
          Collateral Agent such forms of proxy or other appropriate forms of
          authorisation to enable the Collateral Agent to exercise such voting
          and other rights.

10.4 ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS

     Subject to the order of priority of payments set out in section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in and about the carrying on and management of any such
     business as contemplated by Clause 10.1 (Effects) or in the exercise of any
     of the powers conferred by Clause 10.1 (Effects) or otherwise in respect of
     the Charged Property and all outgoings which it shall think fit to pay out
     of the profits and income of the Charged Property and the moneys received
     by it in carrying out any business as contemplated by Clause 10.1 (Effects)
     and may apply the residue of the said profits, income and moneys in the
     manner provided by section 2.16(h) of the Facility Agreement provided that
     any such expenses shall, in any event, to the extent not fully paid or
     discharged, form or shall be deemed to form part of the Secured
     Indebtedness.

10.5 NO WAIVER, REMEDIES CUMULATIVE

     No failure or delay on the part of the Collateral Agent or any Receiver to
     exercise any right, power or remedy under this Deed will operate as a
     waiver thereof nor will any single or partial exercise of any right, power
     or remedy preclude any other or further exercise thereof or the exercise of
     any other right, power or remedy.



10.6 WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Deed must be
     in writing, be express and not implied and may be given subject to any
     conditions which the Collateral Agent considers fit. Any waiver or consent
     shall be effective only in the instance and for the purpose for which it is
     given.

10.7 NO OBLIGATION TO INSURE

     Notwithstanding any provisions to the contrary, the Collateral Agent shall
     not be under any obligation to insure any of the Charged Property or the
     title deeds or other evidence in respect thereof and shall not be
     responsible for any loss which may be suffered as a result of the lack of
     or inadequacy of any such insurance.

10.8 NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Charged Property by any act or omission of the
     Chargor or any prior ranking encumbrancer or any other person.

10.9 NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax, duties or levies in respect of the Charged Property or
     any part thereof on any income therefrom or any proceeds thereof.

10.10 NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Charge or any security created by the Facility
     Agreement or any of the Credit Documents.

10.11 INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Deed and the provisions
     of any applicable law the provisions of this Deed shall prevail and such
     inconsistent or conflicting provisions shall be deemed to be expressly
     negated or modified hereby provided that none of the foregoing shall be
     construed as a limitation on the powers of any Receiver.

10.12 NO EXEMPTION

     Nothing in this Deed shall exempt the Collateral Agent from or indemnify it
     against any liability which would by rule of law or otherwise attach to it
     in respect of any act of gross negligence or wilful default which it may
     have committed in relation to its duties and/or discretions under this
     Deed.



10.13 SUSPENSE ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Deed (including the proceeds of any conversion of
     currency) after the security created hereunder has become enforceable,
     except where such monies together with all other monies received, recovered
     or realised by the Collateral Agent or any Receiver under this Deed are
     sufficient to satisfy and discharge the Secured Indebtedness in full, may
     in the discretion of the Collateral Agent or the Receiver (provided that
     such action has first been approved by the Collateral Agent) be credited to
     any suspense or impersonal account in the name of the Collateral Agent at
     the Account Bank and may be held in such account for so long as the
     Collateral Agent may think fit (with interest accruing thereon at such
     market rate, if any, as the Collateral Agent may deem fit) pending their
     application from time to time (as the Collateral Agent shall be entitled to
     do in its discretion) in or towards satisfaction of the Secured
     Indebtedness in accordance with the terms of this Deed. Save as provided
     above, no party shall be entitled to withdraw any amount at any time
     standing to the credit of any such suspense or impersonal account.

10.14 NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent security interest affecting the
     Charged Property or (b) the Collateral Agent receives notice of any
     assignment or disposition affecting all or any part of the Charged Property
     or any interest therein to which the Collateral Agent has not given its
     approval or (c) the commencement of the insolvency, administration,
     reorganisation (other than as part of a solvent reconstruction or
     amalgamation the terms of which have been approved in writing by the
     Collateral Agent),, liquidation or dissolution of, or any analogous
     proceeding in respect of, of the Chargor, the Collateral Agent may open a
     new account in the name of the Chargor (whether or not it permits any
     existing account to continue). If the Collateral Agent does not open such a
     new account, it shall nevertheless be treated as if it had done so at the
     time when the notice was received or was deemed to have been received or,
     as the case may be, the insolvency, administration, reorganisation,
     liquidation, dissolution or other proceeding commenced. Thereafter, all
     payments made by the Chargor to the Collateral Agent or received by the
     Collateral Agent for the account of the Chargor shall be credited or
     treated as having been credited to the new account and shall not operate to
     reduce the amount secured by this deed at the time when the Collateral
     Agent received or was deemed to have received such notice or, as the case
     may be, the insolvency, administration, reorganisation, liquidation,
     dissolution or other proceeding commenced.

11.  PRESERVATION OF RIGHTS

11.1 SECURITY ADDITIONAL

     The Charge and the rights given to the Collateral Agent under this Deed
     shall be in addition to and shall be independent of every guarantee,
     indemnity or other security which the Collateral Agent may at any time hold
     for the Secured Indebtedness and it is hereby declared that no prior
     security held by the Collateral Agent over the whole or any part of the
     Charged Property shall merge in the Charge.



11.2 SECURITY CONTINUING

     The Charge shall be a continuing security notwithstanding the winding-up or
     dissolution of the Chargor or any partial payment, settlement of account or
     other matter whatsoever and in particular (but without prejudice to the
     generality of the foregoing) shall not be considered satisfied by any
     intermediate repayment in satisfaction of all or any of the Secured
     Indebtedness and shall continue in full force and effect until the Secured
     Indebtedness has been discharged and satisfied in full.

11.3 INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement variation or release with, the Chargor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Chargor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Charge or to the liability of the Chargor for the Secured
     Indebtedness.

11.4 RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Deed are cumulative and
     are not, nor are they to be construed as, exclusive of any rights, power or
     remedies provided by law.

11.5 SECURITY NOT AFFECTED

     Neither the Security nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Deed or by law nor the liability of the Chargor hereunder shall be
     discharged, impaired or otherwise affected by:

     (A)  any time, waiver or consent granted, or any other indulgence or
          concession granted, by the Collateral Agent or any other Secured Party
          to the Chargor or any other person; or

     (B)  the taking, holding, variation, compromise, exchange, renewal,
          realisation or release by the Collateral Agent or any other Secured
          Party or any other person of any rights under or in connection with a
          Credit Document, any other security, guarantee, indemnity or other
          document; or

     (C)  the refusal or failure to take up, hold, realise, perfect or enforce
          by the Collateral Agent or any other Secured Party or any other person
          any rights under or in connection with a Credit Document, any other
          security, guarantee, indemnity or other document (including, without
          limitation, any failure to comply with any formality or other
          requirement or any failure to realise the full value of any security);
          or

     (D)  the existence of any claim, set-off or other right which the Chargor
          may have at any time against the Collateral Agent or any other Secured
          Party or any other person; or



     (E)  the making or absence of any demand for payment or discharge of any
          Secured Indebtedness on the Chargor or any other person, whether by
          the Collateral Agent or any other Secured Party or any other person;
          or

     (F)  any arrangement, compromise or settlement entered into by the
          Collateral Agent or any other Secured Party with the Chargor or any
          other person; or

     (G)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Chargor under a
          Credit Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order; or

     (H)  any variation, amendment, waiver, release, novation, supplement,
          extension (whether of maturity or otherwise) or restatement (in each
          case however fundamental and of whatsoever nature) or replacement of
          any Credit Document, or any other security, guarantee, indemnity or
          other document; or

     (I)  any amendment, variation, novation, supplementation or replacement of
          any agreement between the Secured Parties; or

     (J)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Credit Document or any other security, guarantee,
          indemnity or other document; or

     (K)  any of the obligations of the Chargor under any of Credit Document or
          under any other Lien taken in respect of the obligations of the
          Chargor under any Credit Document being or becoming illegal, invalid,
          unenforceable, ineffective or impaired in any respect; or

     (L)  any amalgamation, merger or reconstruction that may be effected by the
          Collateral Agent with any other person or any sale or transfer of the
          whole or any part of the undertaking, property and assets of the
          Collateral Agent to any other person; or

     (M)  any amalgamation, merger or reconstruction (other than as part of a
          solvent reconstruction or amalgamation the terms of which have been
          approved by the Collateral Agent), reorganisation, administration,
          administrative or other receivership or dissolution or liquidation
          entry into a voluntary arrangement of the Chargor or any other person;
          or

     (N)  the insolvency, bankruptcy, winding-up or dissolution of the Chargor
          or any change in its status, function, control or ownership; or

     (O)  any change in the constitution of the Chargor; or

     (P)  any incapacity, lack of power, authority or legal personality of the
          Chargor to enter into or perform any of its obligations under any
          Credit Document to which it is a party or any irregularity in the
          exercise thereof or any lack of authority by any person purporting to
          act on their behalf; or



     (Q)  any exercise, omission to exercise, compromise, renewal or release of
          any rights against the Chargor; or

     (R)  any invalidity or irregularity in the execution of this Deed or any
          other Credit Document; or

     (S)  any other act (save for any valid act of release and discharge granted
          by the Collateral Agent), event or omission which, but for this Clause
          11.5 (Security Not Affected) might operate to discharge, impair or
          otherwise affect the Security or the liability of the Chargor for the
          Secured Indebtedness or any of the rights, powers or remedies
          conferred upon the Collateral Agent or any Receiver (or their
          respective delegates) by this Deed or by law or the liability of the
          Chargor hereunder.

     Without prejudice to the generality of this Clause 11.5 (Security Not
     Affected), the Chargor expressly confirms that it intends that its
     liability for the Secured Indebtedness and its obligations under this Deed
     shall extend from time to time to any variation, increase, extension,
     addition or replacement (however fundamental) of or to any of the Credit
     Documents and/or any facility or amount made available under any of the
     Credit Documents.

11.6 NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Deed is intended to, or shall operate so as to,
     prejudice or affect any guarantee, indemnity or other security of any kind
     whatsoever which the Collateral Agent may have for the Secured Indebtedness
     or any right, remedy or privilege of the Collateral Agent thereunder.

11.7 SCOPE OF RELEASE

     Any receipt, release or discharge of the Charge or of any liability arising
     under this Deed may be given by the Collateral Agent and, unless expressly
     stated otherwise, shall not release or discharge the Chargor from any
     liability for the same or any other monies which may exist independently of
     this Deed. Where such receipt, release or discharge relates only to part of
     the Charged Property such receipt, release or discharge shall not prejudice
     or affect the Charge in relation to the remainder of the Charged Property,
     unless expressly stated otherwise.

11.8 FURTHER ADVANCES

     The security created by this Deed is intended to secure any further
     advances made by the Lenders pursuant to the terms of the Facility
     Agreement.

11.9 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Chargor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this Clause 11.9 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being



     avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Charge subsequently as if such settlement or discharge had not occurred but
     so that nothing herein shall confer on any Transaction Persons the right to
     claim under this Clause 11.9 (Discharge Conditional) for more than the
     Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment provided that any
     such settlement, reassignment, release or discharge shall become
     unconditional upon the expiry of one month after the maximum period within
     which such settlement, reassignment, release or discharge can be avoided or
     reduced.

11.10 NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Deed or by law:

     (A)  to take any action or obtain judgment in any court against the
          Chargor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Chargor; or

     (C)  to enforce or seek to enforce the recovery of any moneys and
          liabilities hereby secured or any other security taken in respect of
          any of the obligations of the Chargor under any of the Credit
          Documents.

12.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or become exercisable or be
     concerned to see whether any such delegation by the Collateral Agent shall
     have lapsed for any reason or been revoked. Any sale or other dealing by
     the Collateral Agent or its delegate or any Receiver of or with the Charged
     Property and any part thereof shall be deemed to be within the power of the
     person effecting the same and the receipt by such person of the purchase or
     other moneys connected therewith shall effectively discharge the purchaser
     or other party to such dealing who shall not be concerned with the manner
     of application of the proceeds of sale or other dealing or be in any way
     answerable therefor.

13.  APPOINTMENT OF RECEIVER

13.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may if requested by the Chargor or at any time after
     the Charge (or the relevant part thereof) shall have become enforceable in
     accordance with Clause 9 (Default Procedure), appoint one or more persons
     to be a Receiver or Receivers of the whole or any part of the Charged
     Property. The Collateral Agent may:



     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.

13.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Chargor) have, in relation to the Charged Property, or as the case may be,
     that part of the Charged Property in respect of which he was appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by any applicable law or statute; and

     (B)  the power in the name or on behalf and at the cost of the Chargor to
          exercise all the powers and rights of an absolute owner of the Charged
          Property or the relevant part thereof and do or omit to do anything
          which the Chargor could do.

13.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Chargor) have the powers specified in Clause 10.1 (Effects).

13.4 RECEIVER TO BE AGENT OF THE CHARGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Chargor and the Chargor shall be solely
     responsible, jointly and severally, for the acts and defaults of such
     Receiver (save in the case of the fraud, negligence, wilful default, breach
     of duty or breach of trust in relation to duties by such Receiver) and for
     payment of such Receiver's remuneration in respect thereof.

13.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.



13.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Charge (other than monies paid into a
     suspense account by such Receiver in accordance with Clause 10.13 (Suspense
     Account(s)).

13.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any attorney or
          agent of such party shall be liable to any person in respect of any
          loss or damage whatsoever which arises out of the realisation of the
          Charged Property or any part thereof or from any act, default or
          omission in relation to the Charge or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of their respective powers, authorities or
          discretions conferred upon them in relation to the Charge or any part
          of it, unless such loss or damage is caused by its or his negligence,
          wilful default, breach of duty or breach of trust or fraud.

     (B)  The Collateral Agent shall not be liable to any person in respect of
          any loss or damage whatsoever which arises out of the realisation of
          the Charged Property or any part thereof or from any act, default or
          omission in relation to the Charge or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of the powers, authorities or discretions
          conferred upon it in relation to the Charge or any part of it unless
          such loss or damage is caused by its negligence, wilful default breach
          of duty or breach of trust or fraud.

     (C)  Without prejudice to the generality of Sub-clauses (A) and (B), entry
          into possession of the Charged Property shall not render the
          Collateral Agent or the Receiver liable to account as mortgagee in
          possession or liable for any loss on realisation or for any default or
          omission for which a mortgagee in possession might be liable unless
          such loss or damage is caused by its negligence, wilful default,
          breach of duty, breach of trust or fraud and, if and whenever the
          Collateral Agent or the Receiver enters into possession of the Charged
          Property, it shall be entitled at any time to go out of such
          possession.

13.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all statutory and other powers of the
     Collateral Agent under any applicable law or otherwise and so that such
     powers shall be and remain exercisable by the Collateral Agent in respect
     of any part of the Charged Property in respect of which no Receiver has
     been appointed and notwithstanding that an appointment under the provisions
     of this Clause 13 (Appointment of Receiver) shall have subsisted and been
     withdrawn in respect of that property or shall be subsisting in respect of
     any other part of the Charged Property.



14.  INDEMNITY

14.1 INDEMNITY

     Without prejudice to any right at law given to trustees, the Chargor
     further covenants with and undertakes to each of the Collateral Agent and
     any Receiver or Receivers fully to indemnify and keep indemnified it from
     and against all liabilities, losses, damages, costs and expenses (including
     legal costs and expenses), charges, actions, proceedings, claims and
     demands or any other obligation or liability (including, without
     limitation, in respect of taxes, duties, levies, imposts and other charges
     any indemnity and other amounts which the Collateral Agent is or would
     become obliged to pay, upon payment by the Chargor, under such indemnity)
     which it may properly incur (except, having regard to the provisions of any
     Credit Document, insofar as they are incurred because of fraud, negligence,
     wilful default or breach of trust on the part of it whether before or after
     the Charge becomes enforceable):

     (A)  in consequence of anything done or purported to be done by the
          Collateral Agent or any Receiver in relation to the Charged Property
          or under this Deed or any Credit Document as a result of or in
          connection with any failure by the Chargor to comply with its
          obligations thereunder to the Collateral Agent or any Receiver; or

     (B)  in consequence of any payment in respect of the Secured Indebtedness
          (whether made by the Chargor or a third party) being impeached or
          declared void for any reason whatsoever; or

     (C)  in consequence of the breach or non-performance by the Chargor of any
          of their respective warranties, representations, covenants or
          undertakings herein contained or otherwise relating to all or any part
          of the Charged Property; or

     (D)  in connection with the realisation of the Charged Property (including
          the costs of any proceedings in relation to this Deed or to the
          Secured Indebtedness).

14.2 INTEREST

     The amounts payable to the Collateral Agent or the Receiver under Clauses
     14.1 (Indemnity) and 17 (Stamp Duty and Taxes) shall carry interest in
     accordance with section 2.10 of the Facility Agreement from the date on
     which they were paid or incurred by the Collateral Agent or the Receiver
     (as the case may be) to the date of actual payment to the Collateral Agent
     or, as the case may be, the Receiver under the aforementioned clauses as
     well after as before any judgment and such amounts and interest may be
     debited by the Collateral Agent to any account of the Chargor, but shall,
     in any event (to the extent not fully paid or discharged), form part of the
     Secured Indebtedness and accordingly be secured on the Charged Property
     under the Charge.



15.  POWER OF ATTORNEY

15.1 APPOINTMENT AND POWERS

     The Chargor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this Clause 15.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,

     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may reasonably be required (or
     which the Collateral Agent, any person falling within Sub-clause (B) or any
     Receiver appointed hereunder shall reasonably consider requisite) for
     carrying out any obligation imposed on the Chargor, as the case may be, by
     or pursuant to this Deed (including but not limited to the obligations of
     the Chargor under Clauses 4 (Covenant to Deposit and Further Assurance) and
     8 (Covenants and Undertakings), for carrying out any sale, lease or other
     dealing by the Collateral Agent or any such Receiver into effect, for
     conveying or transferring any legal estate or other interest in the Charged
     Property, for getting in the Charged Property, and generally for enabling
     the Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver to exercise the respective powers conferred on them by or pursuant
     to this Deed or by law provided that the power contained in this Clause
     15.1 (Appointment and Powers) shall not be exercisable unless and until the
     Charge shall have become enforceable. The exercise of such power by the
     Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver shall not put any person dealing with it upon any enquiry as to
     whether a Event of Default shall have occurred. Each of the Collateral
     Agent, any person falling within Sub-clause (B) and any Receiver shall have
     full power to delegate the power conferred on it by this Clause 15.1
     (Appointment and Powers), but no such delegation shall preclude the
     subsequent exercise of such power by the Collateral Agent or any person
     falling within Sub-clause (B) or any Receiver (as the case may be) itself
     or preclude the Collateral Agent or any person falling within Sub-clause
     (B) or any Receiver (as the case may be) from making a subsequent
     delegation thereof to some other person; any such delegation may be revoked
     by the Collateral Agent or any person falling within Sub-clause 15.1(B) or
     any Receiver (as the case may be) at any time.

15.2 RATIFICATION

     The Chargor shall ratify and confirm all transactions lawfully and properly
     entered into by the Collateral Agent or any Receiver or delegate of the
     Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     Clause 15.1 (Appointment and Powers).



15.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Chargor hereby
     acknowledges) granted irrevocably and severally, for value and for security
     as part of the Charge to secure the several proprietary interests of and
     the performance of obligations owed to the respective donees within the
     meaning of the Powers of Attorney Law (Revised).

16.  SET-OFF AND CURRENCY

16.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder provided that each payment in
          respect of costs and expenses shall be made in Hong Kong dollars if
          incurred in Hong Kong dollars.

     (B)  If any sum due from the Chargor under this Deed or any order or
          judgment given or made in relation hereto has to be converted from the
          currency (the "FIRST CURRENCY") in which the same is payable hereunder
          or under such order or judgment into another currency (the "SECOND
          CURRENCY") for the purpose of (a) making or filing a claim or proof
          against the Chargor, (b) obtaining an order or judgment in any court
          or other tribunal or (c) enforcing any order or judgment given or made
          in relation hereto then:

          (i)  the Chargor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is suffered as a result of or in connection with
               the Collateral Agent's own fraud, negligence, wilful default,
               breach of duty or breach of trust; and

          (ii) the Collateral Agent shall account to the Chargor for the amount
               by which any sum realised by it exceeds the aggregate amount of
               all sums owing to it by the Chargor at the time at which such
               profit is realised provided that the Collateral Agent shall only
               be required to make any payment to the Chargor in relation
               thereto if at such time all the payment obligations of the
               Chargor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or rates of exchange at which the Collateral
          Agent may in the ordinary course of business purchase the first
          currency with the second currency upon receipt of a sum paid to it in
          satisfaction, in whole or in part, of any such order, judgment, claim
          or proof.

16.2 SET-OFF

     The Chargor waives, and (where incapable of waiver) agrees not to exercise
     (unless required to do so by law), any right of set-off or netting, whether
     conferred by agreement or law, which



     it may have against the Collateral Agent so that it does not reduce any
     amount payable by it to the Collateral Agent under this Deed.

16.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or for the
     purpose of crediting any monies to the Account or any suspense account
     pursuant to Clause 10.13 (Suspense Account(s)) or making any application
     therefrom or for any other purpose in connection with this Deed, the
     Collateral Agent may (unless otherwise required by law) convert any monies
     received, recovered or realised or subject to application by the Collateral
     Agent under this Deed or any monies to be credited to any such account
     (including the proceeds of any previous conversion under this Clause 16
     (Set-off and Currency)) from their existing currency of denomination into
     such other currency of denomination as the Collateral Agent reasonably may
     think fit and any such conversion shall be effected at such rate or rates
     of exchange as may be agreed by the Collateral Agent in consultation with
     the Chargor as being relevant and any rate, method and date so agreed shall
     be binding on the Chargor and any costs, expenses or commissions incurred
     in effecting any such conversion shall be deducted from the proceeds of any
     such conversion.

17.  STAMP DUTY AND TAXES

     The Chargor shall pay all stamp duties and similar fees, filing and
     registration fees and other transaction taxes required in relation to or
     for the purpose of procuring the execution, validity and enforceability of
     this Deed and the Charge and shall indemnify the Collateral Agent and each
     Receiver appointed hereunder against any liabilities, costs, claims and
     expenses resulting from any failure to pay or any delay in paying the same
     on a full indemnity basis.

18.  AMENDMENTS

     This Deed may not be amended, modified or waived in any respect whatsoever,
     without the prior written consent of the Collateral Agent given with
     express reference to this Clause 17 (Amendments) and expressly stated to be
     intended to operate as the Collateral Agent's consent to such amendment,
     modification or waiver on behalf of the Requisite Lenders.

19.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Charge has become
     enforceable, apply to the court for an order that the terms of this Deed be
     carried into execution under the direction of the Court and for the
     appointment of a Receiver of the Charged Property or any part thereof and
     for any other order in relation to the administration of the terms of this
     Deed as the Collateral Agent shall deem fit and it may assent to or approve
     any application to the Court made at the instance of the Collateral Agent
     or on its behalf and the Collateral Agent shall be indemnified by the
     Chargor against all costs, charges and expenses properly incurred by it in
     relation to any such application or proceedings.



20.  PARTIAL INVALIDITY

     Every provision contained in this Deed shall be severable and distinct from
     every other such provision and if at any time any provision hereof is or
     becomes illegal, invalid or unenforceable in any respect under the law of
     any jurisdiction, neither the legality, validity or enforceability of the
     remaining provisions hereof nor the legality, validity or enforceability of
     such provision under the law of any other jurisdiction shall in any way be
     affected or impaired thereby.

21.  NOTICES

21.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

21.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Deed shall (unless that other person has by 15
     days' written notice to the one specified another address department,
     officer or person as the case may be) be made or delivered to that other
     person at the address identified with its signature below and shall be
     deemed to have been made or delivered (in the case of any communication
     made by letter) when left at that address during normal business hours on a
     Business Day (or on the next Business Day if not left during normal
     business hours on a Business Day) or (as the case may be) 5 days (in the
     case of local post) and 10 days (in the case of overseas post) after being
     deposited in the post postage prepaid in an envelope addressed to it at
     that address marked for the attention of any specified department, officer
     or person or (in the case of any communication made by facsimile
     transmission) when sent to the correct facsimile number of the addressee
     identified with its signature below and received in whole and in legible
     form by such addressee provided that any communication or document to be
     made or delivered by the Chargor or the Collateral Agent shall be effective
     only when received by the Chargor or the Collateral Agent, as appropriate
     and then only if the same is expressly marked for the attention of the
     department, officer or person identified below with the signature of the
     relevant addressee (or such other department, officer or person as the
     relevant addressee shall from time to time and in each case by not less
     than 3 days' prior notice in writing to the parties hereto have specified
     for this purpose).

21.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Deed shall be in the English language or accompanied by a
     translation thereof into English certified (by an officer of the person
     making or delivering the same) as being a true and accurate translation
     thereof.



22.  ASSIGNMENT

     The Collateral Agent may assign its rights and obligations under this Deed
     to any successor under the Facility Agreement in accordance with section
     9.7 (b) of the Facility Agreement.

23.  COSTS AND EXPENSES

     The Chargor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the negotiation, preparation, registration, perfection, preservation
          or enforcement of this Deed and any other document relating thereto;
          and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Chargor
          under any of the Credit Documents or the recovery by the Collateral
          Agent or any such Receiver from the Chargor of the Secured
          Indebtedness then due and payable.

24.  CERTIFICATES AND DETERMINATIONS

     For all purposes, including any Proceedings (as defined in Clause 26.3
     (Non-Exclusive Jurisdiction):

     (a)  a determination by the Collateral Agent; or

     (b)  a copy of a certificate signed by an officer of the Collateral Agent,

     of the amount of any indebtedness comprised in the Secured Indebtedness for
     the time being or at any time shall, in the absence of manifest error, be
     conclusive evidence against the Chargor as to the amount thereof.

25.  GOVERNING LAW

     This Deed is governed by, and shall be construed in accordance with, the
     law of the Cayman Islands.



26.  JURISDICTION

26.1 CAYMAN ISLANDS COURTS

     The courts of Cayman Islands have non-exclusive jurisdiction to settle any
     dispute (a "DISPUTE") arising out of or in connection with this Deed
     (including a dispute regarding the existence, validity or termination of
     this Deed or the consequences of its nullity).

26.2 CONVENIENT FORUM

     The parties agree that the courts of the Cayman Islands are the most
     appropriate and convenient courts to settle Disputes between them and,
     accordingly, that they will not argue to the contrary.

26.3 NON-EXCLUSIVE JURISDICTION

     This Clause 26 (Jurisdiction) is for the benefit of all parties hereto
     other than the Chargor. As a result and notwithstanding Clause 26.1 (Cayman
     Islands Courts), it does not prevent any party hereto other than the
     Chargor from taking proceedings relating to a Dispute ("PROCEEDINGS") in
     any other courts with jurisdiction. To the extent allowed by law, the
     parties hereto other than the Chargor may take concurrent Proceedings in
     any number of jurisdictions.

27.  EXECUTION AND COUNTERPARTS

     This Deed 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 when taken together
     shall constitute one and the same Deed.

IN WITNESS WHEREOF the parties hereto have caused this Deed to be duly executed
the day and year first above written.



                                   SCHEDULE 1

                              PARTICULARS OF SHARES



CHARGOR             NUMBER AND CLASS OF SHARES
- -------             --------------------------
                 
3COM TECHNOLOGIES   ONE ordinary share of US$1.00 par value in H3C Holdings
                    Limited, a Cayman Islands exempted company of M&C Corporate
                    Services Limited PO Box 309GT, Ugland House, South Church
                    Street, George Town, Grand Cayman, Cayman Islands (the
                    "COMPANY").




                                   SCHEDULE 2

                                 SHARE TRANSFER

The undersigned, 3Com Technologies (the "TRANSFEROR"), for value received does
hereby transfer to Industrial and Commercial Bank of China (Asia) Limited (the
"TRANSFEREE"), the __________ shares standing in its name in the undertaking
called H3C Holdings Limited to hold the same unto the Transferee.

Signed by the Transferor

in the presence of:


- ----------------------------------------


Witness


- ----------------------------------------


3Com Technologies
Signed by the Transferee
in the presence of:


- ----------------------------------------


Witness


- ----------------------------------------

Industrial and Commercial Bank of China
(Asia) Limited

Dated this [_____] day of [_____] 200[_]



                                   SCHEDULE 3

                              LETTER OF RESIGNATION

To: The Secretary
    H3C Holdings Limited
    M&C Corporate Services Limited
    PO Box 309GT
    Ugland House
    South Church Street
    George Town
    Grand Cayman
    Cayman Islands

[______] 200[_]

Dear Sirs

LETTER OF RESIGNATION

I hereby resign as a director of H3C Holdings Limited (the "COMPANY") and
confirm that I have no claims against the Company for loss of office, arrears of
pay or otherwise howsoever.

This resignation is to be effective as at the date hereof. You are hereby
authorised to complete and date this letter by dating the same at any time after
you are notified by the Industrial and Commercial Bank of China (Asia) Limited
that an Event of Default has occurred (as set out section 8 of the Facility
Agreement between [list parties] dated [__] day of [___] 200[_]).

Yours faithfully


- -------------------------------------
[Director]



                                   SCHEDULE 4

                              DIRECTORS' MEMORANDUM

H3C Holdings Limited
M&C Corporate Services Limited
PO Box 309GT
Ugland House
South Church Street
George Town
Grand Cayman
Cayman Islands

To: INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

[______] 200[_]

Dear Sirs

RE: SHARE CHARGE

I confirm that we have been instructed by 3Com Technologies to make and have
accordingly made an annotation of the existence of the Share Charge between
Industrial and Commercial Bank of China (Asia) Limited and 3 Com Technologies
Limited noting the existence of the security interests created in favour of
Industrial and Commercial Bank of China (Asia) Limited, by the Share Charge in
the Register of Members of H3C Holdings Limited.

Yours sincerely


- -------------------------------------
Director



                                   SCHEDULE 5

                                NOTICE OF CHARGE

                          [On Shareholder's Notepaper]

To: H3C Holdings Limited

[______] 200[_]

Dear Sirs

RE: SHARE CHARGE

We hereby notify you that pursuant to a Share Charge dated [_____] day of
[_____] 200[_] between Industrial and Commercial Bank of China (Asia) Limited
and 3Com Technologies (the "SHARE CHARGE"), the Chargor has granted a security
interest over the shares standing in its name in H3C Holdings Limited and at any
time after Industrial and Commercial Bank of China (Asia) Limited notifies you
that an Event of Default (as defined in the Share Charge) has occurred you may
take such steps to register Industrial and Commercial Bank of China (Asia)
Limited as the registered holder of the shares pursuant to the Share Charge.

Yours faithfully


- -------------------------------------
for and on behalf of

3Com Technologies



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal of   )
INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)      )
LIMITED                                             )   SEAL AFFIXED
in the presence of:                                 )

WONG YUEN FAI STANLEY
Director


CHENG PUI LING CATHY
Secretary

Address:            33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong
Facsimile Number:   2869 8221
Attention:          ____________________________________________________________



                                 EXECUTION PAGES

THE CHARGOR

Executed as a deed by                               )   SEAL AFFIXED
for an on behalf of                                 )   NEAL D. GOLDMAN
3COM TECHNOLOGIES                                   )
in the presence of: JEFFREY M. HELD                 )

Address:            PO Box 309 GT, Ugland House, South Church Street,
                    George Town, Grand Cayman, Cayman Islands
Facsimile Number:   ____________________________________________________________
Attention:          ____________________________________________________________



                               Dated 22 March 2007

                                3COM TECHNOLOGIES

                                   as Chargor

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

                               as Collateral Agent

                                   ----------

                              BORROWER SHARE CHARGE

                                   ----------

                                  (OGIER LOGO)

                              Ref: 0979-001 070321



                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                            1

2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                        3

3.  CHARGE                                                                    3

4.  COVENANT TO DEPOSIT AND FURTHER ASSURANCES                                4

5.  REDEMPTION                                                                5

6.  THE SHARES                                                                6

7.  REPRESENTATIONS AND WARRANTIES                                            6

8.  COVENANTS AND UNDERTAKINGS                                                8

9.  DEFAULT PROCEDURE                                                         9

10. EFFECTS OF THE CHARGE BECOMING ENFORCEABLE                               10

11. PRESERVATION OF RIGHTS                                                   13

12. PROTECTION OF PURCHASERS                                                 17

13. APPOINTMENT OF RECEIVER                                                  17

14. INDEMNITY                                                                20

15. POWER OF ATTORNEY                                                        21

16. SET-OFF AND CURRENCY                                                     22

17. STAMP DUTY AND TAXES                                                     23

18. AMENDMENTS                                                               23

19. APPLICATION TO COURT                                                     23

20. PARTIAL INVALIDITY                                                       24

21. NOTICES                                                                  24

22. ASSIGNMENT                                                               25

23. COSTS AND EXPENSES                                                       25

24. CERTIFICATES AND DETERMINATIONS                                          25

25. GOVERNING LAW                                                            25

26. JURISDICTION                                                             26

27. EXECUTION AND COUNTERPARTS                                               26

SCHEDULE 1                                                                   27

PARTICULARS OF SHARES                                                        27




                                                                         
SCHEDULE 2                                                                   27

SHARE TRANSFER                                                               27

SCHEDULE 3                                                                   28

LETTER OF RESIGNATION                                                        28

SCHEDULE 4                                                                   29

DIRECTORS' MEMORANDUM                                                        29

SCHEDULE 5                                                                   30

NOTICE OF CHARGE                                                             30

EX-10.54

                                                                   Exhibit 10.54

                                                                  CONFORMED COPY

THIS FIXED AND FLOATING CHARGE is made as a deed on 22 March 2007

BETWEEN:

(1)  H3C HOLDINGS LIMITED, a company incorporated under the laws of the Cayman
     Islands (registered number 180539) whose registered office is at PO Box 309
     GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman
     Islands (the "CHARGOR"); and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED a limited liability
     company incorporated under the laws of Hong Kong whose registered office
     located at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in
     its capacity as collateral agent, the "COLLATERAL AGENT", which expression
     shall, wherever the context so admits, include such entity and all other
     persons from time to time acting in such capacity).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Borrower upon the terms and subject to the conditions contained
     therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor has agreed to enter into this Fixed and Floating Charge,

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  INTERPRETATION

     In this Fixed and Floating Charge (including the recitals) words and
     expressions defined and the rules of construction and interpretation set
     out in the Facility Agreement shall, unless otherwise provided herein or
     the context otherwise requires, have the same meaning herein save that, in
     the event that there is a conflict between a definition in the Facility
     Agreement and in this Fixed and Floating Charge, the definition in this
     Fixed and Floating Charge shall prevail.

1.2  DEFINITIONS

     In this Fixed and Floating Charge, unless the context otherwise requires:

     "ACCOUNT BANK" means Industrial and Commercial Bank of China (Asia) Limited
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong;

     "BORROWER DEBT SERVICE ACCOUNT" means the US dollar denominated current
     account opened in the name of the Chargor with the Account Bank and having
     the account number [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES] and
     includes any renewal or re-designation thereof;



                                        2


     "BORROWER DEBT SERVICE RESERVE ACCOUNT" means the US dollar denominated
     current account opened in the name of the Chargor with the Account Bank and
     having the account number [PERSONAL INFORMATION OMITTED FOR SECURITY
     PURPOSES] and includes any renewal or re-designation thereof;

     "CHARGED PROPERTY" means any or all of the property, assets and undertaking
     of the Chargor for the time being whatsoever and wheresoever situated,
     present and future in each case expressed to be subject to the security
     created under clause 3 (Security) of this Fixed and Floating Charge;

     "ENFORCEMENT DATE" means the date upon which an Enforcement Notice is
     served by the Collateral Agent on the Chargor;

     "ENFORCEMENT NOTICE" means a notice served by the Collateral Agent pursuant
     to and in accordance with clause 8 (Default Procedure);

     "FACILITY AGREEMENT" means the senior secured credit facility agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Borrower, the Chargor and the Collateral Agent as amended, supplemented
     and/or restated from time to time in any manner whatsoever;

     "RECEIVABLES" means all books and other debts of any nature whatsoever,
     other than those represented by the Borrower Debt Service Account and the
     Borrower Debt Service Reserve Account;

     "RECEIVER" means a receiver or manager appointed by or on behalf of the
     Collateral Agent under this Fixed and Floating Charge or pursuant to the
     Collateral Agent's statutory powers, and includes more than one such
     receiver and substituted receiver;

     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Chargor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Chargor under or in connection with
     the Facility Agreement;

     "SECURITY" means the security from time to time constituted by or pursuant
     to this Fixed and Floating Charge (or intended to be constituted by or
     pursuant to this Fixed and Floating Charge) or any part thereof;

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Chargor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time and in the manner
     provided for in the Facility

Borrower Fixed and Floating Charge



                                        3


     Agreement and the Chargor hereby creates the Security in the Charged
     Property in the manner and on the terms set out in clause 3 (Security).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each conveyance, transfer, assignment and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or clause 1.1 (Interpretation), any reference in this Fixed and
     Floating Charge to the Chargor, the Collateral Agent or any Secured Party
     shall be construed so as to include their respective successors and
     permitted assigns or transferees.

3.   SECURITY

3.1.1 ASSIGNMENT, FIXED AND FLOATING CHARGE

     Subject always to clause 3.1.2 hereof, the Chargor as beneficial owner, by
     way of continuing security for the payment and discharge of the Secured
     Indebtedness, hereby:

     (A)  conveys, transfers and assigns absolutely to the Collateral Agent all
          of the right, title, interest and benefit of the Chargor (present and
          future and whether legal or equitable) in, to and under the
          Receivables;

     (B)  charges in favour of the Collateral Agent by way of first fixed charge
          all its rights under or in respect of the assets listed in sub-clause
          3.1.1(A) to the extent they are not the subject of a mortgage or an
          assignment under such sub-clause 3.1.1(A); and

     (C)  charges in favour of the Collateral Agent by way of first floating
          charge the whole of the Chargor's undertakings and all its property,
          assets and rights, whatsoever and wheresoever, present and future
          (including without limitation its respective uncalled capital, its
          rights to any insurance policy or insurance proceeds and any property
          held on trust for the benefit of it by a third party), other than:

          (i)  any property, assets or rights from time to time or for the time
               being effectively:

                    (a)  the subject of a Lien (in equity or at law) by
                         sub-clause 3.1.1(A) and (B) (Assignment, Fixed and
                         Floating Charge) or otherwise pursuant to this Fixed
                         and Floating Charge;

                    (b)  the subject of a Lien pursuant to the H3C Share
                         Mortgage or Borrower Fixed Charge Over Bank Accounts
                         (as both are defined in the Facility Agreement); or



                                        4


                    (c)  subject to clause 11.8 (Discharge Conditional),
                         released, discharged and/or reassigned, or as
                         appropriate, transferred in accordance with sub-clauses
                         3.3(A) to 3.3(B) inclusive;

     to hold the same unto the Collateral Agent, but in each case subject to
     clause 3.3 (Redemption).

3.1.2 Notwithstanding any other provision of this Fixed and Floating Charge, the
     following shall not be in any way subject to the security created by this
     Fixed and Floating Charge:

     (A) the amounts of US$112 million and US$45 million received by the Chargor
     from 3Com Cayman pursuant to Sections 5.9 or 5.12 of the Facility
     Agreement;

     (B) the Receivables representing such amounts whilst they are held in a
     bank account by the Chargor;

     (C) the benefit of the loans of US$112 million and US$45 million from H3C
     to Chargor referred to in Section 6.1(n)(x) of the Facility Agreement; and

     (D) the amounts of US$112 million and US$45 million received by the Chargor
     from H3C pursuant to the loans referred to in (iii) above and the bank
     accounts in which such amounts are held whilst held by the Chargor.

3.2  COLLATERAL AGENT NO OBLIGATION TO PERFORM

     Notwithstanding the conveyance, transfer and assignment to the Collateral
     Agent of all the right, title, interest and benefit of the Chargor in, to
     and under the Receivables, the Collateral Agent shall not be or be deemed
     to be liable to perform any of the obligations of the Chargor under any of
     the Receivables and the Chargor hereby acknowledges and confirms that it
     shall remain fully liable for the performance of all such obligations and
     shall have no claim against the Collateral Agent in respect of any omission
     on the part of the Collateral Agent to perform the same.

3.3  REDEMPTION

     (A)  Subject always to clause 11.8 (Discharge Conditional), upon the
          Secured Indebtedness having been fully paid and unconditionally and
          irrevocably discharged in full the Collateral Agent shall at the
          request and cost of the Chargor, promptly release, discharge and/or
          re-assign, or, as appropriate, transfer the benefit of the Security
          constituted by clause 3.1.1 (Assignment, Fixed and Floating Charge) to
          the Chargor or as the Chargor may direct and, thereafter, the Chargor
          shall have no future obligation hereunder.

     (B)  The execution of a discharge, release, re-assignment or partial
          discharge by the Collateral Agent shall be a good and valid release or
          discharge of the Security constituted by this clause 3 (Security) or
          the relevant part thereof (as the case may be) and the obligations (or
          the relevant part thereof, as the case may be) of



                                        5


          the Chargor from this Fixed and Floating Charge without the need for
          the Chargor to be a party thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Chargor, do all such things and execute all such documents
          and procure that its nominees do all such things and execute all such
          documents within its power to do and execute as may be reasonably
          necessary to give effect to the release, discharge, re-assignment
          and/or transfer referred to in sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment and/or transfer pursuant to
          and in accordance with sub-clause (A), the Collateral Agent shall, at
          the request and cost of the Chargor:

          (i)  promptly procure the redelivery to the Chargor of all deeds,
               certificates and other documents deposited with the Collateral
               Agent or to its order pursuant to clause 4.2 (Deposit of Title
               Documents);

          (ii) promptly reverse or remove such memoranda endorsed on such
               documents pursuant to clause 4.3 (Endorsement on Documents) as
               are in the possession of the Collateral Agent;

          (iii) promptly procure the redelivery to the Chargor, if it requests
               the same, of the instruments and papers delivered by the Chargor
               to the Collateral Agent under sub-clause 3.2(A);

          (iv) promptly give notice to each person (if any) who has received
               notice of the Security pursuant to clause 4.1 (Further Deeds and
               Documents) of such release, discharge, re-assignment and/or
               transfer; and

          (v)  promptly instruct the relevant insurance company to remove any
               endorsements and reverse any amendments made pursuant to
               sub-clause 4.1(C),

          in each case to the extent the same relates to such release,
          discharge, re-assignment and/or transfer.

4.   PERFECTION OF SECURITY AND FURTHER ASSURANCE

4.1  FURTHER DEEDS AND DOCUMENTS

     The Chargor shall at any time at the request of the Collateral Agent but at
     the cost of the Chargor for costs reasonably incurred promptly sign, seal,
     execute, deliver and do all deeds, instruments, notices, documents, acts
     and things (including, without limitation further or other legal
     assignments, transfers, mortgages, legal or other charges or securities or
     any filings or registrations) as in each such case may be necessary or
     desirable for the purpose of maintaining, perfecting or protecting the
     Security or at any time after the Security has become enforceable for
     facilitating the realisation thereof and the exercise of all powers,
     authorities and discretions vested in the Collateral Agent or any Receiver
     appointed hereunder provided that and without limitation:



                                       6


     (A)  promptly following the execution and delivery of this Fixed and
          Floating Charge, the Chargor shall:

          (i)  enter the relevant particulars of this Fixed and Floating Charge
               in the register of charges kept or to be kept at the registered
               office of the Chargor; and

          (ii) make all such other filings and registrations as may be requested
               in writing by the Collateral Agent as may be necessary to
               perfect, protect and maintain the Security;

     (B)  as soon as practicable following request by the Collateral Agent the
          Chargor shall assign any material insurance policies inuring to its
          benefit and join with the Collateral Agent in giving notice of such
          assignment in a form reasonably satisfactory to the Collateral Agent
          to each insurance company under such insurance policies and use
          reasonable endeavours to procure that such insurance company
          acknowledges such notice in a form reasonably satisfactory to the
          Collateral Agent and ensure that all endorsements then existing on
          each of such insurance policies will be deleted, and each of such
          insurance policies will be endorsed substantially as set out in, and
          the named insured under each of the insurance policies will be
          amended, in a form reasonably satisfactory to the Collateral Agent;

     (C)  as soon as practicable following request by the Collateral Agent the
          Chargor shall use its reasonable efforts to procure that its insurance
          brokers issue to the Collateral Agent the brokers' undertaking(s) in
          respect of the insurance policies assigned pursuant to sub-clause (B)
          above in a form satisfactory to the Collateral Agent;

     (D)  the Chargor shall, at the request of the Collateral Agent or any
          person deriving title under the Collateral Agent, execute or do all
          lawful acts, assurances and things for further or more perfectly
          assuring the Charged Property or any part thereof to the Collateral
          Agent and to those deriving title under the Collateral Agent,

     and without prejudice to the generality of the foregoing, such assignments,
     transfers, mortgages, legal or other charges or securities shall be in such
     form as the Collateral Agent shall reasonably require and may contain
     provisions such as are herein contained or provisions to the same effect.

4.2  DEPOSIT OF TITLE DOCUMENTS

     In addition to the provisions of clause 3 (Security), the Chargor shall, as
     soon as practicable following request by the Collateral Agent following the
     execution and delivery of this Fixed and Floating Charge (or upon becoming
     possessed thereof at any time hereafter), deposit with the Collateral Agent
     or to the Collateral Agent's order all deeds, certificates and other
     documents (other than those relating to the shares subject to the H3C Share
     Mortgage) constituting or evidencing title to any material asset forming
     part of the Charged Property originally charged pursuant to Clause 3.1.1
     (A) or (B) or subsequently becoming subject to a fixed charge hereunder
     pursuant to clause 5



                                        7


     hereof or any part thereof (if they have not already done so) and the
     Collateral Agent, if held by it or to its order, shall hold or procure to
     be held such deeds, certificates and other documents in safe custody and
     clearly identified so as to be distinct from all other deeds, certificates
     and other documents of the Collateral Agent.

4.3  ENDORSEMENT ON DOCUMENTS

     The Chargor, shall from time to time at the reasonable request of the
     Collateral Agent but at the Chargor's cost for costs reasonably incurred
     endorse or cause to be endorsed on documents referred to in clause 4.2
     (Deposit of Title Documents) such memoranda as the Collateral Agent may
     reasonably require for the purpose of referring or drawing attention to the
     security interests created by this Fixed and Floating Charge.

5.   PROTECTION OF SECURITY AND CRYSTALLISATION OF FLOATING CHARGE

5.1  PART CRYSTALLISATION

     The Collateral Agent shall be entitled at any time by notice in writing to
     the Chargor after an Event of Default to convert the floating charge
     created by sub-clause 3.1.1(C) into a fixed charge affecting all the
     property and assets which for the time being are the subject of such
     floating charge or, as the case may be, such of the said property and
     assets as are specified in such notice.

5.2  AUTOMATIC CRYSTALLISATION

     Notwithstanding clause 5.1 (Part Crystallisation) and without prejudice to
     any rule of law which may have a similar effect, the floating charge shall
     automatically be converted with immediate effect into a fixed charge as
     regards all the property and assets subject to the floating charge and
     without notice from the Collateral Agent to the Chargor on:

     (A)  the presentation of a petition for the compulsory winding up of the
          Chargor;

     (B)  the convening of a meeting for the passing of a resolution for the
          voluntary winding up of the Chargor;

     (C)  the presentation or making of an application for a warrant of
          execution, writ of fieri facias, garnishee order or charging order in
          respect of any material part of the property or assets of the Chargor
          subject to the floating charge which is not discharged within 60 days;
          or

     (D)  the Chargor creating or permitting any Lien over or with respect to
          any of the Charged Property, or attempting to do so other than as
          permitted by the Facility Agreement; or

     (E)  the occurrence of the circumstances referred to in clause 8 (Default
          Procedure).

5.3  RECONVERSION OF CRYSTALLISED ASSETS

     The Collateral Agent may by notice in writing to the Chargor re-convert any
     of the assets which has become subject to a fixed charge pursuant to
     clauses 5.1 (Part



                                        8


     Crystallisation) or 5.2 (Automatic Crystallisation) so that such asset
     shall again be subject to the floating charge specified in sub-clause
     3.1.1(C) provided that the floating charge over any asset re-converted
     under this clause 5.3 (Reconversion of Crystallised Assets) shall be
     subject to the further operation of clauses 5.1 (Part Crystallisation) or
     5.2 (Automatic Crystallisation).

6.   REPRESENTATIONS

6.1  The Chargor represents that, subject only to this Fixed and Floating
     Charge, it is the sole legal and beneficial owner of the Charged Property
     and that the Charged Property is free from any Lien other than as permitted
     by the Facility Agreement and any interest or claims of third parties other
     than interest or claims arising by operation of law affecting companies
     generally.

6.2  The above representations are made on the date of this Fixed and Floating
     Charge and are deemed to be repeated by the Chargor on each day following
     the date of this Fixed and Floating Charge until the termination of the
     Facility Agreement or this Fixed and Floating Charge, whichever is later.

7.   COVENANTS AND UNDERTAKINGS

7.1  COVENANTS AND UNDERTAKINGS OF THE CHARGOR

     The Chargor covenants and undertakes with the Collateral Agent that:

     (A)  it shall take all such actions as are available to it:

          (i)  to perfect and protect the Security intended to be conferred by
               it on the Collateral Agent pursuant to this Fixed and Floating
               Charge, including, inter alia, making all payments, carrying out
               all registrations or renewals and generally taking all steps to
               perfect, preserve, maintain and renew when necessary or desirable
               the Security pursuant to this Fixed and Floating Charge; and

          (ii) to maintain the Security intended to be conferred by it on the
               Collateral Agent pursuant to this Fixed and Floating Charge as
               first ranking security;

     (B)  it shall not sell, transfer, assign, exchange or otherwise dispose of
          the whole or any part of the Charged Property or agree to do any of
          the foregoing other than as expressly permitted or provided for in the
          Facility Agreement or in this Fixed and Floating Charge or (with
          respect to the assets charged pursuant to sub-clause 3.1.1 (C)) in the
          ordinary course of business and in accordance with the Facility
          Agreement;

     (C)  other than as provided in the Facility Agreement or in this Fixed and
          Floating Charge it shall not create, incur or permit to subsist any
          Lien on the Charged Property;



                                        9


     (D)  at the written request of the Collateral Agent, make all such filings
          and registrations, and take all such other reasonable steps, as may be
          necessary or desirable in connection with the creation, perfection or
          protection of any security which it may, or may be required to, create
          in connection herewith;

     (E)  at all times give to the Collateral Agent such information as the
          Collateral Agent may reasonably require in respect of the Charged
          Property for the purpose of the discharge of the trusts, powers,
          rights, duties, authorities and discretions vested in it hereunder or
          by operation of law;

     (F)  take all reasonable steps as may be required by the Collateral Agent
          to allow the Collateral Agent to sell or dispose of the Charged
          Property on or after the Security becomes enforceable; and

     (G)  not to do or cause or permit to be done, or omit to do anything which
          may in any way jeopardise the Security created hereunder.

7.2  POWER OF COLLATERAL AGENT TO REMEDY FAILURES

     If at any time the Chargor shall fail to comply with or perform any of the
     covenants contained in this Fixed and Floating Charge or any Credit
     Document, the Collateral Agent shall have the power on behalf of or in the
     name of the Chargor, but shall not be under any obligation, to perform the
     covenants and to take such steps which the Collateral Agent may in its
     discretion, consider appropriate with a view to remedying, or mitigating
     the consequences of such failure but so that the exercise of this power or
     the failure to exercise it shall, in no circumstances, prejudice the other
     rights of the Collateral Agent under this Fixed and Floating Charge or any
     Credit Document. The Chargor shall on demand reimburse to the Collateral
     Agent all proper costs, expenses and losses incurred or sustained by the
     Collateral Agent in connection with such steps and until such costs,
     expenses and losses are reimbursed the outstanding sums shall carry
     interest in accordance with Section 2.10 of the Facility Agreement from the
     date when payment is due to the date of reimbursement and such outstanding
     sums including any accrued interest shall form part of the Secured
     Indebtedness. No exercise by the Collateral Agent of its powers under this
     clause 7.2 (Power of Collateral Agent to Remedy Failures) shall render the
     Collateral Agent liable to account as a mortgagee in possession.

8.   DEFAULT PROCEDURE

     The Security shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(e) or 8.1(f) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(e) or 8.1(f) of the Facility Agreement with respect to
          Excluded Subsidiaries).



                                       10


9.   EFFECTS OF THE SECURITY BECOMING ENFORCEABLE

9.1  EFFECTS

     After the Security (or the relevant part thereof) shall have become
     enforceable in accordance with clause 8 (Default Procedure) and without
     prejudice to the powers of the Collateral Agent to appoint a Receiver
     pursuant to clause 14 (Appointment of Receiver):

     (A)  the floating charge created under sub-clause 3.1.1(C) shall
          automatically and immediately crystallise and operate as a fixed
          charge;

     (B)  the Chargor's rights or power to deal with the Charged Property
          (whether statutory or otherwise) shall cease and the Collateral Agent
          shall be entitled to deal with, collect in and realise the same in
          such manner as the Collateral Agent thinks fit;

     (C)  the Collateral Agent may exercise all of the rights conferred on any
          mortgagee by law and on the Collateral Agent or on any Receiver under
          this Fixed and Floating Charge including, without limitation, the
          right to sell or otherwise dispose of, for any consideration (as
          referred to in clause 14.4 (Disposal by Receiver)), the whole or any
          part of the Charged Property in respect of which the security hereby
          constituted has become enforceable accordingly and, nothing shall
          restrict the exercise by the Collateral Agent or any Receiver of its
          powers hereunder and the Security shall become immediately enforceable
          and the statutory power of sale and other powers of sale and
          appointing a Receiver shall become immediately exercisable without any
          juridical or other formality or any presentment, demand, protest or
          other notice of any kind on or at any time after the Enforcement Date;

     (D)  without prejudice to the foregoing, (and subject to clause 9.9
          (Inconsistency and Conflict)), the Collateral Agent may in addition to
          any powers granted it by applicable law, upon and from the Enforcement
          Date and upon and subject to the terms and conditions of the Facility
          Agreement):

          (i)  sell all the title to and interest in the Charged Property or any
               interest in the same and do so in consideration of an agreement
               to pay all or part of the purchase price at a later date or
               dates, or an agreement to make periodical payments, whether or
               not the agreement is secured by a security or a guarantee, or for
               such other consideration whatsoever as the Collateral Agent may
               think fit, and also grant any option to purchase and effect
               exchanges;

          (ii) with a view to, or in connection with, the sale of the Charged
               Property, carry out any transaction, scheme or arrangement which
               the Collateral Agent considers appropriate;

          (iii) do all or any of the following things or exercise all or any of
               the following powers, so far as not included in paragraphs (i)
               and (ii) of sub-clause (D):



                                       11


               (a)  take possession of, get in and collect the Charged Property;

               (b)  carry on the business of the Chargor in so far as it relates
                    to the Charged Property as it thinks fit;

               (c)  sell, exchange, license or otherwise dispose of or in any
                    way whatsoever deal with the Charged Property for such
                    consideration (if any) and upon such terms as it may think
                    fit;

               (d)  appoint and engage managers, agents and advisers in respect
                    of the Charged Property upon such terms as to remuneration
                    and otherwise and for such periods as it may determine, and
                    to dismiss them;

               (e)  bring, defend, submit to arbitration, negotiate, compromise,
                    abandon and settle any claims and proceedings concerning the
                    Charged Property;

               (f)  transfer all or any of the Charged Property and/or any of
                    the liabilities of the Chargor to any other company or body
                    corporate, whether or not formed or acquired for the purpose
                    and whether or not a subsidiary or associated company of the
                    Collateral Agent or a company in which the Collateral Agent
                    has an interest;

               (g)  in connection with the exercise of any of its powers
                    hereunder, execute or do, or cause or authorise to be
                    executed or done, on behalf of or in the name of the
                    Chargor, as it may think fit, but only in respect of the
                    Charged Property all assurances, deeds, transactions,
                    schemes of arrangement, documents, acts and things which it
                    may consider appropriate and to do and exercise, in relation
                    to the Charged Property, all such powers as it would be
                    capable of exercising if it were the absolute beneficial
                    owner of the same and to use the name of the Chargor for all
                    or any of the foregoing purposes;

               (h)  exercise or permit any other person to exercise any powers,
                    rights, remedies or privileges in respect of the Charged
                    Property;

               (i)  exercise any of the powers and perform any of the duties
                    conferred on the Chargor by any Credit Document or any
                    statute, deed or contract;

               (j)  disclaim, discharge, abandon, disregard, alter or amend all
                    or any of the outstanding contracts of the Chargor but only
                    in respect of the Charged Property and allow time for
                    payment of any monies either with or without security;



                                       12


               (k)  make and effect insurances in respect of the Charged
                    Property and submit claims thereunder;

               (l)  do all such other acts and things as it may consider
                    necessary, incidental or conducive to the exercise of any of
                    the powers hereby conferred;

               (m)  generally use the name of the Chargor and its corporate seal
                    (where appropriate) in the exercise of all or any of the
                    powers hereby conferred;

               (n)  in respect of the Charged Property, sanction or confirm
                    anything done by the Chargor and concur with the Chargor in
                    any dealing not hereinbefore specifically mentioned; and

               (o)  generally carry out, cause or authorise to be carried out
                    any transaction, scheme or arrangement whatsoever, whether
                    similar or not to any of the foregoing, in relation to the
                    Charged Property which it may consider expedient as
                    effectually as if it were solely and absolutely entitled to
                    the Charged Property.

9.2  ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS

     Subject to the order of priority of payments set out in Section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in and about the carrying on and management of any such
     business as contemplated by clause 9.1 (Effects) or in the exercise of any
     of the powers conferred by clause 9.1 (Effects) or otherwise in respect of
     the Charged Property and all outgoings which it shall think fit to pay out
     of the profits and income of the Charged Property and the moneys received
     by it in carrying out any business as contemplated by clause 9.1 (Effects)
     and may apply the residue of the said profits, income and moneys in the
     manner provided by Section 2.16(h) of the Facility Agreement provided that
     any such expenses shall, in any event, to the extent not fully paid or
     discharged, form or shall be deemed to form part of the Secured
     Indebtedness.

9.3  NO WAIVER

     No failure on the part of the Collateral Agent or any Receiver to exercise,
     and no delay on its part in exercising, any right, power or remedy under
     this deed will operate as a waiver thereof nor will any single or partial
     exercise of any right, power or remedy preclude any other or further
     exercise thereof or the exercise of any other right, power or remedy. .

9.4  WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Fixed and
     Floating Charge must be in writing, be express and not implied and may be
     given subject to any conditions which the Collateral Agent considers fit.
     Any waiver or consent shall be effective only in the instance and for the
     purpose for which it is given.



                                       13


9.5  NO OBLIGATION TO INSURE

     Notwithstanding any provisions to the contrary, the Collateral Agent shall
     not be under any obligation to insure any of the Charged Property or the
     title deeds or other evidence in respect thereof and shall not be
     responsible for any loss which may be suffered as a result of the lack of
     or inadequacy of any such insurance.

9.6  NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Charged Property by any act or omission of the
     Chargor or any prior ranking encumbrancer or any other person.

9.7  NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax in respect of the Charged Property or any part thereof
     on any income therefrom or any proceeds thereof.

9.8  NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Security or any security created by the Facility
     Agreement or any of the Credit Documents.

9.9  INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Fixed and Floating Charge
     and the provisions of any applicable law, the provisions of this Fixed and
     Floating Charge shall prevail and such inconsistent or conflicting
     provisions shall be deemed to be expressly negated or modified hereby
     provided that none of the foregoing shall be construed as a limitation on
     the powers of any Receiver.

9.10 NO EXEMPTION

     Nothing in this Fixed and Floating Charge shall exempt the Collateral Agent
     from or indemnify it against any liability which would by rule of law or
     otherwise attach to it in respect of any act of negligence or wilful
     default which it may have committed in relation to its duties and/or
     discretions under this Fixed and Floating Charge.

10.  CHATTELS AND FIXTURES

     At any time after the Security has become enforceable, the Collateral Agent
     or any Receiver may:

10.1 dispose of any chattels owned by the Chargor forming part of the Charged
     Property as agent for the Chargor and without prejudice to any obligation
     on the part of the



                                       14


     Collateral Agent or the Receiver to account for the proceeds of sale of
     such chattels; and

10.2 sever any plant machinery and other fixtures and fittings owned by the
     Chargor from any premises containing them and sell the same separately
     without the consent of the Chargor.

11.  PRESERVATION OF RIGHTS

11.1 SECURITY ADDITIONAL

     The Security shall be in addition to and shall be independent of every
     guarantee, indemnity or other security which the Collateral Agent may at
     any time hold for the Secured Indebtedness and it is hereby declared that
     no prior security held by the Collateral Agent over the whole or any part
     of the Charged Property shall merge in the Security.

11.2 SECURITY CONTINUING

     The Security shall be a continuing security notwithstanding the winding-up
     or dissolution of the Chargor or any partial payment, settlement of account
     or other matter whatsoever and in particular (but without prejudice to the
     generality of the foregoing) shall not be considered satisfied by any
     intermediate repayment in satisfaction of all or any of the Secured
     Indebtedness and shall continue in full force and effect until the Secured
     Indebtedness has been discharged and satisfied in full.

11.3 INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement variation or release with, the Chargor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Chargor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Security or to the liability of the Chargor for the Secured
     Indebtedness.

11.4 RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Fixed and Floating Charge
     are cumulative and are not, nor are they to be construed as, exclusive of
     any rights, power or remedies provided by law.

11.5 SECURITY NOT AFFECTED

     Neither the Security nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Fixed and Floating Charge or by law nor the liability of the
     Chargor hereunder shall be discharged, impaired or otherwise affected by:

     (A)  the insolvency, bankruptcy, winding-up or dissolution of the Chargor
          or any change in its status, function, control or ownership;



                                       15


     (B)  any of the obligations of the Chargor under any of Credit Document or
          under any other Lien taken in respect of the obligations of the
          Chargor under any Credit Document being or becoming illegal, invalid,
          unenforceable or ineffective in any respect;

     (C)  time or other indulgence being granted or agreed to be granted to the
          Chargor in respect of any of its obligations under any Credit Document
          or under any such Lien;

     (D)  any amendment to, or any variation, waiver or release of, any of the
          obligations of the Chargor under any Credit Document or under any such
          Lien;

     (E)  any failure to take, or fully to take, any Lien contemplated by any
          Credit Document or otherwise agreed to be taken in respect of any of
          the obligations of the Chargor under any Credit Document;

     (F)  any deficiency in the powers of the Chargor to enter into or perform
          any of its obligations under any Credit Document to which it is a
          party or any irregularity in the exercise thereof or any lack of
          authority by any person purporting to act on their behalf;

     (G)  any other Credit Document or Lien (other than the Security) or right
          or remedy (other those under this Fixed and Floating Charge) being or
          becoming wholly or partly void, voidable, unenforceable or impaired or
          by the Collateral Agent releasing, refraining from enforcing, varying
          or in any other way dealing with any of the same or any power, right
          or remedy the Collateral Agent may now or hereafter have from or
          against the Chargor;

     (H)  any waiver, exercise, omission to exercise, compromise, renewal or
          release of any rights against the Chargors or any compromise,
          arrangement or settlement with it;

     (I)  any invalidity or irregularity in the execution of this Fixed and
          Floating Charge or any other Credit Document; and

     (J)  any other act (save for any act of release and discharge granted by
          the Collateral Agent), event or omission which, but for this Clause
          11.5 (Security Not Affected) might operate to discharge, impair or
          otherwise affect the Security or the liability of the Chargor for the
          Secured Indebtedness or any of the rights, powers or remedies
          conferred upon the Collateral Agent or any Receiver (or their
          respective delegates) by this Fixed and Floating Charge or by law or
          the liability of the Chargor hereunder.

     Without prejudice to the generality of this Clause 11.5 (Security Not
     Affected), the Chargor expressly confirms that it intends that its
     liability for the Secured Indebtedness and its obligations under this Fixed
     and Floating Charge shall extend from time to time to any variation,
     increase, extension, addition or replacement (however fundamental) of or to
     any of the Credit Documents and/or any facility or amount made available
     under any of the Credit Documents.



                                       16


11.6 NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Fixed and Floating Charge is intended to, or
     shall operate so as to, prejudice or affect any guarantee, indemnity or
     other security of any kind whatsoever which the Collateral Agent may have
     for the Secured Indebtedness or any right, remedy or privilege of the
     Collateral Agent thereunder.

11.7 SCOPE OF RELEASE

     Any receipt, release or discharge of the Security or of any liability
     arising under this Fixed and Floating Charge may be given by the Collateral
     Agent and, unless expressly stated otherwise, shall not release or
     discharge the Chargor from any liability for the same or any other monies
     which may exist independently of this Fixed and Floating Charge. Where such
     receipt, release or discharge relates only to part of the Charged Property
     such receipt, release or discharge shall not prejudice or affect the
     Security in relation to the remainder of the Charged Property, unless
     expressly stated otherwise.

11.8 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Chargor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this clause 11.8 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Security subsequently as if such settlement or discharge had not occurred
     but so that nothing herein shall confer on any Transaction Persons the
     right to claim under this clause 11.8 (Discharge Conditional) for more than
     the Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment, provided that any
     such Settlement, reassignment, release or discharge shall become
     unconditional upon the expiry of one month after the maximum period within
     which such settlement, reassignment, release or discharge can be avoided or
     reduced.

11.9 NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Fixed and Floating Charge or by law:

     (A)  to take any action or obtain judgment in any court against the
          Chargor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Chargor; or

     (C)  to enforce or seek to enforce any other security taken in respect of
          any of the obligations of the Chargor under any of the Credit
          Documents.



                                       17


11.10 NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent charge affecting the Charged
     Property or (b) the Collateral Agent receives notice of any assignment or
     disposition affecting all or any part of the Charged Property or any
     interest therein to which the Collateral Agent has not given its approval
     or (c) the commencement of the insolvency, administration, reorganisation,
     liquidation or dissolution of, or any analogous proceeding in respect of,
     of the Chargor, the Collateral Agent may open a new account in the name of
     the Chargor (whether or not it permits any existing account to continue).
     If the Collateral Agent does not open such a new account, it shall
     nevertheless be treated as if it had done so at the time when the notice
     was received or was deemed to have been received or, as the case may be,
     the insolvency, administration, reorganisation, liquidation, dissolution or
     other proceeding commenced. Thereafter, all payments made by the Chargor to
     the Collateral Agent or received by the Collateral Agent for the account of
     the Chargor shall be credited or treated as having been credited to the new
     account and shall not operate to reduce the amount secured by this Deed at
     the time when the Collateral Agent received or was deemed to have received
     such notice or, as the case may be, the insolvency, administration,
     reorganisation, liquidation, dissolution or other proceeding commenced.

12.  SUSPENSE ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Fixed and Floating Charge (including the proceeds of
     any conversion of currency) after the security created hereunder has become
     enforceable, except where such monies together with all other monies
     received, recovered or realised by the Collateral Agent or any Receiver
     under this Fixed and Floating Charge are sufficient to satisfy and
     discharge the Secured Indebtedness in full, may in the discretion of the
     Collateral Agent or the Receiver (provided that such action has first been
     approved by the Collateral Agent) be credited to any suspense or impersonal
     account in the name of the Collateral Agent at the Account Bank and may be
     held in such account for so long as the Collateral Agent may think fit
     (with interest accruing thereon at such market rate, if any, as the
     Collateral Agent may deem fit) pending their application from time to time
     (as the Collateral Agent shall be entitled to do in its discretion) in or
     towards satisfaction of the Secured Indebtedness in accordance with the
     terms of this Fixed and Floating Charge. Save as provided above, no party
     shall be entitled to withdraw any amount at any time standing to the credit
     of any such suspense or impersonal account.

13.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or become exercisable or be
     concerned to see whether any such delegation by the Collateral Agent shall
     have lapsed for any reason or been revoked. Any sale or other dealing by
     the Collateral Agent or its delegate or any Receiver of or with the Charged
     Property and any part thereof shall be deemed to be within the power of the
     person effecting the same and the receipt by such person of the purchase or
     other moneys connected therewith shall effectively discharge the purchaser
     or other party to such



                                       18


     dealing who shall not be concerned with the manner of application of the
     proceeds of sale or other dealing or be in any way answerable therefor.

14.  APPOINTMENT OF RECEIVER

14.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may if requested by the Chargor or at any time after
     the Security (or the relevant part thereof) shall have become enforceable
     in accordance with clause 8 (Default Procedure), appoint one or more
     persons to be a Receiver or Receivers of the whole or any part of the
     Charged Property. The Collateral Agent may:

     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.

14.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Chargor) have, in relation to the Charged Property, or as the case may be,
     that part of the Charged Property in respect of which he was appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by common law or otherwise by law on mortgagees (whether or
          not in possession) and receivers appointed under common law; and

     (B)  the power in the name or on behalf and at the cost of the Chargor to
          exercise all the powers and rights of an absolute owner of the Charged
          Property or the relevant part thereof and do or omit to do anything
          which the Chargor could do.

14.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Chargor) have the powers specified in clause 9.1 (Effects).

14.4 RECEIVER TO BE AGENT OF THE CHARGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Chargor and the Chargor shall be solely
     responsible, jointly and severally,



                                       19


     for the acts and defaults of such Receiver (save in the case of the fraud,
     negligence, wilful default, breach of duty or breach of trust in relation
     to duties by such Receiver) and for payment of such Receiver's remuneration
     in respect thereof.

14.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.

14.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Security (other than monies paid into a
     suspense account by such Receiver in accordance with clause 12 (Suspense
     Account(s)).

14.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any attorney or
          agent of such party shall be liable to any person in respect of any
          loss or damage whatsoever which arises out of the realisation of the
          Charged Property or any part thereof or from any act, default or
          omission in relation to the Security or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of their respective powers, authorities or
          discretions conferred upon them in relation to the Security or any
          part of it, unless such loss or damage is caused by its negligence,
          wilful default, breach of duty, breach of trust or fraud.

     (B)  The Collateral Agent shall not be liable to any person in respect of
          any loss or damage whatsoever which arises out of the realisation of
          the Charged Property or any part thereof or from any act, default or
          omission in relation to the Security or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of the powers, authorities or discretions
          conferred upon it in relation to the Security or any part of it unless
          such loss or damage is caused by its negligence, wilful default,
          breach of duty, breach of trust or fraud.

     (C)  Without prejudice to the generality of sub-clauses (A) and (B), entry
          into possession of the Charged Property shall not render the
          Collateral Agent or the Receiver liable to account as mortgagee in
          possession or liable for any loss on realisation or for any default or
          omission for which a mortgagee in possession might be liable unless
          such loss or damage is caused by its negligence, wilful default,
          breach of duty, breach of trust or fraud and, if and whenever the
          Collateral Agent or the Receiver enters into possession of the Charged
          Property, it shall be entitled at any time at its pleasure to go out
          of such possession.



                                       20


14.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all other powers of the Collateral Agent under
     common law or otherwise and so that such powers shall be and remain
     exercisable by the Collateral Agent in respect of any part of the Charged
     Property in respect of which no Receiver has been appointed and
     notwithstanding that an appointment under the provisions of this clause 14
     (Appointment of Receiver) shall have subsisted and been withdrawn in
     respect of that property or shall be subsisting in respect of any other
     part of the Charged Property.

15.  INDEMNITY

15.1 INDEMNITY

     Without prejudice to any right at law given to trustees, the Chargor
     further covenants with and undertakes to each of the Collateral Agent and
     any Receiver or Receivers fully to indemnify and keep indemnified it from
     and against all liabilities, losses, damages, costs and expenses (including
     legal costs and expenses), charges, actions, proceedings, claims and
     demands or any other obligation or liability (including, without
     limitation, in respect of taxes, duties, levies, imposts and other charges
     any indemnity and other amounts which the Collateral Agent is or would
     become obliged to pay, upon payment by the Chargor, under such indemnity)
     which it may properly incur (except, having regard to the provisions of any
     Credit Document, insofar as they are incurred because of fraud, negligence,
     wilful default or breach of trust on the part of it whether before or after
     the Enforcement Date):

     (A)  in consequence of anything done or purported to be done by the
          Collateral Agent or any Receiver in relation to the Charged Property
          or under this Fixed and Floating Charge or any Credit Document as a
          result of or in connection with any failure by the Chargor to comply
          with its obligations thereunder to the Collateral Agent or any
          Receiver; or

     (B)  in consequence of any payment in respect of the Secured Indebtedness
          (whether made by the Chargor or a third party) being impeached or
          declared void for any reason whatsoever; or

     (C)  in consequence of the breach or non-performance by the Chargor of any
          of their respective warranties, representations, covenants or
          undertakings herein contained or otherwise relating to all or any part
          of the Charged Property; or

     (D)  in connection with the realisation of the Charged Property (including
          the costs of any proceedings in relation to this Fixed and Floating
          Charge or to the Secured Indebtedness).

15.2 INTEREST

     The amounts payable to the Collateral Agent or the Receiver under clauses
     15.1 (Indemnity) and 19 (Stamp Duty and Taxes) shall carry interest in
     accordance with Section 2.10 of the Facility Agreement from the date on
     which they were paid or



                                       21


     incurred by the Collateral Agent or the Receiver (as the case may be) to
     the date of actual payment to the Collateral Agent or, as the case may be,
     the Receiver under the aforementioned clauses as well after as before any
     judgment and such amounts and interest may be debited by the Collateral
     Agent to any account of the Chargor, but shall, in any event (to the extent
     not fully paid or discharged), form part of the Secured Indebtedness and
     accordingly be secured on the Charged Property under the Security.

16.  POWER OF ATTORNEY

16.1 APPOINTMENT AND POWERS

     The Chargor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this clause 16.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,

     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may be required (or which the
     Collateral Agent, any person falling within sub-clause (B) or any Receiver
     appointed hereunder shall reasonably consider requisite) for carrying out
     any obligation imposed on the Chargor, as the case may be, by or pursuant
     to this Fixed and Floating Charge (including but not limited to the
     obligations of the Chargor under clause 4.1 (Further Deeds and Documents)
     and the covenants referred to in clause 4.1 (Further Deeds and Documents)),
     for carrying out any sale, lease or other dealing by the Collateral Agent
     or any such Receiver into effect, for conveying or transferring any legal
     estate or other interest in the Charged Property, for getting in the
     Charged Property, and generally for enabling the Collateral Agent or any
     person falling within sub-clause (B) or any Receiver to exercise the
     respective powers conferred on them by or pursuant to this Fixed and
     Floating Charge or by law provided that the power contained in this clause
     16.1 (Appointment and Powers) shall not be exercisable unless and until the
     Security shall have become enforceable. The exercise of such power by the
     Collateral Agent or any person falling within sub-clause (B) or any
     Receiver shall not put any person dealing with it upon any enquiry as to
     whether a Event of Default shall have occurred. Each of the Collateral
     Agent, any person falling within sub-clause (B) and any Receiver shall have
     full power to delegate the power conferred on it by clause 16.1
     (Appointment and Powers), but no such delegation shall preclude the
     subsequent exercise of such power by the Collateral Agent or any person
     falling within sub-clause (B) or any Receiver (as the case may be) itself
     or preclude the Collateral Agent or any person falling within sub-clause
     (B) or any Receiver (as the case may be) from making a subsequent
     delegation thereof to some other person; any such delegation may be revoked
     by the Collateral Agent or any person falling within sub-clause 16.1(B) or
     any Receiver (as the case may be) at any time.



                                       22


16.2 RATIFICATION

     The Chargor shall ratify and confirm all transactions lawfully and properly
     entered into by the Collateral Agent or any Receiver or delegate of the
     Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     clause 16.1 (Appointment and Powers).

16.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Chargor hereby
     acknowledges) granted irrevocably and severally, for value and for security
     as part of the Security to secure the several proprietary interests of and
     the performance of obligations owed to the respective donees.

17.  SET-OFF AND CURRENCY

17.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder provided that payments in respect of
          costs and expenses may be made in Hong Kong dollars if incurred in
          Hong Kong dollars.

     (B)  If any sum due from the Chargor under this Fixed and Floating Charge
          or any order or judgment given or made in relation hereto has to be
          converted from the currency (the "FIRST CURRENCY") in which the same
          is payable hereunder or under such order or judgment into another
          currency (the "SECOND CURRENCY") for the purpose of (a) making or
          filing a claim or proof against the Chargor, (b) obtaining an order or
          judgment in any court or other tribunal or (c) enforcing any order or
          judgment given or made in relation hereto then:

          (i)  the Chargor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is suffered as a result of or in connection with
               the Collateral Agent's own fraud, negligence, wilful default,
               breach of duty or breach of trust; and

          (ii) the Collateral Agent shall account to the Chargor for the amount
               by which any sum realised by it exceeds the aggregate amount of
               all sums owing to it by the Chargor at the time at which such
               profit is realised provided that the Collateral Agent shall only
               be required to make any payment to the Chargor in relation
               thereto if at such time all the payment obligations of the
               Chargor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or



                                       23


          rates of exchange at which the Collateral Agent may in the ordinary
          course of business purchase the first currency with the second
          currency upon receipt of a sum paid to it in satisfaction, in whole or
          in part, of any such order, judgment, claim or proof.

17.2 SET-OFF

     The Chargor waives, and (where incapable of waiver) agrees not to exercise
     (unless required to do so by law), any right of set-off or netting, whether
     conferred by agreement or law, which it may have against the Collateral
     Agent so that it does not reduce any amount payable by it to the Collateral
     Agent under this Fixed and Floating Charge.

17.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or any
     suspense account pursuant to clause 12 (Suspense Account(s)) or making any
     application therefrom or for any other purpose in connection with this
     Fixed and Floating Charge, the Collateral Agent may (unless otherwise
     required by law) convert any monies received, recovered or realised or
     subject to application by the Collateral Agent under this Fixed and
     Floating Charge or any monies to be credited to any such account (including
     the proceeds of any previous conversion under this clause 17 (Set-off and
     Currency)) from their existing currency of denomination into such other
     currency of denomination as the Collateral Agent may reasonably think fit
     and any such conversion shall be effected at such rate or rates of exchange
     as may be agreed by the Collateral Agent in consultation with the Chargor
     as being relevant and any rate, method and date so agreed shall be binding
     on the Chargor and any costs, expenses or commissions incurred in effecting
     any such conversion shall be deducted from the proceeds of any such
     conversion.

18.  AMENDMENTS

     This Fixed and Floating Charge may not be amended, modified or waived in
     any respect whatsoever, without the prior written consent of the Collateral
     Agent given with express reference to this Clause 18 (Amendments) and
     expressly stated to be intended to operate as the Collateral Agent's
     consent to such amendment, modification or waiver on behalf of the
     Requisite Lenders.

19.  STAMP DUTY AND TAXES

     The Chargor shall pay all stamp duties, land registry and similar fees,
     filing and registration fees and other transaction taxes required in
     relation to or for the purpose of procuring the execution, validity and
     enforceability of this Fixed and Floating Charge and the Security and shall
     indemnify the Collateral Agent and each Receiver appointed hereunder
     against any liabilities, costs, claims and expenses resulting from any
     failure to pay or any delay in paying the same on a full indemnity basis.

20.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Security has become
     enforceable, apply to the court for an order that the terms of this Fixed
     and Floating Charge be carried into



                                       24


     execution under the direction of the court and for the appointment of a
     Receiver of the Charged Property or any part thereof and for any other
     order in relation to the administration of the terms of this Fixed and
     Floating Charge as the Collateral Agent shall deem fit and it may assent to
     or approve any application to the court made at the instance of the
     Collateral Agent or on its behalf and the Collateral Agent shall be
     indemnified by the Chargor against all costs, charges and expenses properly
     incurred by it in relation to any such application or proceedings.

21.  PARTIAL INVALIDITY

     Every provision contained in this Fixed and Floating Charge shall be
     severable and distinct from every other such provision and if at any time
     any provision hereof is or becomes illegal, invalid or unenforceable in any
     respect under the law of any jurisdiction, neither the legality, validity
     or enforceability of the remaining provisions hereof nor the legality,
     validity or enforceability of such provision under the law of any other
     jurisdiction shall in any way be affected or impaired thereby.

22.  NOTICES

22.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

22.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Fixed and Floating Charge shall (unless that other
     person has by 15 days' written notice to the one specified another address
     department, officer or person as the case may be) be made or delivered to
     that other person at the address identified with its signature below and
     shall be deemed to have been made or delivered (in the case of any
     communication made by letter) when left at that address during normal
     business hours on a Hong Kong Business Day (or on the next Hong Kong
     Business Day if not left during normal business hours on a Hong Kong
     Business Day) or (as the case may be) 5 days (in the case of local post)
     and 10 days (in the case of overseas post) after being deposited in the
     post postage prepaid in an envelope addressed to it at that address marked
     for the attention of any specified department, officer or person or (in the
     case of any communication made by facsimile transmission) when sent to the
     correct facsimile number of the addressee identified with its signature
     below and received in whole and in legible form by such addressee provided
     that any communication or document to be made or delivered by the Chargor
     or the Collateral Agent shall be effective only when received by the
     Chargor or the Collateral Agent, as appropriate, and then only if the same
     is expressly marked for the attention of the department, officer or person
     identified below with the signature of the relevant addressee (or such
     other department, officer or person as the relevant addressee shall from
     time to time and in each case by not less than 3 days' prior notice in
     writing to the parties hereto have specified for this purpose).



                                       25


22.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Fixed and Floating Charge shall be in the English language
     or accompanied by a translation thereof into English certified (by an
     officer of the person making or delivering the same) as being a true and
     accurate translation thereof.

23.  ASSIGNMENT

     The Collateral Agent may assign its rights and obligations under this Fixed
     and Floating Charge to any successor under the Facility Agreement in
     accordance with Section 9.7 of the Facility Agreement.

24.  COSTS AND EXPENSES

     The Chargor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the registration, perfection, preservation or enforcement of this
          Fixed and Floating Charge and any other document relating thereto; and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Chargor
          under any of the Credit Documents or the recovery by the Collateral
          Agent or any such Receiver from the Chargor of the Secured
          Indebtedness then due and payable.

25.  GOVERNING LAW

     This Fixed and Floating Charge is governed by the laws of the Cayman
     Islands.

26.  JURISDICTION

26.1 CAYMAN ISLANDS COURTS

     The courts of the Cayman Islands have non-exclusive jurisdiction to settle
     any dispute (a "DISPUTE") arising out of or in connection with this Fixed
     and Floating Charge (including a dispute regarding the existence, validity
     or termination of this Fixed and Floating Charge or the consequences of its
     nullity).



                                       26


26.2 CONVENIENT FORUM

     The Chargor agrees that a judgement or order of a court of the Cayman
     Islands in connection with this deed is conclusive and binding on it and
     may be enforced against it in the courts of any other jurisdiction.

26.3 NON-EXCLUSIVE JURISDICTION

     This clause 26 (Jurisdiction) is for the benefit of all parties hereto
     other than the the Chargor. As a result and notwithstanding clause 26.1
     (Cayman Islands Courts), it does not prevent any party hereto other than
     the Chargor from taking proceedings relating to a Dispute ("PROCEEDINGS")
     in any other courts with jurisdiction. To the extent allowed by law, the
     parties hereto other than the Chargor may take concurrent Proceedings in
     any number of jurisdictions.

27.  EXECUTION AND COUNTERPARTS

     This Fixed and Floating Charge 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 when taken together shall constitute one and the same Fixed and
     Floating Charge.

IN WITNESS WHEREOF the parties hereto have caused this Deed to be duly executed
the day and year first above written.



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal of   )
INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)      )   SEAL AFFIXED
LIMITED                                             )
in the presence of:                                 )


WONG YUEN FAI STANLEY
- ------------------------------------
Director


CHENG PUI LING CATHY
- ------------------------------------
Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong
Facsimile Number: 2869 8221
Attention:        __________________________________



                                 EXECUTION PAGES

THE CHARGOR

Executed as a deed by                               )
for an on behalf of                                 )   SEAL AFFIXED
H3C HOLDINGS LIMITED                                )   NEAL D. GOLDMAN
in the presence of: JEFFREY M. HELD                 )

Address:          PO Box 309 GT, Ugland House, South Church Street,
                  George Town, Grand Cayman, Cayman Islands
Facsimile Number: _____________________
Attention:        _____________________



                                                                  CONFORMED COPY

                               Dated 22 March 2007

                              H3C HOLDINGS LIMITED

                                   as Chargor

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

                               as Collateral Agent

                                   ----------

                       BORROWER FIXED AND FLOATING CHARGE

                                   ----------

                                  (OGIER LOGO)

                            Our Ref: 0979-001 070321



                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                            1

2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                        2

3.  SECURITY                                                                  3

4.  PERFECTION OF SECURITY AND FURTHER ASSURANCE                              5

5.  PROTECTION OF SECURITY AND CRYSTALLISATION OF FLOATING CHARGE             7

6.  REPRESENTATIONS                                                           8

7.  COVENANTS AND UNDERTAKINGS                                                8

8.  DEFAULT PROCEDURE                                                         9

9.  EFFECTS OF THE SECURITY BECOMING ENFORCEABLE                             10

10. CHATTELS AND FIXTURES                                                    13

11. PRESERVATION OF RIGHTS                                                   14

12. SUSPENSE ACCOUNT(S)                                                      17

13. PROTECTION OF PURCHASERS                                                 17

14. APPOINTMENT OF RECEIVER                                                  18

15. INDEMNITY                                                                20

16. POWER OF ATTORNEY                                                        21

17. SET-OFF AND CURRENCY                                                     22

18. STAMP DUTY AND TAXES                                                     23

19. APPLICATION TO COURT                                                     23

20. PARTIAL INVALIDITY                                                       24

21. NOTICES                                                                  24

22. ASSIGNMENT                                                               25

23. COSTS AND EXPENSES                                                       25

24. GOVERNING LAW                                                            25

25. JURISDICTION                                                             25

26. EXECUTION AND COUNTERPARTS                                               26

EX-10.55

                                                                  Exhibit 10.55

                                                                  CONFORMED COPY

                               DATED 22 March 2007

                              H3C HOLDINGS LIMITED

                                       and

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

                                   ----------

                                 BORROWER CHARGE
                               OVER BANK ACCOUNTS

                                   ----------

                                Slaughter and May
                               47/F, Jardine House
                               One Connaught Place
                               Central, Hong Kong
                                   (RMGG/AHLL)

                                   HK070110041



                                    CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                            1
2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                        3
3.  CHARGE                                                                    3
4.  RESTRICTIONS ON WITHDRAWALS                                               4
5.  PERFECTION; PROTECTION OF SECURITY AND CRYSTALLISATION OF
    FLOATING CHARGE                                                           5
6.  PRESERVATION OF RIGHTS                                                    7
7.  REPRESENTATIONS AND WARRANTIES                                           10
8.  COVENANTS AND UNDERTAKINGS                                               12
9.  DEFAULT PROCEDURE                                                        13
10. ENFORCEMENT                                                              13
11. RELEASE                                                                  15
12. PROTECTION OF PURCHASERS                                                 17
13. APPOINTMENT OF RECEIVER                                                  17
14. POWER OF ATTORNEY                                                        19
15. SET-OFF AND CURRENCY                                                     20
16. STAMP DUTY AND TAXES                                                     21
17. AMENDMENTS                                                               22
18. APPLICATION TO COURT                                                     22
19. PARTIAL INVALIDITY                                                       22
20. NOTICES                                                                  22
21. ASSIGNMENT                                                               23
22. COSTS AND EXPENSES                                                       23
23. CERTIFICATES  AND DETERMINATIONS                                         24




                                                                         
24. GOVERNING LAW                                                            24
25. JURISDICTION                                                             24
26. EXECUTION AND COUNTERPARTS                                               25
SCHEDULE 1 NOTICE OF CHARGE                                                  26
SCHEDULE 2 FORM OF ACKNOWLEDGEMENT                                           28




BORROWER CHARGE OVER BANK ACCOUNTS

DATE: 22 March 2007

PARTIES:

(1)  H3C HOLDINGS LIMITED a company incorporated in the Cayman Islands
     (registered in the Cayman Islands no. MC-180539) whose registered office is
     at PO Box 309GT, Ugland House, South Church Street, George Town, Grand
     Cayman, Cayman Islands (the "CHARGOR"); and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED a limited liability
     company incorporated under the laws of Hong Kong whose registered office is
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (the
     "COLLATERAL AGENT" as agent and trustee for the Secured Parties).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Chargor upon the terms and subject to the conditions contained therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor has agreed to enter into this Deed.

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  DEFINITIONS

     In this Deed:-

     "ACCOUNTS" means the Debt Service Account, the Debt Service Investment
     Accounts and the Debt Service Reserve Accounts.

     "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which
     banks are generally open for business in Hong Kong.

     "CHARGE" means all or any of the security created, or which may at any time
     be created, under or pursuant to this Deed.

     "CONVEYANCING AND PROPERTY ORDINANCE" means the Conveyancing and Property
     Ordinance (Chapter 219 of the Laws of Hong Kong).

     "DEBT SERVICE ACCOUNT" means the US dollar current account (number
     [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES] designated " H3C
     Holdings Limited " of the Chargor opened and maintained with the Deposit
     Bank, and includes any renewal or re-designation thereof.

SPV Charge on Cash Deposits



                                        2


     "DEBT SERVICE DEPOSIT" means all balances now or at any time in future
     standing to the credit of the Debt Service Account, all debts from time to
     time represented by such credit balances and all other rights of the
     Chargor accruing or arising in relation to the Debt Service Account.

     "DEBT SERVICE INVESTMENT ACCOUNTS" means any account or accounts of the
     Chargor, opened and maintained with the Deposit Bank, and which is or are
     opened pursuant to section 5.21 of the Facility Agreement.

     "DEBT SERVICE INVESTMENT ACCOUNTS DEPOSIT" means all investments and
     balances now or at any time in future standing to the credit of the Debt
     Service Investment Accounts, all debts from time to time represented by
     such investments or credit balances and all other rights of the Chargor
     accruing or arising in relation to the Debt Service Investment Accounts.

     "DEBT SERVICE RESERVE ACCOUNTS" means i) the US dollar current account
     (number [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES] designated "
     H3C Holdings Limited ") of the Chargor opened and maintained with the
     Deposit Bank, and includes any renewal or re-designation thereof; and ii)
     the Debt Service Reserve Investment Accounts.

     "DEBT SERVICE RESERVE DEPOSIT" means all investments and balances now or at
     any time in future standing to the credit of the Debt Service Reserve
     Accounts, all debts from time to time represented by such investments or
     credit balances and all other rights of the Chargor accruing or arising in
     relation to the Debt Service Reserve Accounts.

     "DEBT SERVICE RESERVE INVESTMENT ACCOUNTS" means any account or accounts
     (the designation of which includes the words "Debt Service Reserve
     Investment Account") of the Chargor opened and maintained with the Deposit
     Bank pursuant to section 5.21 of the Facility Agreement

     "DEPOSITS" means the Debt Service Deposit, the Debt Service Investment
     Accounts Deposit and the Debt Service Reserve Deposit.

     "DEPOSIT BANK" means Industrial and Commercial Bank of China (Asia)
     Limited.

     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Chargor and the Collateral Agent, as amended, supplemented and/or restated
     from time to time in any manner whatsoever.

     "PROCEEDINGS" means any proceeding, suit or action arising out of or in
     connection with this Deed and/or any other document referred to in this
     Deed.

     "RECEIVER" means a receiver appointed by or on behalf of the Collateral
     Agent under this Deed or pursuant to the Collateral Agent's statutory
     powers, and includes more than one such receiver and substituted receiver.



                                        3


     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Chargor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Chargor under or in connection with
     the Facility Agreement.

1.2  DEFINITIONS IN THE FACILITY AGREEMENT

     Unless a contrary indication appears, a term used in the Facility Agreement
     has the same meaning when used in this Deed.

1.3  CONVEYANCING AND PROPERTY ORDINANCE

     In the context of the rights, powers, privileges, discretions and
     immunities conferred on the Collateral Agent, any Receiver or any Attorney
     (as defined in Clause 14 (Power of Attorney), references to "mortgage" and
     "mortgaged land" in any provision of the Conveyancing and Property
     Ordinance shall, for the purposes of this Deed, be deemed to be references
     to the Charge and the Deposits respectively.

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Chargor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time or times and in the
     manner provided for in the Facility Agreement and the Chargor hereby
     creates the Charge in the Deposits in the manner and on the terms set out
     in Clause 3 (Charge).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each conveyance, transfer, assignment and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or Clause 1.2 (Definitions in the Facility Agreement), any
     reference in this Deed to the Chargor, the Collateral Agent or any Secured
     Party shall be construed so as to include their respective successors and
     permitted assigns or transferees.

3.   CHARGE

     As continuing security for the full and punctual payment, performance and
     discharge of all Secured Indebtedness, the Chargor, as beneficial owner and
     free from any other security interest:



                                        4


     (A)  charges by way of first fixed charge the Debt Service Deposit and the
          Debt Service Investment Accounts Deposit in favour of the Collateral
          Agent; and

     (B)  charges by way of first floating charge the Debt Service Reserve
          Deposit in favour of the Collateral Agent.

4.   RESTRICTIONS ON WITHDRAWALS

4.1  PAYMENTS OUT OF THE ACCOUNTS

     (A)  The Collateral Agent shall for so long as an Event of Default shall
          not have occurred and be continuing be entitled to withdraw the Debt
          Service Deposit or any part thereof from the Debt Service Account,
          and/or the Debt Service Investment Accounts Deposit from the Debt
          Service Investment Accounts, in a manner and at a time or times
          provided for in, and in an amount or amounts calculated in accordance
          with, the Facility Agreement. Such withdrawals shall be applied by the
          Collateral Agent in discharge of the Secured Indebtedness in
          accordance with sections 2.8, 2.12, 2.13, 2.14 and 2.16(b) of the
          Facility Agreement.

     (B)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to require the Collateral Agent
          to use all or any part of the balance standing to the credit of the
          Debt Service Account and/or the Debt Service Investment Accounts
          towards any discharge of the Secured Indebtedness in accordance with
          sections 2.8, 2.12, 2.13, 2.14 and 2.16(b) of the Facility Agreement
          and the Collateral Agent shall thereupon discharge such Secured
          Indebtedness.

     (C)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to require the Collateral Agent
          to use all or any part of the balance standing to the credit of the
          Debt Service Account towards any investment in Cash Equivalents (or
          such other investments as agreed by the Collateral Agent), and the
          Collateral Agent shall thereupon make such investment in such Cash
          Equivalents (or such other agreed investments) in the name of the
          Chargor, provided always that any such investments may only be made
          through the Debt Service Investment Accounts and subject to the fixed
          charge set out in Clause 3(A) of this Deed.

     (D)  The Collateral Agent shall however be entitled to decline to make any
          such discharge or investment as is mentioned in Sub-clauses (B) or (C)
          above if to do so would prevent the withdrawal and application of any
          amount in accordance with Sub-clause (A).

     (E)  All interest accruing on the Debt Service Account and the Debt Service
          Investment Accounts shall be transferred to the credit of the Debt
          Service Reserve Accounts by the Collateral Agent as and when credited
          to the Debt Service Account or, as the case may be, the Debt Service
          Investment Accounts.



                                        5


     (F)  Other than pursuant to Sub-clauses (A) to (C), no amount may be
          withdrawn from the Debt Service Account or the Debt Service Investment
          Accounts by the Chargor without the prior written consent of the
          Collateral Agent.

     (G)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to withdraw from the Debt
          Service Reserve Accounts without consent from the Collateral Agent:

               (a)  the entire balance standing to the credit of the Debt
                    Service Reserve Accounts for purposes of satisfying payment
                    to Seller for the Acquisition and to pay any transaction
                    costs, fees and expenses arising in connection with the
                    Acquisition; and

               (b)  at any time any amount to be applied by it for any purpose
                    in the ordinary course of business not prohibited by the
                    Facility Agreement,

          and apply the withdrawn amounts for such purposes.

     (H)  Other than as permitted in Clause 4.1(G), no amount may be withdrawn
          from the Debt Service Reserve Account by the Chargor without the prior
          written consent of the Collateral Agent.

5.   PERFECTION; PROTECTION OF SECURITY AND CRYSTALLISATION OF FLOATING CHARGE

5.1  NOTICE OF CHARGE

     Immediately after execution of this Deed and immediately upon the opening
     of any Debt Service Investment Account or Debt Service Reserve Investment
     Account pursuant to section 5.21 of the Facility Agreement, the Chargor
     shall give notice (in or substantially in the form of Schedule 1 (Notice of
     Charge) (or as otherwise approved by the Collateral Agent)), duly
     completed, to the Deposit Bank, and shall procure that the Deposit Bank
     promptly acknowledges that notice in writing to the Collateral Agent in or
     substantially in the form of Schedule 2 (Form of Acknowledgement) (or as
     otherwise approved by the Collateral Agent).

5.2  INSTRUCTIONS TO DEPOSIT BANK

     The Chargor irrevocably authorises the Collateral Agent to give the Deposit
     Bank all instructions and notices which the Collateral Agent may from time
     to time and in its absolute and uncontrolled discretion consider necessary
     or appropriate in relation to any of the matters contemplated by this Deed
     including, but without limitation, withdrawals from the Accounts and the
     enforcement of the Charge.

5.3  FURTHER ASSURANCES

     The Chargor shall, at the request of the Collateral Agent but at its own
     cost, promptly take whatever action the Collateral Agent may from time to
     time require to:



                                        6


     (a)  ensure that the Charge is and remains valid, legally binding and
          enforceable;

     (b)  perfect, preserve or protect the Charge and the priority of the
          Charge; and

     (c)  facilitate the exercise of any and all of the rights, powers and
          discretions vested or intended to be vested in the Collateral Agent by
          or pursuant to this Deed and to facilitate the realisation of the
          Deposits,

     and for such purposes it shall in particular, but without limitation,
     execute all such documents, transfers, conveyances, assignments and
     assurances in respect of the Deposits, and give all such notices, orders,
     instructions and directions as the Collateral Agent or any Receiver may
     consider necessary or expedient.

5.4  PART CRYSTALLISATION

     The Collateral Agent shall be entitled at any time by notice in writing to
     the Chargor after an Event of Default to convert the floating charge
     created by Clause 3(B) into a fixed charge affecting all the property and
     assets which for the time being are the subject of such floating charge or,
     as the case may be, such of the said property and assets as are specified
     in such notice.

5.5  AUTOMATIC CRYSTALLISATION

     Notwithstanding Clause 5.4 (Part Crystallisation) and without prejudice to
     any rule of law which may have a similar effect, the floating charge
     created by Clause 3(B) shall automatically be converted with immediate
     effect into a fixed charge as regards all the property and assets subject
     to the floating charge and without notice from the Collateral Agent to the
     Chargor on:

     (A)  the presentation of a petition for the compulsory winding up of the
          Chargor;

     (B)  the convening of a meeting for the passing of a resolution for the
          voluntary winding up of the Chargor;

     (C)  the presentation or making of an application for a warrant of
          execution, writ of fieri facias, garnishee order or charging order in
          respect of any material part of the property or assets of the Chargor
          subject to the floating charge which is not discharged within 60 days;

     (D)  the Chargor creating or permitting any Lien over or with respect to
          any of the Charged Property, or attempting to do so without the prior
          consent of the Collateral Agent (other than as permitted by the
          Facility Agreement); or

     (E)  the Security becoming enforceable in accordance with Clause 9 (Default
          Procedure).

5.6  RECONVERSION OF CRYSTALLISED ASSETS

     The Collateral Agent may by notice in writing to the Chargor re-convert any
     of the assets which has become subject to a fixed charge pursuant to
     Clauses 5.4 (Part



                                        7


     Crystallisation) or 5.5 (Automatic Crystallisation) so that such asset
     shall again be subject to the floating charge specified in Clause 3(B)
     provided that the floating charge over any asset re-converted under this
     Clause 5.6 (Reconversion of Crystallised Assets) shall be subject to the
     further operation of Clauses 5.4 (Part Crystallisation) or 5.5 (Automatic
     Crystallisation).

6.   PRESERVATION OF RIGHTS

6.1  SECURITY ADDITIONAL

     The security created by this Deed and the rights given to the Collateral
     Agent under this Deed shall be in addition to and shall be independent of
     every guarantee, indemnity or other security which the Collateral Agent may
     at any time hold for the Secured Indebtedness and it is hereby declared
     that no prior security held by the Collateral Agent over the whole or any
     part of the Deposits shall merge in the Charge.

6.2  SECURITY CONTINUING

     The Deposits shall be a continuing security notwithstanding the winding-up
     or dissolution of the Chargor or any partial payment, settlement of account
     or other matter whatsoever and in particular (but without prejudice to the
     generality of the foregoing) shall not be considered satisfied by any
     intermediate repayment in satisfaction of all or any of the Secured
     Indebtedness and shall continue in full force and effect until the Secured
     Indebtedness has been discharged and satisfied in full.

6.3  INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement, variation or release with, the Chargor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Chargor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Deposits or to the liability of the Chargor for the Secured
     Indebtedness.

6.4  RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Deed are cumulative and
     are not, nor are they to be construed as, exclusive of any rights, power or
     remedies provided by law.

6.5  SECURITY NOT AFFECTED

     Neither the Security nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Deed or by law nor the liability of the Chargor hereunder shall be
     discharged, impaired or otherwise affected by:

     (a)  any time, waiver or consent granted, or any other indulgence or
          concession granted, by the Collateral Agent or any other Secured Party
          to the Chargor or any other person; or



                                        8


     (b)  the taking, holding, variation, compromise, exchange, renewal,
          realisation or release by the Collateral Agent or any other Secured
          Party or any other person of any rights under or in connection with a
          Credit Document, any other security, guarantee, indemnity or other
          document; or

     (c)  the refusal or failure to take up, hold, realise, perfect or enforce
          by the Collateral Agent or any other Secured Party or any other person
          any rights under or in connection with a Credit Document, any other
          security, guarantee, indemnity or other document (including, without
          limitation, any failure to comply with any formality or other
          requirement or any failure to realise the full value of any security);
          or

     (d)  the existence of any claim, set-off or other right which the Chargor
          may have at any time against the Collateral Agent or any other Secured
          Party or any other person; or

     (e)  the making or absence of any demand for payment or discharge of any
          Secured Indebtedness on the Chargor or any other person, whether by
          the Collateral Agent or any other Secured Party or any other person;
          or

     (f)  any arrangement, compromise or settlement entered into by the
          Collateral Agent or any other Secured Party with the Chargor or any
          other person; or

     (g)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Chargor under a
          Credit Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order; or

     (h)  any variation, amendment, waiver, release, novation, supplement,
          extension (whether of maturity or otherwise) or restatement (in each
          case however fundamental and of whatsoever nature) or replacement of
          any Credit Document, or any other security, guarantee, indemnity or
          other document; or

     (i)  any amendment, variation, novation, supplementation or replacement of
          any agreement between the Secured Parties; or

     (j)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Credit Document or any other security, guarantee,
          indemnity or other document; or

     (k)  any of the obligations of the Chargor under any of Credit Document or
          under any other Lien taken in respect of the obligations of the
          Chargor under any Credit Document being or becoming illegal, invalid,
          unenforceable, ineffective or impaired in any respect; or

     (l)  any amalgamation, merger or reconstruction that may be effected by the
          Collateral Agent with any other person or any sale or transfer of the
          whole or any part of the undertaking, property and assets of the
          Collateral Agent to any other person; or



                                        9


     (m)  any amalgamation, merger or reconstruction (other than as part of a
          solvent reconstruction or amalgamation the terms of which have been
          approved by the Collateral Agent), reorganisation, administration,
          administrative or other receivership or dissolution or liquidation
          entry into a voluntary arrangement of the Chargor or any other person;
          or

     (n)  the insolvency, bankruptcy, winding-up or dissolution of the Chargor
          or any change in its status, function, control or ownership; or

     (o)  any change in the constitution of the Chargor; or

     (p)  any incapacity, lack of power, authority or legal personality of the
          Chargor to enter into or perform any of its obligations under any
          Credit Document to which it is a party or any irregularity in the
          exercise thereof or any lack of authority by any person purporting to
          act on their behalf; or

     (q)  any exercise, omission to exercise, compromise, renewal or release of
          any rights against the Chargor; or

     (r)  any invalidity or irregularity in the execution of this Deed or any
          other Credit Document; or

     (s)  any other act (save for an act of release and discharge granted by the
          Collateral Agent in accordance with this Agreement), event or omission
          which, but for this Clause 6.5 (Security Not Affected) might operate
          to discharge, impair or otherwise affect the Charge or the liability
          of the Chargor for the Secured Indebtedness or any of the rights,
          powers or remedies conferred upon the Collateral Agent or any Receiver
          (or their respective delegates) by this Deed or by law or the
          liability of the Chargor hereunder.

     Without prejudice to the generality of this Clause 6.5, the Chargor
     expressly confirms that it intends that its liability for the Secured
     Indebtedness and its obligations under this Deed shall extend from time to
     time to any variation, increase, extension, addition or replacement
     (however fundamental) of or to any of the Credit Documents and/or any
     facility or amount made available under any of the Credit Documents.

6.6  NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Deed is intended to, or shall operate so as to,
     prejudice or affect any guarantee, indemnity or other security of any kind
     whatsoever which the Collateral Agent may have for the Secured Indebtedness
     or any right, remedy or privilege of the Collateral Agent thereunder.

6.7  SCOPE OF RELEASE

     Any receipt, release or discharge of the Deposits or of any liability
     arising under this Deed may be given by the Collateral Agent and, unless
     expressly stated otherwise, shall not release or discharge the Chargor from
     any liability for the same or any other monies which may exist
     independently of this Deed. Where such receipt, release or discharge
     relates only to part of the Deposits, such receipt, release or discharge
     shall



                                       10


     not prejudice or affect the Deposits in relation to the remainder of the
     Deposits, unless expressly stated otherwise.

6.8  NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Deed or by law:

     (A)  to take any action or obtain judgment in any court against the
          Chargor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Chargor; or

     (C)  to enforce or seek to enforce the recovery of any moneys and
          liabilities hereby secured or any other security taken in respect of
          any of the obligations of the Chargor under any of the Credit
          Documents.

6.9  NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent charge affecting the Charged
     Property or (b) the Collateral Agent receives notice of any assignment or
     disposition affecting all or any part of the Charged Property or any
     interest therein to which the Collateral Agent has not given its approval
     or (c) the commencement of the insolvency, administration, reorganisation,
     liquidation or dissolution of, or any analogous proceeding in respect of,
     of the Chargor, the Collateral Agent may open a new account in the name of
     the Chargor (whether or not it permits any existing account to continue).
     If the Collateral Agent does not open such a new account, it shall
     nevertheless be treated as if it had done so at the time when the notice
     was received or was deemed to have been received or, as the case may be,
     the insolvency, administration, reorganisation, liquidation, dissolution or
     other proceeding commenced. Thereafter, all payments made by the Chargor to
     the Collateral Agent or received by the Collateral Agent for the account of
     the Chargor shall be credited or treated as having been credited to the new
     account and shall not operate to reduce the amount secured by this Deed at
     the time when the Collateral Agent received or was deemed to have received
     such notice or, as the case may be, the insolvency, administration,
     reorganisation, liquidation, dissolution or other proceeding commenced.

6.10 FURTHER ADVANCES

     The security created by this Deed is intended to secure any further
     advances pursuant to the terms of the Facility Agreement.

7.   REPRESENTATIONS AND WARRANTIES

     The Chargor makes the represents and warrants that:



                                       11


7.1  It is duly incorporated and validly existing under the laws of the Cayman
     Islands and it has the power and capacity to enter into this Deed and grant
     the Charge created hereunder.

7.2  Subject only to this Deed, it is the sole legal and beneficial owner of the
     Deposits and that the Deposits are free from any Lien and any interest or
     claims of third parties other than interest or claims arising by operation
     of law affecting companies generally and Permitted Liens.

7.3  The Charge is (subject to completion of all registrations required by law)
     a legal, valid, binding and enforceable first fixed charge over the Debt
     Service Deposit ranking in priority to the interests of any liquidator,
     administrator or creditor of the Chargor and a legal, valid, binding and
     enforceable first floating charge over the Debt Service Reserve Deposit.

7.4  The entry into and performance by it of, the creation of security under,
     and the transactions contemplated by, this Deed do not and will not
     conflict with:

     (A)  any law or regulation applicable to it;

     (B)  its constitutional documents; or

     (C)  any agreement or instrument binding upon or its Subsidiaries or any of
          its or its Subsidiaries' assets.

7.5  All authorisations and consents required or desirable to:

     (a)  enable it lawfully to enter into, exercise its rights and comply with
          its obligations under this Deed;

     (b)  permit the creation of security and ensure that (subject to completion
          of all registrations required by law) the Charge is a legal, valid,
          binding and enforceable first fixed charge over the Debt Service
          Deposit ranking in priority to the interests of any liquidator,
          administrator or creditor of the Chargor and a legal, valid, binding
          and enforceable first floating charge over the Debt Service Reserve
          Deposit; and

     (c)  make this Deed admissible in evidence in the courts of Hong Kong, the
          Cayman Islands and any other relevant jurisdictions,

     have been obtained or effected and are in full force and effect.

7.6  The above representations are made on the date of this Deed and are deemed
     to be repeated by the Chargor, with reference to the facts and
     circumstances then existing, on each day following the date of this Deed
     until the termination of the Facility Agreement or this Deed, whichever is
     later.



                                       12


8.   COVENANTS AND UNDERTAKINGS

     The undertakings in this Clause 8 (Covenants and Undertakings) are given to
     the Collateral Agent by the Chargor and will remain in force from the date
     of this Deed for so long as any of the Secured Indebtedness is outstanding
     or any security interest created under this Deed has not been released or
     discharged.

8.1  AUTHORISATIONS

     It shall promptly:

     (a)  obtain, comply with and do all that is necessary to maintain in full
          force and effect; and

     (b)  supply certified copies to the Collateral Agent of,

     any authorisation required under any law of the Cayman Islands or any other
     relevant jurisdiction to enable it to create the Charge, and to enter into
     and perform its obligations under this Deed and to ensure the legality,
     validity, enforceability or admissibility in evidence in the Cayman Islands
     or any other relevant jurisdiction of this Deed and the Charge.

8.2  COMPLIANCE WITH LAWS

     It shall comply in all respects with all laws to which it may be subject,
     if failure so to comply would materially impair the Charge or its ability
     to perform its obligations under this Deed or would impose any liability or
     obligation on the Collateral Agent or any Secured Party.

8.3  INFORMATION

     It shall at all times give to the Collateral Agent such information as the
     Collateral Agent may reasonably require in respect of the Deposits for the
     purpose of the discharge of the trusts, powers, rights, duties, authorities
     and discretions vested in it hereunder or by operation of law.

8.4  ALTERATION OF THE ACCOUNTS

     It shall not, without the prior written consent of the Collateral Agent,
     alter any of the terms on which the Accounts exists with the Deposit Bank.

8.5  VALUE OF DEPOSITS

     It shall not to do or cause or permit to be done, or omit to do anything
     which may in any way jeopardise, adversely affect or diminish the value of
     the Deposits.

8.6  NEGATIVE PLEDGE

     It shall not create or permit to subsist, or attempt to create or permit to
     subsist, any security (other than the Charge) over the Deposits or the
     Accounts, without the prior



                                       13


     written consent of the Collateral Agent (acting on the instructions of the
     Requisite Lenders).

8.7  DISPOSALS OF ASSETS

     It shall not enter into a single transaction or a series of transactions
     (whether related or not) and whether voluntary or involuntary to sell,
     transfer, assign, lease, licence or otherwise dispose of any interest in
     any of the Deposits or the Accounts (otherwise than pursuant to this Deed).

9.   DEFAULT PROCEDURE

     The Security shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          Excluded Subsidiaries).

10.  ENFORCEMENT

10.1 APPROPRIATION OF DEPOSITS

     Immediately upon and at any time after the Charge becomes enforceable, the
     Collateral Agent shall be entitled, and is hereby irrevocably and
     unconditionally authorised, without giving prior notice to the Chargor or
     obtaining the consent of the Chargor but at the cost of the Chargor, to
     require payment by the Deposit Bank to the Collateral Agent of the whole or
     any part of the Deposits and to appropriate the same in or towards payment
     of the Secured Indebtedness or any part thereof in such order set out in
     section 2.16(h) of the Facility Agreement.

10.2 FIXED PERIOD

     Clause 10.1 (Appropriation of Deposits) shall apply notwithstanding that
     the Deposits or any part thereof may have been made or deposited for a
     fixed period and that that period may not have expired.

10.3 STATUTORY POWERS

     No restrictions imposed by any applicable law on any immediate or other
     power of sale, application of proceeds or on any other right or on the
     consolidation of mortgages or other security interests shall apply to this
     Charge.

10.4 ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS



                                       14


     Subject to the order of priority of payments set out in section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in the exercise of any of the powers conferred by Clause 10
     (Enforcement) or otherwise in respect of the Deposits and all outgoings
     which it shall think fit to pay out of the profits and income of the
     Deposits and the moneys received by it in carrying out any business as
     contemplated by Clause 10 (Enforcement) and may apply the residue of the
     said profits, income and moneys in the manner provided by section 2.16(h)
     of the Facility Agreement provided that any such expenses shall, in any
     event, to the extent not fully paid or discharged, form or shall be deemed
     to form part of the Secured Indebtedness.

10.5 NO WAIVER, REMEDIES CUMULATIVE

     No failure or delay on the part of the Collateral Agent or any Receiver to
     exercise any right, power or remedy under this Deed will operate as a
     waiver thereof nor will any single or partial exercise of any right, power
     or remedy preclude any other or further exercise thereof or the exercise of
     any other right, power or remedy. The rights, powers and remedies provided
     in this Deed are cumulative and not exclusive of any rights, powers and
     remedies provided by law.

10.6 WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Deed must be
     in writing, be express and not implied and may be given subject to any
     conditions which the Collateral Agent considers fit. Any waiver or consent
     shall be effective only in the instance and for the purpose for which it is
     given.

10.7 NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Deposits by any act or omission of the Chargor
     or any prior ranking encumbrancer or any other person.

10.8 NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax, duties or levies in respect of the Deposits or any part
     thereof on any income therefrom or any proceeds thereof.

10.9 NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Charge or any security created by the Facility
     Agreement or any of the Credit Documents.

10.10 INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Deed and the provisions
     of any applicable law



                                       15


     (including without limitation the Conveyancing and Property Ordinance and
     the Trustee Ordinance (Chapter 29 of the Laws of Hong Kong)), the
     provisions of this Deed shall prevail and such inconsistent or conflicting
     provisions shall be deemed to be expressly negated or modified hereby
     provided that none of the foregoing shall be construed as a limitation on
     the powers of any Receiver.

10.11 NO EXEMPTION

     Nothing in this Deed shall exempt the Collateral Agent from or indemnify it
     against any liability which would by rule of law or otherwise attach to it
     in respect of any act of gross negligence or wilful default which it may
     have committed in relation to its duties and/or discretions under this
     Deed.

10.12 SUSPENDED ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Deed (including the proceeds of any conversion of
     currency) after the security created hereunder has become enforceable,
     except where such monies together with all other monies received, recovered
     or realised by the Collateral Agent or any Receiver under this Deed are
     sufficient to satisfy and discharge the Secured Indebtedness in full, may
     at the discretion of the Collateral Agent or the Receiver (provided that
     such action has first been approved by the Collateral Agent) be credited to
     any suspense or impersonal account in the name of the Collateral Agent at
     the Deposit Bank and may be held in such account for so long as the
     Collateral Agent may think fit (with interest accruing thereon at such
     market rate, if any, as the Collateral Agent may deem fit) pending their
     application from time to time (as the Collateral Agent shall be entitled to
     do in its discretion) in or towards satisfaction of the Secured
     Indebtedness in accordance with the terms of this Deed. Save as provided
     above, no party shall be entitled to withdraw any amount at any time
     standing to the credit of any such suspense or impersonal account.

11.  RELEASE

11.1 RELEASE OF DEPOSITS

     (A)  If the Collateral Agent is satisfied, acting reasonably, that:

          (i)  all Secured Indebtedness have been unconditionally and
               irrevocably paid or discharged in full and that none of the
               Secured Parties has any further liability or obligation to
               advance any funds under any Credit Document; or

          (ii) security or a guarantee for the Secured Indebtedness, in each
               case acceptable to the Collateral Agent, has been provided in
               substitution for this Deed,

          then, subject to the remainder of this Clause 11.2 (Discharge
          Conditional) the Collateral Agent shall at the request and cost of the
          Chargor take whatever action is necessary to release the Deposits from
          the Charge.



                                       16


     (B)  The execution of a discharge, release, re-assignment, transfer or
          partial discharge by the Collateral Agent shall be a good and valid
          release or discharge of the Charge constituted by this Clause 3
          (Charge) or the relevant part thereof (as the case may be) and the
          obligations (or the relevant part thereof, as the case may be) of the
          Chargor from this Deed without the need for the Chargor to be a party
          thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Chargor, do all such things and execute all such documents
          within its power to do and execute as may be reasonably necessary to
          give effect to the discharge, release, re-assignment, transfer or
          partial discharge referred to in Sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment, transfer or partial
          discharge pursuant to and in accordance with Sub-clause (A), the
          Collateral Agent shall, at the request and cost of the Chargor:

          (i)  promptly procure the redelivery to the Chargor of all deeds,
               instruments, certificates and other documents delivered to or
               deposited with or to the order of the Collateral Agent; and

          (ii) promptly give notice to each person (if any) who has received
               notice of the Charge pursuant to this Deed of such release,
               discharge, re-assignment and/or transfer,

          in each case to the extent the same relates to such release,
          discharge, re-assignment, transfer or partial discharge.

11.2 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Chargor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this Clause 11.2 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Charge subsequently as if such settlement or discharge had not occurred but
     so that nothing herein shall confer on any Transaction Persons the right to
     claim under this Clause 11.2 (Discharge Conditional) for more than the
     Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment provided that any
     such settlement, reassignment, release or discharge shall become
     unconditional upon the expiry of one month after the maximum period within
     which such settlement, reassignment, release or discharge can be avoided or
     reduced.



                                       17


12.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or become exercisable or be
     concerned to see whether any such delegation by the Collateral Agent shall
     have lapsed for any reason or been revoked. Any sale or other dealing by
     the Collateral Agent or its delegate or any Receiver of or with the
     Deposits and any part thereof shall be deemed to be within the power of the
     person effecting the same and the receipt by such person of the purchase or
     other moneys connected therewith shall effectively discharge the purchaser
     or other party to such dealing who shall not be concerned with the manner
     of application of the proceeds of sale or other dealing or be in any way
     answerable therefor.

13.  APPOINTMENT OF RECEIVER

13.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may, if requested by the Chargor or at any time after
     the Charge (or the relevant part thereof) shall have become enforceable in
     accordance with Clause 9 (Default Procedure), appoint one or more persons
     to be a Receiver or Receivers of the whole or any part of the Deposits. The
     Collateral Agent may:

     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.

13.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Chargor) have, in relation to the Deposits, or as the case may be, that
     part of the Deposits in respect of which he was appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by the Conveyancing and Property Ordinance or otherwise by
          law on mortgagees (whether or not in possession) and receivers
          appointed under the Conveyancing and Property Ordinance; and



                                       18


     (B)  the power in the name or on behalf and at the cost of the Chargor to
          exercise all the powers and rights of an absolute owner of the
          Deposits or the relevant part thereof and do or omit to do anything
          which the Chargor could do.

13.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Chargor) have the powers specified in Clause 10.1 (Appropriation of
     Deposits).

13.4 RECEIVER TO BE AGENT OF THE CHARGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Chargor and the Chargor shall be solely
     responsible, jointly and severally, for the acts and defaults of such
     Receiver (save in the case of the fraud, negligence, wilful default, breach
     of duty or breach of trust in relation to duties by such Receiver) and for
     payment of such Receiver's remuneration in respect thereof.

13.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.

13.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Charge (other than monies paid into a
     suspense account by such Receiver in accordance with Clause 10.12 (Suspense
     Account(s)).

13.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any Attorney (as
          defined in Clause 14 (Power of Attorney)) or agent of such party shall
          be liable to any person in respect of any loss or damage whatsoever
          which arises out of the realisation of the Deposits or any part
          thereof or from any act, default or omission in relation to the Charge
          or from any exercise or non-exercise, or the attempted or purported
          exercise of, or the failure to exercise any of their respective
          powers, authorities or discretions conferred upon them in relation to
          the Charge or any part of it, unless such loss or damage is caused by
          its or his negligence, wilful default, breach of duty, breach of trust
          or fraud.

     (B)  Without prejudice to the generality of Clause (A), entry into
          possession of the Deposits shall not render the Collateral Agent or
          the Receiver liable to account as mortgagee in possession or liable
          for any loss on realisation or for any



                                       19


          default or omission for which a mortgagee in possession might be
          liable unless such loss or damage is caused by its negligence, wilful
          default, breach of duty, breach of trust or fraud and, if and whenever
          the Collateral Agent or the Receiver enters into possession of the
          Deposits, it shall be entitled at any time to go out of such
          possession.

13.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all statutory and other powers of the
     Collateral Agent under the Conveyancing and Property Ordinance (and so that
     the statutory power of sale shall be exercisable without regard to
     paragraph 11 of the Fourth Schedule to the said Ordinance) or otherwise and
     so that such powers shall be and remain exercisable by the Collateral Agent
     in respect of any part of the Deposits in respect of which no Receiver has
     been appointed and notwithstanding that an appointment under the provisions
     of this Clause 13 (Appointment of Receiver) shall have subsisted and been
     withdrawn in respect of that property or shall be subsisting in respect of
     any other part of the Deposits.

14.  POWER OF ATTORNEY

14.1 APPOINTMENT AND POWERS

     The Chargor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this Clause 14.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,

     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may be required (or which the
     Collateral Agent, any person falling within Sub-clause (B) or any Receiver
     appointed hereunder shall consider requisite) for carrying out any
     obligation imposed on the Chargor, as the case may be, by or pursuant to
     this Deed (including but not limited to the obligations of the Chargor
     under Clause 5 (Perfection) and the covenants referred to in Clause 8
     (Covenants and Undertakings)), for carrying out any sale or other dealing
     by the Collateral Agent or any such Receiver into effect, for conveying or
     transferring any legal or other interest in the Deposits, for getting in
     the Deposits, and generally for enabling the Collateral Agent or any person
     falling within Sub-clause (B) or any Receiver to exercise the respective
     powers conferred on them by or pursuant to this Deed or by law provided
     that the power contained in this Clause 14.1 (Appointment and Powers) shall
     not be exercisable unless and until the Charge shall have become
     enforceable. The exercise of such power by the Collateral Agent or any
     person falling within Sub-clause (B) or any Receiver shall



                                       20


     not put any person dealing with it upon any enquiry as to whether an Event
     of Default shall have occurred. Each of the Collateral Agent, any person
     falling within Sub-clause (B) and any Receiver shall have full power to
     delegate the power conferred on it by Clause 14.1 (Appointment and Powers),
     but no such delegation shall preclude the subsequent exercise of such power
     by the Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver (as the case may be) itself or preclude the Collateral Agent or
     any person falling within Sub-clause (B) or any Receiver (as the case may
     be) from making a subsequent delegation thereof to some other person; any
     such delegation may be revoked by the Collateral Agent or any person
     falling within Clause 14.1(B) or any Receiver (as the case may be) at any
     time.

14.2 RATIFICATION

     The Chargor shall ratify and confirm all transactions lawfully and properly
     entered into by the Collateral Agent or any Receiver or delegate of the
     Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     Clause 14.1 (Appointment and Powers).

14.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Chargor hereby
     acknowledges) granted irrevocably and severally, for value and for security
     as part of the Charge to secure the several proprietary interests of and
     the performance of obligations owed to the respective donees within the
     meaning of the Powers of Attorney Ordinance (Chapter 31 of the Laws of Hong
     Kong).

15.  SET-OFF AND CURRENCY

15.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder, provided that payments in respect
          of costs and expenses may be made in Hong Kong dollars if incurred in
          Hong Kong dollars.

     (B)  If any sum due from the Chargor under this Deed or any order or
          judgment given or made in relation hereto has to be converted from the
          currency (the "FIRST CURRENCY") in which the same is payable hereunder
          or under such order or judgment into another currency (the "SECOND
          CURRENCY") for the purpose of (a) making or filing a claim or proof
          against the Chargor, (b) obtaining an order or judgment in any court
          or other tribunal or (c) enforcing any order or judgment given or made
          in relation hereto then:

          (i)  the Chargor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is suffered as a result of or in connection with
               the Collateral Agent's own fraud, negligence, wilful default,
               breach of duty or breach of trust; and



                                       21


          (ii) the Collateral Agent shall account to the Chargor for the amount
               by which any sum realised by it exceeds the aggregate amount of
               all sums owing to it by the Chargor at the time at which such
               profit is realised provided that the Collateral Agent shall only
               be required to make any payment to the Chargor in relation
               thereto if at such time all the payment obligations of the
               Chargor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or rates of exchange at which the Collateral
          Agent may in the ordinary course of business purchase the first
          currency with the second currency upon receipt of a sum paid to it in
          satisfaction, in whole or in part, of any such order, judgment, claim
          or proof.

15.2 SET-OFF

     The Chargor waives, and (where incapable of waiver) agrees not to exercise
     (unless required to do so by law), any right of set-off or netting, whether
     conferred by agreement or law, which it may have against the Collateral
     Agent so that it does not reduce any amount payable by it to the Collateral
     Agent under this Deed.

15.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or for the
     purpose of crediting any monies to the Accounts or any suspense account
     pursuant to Clause 10.12 (Suspense Account(s)) or making any application
     therefrom or for any other purpose in connection with this Deed, the
     Collateral Agent may (unless otherwise required by law) convert any monies
     received, recovered or realised or subject to application by the Collateral
     Agent under this Deed or any monies to be credited to any such account
     (including the proceeds of any previous conversion under this Clause 15
     (Set-off and Currency)) from their existing currency of denomination into
     such other currency of denomination as the Collateral Agent may reasonably
     think fit and any such conversion shall be effected at such rate or rates
     of exchange as may be agreed by the Collateral Agent in consultation with
     the Chargor as being relevant and any rate, method and date so agreed shall
     be binding on the Chargor and any costs, expenses or commissions incurred
     in effecting any such conversion shall be deducted from the proceeds of any
     such conversion.

16.  STAMP DUTY AND TAXES

     The Chargor shall pay all stamp duties and similar fees, filing and
     registration fees and other transaction taxes required in relation to or
     for the purpose of procuring the execution, validity and enforceability of
     this Deed and the Charge and shall indemnify the Collateral Agent and each
     Receiver appointed hereunder against any liabilities, costs, claims and
     expenses resulting from any failure to pay or any delay in paying the same
     on a full indemnity basis.



                                       22


17.  AMENDMENTS

     This Deed may not be amended, modified or waived in any respect whatsoever,
     without the prior written consent of the Collateral Agent given with
     express reference to this Clause 17 (Amendments) and expressly stated to be
     intended to operate as the Collateral Agent's consent to such amendment,
     modification or waiver on behalf of the Requisite Lenders.

18.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Charge has become
     enforceable, apply to the court for an order that the terms of this Deed be
     carried into execution under the direction of the Court and for the
     appointment of a Receiver of the Deposits or any part thereof and for any
     other order in relation to the administration of the terms of this Deed as
     the Collateral Agent shall deem fit and it may assent to or approve any
     application to the Court made at the instance of the Collateral Agent or on
     its behalf and the Collateral Agent shall be indemnified by the Chargor
     against all costs, charges and expenses properly incurred by it in relation
     to any such application or proceedings.

19.  PARTIAL INVALIDITY

     Every provision contained in this Deed shall be severable and distinct from
     every other such provision and if at any time any provision hereof is or
     becomes illegal, invalid or unenforceable in any respect under the law of
     any jurisdiction, neither the legality, validity or enforceability of the
     remaining provisions hereof nor the legality, validity or enforceability of
     such provision under the law of any other jurisdiction shall in any way be
     affected or impaired thereby.

20.  NOTICES

20.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

20.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Deed shall (unless that other person has by 15
     days' written notice to the one specified another address, department,
     officer or person as the case may be) be made or delivered to that other
     person at the address identified with its signature below and shall be
     deemed to have been made or delivered (in the case of any communication
     made by letter) when left at that address during normal business hours on a
     Business Day (or on the next Business Day if not left during normal
     business hours on a Business Day) or (as the case may be) 5 days (in the
     case of local post) and 10 days (in the case of overseas post) after being
     deposited in the post postage prepaid in an envelope addressed to it at
     that address marked for the attention of any specified department, officer
     or person or (in the case of any communication made by facsimile
     transmission) when sent to the correct facsimile number of the addressee
     identified with its signature below and received in whole and in legible
     form by such addressee



                                       23


     provided that any communication or document to be made or delivered by the
     Chargor the Collateral Agent shall be effective only when received by the
     Chargor the Collateral Agent, as appropriate and then only if the same is
     expressly marked for the attention of the department, officer or person
     identified below with the signature of the relevant addressee (or such
     other department, officer or person as the relevant addressee shall from
     time to time and in each case by not less than 3 days' prior notice in
     writing to the parties hereto have specified for this purpose).

20.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Deed shall be in the English language or accompanied by a
     translation thereof into English certified (by an officer of the person
     making or delivering the same) as being a true and accurate translation
     thereof.

21.  ASSIGNMENT

21.1 ASSIGNMENT BY THE COLLATERAL AGENT

     The Collateral Agent may assign its rights and obligations under this Deed
     to any successor under the Facility Agreement in accordance with section
     9.7 of the Facility Agreement.

21.2 ASSIGNMENT BY THE CHARGOR

     The rights, interests and obligations of the Chargor under this Deed are
     personal to it. Accordingly, they are not capable of being assigned,
     transferred or delegated in any manner. The Chargor undertakes that it
     shall not at any time assign or transfer, or attempt to assign or transfer,
     any of its rights, interests or obligations under or in respect of this
     Deed to any person.

22.  COSTS AND EXPENSES

     The Chargor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the negotiation, preparation, registration, perfection, preservation
          or enforcement of this Deed and any other document relating thereto;
          and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Chargor
          under any of the Credit Documents or the recovery



                                       24


          by the Collateral Agent or any such Receiver from the Chargor of the
          Secured Indebtedness then due and payable.

23.  CERTIFICATES AND DETERMINATIONS

     For all purposes, including any Proceedings:

     (a)  a determination by the Collateral Agent; or

     (b)  a copy of a certificate signed by an officer of the Collateral Agent,

     of the amount of any indebtedness comprised in the Secured Indebtedness or
     the amount standing to the credit of the Accounts for the time being or at
     any time shall, in the absence of manifest error, be conclusive evidence
     against the Chargor as to the amount thereof.

24.  GOVERNING LAW

     This Deed is governed by Hong Kong law.

25.  JURISDICTION

25.1 HONG KONG COURTS

     The courts of Hong Kong have non-exclusive jurisdiction to settle any
     dispute (a "DISPUTE") arising out of or in connection with this Deed
     (including a dispute regarding the existence, validity or termination of
     this Deed or the consequences of its nullity).

25.2 CONVENIENT FORUM

     The parties agree that the court of Hong Kong are the most appropriate and
     convenient courts to settle Disputes between them and, accordingly, that
     they will not argue to the contrary.

25.3 NON-EXCLUSIVE JURISDICTION

     This Clause 25 (Jurisdiction) is for the benefit of all parties hereto
     other than the Chargor. As a result and notwithstanding Clause 25.1 (Hong
     Kong Courts), it does not prevent any party hereto other than the Chargor
     from taking Proceedings in any other courts with jurisdiction. To the
     extent allowed by law, the parties hereto other than the Chargor may take
     concurrent Proceedings in any number of jurisdictions.

25.4 AGENT FOR SERVICE

     (A)  The Chargor irrevocably appoints Huawei-3Com Co., Limited of Suites
          3013-3014, 30/F One International Finance Centre, 1 Harbour View
          Street, Central, Hong Kong to be its agent for the receipt of Service
          Documents. It agrees that any Service Document may be effectively
          served on it in connection with Proceedings in Hong Kong by service on
          its agent effected in any manner permitted by applicable law.



                                       25


     (B)  If the agent at any time ceases for any reason to act as such, the
          Chargor shall appoint a replacement agent having an address for
          service in Hong Kong and shall notify the Collateral Agent of the name
          and address of the replacement agent. Failing such appointment and
          notification, the Collateral Agent shall be entitled by notice to the
          Chargor to appoint a replacement agent to act on behalf of the
          Chargor. The provisions of this clause applying to service on an agent
          apply equally to service on a replacement agent.

     (C)  "SERVICE DOCUMENT" means a claim form, application notice, order,
          judgment or other document relating to any Proceedings.

26.  EXECUTION AND COUNTERPARTS

     This Deed 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 when taken together
     shall constitute one and the same Deed.

IN WITNESS of which this document has been executed as a deed and delivered on
the date stated at the beginning of this Deed.



                                       26


                                   SCHEDULE 1
                                NOTICE OF CHARGE

                             [LETTERHEAD OF CHARGOR]

To:  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
     33RD FLOOR, ICBC TOWER
     3 GARDEN ROAD
     CENTRAL, HONG KONG

                                                                 ____ MARCH 2007

Dear Sirs,

                                NOTICE OF CHARGE

We refer to our US dollar current accounts (number _________________________
designated "_________________________________________________________" and
number ___________________________________ designated
"_________________________________________________________") and the US dollar
interest-bearing deposit account (number _________________________ designated
"_________________________________________________________") with you (the
"ACCOUNTS").

A copy of a charge on cash deposits dated March 2007 (the "CHARGE") and made
between ourselves and Industrial and Commercial Bank of China (Asia) Limited (as
agent and trustee for the Secured Parties) (the "COLLATERAL AGENT") is enclosed
for your attention and we request that you take note of its provisions, in
particular, the undertaking from the Chargor that it shall not create any
security over the Deposits (Clause 8.6).

Words and expressions defined in the Charge shall, unless otherwise defined
herein, have the same meaning in this notice.

We give you notice of the Charge and, for the purposes of the Charge, we
irrevocably and unconditionally instruct and authorise you (notwithstanding any
previous instructions which we may have given you to the contrary) as follows:

(a)  To disclose to the Collateral Agent, without any reference to or further
     authority from us and without any enquiry by you as to the justification
     for such disclosure, such information relating to the Accounts and the
     Deposits as the Collateral Agent may, at any time and from time to time,
     request you to disclose to it.

(b)  At all times to hold the Debt Service Deposit to the exclusive order of the
     Collateral Agent.

(c)  To hold the Debt Service Reserve Deposit to the exclusive order of the
     Collateral Agent upon (i) receiving notice from the Collateral Agent that
     there has occurred a Default or an Event of Default or (ii) conversion of
     the floating charge created by Clause 3(B) into a fixed charge pursuant to
     Clause 5.4 or 5.5, subject to any reconversion pursuant to Clause 5.6.

(d)  To comply with the terms of any written notice statement or instructions
     (including any instructions as to the payment of the Deposits (or any part
     of it), the renewal or



                                       27


     extension of the term of the Deposits, or the breaking of the term of the
     Deposits) in any way relating or purporting to relate to the Charge and/or
     the Accounts and/or the Deposits which you may receive at any time and from
     time to time from the Collateral Agent without any reference to or further
     authority from us and without any enquiry by you as to the justification
     for such notice, statement or instructions or the validity thereof.

(e)  To advise us of any withdrawal or transfer of moneys from the Accounts as
     soon as practicable.

The instructions and authorisations which are contained in this letter shall
remain in full force and effect until the Collateral Agent gives you notice in
writing revoking them. This notice is governed by Hong Kong law.

Please acknowledge receipt of this notice and confirm your agreement to it, by
executing and returning an original copy of the Form of Acknowledgement attached
to this notice to the Collateral Agent at 33rd Floor, ICBC Tower, 3 Garden Road,
Central, Hong Kong with a copy to us.

                                        Yours faithfully,


                                        ----------------------------------------
                                        For and on behalf of
                                        H3C Holdings Limited



                                       28


                                   SCHEDULE 2
                             FORM OF ACKNOWLEDGEMENT

                              [LETTERHEAD OF ICBC]

To:  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
     33RD FLOOR, ICBC TOWER
     3 GARDEN ROAD
     CENTRAL, HONG KONG

     (as agent and trustee for the Secured Parties, the "COLLATERAL AGENT")

With a copy to:

     H3C Holdings Limited
     PO Box 309GT
     Ugland House, South Church Street
     George Town, Grand Cayman
     Cayman Islands
     (the "CHARGOR")

                                                                 ____ MARCH 2007

Dear Sirs,

                       ACKNOWLEDGEMENT OF NOTICE OF CHARGE

We acknowledge receipt of a Notice of Charge dated ___ March 2007 (the "NOTICE")
(a copy of which is attached to this letter) and the copy of the Charge enclosed
with the Notice. We take note of the provisions contained in the Charge, in
particular, the undertaking made by the Chargor under Clause 8.6. Words and
expressions defined in the Notice and the Charge shall have the same meanings in
this letter.

In consideration of the Secured Parties agreeing to provide finance and
financial support pursuant to the Credit Documents, we represent and undertake
to the Collateral Agent in the terms set out in this letter.

(a)  We will act in accordance and comply with the terms of the Notice.

(b)  No mortgage, charge, pledge, lien, security assignment, hypothecation or
     trust arrangement for the purpose of providing security and any other
     encumbrance or security interest of any kind having the effect of securing
     any obligation of any person (including, without limitation, the deposit of
     moneys or property with a person with the intention of affording such
     person a right of lien, set-off, combination or counter-claim) and any
     other agreement or any other type of arrangement having a similar effect
     (including, without limitation, any "flawed-asset" or "hold back"
     arrangement) exists in our favour on, over or with respect to the Accounts
     or the Deposits or any part thereof.

(c)  No rights of counter-claim, rights of set-off or combination of accounts or
     any other equities whatsoever have arisen in our favour against the Chargor
     in respect of the



                                       29


     Accounts or the Deposits or any part thereof, and we shall not assert or
     seek to exercise any such rights or equities.

(d)  We have not, as at the date hereof, received any notice that any other
     person has or will have any right or interest whatsoever in, or has made or
     will be making any claim or demand or be taking any action whatsoever
     against, the Accounts or the Deposits or any part thereof, and if, after
     the date hereof, we receive any such notice, we shall immediately give
     written notice thereof to the Collateral Agent.

We have made the representations and given the undertakings set out in this
letter in the knowledge that they are required by the Collateral Agent in
connection with the security which has been granted by the Chargor in favour of
the Collateral Agent under the Charge.

This letter is for the benefit of the Collateral Agent as agent and trustee for
the Secured Parties and is governed by Hong Kong law.

                                        Yours faithfully,

                                        Signed for and on behalf of
                                        INDUSTRIAL AND COMMERCIAL BANK OF CHINA
                                        (ASIA) LIMITED


                                        By
                                           -------------------------------------
                                        (Print Name):
                                                      --------------------------



                                 EXECUTION PAGES

THE CHARGOR

Executed as a Deed by               )   SEAL AFFIXED
for and on behalf of                )
H3C HOLDINGS LIMITED                )   NEAL D. GOLDMAN
in the presence of: JEFFREY M. HELD )

Address:          PO Box 309 GT, Ugland House, South Church Street, George Town,
                  Grand Cayman, Cayman Islands

Facsimile Number: ________________________________

Attention:        ________________________________



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal of )
INDUSTRIAL AND COMMERCIAL BANK OF                 )
CHINA (ASIA) LIMITED                              )   SEAL AFFIXED
in the presence of:                               )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: 2869 8221

Attention:        ________________________________

EX-10.56

                                                                   Exhibit 10.56

                                                                  CONFORMED COPY

THIS FIXED AND FLOATING CHARGE is made as a deed on 3 April 2007

BETWEEN:

(1)  HUAWEI-3COM CO., LIMITED, a company incorporated under the laws of Hong
     Kong whose registered office is at Suites 3013-3014, 30/F One International
     Finance Centre, 1 Harbour View Street, Central, Hong Kong (the "CHARGOR");
     and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a limited liability
     company incorporated under the laws of Hong Kong whose registered office is
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in its
     capacity as collateral agent, the "COLLATERAL AGENT", which expression
     shall, wherever the context so admits, include such entity and all other
     persons from time to time acting in such capacity).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Borrower upon the terms and subject to the conditions contained
     therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor has agreed to enter into this Fixed and Floating Charge.

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  DEFINITIONS

     In this Fixed and Floating Charge, unless the context otherwise requires:

     "ACCOUNT BANK" means Industrial and Commercial Bank of China (Asia) Limited
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong;

     "ACCOUNTS" means the H3C Debt Service Account, the H3C Debt Service
     Investment Accounts and the H3C Debt Service Reserve Account and includes
     any renewal or redesignations thereof;

     "BORROWER DEBT SERVICE ACCOUNT" means the US dollar interest-bearing
     deposit account (number [PERSONAL INFORMATION OMITTED FOR SECURITY
     PURPOSES] designated "H3C Holdings Limited") of the Borrower opened and
     maintained with the Account Bank, and includes any renewal or
     re-designation thereof.

     "CHARGED PROPERTY" means any or all of the property, assets and undertaking
     of the Chargor for the time being whatsoever and wheresoever situated,
     present and future in each case expressed to be subject to the security
     created under Clause 3 (Security) of this Fixed and Floating Charge;

     "CONVEYANCING AND PROPERTY ORDINANCE" means the Conveyancing and Property
     Ordinance (Chapter 219 of the Laws of Hong Kong);

H3C Fixed and Floating Charge



                                        2


     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated __________ 2007 and signed by or on behalf of, amongst others, the
     Chargor and the Collateral Agent, as amended, supplemented and/or restated
     from time to time in any manner whatsoever;

     "H3C DEBT SERVICE ACCOUNT" means the US dollar interest-bearing deposit
     account (number [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]
     designated "Huawei-3Com Co., Limited") of the Chargor opened and maintained
     with the Account Bank, and includes any renewal or re-designation thereof;

     "H3C DEBT SERVICE INVESTMENT ACCOUNTS" means any account or accounts (the
     designation of which includes the words "H3C Debt Service Investment
     Account") of the Chargor opened and maintained with the Account Bank, which
     is or are opened pursuant to section 5.21 of the Facility Agreement.

     "H3C DEBT SERVICE RESERVE ACCOUNT" means the US dollar interest-bearing
     deposit account (number [PERSONAL INFORMATION OMITTED FOR SECURITY
     PURPOSES] designated "Huawei-3Com Co., Limited") of the Chargor opened and
     maintained with the Account Bank, and includes any renewal or
     re-designation thereof;

     "POWERS OF ATTORNEY ORDINANCE" means the Powers of Attorney Ordinance
     (Chapter 31 of the Laws of Hong Kong);

     "RECEIVABLES" means all books and other debts of any nature whatsoever,
     other than those represented by the Accounts;

     "RECEIVER" means a receiver appointed by or on behalf of the Collateral
     Agent under this Fixed and Floating Charge or pursuant to the Collateral
     Agent's statutory powers, and includes more than one such receiver and
     substituted receiver;

     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Chargor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Chargor under or in connection with
     the Facility Agreement;

     "SECURITY" means the security from time to time constituted by or pursuant
     to this Fixed and Floating Charge (or intended to be constituted by or
     pursuant to this Fixed and Floating Charge) or any part thereof; and

     "WFOE CHARGES" means the deeds of charge to be entered into by the Chargor
     in favour of the Collateral Agent to create a Lien over the shares of
     Hangzhou Huawei-3Com Technologies Co Limited and Hangzhou Queenhive
     Software Co Limited respectively as security for the Secured Indebtedness.



                                        3


1.2  DEFINITIONS IN THE FACILITY AGREEMENT

     Unless the contrary interpretation appears, a term used in the Facility
     Agreement has the same meaning when used in this Fixed and Floating Charge.

1.3  CONVEYANCING AND PROPERTY ORDINANCE

     In the context of the rights, powers, privileges, discretions and
     immunities conferred on the Collateral Agent, any Receiver or any Attorney,
     references to "mortgage" and "mortgaged land" in any provision of the
     Conveyancing and Property Ordinance shall, for the purposes of this Fixed
     and Floating Charge, be deemed to be references to the Security and the
     Charged Property respectively.

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Chargor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time or times and in the
     manner provided for in the Facility Agreement and the Chargor hereby
     creates the Security in the Charged Property in the manner and on the terms
     set out in Clause 3 (Security).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each conveyance, transfer, assignment and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or Clause 1.2 (Definitions in the Facility Agreement), any
     reference in this Fixed and Floating Charge to the Chargor, the Collateral
     Agent or any Secured Party shall be construed so as to include their
     respective successors and permitted assigns or transferees.

3.   SECURITY

3.1  ASSIGNMENT, FIXED AND FLOATING CHARGE

     The Chargor as beneficial owner, by way of continuing security for the
     payment and discharge of the Secured Indebtedness, hereby:

     (A)  conveys, transfers and assigns absolutely to the Collateral Agent all
          of the right, title, interest and benefit of the Chargor (present and
          future and whether legal or equitable) in, to and under the
          Receivables, save only for the sums from time to time standing to the
          credit of the bank account to be established by the Chargor to
          receive, and representing, capital contributions from H3C Holdings
          Limited for the purpose of sections 5.9 or 5.12 of the Facility
          Agreement and any



                                       4


          Receivable(s) represented by any loan of all or any part of any such
          sums to H3C Holdings Limited;

     (B)  charges in favour of the Collateral Agent by way of first fixed charge
          all its rights under or in respect of the assets referred to in
          Sub-clause 3.1(A) (save as expressly excepted there) to the extent
          they are not the subject of a mortgage or an assignment under such
          Sub-clause 3.1(A);

     (C)  charges in favour of the Collateral Agent by way of first fixed charge
          all its rights under or in respect of the H3C Debt Service Account and
          all of the amounts and deposits standing to the credit of such account
          from time to time together with all interest accruing from time to
          time thereon and the debts represented thereby; and

     (D)  charges in favour of the Collateral Agent by way of first fixed charge
          all its rights under or in respect of the H3C Debt Service Investment
          Accounts and all of the deposits and investments standing to the
          credit of such accounts with all interest accruing from time to time
          thereon and all title, interests, rights and benefit of the Chargor
          represented thereby; and

     (E)  charges in favour of the Collateral Agent by way of first floating
          charge the whole of the Chargor's undertakings and all its property,
          assets and rights, whatsoever and wheresoever, present and future
          (including without limitation its respective uncalled capital, its
          rights to any insurance policy or insurance proceeds and any property
          held on trust for the benefit of it by a third party), other than:

          (i)  [a sum of cash not exceeding US$41,000,000 set aside in an amount
               held by the Chargor to satisfy the Restricted Junior Payment
               referred to in section 6.4(b) of the Facility Agreement;]

          (ii) the H3C Debt Service Account and all of the amounts and deposits
               standing to the credit of such account from time to time together
               with all interest accruing from time to time thereon and the
               debts represented thereby;

          (iii) any property, assets or rights from time to time or for the time
               being effectively:

               (a)  the subject of a Lien (in equity or at law) by Sub-clause
                    3.1(A) and (B) (Assignment, Fixed and Floating Charge) or
                    otherwise pursuant to this Fixed and Floating Charge;

               (b)  the subject of a Lien pursuant to the WFOE Charges; or

               (c)  subject to Clause 12.8 (Discharge Conditional), released,
                    discharged and/or reassigned, or as appropriate, transferred
                    in accordance with Sub-clauses 3.4(A) and 3.4(B);



                                       5


          (iv) any of the Chargor's rights arising out of:

               (a)  the lease agreement dated 30 April 2004 entered into between
                    the Chargor, MTR Corporation Limited and IFC Development
                    Limited in respect of Suites 3013 and 3014 on the thirtieth
                    floor of One International Finance Centre, No.1 Harbour View
                    Street, Central, Hong Kong;

               (b)  the tenancy agreement due to expire on 14 November 2009
                    entered into between Cityplaza Holdings Limited and the
                    Chargor in respect of Suites 1702 to 1704 on the 17th Floor
                    of Cityplaza One, Taikoo Shing, Hong Kong; and

               (c)  the tenancy agreement entered into in 2007 between the
                    Landlord (as defined thereunder) acting through its
                    authorised agent, Harriman Leasing Limited, and the Chargor
                    in respect of Suites 2801-3 (28th Floor), Shell Tower, Times
                    Square, Hong Kong; and

          (v)  the sums and the Receivable(s) expressly excepted in Sub-clause
               3.1(A);

     to hold the same unto the Collateral Agent, but in each case subject to
     Clause 3.4 (Redemption).

3.2  CHARGOR TO DELIVER DOCUMENTS

     The Chargor shall as soon as reasonably practicable following the execution
     of this Fixed and Floating Charge deposit with the Collateral Agent (using
     all reasonable endeavours to procure such deposit as soon as reasonably
     practicable):

     (A)  all share certificates and documents of title (to the extent such
          exist) in respect of the shares in any Subsidiary of the Chargor
          (other than those whose shares are the subject of a Lien pursuant to
          the WFOE Charges); and

     (B)  instrument(s) of transfer in respect of such shares duly executed,

     subject always to the provisions of sections 5.13 and 5.15 of the Facility
     Agreement and any applicable local laws. Notwithstanding the requirements
     in this Sub-clause 3.2 and any other provisions in this Fixed and Floating
     Charge, nothing shall prevent the Chargor from entering into any Subsidiary
     Integration Transactions in accordance with the Facility Agreement. The
     Collateral Agent shall return any documents under Sub-clause (A) to the
     extent and for any period required by the Chargor to comply with its legal
     and regulatory obligations, provided the recipient of the documents shall
     confirm to the Collateral Agent that the documents are held to the order of
     the Collateral Agent.



                                       6


3.3  COLLATERAL AGENT NO OBLIGATION TO PERFORM

     Notwithstanding the conveyance, transfer and assignment to the Collateral
     Agent of all the right, title, interest and benefit of the Chargor in, to
     and under the Receivables, the Collateral Agent shall not be or be deemed
     to be liable to perform any of the obligations of the Chargor under any of
     the Receivables and the Chargor hereby acknowledges and confirms that it
     shall remain fully liable for the performance of all such obligations and
     shall have no claim against the Collateral Agent in respect of any omission
     on the part of the Collateral Agent to perform the same.

3.4  REDEMPTION

     (A)  Subject always to Clause 12.9 (Discharge Conditional), upon the
          Secured Indebtedness having been fully paid and unconditionally and
          irrevocably discharged in full the Collateral Agent shall at the
          request and cost of the Chargor, promptly release, discharge and/or
          re-assign, or, as appropriate, transfer the benefit of the Security
          constituted by Clause 3.1 (Assignment, Fixed and Floating Charge) to
          the Chargor or as the Chargor may direct and, thereafter, the Chargor
          shall have no future obligation hereunder.

     (B)  The execution of a discharge, release, re-assignment or partial
          discharge by the Collateral Agent shall be a good and valid release or
          discharge of the Security constituted by this Clause 3 (Security) or
          the relevant part thereof (as the case may be) and the obligations (or
          the relevant part thereof, as the case may be) of the Chargor from
          this Fixed and Floating Charge without the need for the Chargor to be
          a party thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Chargor, do all such things and execute all such documents
          and procure that its nominees do all such things and execute all such
          documents within its power to do and execute as may be reasonably
          necessary to give effect to the release, discharge, re-assignment
          and/or transfer referred to in Sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment and/or transfer pursuant to
          and in accordance with Sub-clause (A), the Collateral Agent shall, at
          the request and cost of the Chargor:

          (i)  promptly procure the redelivery to the Chargor of all deeds,
               certificates and other documents deposited with the Collateral
               Agent or to its order pursuant to Clause 4.2 (Deposit of Title
               Documents);

          (ii) promptly reverse or remove such memoranda endorsed on such
               documents pursuant to Clause 4.3 (Endorsement on Documents) as
               are in the possession of the Collateral Agent;

          (iii) promptly procure the redelivery to the Chargor, if it requests
               the same, of the instruments and papers delivered by the Chargor
               to the Collateral Agent under Sub-clause 3.2(A);



                                       7


          (iv) promptly give notice to each person (if any) who has received
               notice of the Security pursuant to Clause 4.1 (Further Deeds and
               Documents) of such release, discharge, re-assignment and/or
               transfer; and

          (v)  promptly instruct the relevant insurance company to remove any
               endorsements and reverse any amendments made pursuant to
               Sub-clause 4.1(D),

          in each case to the extent the same relates to such release,
          discharge, re-assignment and/or transfer.

4.   PERFECTION OF SECURITY AND FURTHER ASSURANCE

4.1  FURTHER DEEDS AND DOCUMENTS

     The Chargor shall at any time, at the request of the Collateral Agent but
     at the cost of the Chargor for costs reasonably incurred, promptly sign,
     seal, execute, deliver and do all deeds, instruments, notices, documents,
     acts and things (including, without limitation further or other legal
     assignments, transfers, mortgages, legal or other charges or securities or
     any filings or registrations) as in each such case may be necessary or
     desirable for the purpose of maintaining, perfecting or protecting the
     Security or at any time after the Security has become enforceable for
     facilitating the realisation thereof and the exercise of all powers,
     authorities and discretions vested in the Collateral Agent or any Receiver
     appointed hereunder provided that and without limitation:

     (A)  promptly following the execution and delivery of this Fixed and
          Floating Charge, the Chargor shall:

          (i)  enter the relevant particulars of this Fixed and Floating Charge
               in the registers of charges kept or to be kept at the registered
               office of the Chargor;

          (ii) make all such other filings and registrations as may be requested
               in writing by the Collateral Agent as may be necessary to
               perfect, protect and maintain the Security; and

          (iii) authorise its secretary or any person nominated by the
               Collateral Agent to deliver particulars of the Security created
               by this Fixed and Floating Charge, together with a copy of this
               Fixed and Floating Charge, to the Registrar of Companies in Hong
               Kong in accordance with Section 80 of the Companies Ordinance
               (Chapter 32 of the Laws of Hong Kong);

     (B)  the Chargor shall, forthwith following the execution and delivery of
          this Fixed and Floating Charge, and forthwith upon the opening of any
          H3C Debt Service Investment Account, join with the Collateral Agent in
          giving notice of the fixed and floating charges effected pursuant to
          Clause 3.1(C) and Clause 3.1(D) to the Account Bank in substantially
          the form set out in Schedule 1 (Notice of Charge) or as otherwise
          approved by the Collateral Agent and use reasonable



                                       8


          efforts to procure that the Account Bank executes the acknowledgements
          and agreements set out in Schedule 2 (Form of Acknowledgement);

     (C)  as soon as practicable following a request by the Collateral Agent,
          the Chargor shall assign any material insurance policies inuring to
          its benefit and join with the Collateral Agent in giving notice of
          such assignment in a form reasonably satisfactory to the Collateral
          Agent to each insurance company under such insurance policies and use
          reasonable endeavours to procure that such insurance company
          acknowledges such notice in a form reasonably satisfactory to the
          Collateral Agent and ensure that all endorsements then existing on
          each of such insurance policies will be deleted, and each of such
          insurance policies will be endorsed substantially as set out in, and
          the named insured under each of the insurance policies will be amended
          in, a form satisfactory to the Collateral Agent;

     (D)  as soon as practicable following a request by the Collateral Agent,
          the Chargor shall use its reasonable efforts to procure that its
          insurance brokers issue to the Collateral Agent the brokers'
          undertaking(s) in respect of the insurance policies assigned pursuant
          to Sub-clause (B) above in a form reasonably satisfactory to the
          Collateral Agent; and

     (E)  the Chargor shall, at the request of the Collateral Agent or any
          person deriving title under the Collateral Agent, execute or do all
          lawful acts, assurances and things for further or more perfectly
          assuring the Charged Property or any part thereof to the Collateral
          Agent and to those deriving title under the Collateral Agent,

     and without prejudice to the generality of the foregoing, such assignments,
     transfers, mortgages, legal or other charges or securities shall be in such
     form as the Collateral Agent shall reasonably require and may contain
     provisions such as are herein contained or provisions to the same effect.

4.2  DEPOSIT OF TITLE DOCUMENTS

     In addition to the provisions of Clause 3 (Security), the Chargor shall, as
     soon as practicable following the request of the Collateral Agent following
     the execution and delivery of this Fixed and Floating Charge (or upon
     becoming possessed thereof at any time hereafter), deposit with the
     Collateral Agent or to the Collateral Agent's order all deeds, certificates
     and other documents (other than those relating to the shares in the
     Subsidiaries of the Chargor subject to the WFOE Charges) constituting or
     evidencing title to any material asset forming part of the Charged Property
     originally charged pursuant to Clause 3.1(A), (B) or (C) or subsequently
     becoming subject to a fixed charge hereunder pursuant to Clause 5 hereof or
     any part thereof (if they have not already done so) and the Collateral
     Agent, if held by it or to its order, shall hold or procure to be held such
     deeds, certificates and other documents in safe custody and clearly
     identified so as to be distinct from all other deeds, certificates and
     other documents of the Collateral Agent.



                                       9


4.3  ENDORSEMENT ON DOCUMENTS

     The Chargor, shall from time to time at the reasonable request of the
     Collateral Agent but at the Chargor's cost for costs reasonably incurred
     endorse or cause to be endorsed on documents referred to in Clause 4.2
     (Deposit of Title Documents) such memoranda as the Collateral Agent may
     reasonably require for the purpose of referring or drawing attention to the
     security interests created by this Fixed and Floating Charge.

5.   PROTECTION OF SECURITY AND CRYSTALLISATION OF FLOATING CHARGE

5.1  PART CRYSTALLISATION

     The Collateral Agent shall be entitled at any time by notice in writing to
     the Chargor after an Event of Default to convert the floating charge
     created by Clause 3.1(D) into a fixed charge affecting all the property and
     assets which for the time being are the subject of such floating charge or,
     as the case may be, such of the said property and assets as are specified
     in such notice.

5.2  AUTOMATIC CRYSTALLISATION

     Notwithstanding Clause 5.1 (Part Crystallisation) and without prejudice to
     any rule of law which may have a similar effect, the floating charge shall
     automatically be converted with immediate effect into a fixed charge as
     regards all the property and assets subject to the floating charge and
     without notice from the Collateral Agent to the Chargor on:

     (A)  the presentation of a petition for the compulsory winding up of the
          Chargor;

     (B)  the convening of a meeting for the passing of a resolution for the
          voluntary winding up of the Chargor;

     (C)  the presentation or making of an application for a warrant of
          execution, writ of fieri facias, garnishee order or charging order in
          respect of any material part of the property or assets of the Chargor
          subject to the floating charge which is not discharged within 60 days;

     (D)  the Chargor creating or permitting any Lien over or with respect to
          any of the Charged Property, or attempting to do so without the prior
          consent of the Collateral Agent (other than as permitted by the
          Facility Agreement); or

     (E)  the Security becoming enforceable in accordance with Clause 9 (Default
          Procedure).

5.3  RECONVERSION OF CRYSTALLISED ASSETS

     The Collateral Agent may by notice in writing to the Chargor re-convert any
     of the assets which has become subject to a fixed charge pursuant to
     Clauses 5.1 (Part Crystallisation) or 5.2 (Automatic Crystallisation) so
     that such asset shall again be subject to the floating charge specified in
     Clause 3.1(D) provided that the floating



                                       10


     charge over any asset re-converted under this Clause 5.3 (Reconversion of
     Crystallised Assets) shall be subject to the further operation of Clause
     5.1 (Part Crystallisation) or 5.2 (Automatic Crystallisation).

6.   PAYMENTS INTO AND OUT OF THE CHARGED ACCOUNTS

     (A)  All dividends received from the PRC Subsidiaries shall be credited to
          the H3C Debt Service Account and the H3C Debt Service Reserve Account
          in the respective amounts provided for in section 5.21 of the Facility
          Agreement and the Chargor undertakes to procure that WFOE and
          Queenhive pay such dividends to such accounts in such respective
          amounts. The Chargor shall, as soon as reasonably practicable
          following the execution and delivery of this Fixed and Floating
          Charge, join with the Collateral Agent in giving notice of the
          security granted by Clause 3.1 to WFOE and Queenhive in substantially
          the form set out in Schedule 3 (Notice of Charge) or otherwise
          approved by the Collateral Agent and use reasonable efforts to procure
          that WFOE and Queenhive acknowledge and agree to the notice of charge
          by executing a copy of the notice of charge.

     (B)  The Collateral Agent shall for so long as an Event of Default shall
          not have occurred and be continuing be entitled to withdraw amounts
          from the H3C Debt Service Account, and/or the H3C Debt Service
          Investment Accounts, in a manner and at a time or times provided for
          in, and in an amount or amounts calculated in accordance with, section
          5.21 of the Facility Agreement and transfer the same to the Borrower
          Debt Service Account, in each case in satisfaction of a dividend
          declared by the Chargor in respect of its issued share capital.

     (C)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to require the Collateral Agent
          to use all or any part of the balance standing to the credit of the
          H3C Debt Service Account and/or the H3C Debt Service Investment
          Accounts towards transfer to the Borrower Debt Service Account in a
          manner and at times provided for in, and in amounts calculated in
          accordance with, section 5.21 of the Facility Agreement, in each case
          in satisfaction of a dividend declared by the Chargor in respect of
          its issued share capital.

     (D)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to require the Collateral Agent
          to use all or any part of the balance standing to the Credit of the
          H3C Debt Service Account towards any investment in Cash Equivalents
          (or such other investments as agreed by the Collateral Agent), and the
          Collateral Agent shall thereupon make such investment in Cash
          Equivalents (or such other agreed investments) in the name of the
          Chargor, provided always that any such investments may only be made
          through the H3C Debt Service Investment Accounts and subject to the
          fixed charge set out in Clause 3.1(D).



                                       11


     (E)  The Collateral Agent shall however be entitled to decline to make any
          such discharge or investment as is mentioned in Sub-clauses (C) or (D)
          above if to do so would prevent the withdrawal and application of any
          amount in accordance with Sub-clause (B).

     (F)  All interest accruing on the H3C Debt Service Account and/or the H3C
          Debt Service Investment Accounts shall be transferred to the credit of
          the H3C Debt Service Reserve Account by the Collateral Agent as and
          when credited to the H3C Debt Service Account or, as the case may be,
          the H3C Debt Service Investment Accounts.

     (G)  Other than pursuant to Sub-clauses (B) to (F), no amount may be
          withdrawn from the H3C Debt Service Account or the H3C Debt Service
          Investment Accounts by the Chargor without the prior written consent
          of the Collateral Agent.

     (H)  The Chargor shall for so long as an Event of Default shall not have
          occurred and be continuing be entitled to withdraw from the H3C Debt
          Service Reserve Account at any time and without any consent from the
          Collateral Agent any amount to be applied by it for any purpose in the
          ordinary course of business not prohibited by the Facility Agreement,
          and apply it for such purpose.

     (I)  Other than pursuant to Sub-clause (H) above, no amount may be
          withdrawn from the H3C Debt Service Reserve Account by the Chargor
          without the prior written consent of the Collateral Agent.

     (J)  The Collateral Agent shall transfer amounts from the H3C Debt Service
          Account and/or the H3C Debt Service Investment Accounts to the H3C
          Debt Service Reserve Account pursuant to and in accordance with
          section 5.21 of the Facility Agreement.

7.   REPRESENTATIONS

7.1  The Chargor makes the following representations:

     (A)  it is duly incorporated and validly existing under the laws of Hong
          Kong and it has the power and capacity to enter into this Fixed and
          Floating Charge and grant the Security created hereunder;

     (B)  it has taken all necessary action to authorise its entry into, and the
          creation of security and the performance of all its obligations under,
          this Fixed and Floating Charge and the transactions contemplated by
          this Fixed and Floating Charge;

     (C)  the entry into and performance by it of, the creation of security
          under, and the transactions contemplated by, this Fixed and Floating
          Charge do not and will not conflict with:

          (i)  any law or regulation applicable to it;



                                       12


          (ii) its constitutional documents; or

          (iii) any agreement or instrument binding upon or its Subsidiaries or
               any of its or its Subsidiaries' assets.

     (D)  the execution, delivery and performance by the Chargor of its
          obligations under this Fixed and Floating Charge will not require any
          consent, approval or notice to any governmental or other regulatory
          body.

     (E)  the obligations expressed to be assumed by it under this Fixed and
          Floating Charge are, subject to any general principles of law limiting
          its obligations, legal, valid, binding and enforceable obligations;

     (F)  the security interests created under this Fixed and Floating Charge
          are (subject to completion of all registrations required by law)
          legal, valid, binding and enforceable security having the priority and
          ranking which they are expressed to have; and

     (G)  subject only to this Fixed and Floating Charge, it is the sole legal
          and beneficial owner of the Charged Property and that the Charged
          Property is free from any Lien and any interest or claims of third
          parties other than interest or claims arising by operation of law
          affecting companies generally and Permitted Liens.

7.2  The above representations are made on the date of this Fixed and Floating
     Charge and are deemed to be repeated by the Chargor on each day following
     the date of this Fixed and Floating Charge until the termination of the
     Facility Agreement or this Fixed and Floating Charge, whichever is later.

8.   COVENANTS AND UNDERTAKINGS

8.1  COVENANTS AND UNDERTAKINGS OF THE CHARGOR

     The Chargor covenants and undertakes with the Collateral Agent that:

     (A)  The Chargor undertakes to, within 14 days from the date of this Fixed
          and Floating Charge, provide evidence in form and substance
          satisfactory to the Collateral Agent that the particulars of this
          Fixed and Floating Charge have been recorded in the register of
          mortgages, charges and other encumbrances of the Chargor and filed
          with the Companies Registry of Hong Kong pursuant to Section 80 of the
          Companies Ordinance (Chapter 32 of the Laws of Hong Kong);

     (B)  it shall take all such actions as are available to it:

          (i)  to perfect and protect the Security intended to be conferred by
               it on the Collateral Agent pursuant to this Fixed and Floating
               Charge; and



                                       13


          (ii) to maintain the Security intended to be conferred by it on the
               Collateral Agent pursuant to this Fixed and Floating Charge as
               first ranking security;

     (C)  it shall not sell, transfer, assign, exchange or otherwise dispose of
          the whole or any part of the Charged Property or agree to do any of
          the foregoing other than as expressly permitted or provided for in the
          Facility Agreement or in this Fixed and Floating Charge or (with
          respect to the assets charged pursuant to Clause 3.1(D)) in the
          ordinary course of business and in accordance with the Facility
          Agreement;

     (D)  other than as permitted by the Facility Agreement or this Fixed and
          Floating Charge it shall not create, incur or permit to subsist or
          attempt to create, incur or permit to subsist any Lien on the Charged
          Property;

     (E)  it shall at the written request of the Collateral Agent, make all such
          filings and registrations, and take all such other reasonable steps,
          as may be necessary or desirable in connection with the creation,
          perfection or protection of any security which it may, or may be
          required to, create in connection herewith;

     (F)  it shall at all times give to the Collateral Agent such information as
          the Collateral Agent may reasonably require in respect of the Charged
          Property for the purpose of the discharge of the trusts, powers,
          rights, duties, authorities and discretions vested in it hereunder or
          by operation of law;

     (G)  it shall take all reasonable steps as may be required by the
          Collateral Agent to allow the Collateral Agent to sell or dispose of
          the Charged Property on or after the Security becomes enforceable; and

     (H)  it shall not to do or cause or permit to be done, or omit to do
          anything which may in any way jeopardise the Security created
          hereunder.

8.2  POWER OF COLLATERAL AGENT TO REMEDY FAILURES

     If at any time the Chargor shall fail to comply with or perform any of the
     covenants contained in this Fixed and Floating Charge or any Credit
     Document, the Collateral Agent shall have the power on behalf of or in the
     name of the Chargor, but shall not be under any obligation, to perform the
     covenants and to take such steps which the Collateral Agent may in its
     discretion consider appropriate with a view to remedying, or mitigating the
     consequences of, such failure but so that the exercise of this power or the
     failure to exercise it shall, in no circumstances, prejudice the other
     rights of the Collateral Agent under this Fixed and Floating Charge or any
     Credit Document. The Chargor shall on demand reimburse to the Collateral
     Agent all proper costs, expenses and losses incurred or sustained by the
     Collateral Agent in connection with such steps and until such costs,
     expenses and losses are reimbursed the outstanding sums shall carry
     interest in accordance with section 2.10 of the Facility Agreement from the
     date when payment is due to the date of reimbursement and such outstanding
     sums including any accrued interest shall form part of the Secured
     Indebtedness. No



                                       14


     exercise by the Collateral Agent of its powers under this Clause 8.2 (Power
     of Collateral Agent to Remedy Failures) shall render the Collateral Agent
     liable to account as a mortgagee in possession.

9.   DEFAULT PROCEDURE

     The Security shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          Excluded Subsidiaries).

10.  CHATTELS AND FIXTURES

     At any time after the Security has become enforceable, the Collateral Agent
     or any Receiver may:

     (A)  dispose of any chattels owned by the Chargor forming part of the
          Charged Property as agent for the Chargor and without prejudice to any
          obligation on the part of the Collateral Agent or the Receiver to
          account for the proceeds of sale of such chattels; and

     (B)  sever any plant machinery and other fixtures and fittings owned by the
          Chargor from any premises containing them and sell the same separately
          without the consent of the Chargor.

11.  EFFECTS OF THE SECURITY BECOMING ENFORCEABLE

11.1 EFFECTS

     After the Security (or the relevant part thereof) shall have become
     enforceable in accordance with Clause 9 (Default Procedure) and without
     prejudice to the powers of the Collateral Agent to appoint a Receiver
     pursuant to Clause 14 (Appointment of Receiver):

     (A)  the floating charge created under Clause 3.1(D) shall automatically
          and immediately crystallise and operate as a fixed charge;

     (B)  the Chargor's rights or power to deal with the Charged Property
          (whether statutory or otherwise) shall cease and the Collateral Agent
          shall be entitled to deal with, collect in and realise the same in
          such manner as the Collateral Agent thinks fit;



                                       15


     (C)  the Collateral Agent shall be entitled to exercise all powers in
          respect of the Charged Property provided in Section 51 of and The
          Fourth Schedule to the Conveyancing and Property Ordinance but without
          the necessity to comply with any restrictions imposed by the
          provisions of the said Section 51 or The Fourth Schedule;

     (D)  the Collateral Agent may exercise all of the rights conferred on any
          mortgagee by law and on the Collateral Agent or on any Receiver under
          this Fixed and Floating Charge including, without limitation, the
          right to sell or otherwise dispose of, for any consideration, the
          whole or any part of the Charged Property in respect of which the
          security hereby constituted has become enforceable accordingly and, in
          particular the provisions of paragraph 11 of The Fourth Schedule to
          the Conveyancing and Property Ordinance shall not restrict the
          exercise by the Collateral Agent or any Receiver of its powers
          hereunder and the Security shall become immediately enforceable and
          the statutory power of sale and other powers of sale and appointing a
          Receiver shall become immediately exercisable without any juridical or
          other formality or any presentment, demand, protest or other notice of
          any kind on or at any time after the Security becomes enforceable;

     (E)  the Collateral Agent may sell, realise or otherwise dispose of, for
          such consideration (whether payable immediately or by instalments) as
          it shall in its absolute discretion think fit (whether by private sale
          or otherwise), the whole or any part of the shares held by the Chargor
          in any Subsidiaries (other than the shares which are subject to Liens
          pursuant to the WFOE Charges) and the Collateral Agent may to the
          extent that it has not already done so, take possession of and hold
          all or any part of such shares and accordingly register, or cause to
          be registered, all or any of such shares in its own name or in the
          name of the Collateral Agent's nominee or assignee or in the name of
          any purchaser thereof and apply any shares constituting dividends or
          other distributions in cash as if they were proceeds of sale of such
          shares; and

     (F)  without prejudice to the foregoing, the provisions of the Conveyancing
          and Property Ordinance are expressly extended (subject to Clause 11.9
          (Inconsistency and Conflict)) so that the Collateral Agent may in
          addition to any powers granted it by applicable law, upon the Security
          becoming enforceable and upon and subject to the terms and conditions
          of the Facility Agreement):

          (i)  sell all the title to and interest in the Charged Property or any
               interest in the same and do so in consideration of an agreement
               to pay all or part of the purchase price at a later date or
               dates, or an agreement to make periodical payments, whether or
               not the agreement is secured by a security or a guarantee, or for
               such other consideration whatsoever as the Collateral Agent may
               think fit, and also grant any option to purchase and effect
               exchanges;



                                       16


          (ii) with a view to, or in connection with, the sale of the Charged
               Property, carry out any transaction, scheme or arrangement which
               the Collateral Agent considers appropriate;

          (iii) do all or any of the following things or exercise all or any of
               the following powers, so far as not included in paragraphs (i)
               and (ii) of Sub-clause (F):

               (a)  take possession of, get in and collect the Charged Property
                    and, without prejudice to the generality of the foregoing,
                    the Collateral Agent shall be at liberty and is hereby
                    irrevocably authorised, without any reference to or further
                    authority from the Chargor and without giving prior notice
                    to the Chargor or obtaining the consent of the Chargor at
                    any time or times without any restriction whatsoever, to
                    appropriate the moneys for the time being standing to the
                    credit of the Accounts in or towards payment to the
                    Collateral Agent of any or all of the moneys hereby
                    covenanted to be paid, it being agreed that any such moneys
                    shall be applied in accordance with section 2.16(h) of the
                    Facility Agreement;

               (b)  carry on the business of the Chargor in so far as it relates
                    to the Charged Property as it thinks fit;

               (c)  sell, exchange, license or otherwise dispose of or in any
                    way whatsoever deal with the Charged Property for such
                    consideration (if any) and upon such terms as it may think
                    fit;

               (d)  appoint and engage managers, agents and advisers in respect
                    of the Charged Property upon such terms as to remuneration
                    and otherwise and for such periods as it may determine, and
                    to dismiss them;

               (e)  bring, defend, submit to arbitration, negotiate, compromise,
                    abandon and settle any claims and proceedings concerning the
                    Charged Property;

               (f)  transfer all or any of the Charged Property and/or any of
                    the liabilities of the Chargor to any other company or body
                    corporate, whether or not formed or acquired for the purpose
                    and whether or not a subsidiary or associated company of the
                    Collateral Agent or a company in which the Collateral Agent
                    has an interest;

               (g)  in connection with the exercise of any of its powers
                    hereunder, execute or do, or cause or authorise to be
                    executed or done, on behalf of or in the name of the
                    Chargor, as it may think fit, but only in respect of the
                    Charged Property all assurances, deeds,



                                       17


                    transactions, schemes of arrangement, documents, acts and
                    things which it may consider appropriate and to do and
                    exercise, in relation to the Charged Property, all such
                    powers as it would be capable of exercising if it were the
                    absolute beneficial owner of the same and to use the name of
                    the Chargor for all or any of the foregoing purposes;

               (h)  exercise or permit any other person to exercise any powers,
                    rights, remedies or privileges in respect of the Charged
                    Property;

               (i)  exercise any of the powers and perform any of the duties
                    conferred on the Chargor by any Credit Document or any
                    statute, deed or contract;

               (j)  disclaim, discharge, abandon, disregard, alter or amend all
                    or any of the outstanding contracts of the Chargor but only
                    in respect of the Charged Property and allow time for
                    payment of any monies either with or without security;

               (k)  make and effect insurances in respect of the Charged
                    Property and submit claims thereunder;

               (l)  do all such other acts and things as it may consider
                    necessary, incidental or conducive to the exercise of any of
                    the powers hereby conferred;

               (m)  generally use the name of the Chargor and its corporate seal
                    (where appropriate) in the exercise of all or any of the
                    powers hereby conferred;

               (n)  in respect of the Charged Property, sanction or confirm
                    anything done by the Chargor and concur with the Chargor in
                    any dealing not hereinbefore specifically mentioned; and

               (o)  generally carry out, cause or authorise to be carried out
                    any transaction, scheme or arrangement whatsoever, whether
                    similar or not to any of the foregoing, in relation to the
                    Charged Property which it may consider expedient as
                    effectually as if it were solely and absolutely entitled to
                    the Charged Property.

11.2 ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS

     Subject to the order of priority of payments set out in section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in and about the carrying on and management of any such
     business as contemplated by Clause 11.1 (Effects) or in the exercise of any
     of the powers conferred by Clause 11.1 (Effects) or otherwise in respect of
     the Charged Property and all outgoings which it shall think fit to



                                       18


     pay out of the profits and income of the Charged Property and the moneys
     received by it in carrying out any business as contemplated by Clause 11.1
     (Effects) and may apply the residue of the said profits, income and moneys
     in the manner provided by section 2.16(h) of the Facility Agreement
     provided that any such expenses shall, in any event, to the extent not
     fully paid or discharged, form or shall be deemed to form part of the
     Secured Indebtedness.

11.3 NO WAIVER

     No failure or delay on the part of the Collateral Agent or any Receiver to
     exercise any right, power or remedy under this Fixed and Floating Charge
     will operate as a waiver thereof nor will any single or partial exercise of
     any right, power or remedy preclude any other or further exercise thereof
     or the exercise of any other right, power or remedy.

11.4 WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Fixed and
     Floating Charge must be in writing, be express and not implied and may be
     given subject to any conditions which the Collateral Agent considers fit.
     Any waiver or consent shall be effective only in the instance and for the
     purpose for which it is given.

11.5 NO OBLIGATION TO INSURE

     Notwithstanding any provisions to the contrary, the Collateral Agent shall
     not be under any obligation to insure any of the Charged Property or the
     title deeds or other evidence in respect thereof and shall not be
     responsible for any loss which may be suffered as a result of the lack of
     or inadequacy of any such insurance.

11.6 NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Charged Property by any act or omission of the
     Chargor or any prior ranking encumbrancer or any other person.

11.7 NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax in respect of the Charged Property or any part thereof
     on any income therefrom or any proceeds thereof.

11.8 NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Security or any security created by the Facility
     Agreement or any of the Credit Documents.



                                       19


11.9 INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Fixed and Floating Charge
     and the provisions of any applicable law (including without limitation the
     Conveyancing and Property Ordinance and the Trustee Ordinance (Chapter 29
     of the Laws of Hong Kong)), the provisions of this Fixed and Floating
     Charge shall prevail and such inconsistent or conflicting provisions shall
     be deemed to be expressly negated or modified hereby provided that none of
     the foregoing shall be construed as a limitation on the powers of any
     Receiver.

11.10 NO EXEMPTION

     Nothing in this Fixed and Floating Charge shall exempt the Collateral Agent
     from or indemnify it against any liability which would by rule of law or
     otherwise attach to it in respect of any act of negligence or wilful
     default which it may have committed in relation to its duties and/or
     discretions under this Fixed and Floating Charge.

12.  PRESERVATION OF RIGHTS

12.1 SECURITY ADDITIONAL

     The Security and the rights given to the Collateral Agent under this Fixed
     and Floating Charge shall be in addition to and shall be independent of
     every guarantee, indemnity or other security which the Collateral Agent may
     at any time hold for the Secured Indebtedness and it is hereby declared
     that no prior security held by the Collateral Agent over the whole or any
     part of the Charged Property shall merge in the Security.

12.2 SECURITY CONTINUING

     The Security and the rights given to the Collateral Agent under this Fixed
     and Floating Charge shall be a continuing security notwithstanding the
     winding-up or dissolution of the Chargor or any partial payment, settlement
     of account or other matter whatsoever and in particular (but without
     prejudice to the generality of the foregoing) shall not be considered
     satisfied by any intermediate repayment in satisfaction of all or any of
     the Secured Indebtedness and shall continue in full force and effect until
     the Secured Indebtedness has been discharged and satisfied in full.

12.3 INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement, variation or release with, the Chargor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Chargor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Security or to the liability of the Chargor for the Secured
     Indebtedness.



                                       20


12.4 RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Fixed and Floating Charge
     are cumulative and are not, nor are they to be construed as, exclusive of
     any rights, power or remedies provided by law.

12.5 SECURITY NOT AFFECTED

     Neither the Security nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Fixed and Floating Charge or by law nor the liability of the
     Chargor hereunder shall be discharged, impaired or otherwise affected by:

     (A)  any time, waiver or consent granted, or any other indulgence or
          concession granted, by the Collateral Agent or any other Secured Party
          to the Chargor or any other person; or

     (B)  the taking, holding, variation, compromise, exchange, renewal,
          realisation or release by the Collateral Agent or any other Secured
          Party or any other person of any rights under or in connection with a
          Credit Document, any other security, guarantee, indemnity or other
          document; or

     (C)  the refusal or failure to take up, hold, realise, perfect or enforce
          by the Collateral Agent or any other Secured Party or any other person
          any rights under or in connection with a Credit Document, any other
          security, guarantee, indemnity or other document (including, without
          limitation, any failure to comply with any formality or other
          requirement or any failure to realise the full value of any security);
          or

     (D)  the existence of any claim, set-off or other right which the Chargor
          may have at any time against the Collateral Agent or any other Secured
          Party or any other person; or

     (E)  the making or absence of any demand for payment or discharge of any
          Secured Indebtedness on the Chargor or any other person, whether by
          the Collateral Agent or any other Secured Party or any other person;
          or

     (F)  any arrangement, compromise or settlement entered into by the
          Collateral Agent or any other Secured Party with the Chargor or any
          other person; or

     (G)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Chargor under a
          Credit Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order; or

     (H)  any variation, amendment, waiver, release, novation, supplement,
          extension (whether of maturity or otherwise) or restatement (in each
          case however



                                       21


          fundamental and of whatsoever nature) or replacement of any Credit
          Document, or any other security, guarantee, indemnity or other
          document; or

     (I)  any amendment, variation, novation, supplementation or replacement of
          any agreement between the Secured Parties; or

     (J)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Credit Document or any other security, guarantee,
          indemnity or other document; or

     (K)  any of the obligations of the Chargor under any of Credit Document or
          under any other Lien taken in respect of the obligations of the
          Chargor under any Credit Document being or becoming illegal, invalid,
          unenforceable, ineffective or impaired in any respect; or

     (L)  any amalgamation, merger or reconstruction that may be effected by the
          Collateral Agent with any other person or any sale or transfer of the
          whole or any part of the undertaking, property and assets of the
          Collateral Agent to any other person; or

     (M)  any amalgamation, merger or reconstruction (other than as part of a
          solvent reconstruction or amalgamation the terms of which have been
          approved by the Collateral Agent), reorganisation, administration,
          administrative or other receivership or dissolution or liquidation
          entry into a voluntary arrangement of the Chargor or any other person;
          or

     (N)  the insolvency, bankruptcy, winding-up or dissolution of the Chargor
          or any change in its status, function, control or ownership; or

     (O)  any change in the constitution of the Chargor; or

     (P)  any incapacity, lack of power, authority or legal personality of the
          Chargor to enter into or perform any of its obligations under any
          Credit Document or any irregularity in the exercise thereof or any
          lack of authority by any person purporting to act on their behalf; or

     (Q)  any exercise, omission to exercise, compromise, renewal or release of
          any rights against the Chargor; or

     (R)  any invalidity or irregularity in the execution of this Fixed and
          Floating Charge or any other Credit Document; or

     (S)  any other act (save for an act of release and discharge by the
          Collateral Agent in accordance with this Agreement), event or omission
          which, but for this Clause 12.5 (Security Not Affected) might operate
          to discharge, impair or otherwise affect the Security or the liability
          of the Chargor for the Secured Indebtedness or any of the rights,
          powers or remedies conferred upon the



                                       22


          Collateral Agent or any Receiver (or their respective delegates) by
          this Fixed and Floating Charge or by law or the liability of the
          Chargor hereunder.

     Without prejudice to the generality of this Clause 12.5 (Security Not
     Affected), the Chargor expressly confirms that it intends that its
     liability for the Secured Indebtedness and its obligations under this Fixed
     and Floating Charge shall extend from time to time to any variation,
     increase, extension, addition or replacement (however fundamental) of or to
     any of the Credit Documents and/or any facility or amount made available
     under any of the Credit Documents.

12.6 NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Fixed and Floating Charge is intended to, or
     shall operate so as to, prejudice or affect any guarantee, indemnity or
     other security of any kind whatsoever which the Collateral Agent may have
     for the Secured Indebtedness or any right, remedy or privilege of the
     Collateral Agent thereunder.

12.7 SCOPE OF RELEASE

     Any receipt, release or discharge of the Security or of any liability
     arising under this Fixed and Floating Charge may be given by the Collateral
     Agent and, unless expressly stated otherwise, shall not release or
     discharge the Chargor from any liability for the same or any other monies
     which may exist independently of this Fixed and Floating Charge. Where such
     receipt, release or discharge relates only to part of the Charged Property
     such receipt, release or discharge shall not prejudice or affect the
     Security in relation to the remainder of the Charged Property, unless
     expressly stated otherwise.

12.8 FURTHER ADVANCES

     The security created by this Fixed and Floating Charge is intended to
     secure any further advances made by the Lenders pursuant to the terms of
     the Facility Agreement.

12.9 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Chargor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this Clause 12.9 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Security subsequently as if such settlement or discharge had not occurred
     but so that nothing herein shall confer on any Transaction Persons the
     right to claim under this Clause 12.8 (Discharge Conditional) for more than
     the Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment provided that any
     such Settlement,



                                       23


     reassignment, release or discharge shall become unconditional upon the
     expiry of one month after the maximum period within which such settlement,
     reassignment, release or discharge can be avoided or reduced.

12.10 NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Fixed and Floating Charge or by law:

     (A)  to take any action or obtain judgment in any court against the
          Chargor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Chargor; or

     (C)  to enforce or seek to enforce the recovery of any moneys and
          liabilities hereby secured or any other security taken in respect of
          any of the obligations of the Chargor under any of the Credit
          Documents.

12.11 NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent charge affecting the Charged
     Property or (b) the Collateral Agent receives notice of any assignment or
     disposition affecting all or any part of the Charged Property or any
     interest therein to which the Collateral Agent has not given its approval
     or (c) the commencement of the insolvency, administration, reorganisation,
     liquidation or dissolution of, or any analogous proceeding in respect of,
     of the Chargor, the Collateral Agent may open a new account in the name of
     the Chargor (whether or not it permits any existing account to continue).
     If the Collateral Agent does not open such a new account, it shall
     nevertheless be treated as if it had done so at the time when the notice
     was received or was deemed to have been received or, as the case may be,
     the insolvency, administration, reorganisation, liquidation, dissolution or
     other proceeding commenced. Thereafter, all payments made by the Chargor to
     the Collateral Agent or received by the Collateral Agent for the account of
     the Chargor shall be credited or treated as having been credited to the new
     account and shall not operate to reduce the amount secured by this Deed at
     the time when the Collateral Agent received or was deemed to have received
     such notice or, as the case may be, the insolvency, administration,
     reorganisation, liquidation, dissolution or other proceeding commenced.

12.12 SUSPENSE ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Fixed and Floating Charge (including the proceeds of
     any conversion of currency) after the security created hereunder has become
     enforceable, except where such monies together with all other monies
     received, recovered or realised by the Collateral Agent or any Receiver
     under this Fixed and Floating Charge are sufficient to satisfy and
     discharge the Secured Indebtedness in full, may in the discretion of the
     Collateral Agent



                                       24


     or the Receiver (provided that such action has first been approved by the
     Collateral Agent) be credited to any suspense or impersonal account in the
     name of the Collateral Agent at the Account Bank and may be held in such
     account for so long as the Collateral Agent may think fit (with interest
     accruing thereon at such market rate, if any, as the Collateral Agent may
     deem fit) pending their application from time to time (as the Collateral
     Agent shall be entitled to do in its discretion) in or towards satisfaction
     of the Secured Indebtedness in accordance with the terms of this Fixed and
     Floating Charge. Save as provided above, no party shall be entitled to
     withdraw any amount at any time standing to the credit of any such suspense
     or impersonal account.

13.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or become exercisable or be
     concerned to see whether any such delegation by the Collateral Agent shall
     have lapsed for any reason or been revoked. Any sale or other dealing by
     the Collateral Agent or its delegate or any Receiver of or with the Charged
     Property and any part thereof shall be deemed to be within the power of the
     person effecting the same and the receipt by such person of the purchase or
     other moneys connected therewith shall effectively discharge the purchaser
     or other party to such dealing who shall not be concerned with the manner
     of application of the proceeds of sale or other dealing or be in any way
     answerable therefor.

14.  APPOINTMENT OF RECEIVER

14.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may if requested by the Chargor or at any time after
     the Security (or the relevant part thereof) shall have become enforceable
     in accordance with Clause 9 (Default Procedure), appoint one or more
     persons to be a Receiver or Receivers of the whole or any part of the
     Charged Property. The Collateral Agent may:

     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.



                                       25


14.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Chargor) have, in relation to the Charged Property, or as the case may be,
     that part of the Charged Property in respect of which he was appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by the Conveyancing and Property Ordinance or otherwise by
          law on mortgagees (whether or not in possession) and receivers
          appointed under the Conveyancing and Property Ordinance; and

     (B)  the power in the name or on behalf and at the cost of the Chargor to
          exercise all the powers and rights of an absolute owner of the Charged
          Property or the relevant part thereof and do or omit to do anything
          which the Chargor could do.

14.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Chargor) have the powers specified in Clause 11.1 (Effects).

14.4 RECEIVER TO BE AGENT OF THE CHARGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Chargor and the Chargor shall be solely
     responsible, jointly and severally, for the acts and defaults of such
     Receiver (save in the case of the fraud, negligence, wilful default, breach
     of duty or breach of trust in relation to duties by such Receiver) and for
     payment of such Receiver's remuneration in respect thereof.

14.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.

14.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Security (other than monies paid into a
     suspense account by such Receiver in accordance with Clause 12.12 (Suspense
     Account(s)).



                                       26


14.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any Attorney (as
          defined in Clause 16 (Power of Attorney) or agent of such party shall
          be liable to any person in respect of any loss or damage whatsoever
          which arises out of the realisation of the Charged Property or any
          part thereof or from any act, default or omission in relation to the
          Security or from any exercise or non-exercise, or the attempted or
          purported exercise of, or the failure to exercise any of their
          respective powers, authorities or discretions conferred upon them in
          relation to the Security or any part of it, unless such loss or damage
          is caused by its or his negligence, wilful default, breach of duty,
          breach of trust or fraud.

     (B)  Without prejudice to the generality of Sub-clause (A), entry into
          possession of the Charged Property shall not render the Collateral
          Agent or the Receiver liable to account as mortgagee in possession or
          liable for any loss on realisation or for any default or omission for
          which a mortgagee in possession might be liable unless such loss or
          damage is caused by its negligence, wilful default, breach of duty,
          breach of trust or fraud and, if and whenever the Collateral Agent or
          the Receiver enters into possession of the Charged Property, it shall
          be entitled at any time to go out of such possession.

14.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all statutory and other powers of the
     Collateral Agent under the Conveyancing and Property Ordinance (and so that
     the statutory power of sale shall be exercisable without regard to
     paragraph 11 of the Fourth Schedule to the said Ordinance) or otherwise and
     so that such powers shall be and remain exercisable by the Collateral Agent
     in respect of any part of the Charged Property in respect of which no
     Receiver has been appointed and notwithstanding that an appointment under
     the provisions of this Clause 12 (Appointment of Receiver) shall have
     subsisted and been withdrawn in respect of that property or shall be
     subsisting in respect of any other part of the Charged Property.

15.  INDEMNITY

15.1 INDEMNITY

     Without prejudice to any right at law given to trustees, the Chargor
     further covenants with and undertakes to each of the Collateral Agent and
     any Receiver or Receivers fully to indemnify and keep indemnified it from
     and against all liabilities, losses, damages, costs and expenses (including
     legal costs and expenses), charges, actions, proceedings, claims and
     demands or any other obligation or liability (including, without
     limitation, in respect of taxes, duties, levies, imposts and other charges
     any indemnity and other amounts which the Collateral Agent is or would
     become obliged to pay, upon payment by the Chargor, under such indemnity)
     which it may properly incur (except, having regard to the provisions of any
     Credit Document, insofar as they are incurred



                                       27


     because of fraud, negligence, wilful default or breach of trust on the part
     of it whether before or after the Security becomes enforceable):

     (A)  in consequence of anything done or purported to be done by the
          Collateral Agent or any Receiver in relation to the Charged Property
          or under this Fixed and Floating Charge or any Credit Document as a
          result of or in connection with any failure by the Chargor to comply
          with its obligations thereunder to the Collateral Agent or any
          Receiver; or

     (B)  in consequence of any payment in respect of the Secured Indebtedness
          (whether made by the Chargor or a third party) being impeached or
          declared void for any reason whatsoever; or

     (C)  in consequence of the breach or non-performance by the Chargor of any
          of their respective warranties, representations, covenants or
          undertakings herein contained or otherwise relating to all or any part
          of the Charged Property; or

     (D)  in connection with the realisation of the Charged Property (including
          the costs of any proceedings in relation to this Fixed and Floating
          Charge or to the Secured Indebtedness).

15.2 INTEREST

     The amounts payable to the Collateral Agent or the Receiver under Clauses
     15.1 (Indemnity) and 18 (Stamp Duty and Taxes) shall carry interest in
     accordance with section 2.10 of the Facility Agreement from the date on
     which they were paid or incurred by the Collateral Agent or the Receiver
     (as the case may be) to the date of actual payment to the Collateral Agent
     or, as the case may be, the Receiver under the aforementioned clauses as
     well after as before any judgment and such amounts and interest may be
     debited by the Collateral Agent to any account of the Chargor, but shall,
     in any event (to the extent not fully paid or discharged), form part of the
     Secured Indebtedness and accordingly be secured on the Charged Property
     under the Security.

16.  POWER OF ATTORNEY

16.1 APPOINTMENT AND POWERS

     The Chargor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this Clause 16.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,



                                       28


     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may be required (or which the
     Collateral Agent, any person falling within Sub-clause (B) or any Receiver
     appointed hereunder shall reasonably consider requisite) for carrying out
     any obligation imposed on the Chargor, as the case may be, by or pursuant
     to this Fixed and Floating Charge (including but not limited to the
     obligations of the Chargor under Clause 4.1 (Further Deeds and Documents)
     and the covenants referred to in Clause 4.1 (Further Deeds and Documents)),
     for carrying out any sale, lease or other dealing by the Collateral Agent
     or any such Receiver into effect, for conveying or transferring any legal
     estate or other interest in the Charged Property, for getting in the
     Charged Property, and generally for enabling the Collateral Agent or any
     person falling within Sub-clause (B) or any Receiver to exercise the
     respective powers conferred on them by or pursuant to this Fixed and
     Floating Charge or by law provided that the power contained in this Clause
     16.1 (Appointment and Powers) shall not be exercisable unless and until the
     Security shall have become enforceable. The exercise of such power by the
     Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver shall not put any person dealing with it upon any enquiry as to
     whether a Event of Default shall have occurred. Each of the Collateral
     Agent, any person falling within Sub-clause (B) and any Receiver shall have
     full power to delegate the power conferred on it by Clause 16.1
     (Appointment and Powers), but no such delegation shall preclude the
     subsequent exercise of such power by the Collateral Agent or any person
     falling within Sub-clause (B) or any Receiver (as the case may be) itself
     or preclude the Collateral Agent or any person falling within Sub-clause
     (B) or any Receiver (as the case may be) from making a subsequent
     delegation thereof to some other person; any such delegation may be revoked
     by the Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver (as the case may be) at any time.

16.2 RATIFICATION

     The Chargor shall ratify and confirm all transactions lawfully and properly
     entered into by the Collateral Agent or any Receiver or delegate of the
     Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     Clause 16.1 (Appointment and Powers).

16.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Chargor hereby
     acknowledges) granted irrevocably and severally, for value and for security
     as part of the Security to secure the several proprietary interests of and
     the performance of obligations owed to the respective donees within the
     meaning of the Powers of Attorney Ordinance.



                                       29


17.  SET-OFF AND CURRENCY

17.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder provided that payments in respect of
          costs and expenses may be made in Hong Kong dollars if incurred in
          Hong Kong dollars.

     (B)  If any sum due from the Chargor under this Fixed and Floating Charge
          or any order or judgment given or made in relation hereto has to be
          converted from the currency (the "FIRST CURRENCY") in which the same
          is payable hereunder or under such order or judgment into another
          currency (the "SECOND CURRENCY") for the purpose of (a) making or
          filing a claim or proof against the Chargor, (b) obtaining an order or
          judgment in any court or other tribunal or (c) enforcing any order or
          judgment given or made in relation hereto then:

          (i)  the Chargor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is suffered as a result of or in connection with
               the Collateral Agent's own fraud, negligence, wilful default,
               breach of duty or breach of trust; and

          (ii) the Collateral Agent shall account to the Chargor for the amount
               by which any sum realised by it exceeds the aggregate amount of
               all sums owing to it by the Chargor at the time at which such
               profit is realised provided that the Collateral Agent shall only
               be required to make any payment to the Chargor in relation
               thereto if at such time all the payment obligations of the
               Chargor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or rates of exchange at which the Collateral
          Agent may in the ordinary course of business purchase the first
          currency with the second currency upon receipt of a sum paid to it in
          satisfaction, in whole or in part, of any such order, judgment, claim
          or proof.

17.2 SET-OFF

     The Chargor waives, and (where incapable of waiver) agrees not to exercise
     (unless required to do so by law), any right of set-off or netting, whether
     conferred by agreement or law, which it may have against the Collateral
     Agent so that it does not reduce any amount payable by it to the Collateral
     Agent under this Fixed and Floating Charge.



                                       30


17.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or for the
     purpose of crediting any monies to the Accounts or any suspense account
     pursuant to Clause 12.12 (Suspense Account(s)) or making any application
     therefrom or for any other purpose in connection with this Fixed and
     Floating Charge, the Collateral Agent may (unless otherwise required by
     law) convert any monies received, recovered or realised or subject to
     application by the Collateral Agent under this Fixed and Floating Charge or
     any monies to be credited to any such account (including the proceeds of
     any previous conversion under this Clause 17 (Set-off and Currency)) from
     their existing currency of denomination into such other currency of
     denomination as the Collateral Agent may reasonably think fit and any such
     conversion shall be effected at such rate or rates of exchange as may be
     agreed by the Collateral Agent in consultation with the Chargor as being
     relevant and any rate, method and date so agreed shall be binding on the
     Chargor and any costs, expenses or commissions incurred in effecting any
     such conversion shall be deducted from the proceeds of any such conversion.

18.  STAMP DUTY AND TAXES

     The Chargor shall pay all stamp duties, land registry and similar fees,
     filing and registration fees and other transaction taxes required in
     relation to or for the purpose of procuring the execution, validity and
     enforceability of this Fixed and Floating Charge and the Security and shall
     indemnify the Collateral Agent and each Receiver appointed hereunder
     against any liabilities, costs, claims and expenses resulting from any
     failure to pay or any delay in paying the same on a full indemnity basis.

19.  AMENDMENTS

     This Fixed and Floating Charge may not be amended, modified or waived in
     any respect whatsoever, without the prior written consent of the Collateral
     Agent given with express reference to this Clause 19 (Amendments) and
     expressly stated to be intended to operate as the Collateral Agent's
     consent to such amendment, modification or waiver on behalf of the
     Requisite Lenders.

20.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Security has become
     enforceable, apply to the court for an order that the terms of this Fixed
     and Floating Charge be carried into execution under the direction of the
     Court and for the appointment of a Receiver of the Charged Property or any
     part thereof and for any other order in relation to the administration of
     the terms of this Fixed and Floating Charge as the Collateral Agent shall
     deem fit and it may assent to or approve any application to the Court made
     at the instance of the Collateral Agent or on its behalf and the Collateral
     Agent shall be indemnified by the Chargor against all costs, charges and
     expenses properly incurred by it in relation to any such application or
     proceedings.



                                       31


21.  PARTIAL INVALIDITY

     Every provision contained in this Fixed and Floating Charge shall be
     severable and distinct from every other such provision and if at any time
     any provision hereof is or becomes illegal, invalid or unenforceable in any
     respect under the law of any jurisdiction, neither the legality, validity
     or enforceability of the remaining provisions hereof nor the legality,
     validity or enforceability of such provision under the law of any other
     jurisdiction shall in any way be affected or impaired thereby.

22.  NOTICES

22.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

22.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Fixed and Floating Charge shall (unless that other
     person has by 15 days' written notice to the one specified another address
     department, officer or person as the case may be) be made or delivered to
     that other person at the address identified with its signature below and
     shall be deemed to have been made or delivered (in the case of any
     communication made by letter) when left at that address during normal
     business hours on a Business Day (or on the next Business Day if not left
     during normal business hours on a Business Day) or (as the case may be) 5
     days (in the case of local post) and 10 days (in the case of overseas post)
     after being deposited in the post postage prepaid in an envelope addressed
     to it at that address marked for the attention of any specified department,
     officer or person or (in the case of any communication made by facsimile
     transmission) when sent to the correct facsimile number of the addressee
     identified with its signature below and received in whole and in legible
     form by such addressee provided that any communication or document to be
     made or delivered by the Chargor or the Collateral Agent shall be effective
     only when received by the Chargor or the Collateral Agent, as appropriate,
     and then only if the same is expressly marked for the attention of the
     department, officer or person identified below with the signature of the
     relevant addressee (or such other department, officer or person as the
     relevant addressee shall from time to time and in each case by not less
     than 3 days' prior notice in writing to the parties hereto have specified
     for this purpose).

22.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Fixed and Floating Charge shall be in the English language
     or accompanied by a translation thereof into English certified (by an
     officer of the person making or delivering the same) as being a true and
     accurate translation thereof.



                                       32


23.  ASSIGNMENT

     The Collateral Agent may assign its rights and obligations under this Fixed
     and Floating Charge to any successor under the Facility Agreement in
     accordance with section 9.7 of the Facility Agreement.

24.  COSTS AND EXPENSES

     The Chargor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the negotiation, preparation, registration, perfection, preservation
          or enforcement of this Fixed and Floating Charge and any other
          document relating thereto; and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Chargor
          under any of the Credit Documents or the recovery by the Collateral
          Agent or any such Receiver from the Chargor of the Secured
          Indebtedness then due and payable.

25.  CERTIFICATES AND DETERMINATIONS

     For all purposes, including any Proceedings (as defined in Clause 27.3):

     (a)  a determination by the Collateral Agent; or

     (b)  a copy of a certificate signed by an officer of the Collateral Agent,

     of the amount of any indebtedness comprised in the Secured Indebtedness for
     the time being or at any time shall, in the absence of manifest error, be
     conclusive evidence against the Chargor as to the amount thereof.

26.  GOVERNING LAW

     This Fixed and Floating Charge is governed by Hong Kong law.



                                       33


27.  JURISDICTION

27.1 HONG KONG COURTS

     The courts of Hong Kong have non-exclusive jurisdiction to settle any
     dispute (a "DISPUTE") arising out of or in connection with this Fixed and
     Floating Charge (including a dispute regarding the existence, validity or
     termination of this Fixed and Floating Charge or the consequences of its
     nullity).

27.2 CONVENIENT FORUM

     The parties agree that the court of Hong Kong are the most appropriate and
     convenient courts to settle Disputes between them and, accordingly, that
     they will not argue to the contrary.

27.3 NON-EXCLUSIVE JURISDICTION

     This Clause 27 (Jurisdiction) is for the benefit of all parties hereto
     other than the Borrower and the Chargor. As a result and notwithstanding
     Clause 27.1 (Hong Kong Courts), it does not prevent any party hereto other
     than the Chargor from taking proceedings relating to a Dispute
     ("PROCEEDINGS") in any other courts with jurisdiction. To the extent
     allowed by law, the parties hereto other than the Chargor may take
     concurrent Proceedings in any number of jurisdictions.

28.  EXECUTION AND COUNTERPARTS

     This Fixed and Floating Charge 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 when taken together shall constitute one and the same Fixed and
     Floating Charge.

IN WITNESS WHEREOF the parties hereto have caused this Fixed and Floating Charge
to be duly executed the day and year first above written.



                                       34


                                   SCHEDULE 1
                                NOTICE OF CHARGE

                             [LETTERHEAD OF CHARGOR]

To: INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
    33RD FLOOR, ICBC TOWER
    3 GARDEN ROAD
    CENTRAL, HONG KONG

                                                                  ___ MARCH 2007

Dear Sirs,

                                NOTICE OF CHARGE

We refer to our US dollar interest-bearing deposit accounts (number __________
designated " ______________________________" and number ____________________
designated " ______________________________") with you (the "ACCOUNTS").

A copy of a fixed and floating charge dated ___ March 2007 (the "FIXED AND
FLOATING CHARGE") and made between ourselves and Industrial and Commercial Bank
of China (Asia) Limited (as agent and trustee for the Secured Parties) (the
"COLLATERAL AGENT") is enclosed for your attention and we request that you take
note of its provisions, in particular, the undertaking from the Chargor that it
shall not create any security over the Charged Property (Clause 8.1(D)).

Words and expressions defined in the Fixed and Floating Charge shall, unless
otherwise defined herein, have the same meaning in this notice.

We give you notice of the Fixed and Floating Charge and, for the purposes of the
Fixed and Floating Charge, we irrevocably and unconditionally instruct and
authorise you (notwithstanding any previous instructions which we may have given
you to the contrary) as follows:

(a)  To disclose to the Collateral Agent, without any reference to or further
     authority from us and without any enquiry by you as to the justification
     for such disclosure, such information relating to the Accounts and all
     credit balances now or at any time in future on the Accounts, all debts
     from time to time represented by such credit balances and all our other
     rights accruing or arising in relation to the Accounts (the "DEPOSIT") as
     the Collateral Agent may, at any time and from time to time, request you to
     disclose to it.

(b)  To at all times hold the Deposit relating to the H3C Debt Service Account
     to the exclusive order of the Collateral Agent.

(c)  To hold the part of the Deposit relating to the (i) H3C Debt Service
     Reserve Account to the exclusive order of the Collateral Agent upon
     receiving notice from the Collateral Agent that there has occurred an Event
     of Default or (ii conversion of the floating charge created by Clause
     3.1(D) into a fixed charge pursuant to Clause 5.1 or 5.2, subject to any
     reconversation pursuant to Clause 5.3.



                                       35


(d)  To, immediately upon receiving notice from the Collateral Agent that the
     Security has become enforceable, comply with the terms of any written
     notice statement or instructions (including any instructions as to the
     payment of the Deposit (or any part of it), the renewal or extension of the
     term of the Deposit, or the breaking of the term of the Deposit) in any way
     relating or purporting to relate to the Fixed and Floating Charge and/or
     the Accounts and/or the Deposit which you may receive at any time and from
     time to time from the Collateral Agent without any reference to or further
     authority from us and without any enquiry by you as to the justification
     for such notice, statement or instructions or the validity thereof.

(e)  To advise us of any withdrawals or transfer of moneys from the Accounts as
     soon as practicable.

The instructions and authorisations which are contained in this letter shall
remain in full force and effect until the Collateral Agent gives you notice in
writing revoking them. This notice is governed by Hong Kong law.

Please acknowledge receipt of this notice and confirm your agreement to it, by
executing and returning an original copy of the Form of Acknowledgement attached
to this notice to the Collateral Agent at 33rd Floor, ICBC Tower, 3 Garden Road,
Central, Hong Kong with a copy to us.

                                        Yours faithfully,


                                        ----------------------------------------
                                        For and on behalf of
                                        Huawei-3Com Co., Limited



                                       36


                                   SCHEDULE 2
                             FORM OF ACKNOWLEDGEMENT

                              [LETTERHEAD OF ICBC]

To: INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
    33RD FLOOR, ICBC TOWER
    3 GARDEN ROAD
    CENTRAL, HONG KONG

    (as agent and trustee for the Secured Parties, the "COLLATERAL AGENT")

With a copy to:

    Huawei-3Com Co., Limited

    Suites 3013-3014,
    30/F One International Finance Centre,
    1 Harbour View Street, Central,
    Hong Kong
    (the "COMPANY")

                                                                  ___ MARCH 2007

Dear Sirs,

                       ACKNOWLEDGEMENT OF NOTICE OF CHARGE

We acknowledge receipt of a Notice of Charge dated ___ March 2007 (the "NOTICE")
(a copy of which is attached to this letter) and the copy of the Fixed and
Floating Charge enclosed with the Notice. We take note of the provisions
contained in the Charge, in particular, the undertaking made by the Chargor
under Clause 8.1(D). Words and expressions defined in the Notice and the Fixed
and Floating Charge shall have the same meanings in this letter.

In consideration of the Secured Parties agreeing to provide finance and
financial support pursuant to the Credit Documents, we represent and undertake
to the Collateral Agent in the terms set out in this letter.

(a)  We will act in accordance and comply with the terms of the Notice.

(b)  No mortgage, charge, pledge, lien, security assignment, hypothecation or
     trust arrangement for the purpose of providing security and any other
     encumbrance or security interest of any kind having the effect of securing
     any obligation of any person (including, without limitation, the deposit of
     moneys or property with a person with the intention of affording such
     person a right of lien, set-off, combination or counter-claim) and any
     other agreement or any other type of arrangement having a similar effect
     (including, without limitation, any "flawed-asset" or "hold back"
     arrangement) exists in our favour on, over or with respect to the Accounts
     or the Deposit or any part thereof.



                                       37


(c)  No rights of counter-claim, rights of set-off or combination of accounts or
     any other equities whatsoever have arisen in our favour against the Company
     in respect of the Accounts or the Deposit or any part thereof, and we shall
     not assert or seek to exercise any such rights or equities.

(d)  We have not, as at the date hereof, received any notice that any other
     person has or will have any right or interest whatsoever in, or has made or
     will be making any claim or demand or be taking any action whatsoever
     against, the Accounts or the Deposit or any part thereof, and if, after the
     date hereof, we receive any such notice, we shall immediately give written
     notice thereof to the Collateral Agent.

We have made the representations and given the undertakings set out in this
letter in the knowledge that they are required by the Collateral Agent in
connection with the security which has been granted by the Company in favour of
the Collateral Agent under the Fixed and Floating Charge.

This letter is for the benefit of the Collateral Agent as agent and trustee for
the Secured Parties and is governed by Hong Kong law.

                                        Yours faithfully,

                                        Signed for and on behalf of
                                        INDUSTRIAL AND COMMERCIAL BANK OF CHINA
                                        (ASIA) LIMITED


                                        By
                                           -------------------------------------
                                        (Print Name):
                                                      --------------------------



                                       38


                                   SCHEDULE 3
                                NOTICE OF CHARGE

                             [LETTERHEAD OF CHARGOR]

To: Hangzhou Huawei-3Com Technology Co., Ltd.

    (CHINESE CHARACTERS)
    (CHINESE CHARACTERS)
    (CHINESE CHARACTERS): 310053

    Hangzhou Queenhive Software Co., Ltd.

    (CHINESE CHARACTERS)
    (CHINESE CHARACTERS): 310053

                                                                  ___ MARCH 2007

Dear Sirs,

                                NOTICE OF CHARGE

A copy of a fixed and floating charge dated ___ March 2007 (the "CHARGE") and
made between ourselves and Industrial and Commercial Bank of China (Asia)
Limited (as agent and trustee for the Secured Parties) (the "COLLATERAL AGENT")
is enclosed for your attention and we request that you take note of its
provisions.

Words and expressions defined in the Charge shall, unless otherwise defined
herein, have the same meaning in this notice.

We give you notice of the Charge and, for the purposes of the Charge, we
irrevocably and unconditionally instruct and authorise you (notwithstanding any
previous instructions which we may have given you to the contrary) to make
payment of the amount of any dividends which may be declared by you directly to
the account of Huawei-3Com Co., Limited no. _______________ with Industrial and
Commercial Bank of China (Asia) Limited at 33rd Floor, ICBC Tower, 3 Garden
Road, Central, Hong Kong and/or to such other account of Huawei-3Com Co.,
Limited with such bank as the Collateral Agent may notify to you.

The instructions and authorisations which are contained in this letter shall
remain in full force and effect until the Collateral Agent gives you notice in
writing revoking them. This notice is governed by Hong Kong law.

Please acknowledge receipt of this notice and confirm your agreement to it, by
executing and returning an original copy of this notice to the Collateral Agent
at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong with a copy to us.



                                       39


                                        Yours faithfully,


                                        ----------------------------------------
                                        For and on behalf of
                                        Huawei-3Com Co., Limited



                                       40


                                        Signed, acknowledged and agreed by


                                        ----------------------------------------
                                        For and on behalf of
                                        Hangzhou Huawei-3Com Technology Co.,
                                        Ltd. / Hangzhou Queenhive Software Co.,
                                        Ltd.

                                        Date:
                                              ------------------



                                 EXECUTION PAGES

THE CHARGOR

Executed as a deed by affixing the common seal ) NEAL D. GOLDMAN
of HUAWEI-3COM CO., LIMITED                    ) DONALD M. HALSTED, III
                                               )
in the presence of:                            ) SEAL AFFIXED

Neal D. Goldman
Director

Donald M. Halsted, III
Director

Address:          Suites 3013-3014,
                  30/F One International Finance Centre,
                  1 Harbour View Street, Central,
                  Hong Kong

Facsimile Number: _______________________

Attention:        _______________________



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal of )
INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)    ) SEAL AFFIXED
LIMITED                                           )
in the presence of:                               )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Director/Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

Attention:        _______________________



                                                                  CONFORMED COPY

                               Dated 3 April 2007

                            HUAWEI-3COM CO., LIMITED
                                   as Chargor

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
                               as Collateral Agent

                                   ----------

                          H3C FIXED AND FLOATING CHARGE

                                   ----------

                                Slaughter and May
                            47th Floor, Jardine House
                               One Connaught Place
                               Central, Hong Kong
                                   (RMGG/AHLL)

                                  (HK070060022)



                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                            1
2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                        3
3.  SECURITY                                                                  3
4.  PERFECTION OF SECURITY AND FURTHER ASSURANCE                              7
5.  PROTECTION OF SECURITY AND CRYSTALLISATION OF FLOATING CHARGE             9
6.  PAYMENTS INTO AND OUT OF THE CHARGED ACCOUNTS                            10
7.  REPRESENTATIONS                                                          11
8.  COVENANTS AND UNDERTAKINGS                                               12
9.  DEFAULT PROCEDURE                                                        14
10. CHATTELS AND FIXTURES                                                    14
11. EFFECTS OF THE SECURITY BECOMING ENFORCEABLE                             14
12. PRESERVATION OF RIGHTS                                                   19
13. PROTECTION OF PURCHASERS                                                 24
14. APPOINTMENT OF RECEIVER                                                  24
15. INDEMNITY                                                                26
16. POWER OF ATTORNEY                                                        27
17. SET-OFF AND CURRENCY                                                     29
18. STAMP DUTY AND TAXES                                                     30
19. AMENDMENTS                                                               30
20. APPLICATION TO COURT                                                     30
21. PARTIAL INVALIDITY                                                       31
22. NOTICES                                                                  31
23. ASSIGNMENT                                                               32
24. COSTS AND EXPENSES                                                       32
25. CERTIFICATES AND DETERMINATIONS                                          32
26. GOVERNING LAW                                                            32
27. JURISDICTION                                                             33
28. EXECUTION AND COUNTERPARTS                                               33
SCHEDULE 1 NOTICE OF CHARGE                                                  34




                                                                         
SCHEDULE 2 FORM OF ACKNOWLEDGEMENT                                           36
SCHEDULE 3 NOTICE OF CHARGE                                                  38

EX-10.57

                                                                   Exhibit 10.57

                                                                  CONFORMED COPY

THIS SHARE MORTGAGE is made as a deed on 30 March 2007

BETWEEN:

(1)  H3C HOLDINGS LIMITED, a company incorporated under the laws of the Cayman
     Islands whose registered office is at PO Box 309GT, Ugland House, South
     Church Street, George Town, Grand Cayman, Cayman Islands (the "MORTGAGOR");
     and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a limited
     partnership registered under the laws of Hong Kong whose registered office
     is at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in its
     capacity as collateral agent, the "COLLATERAL AGENT", which expression
     shall, wherever the context so admits, include such entity and all other
     persons from time to time acting in such capacity).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Mortgagor upon the terms and subject to the conditions contained
     therein.

(B)  As security for the Mortgagor's obligations under the Facility Agreement,
     the Mortgagor has agreed to enter into this Deed.

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  DEFINITIONS

     In this Deed, unless the context otherwise requires:

     "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which
     banks are generally open for business in Hong Kong;

     "CONVEYANCING AND PROPERTY ORDINANCE" means the Conveyancing and Property
     Ordinance (Chapter 219 of the Laws of Hong Kong);

     "DEBT SERVICE ACCOUNT" means the bank account defined as the Debt Service
     Account in the Borrower Charge over Bank Accounts entered into on 22 March
     2007 by the Mortgagor and the Collateral Agent;

     "DERIVED ASSETS" means all shares, rights or other property of a capital
     nature which accrue or are offered, issued or paid at any time (by way of
     bonus, rights, redemption, conversion, exchange, substitution,
     consolidation, subdivision, preference, warrant, option, purchase or
     otherwise) in respect of:

     (A)  the Shares; or

     (B)  any Further Shares; or

H3C Share Mortgage



                                       2


     (C)  any shares, rights or other property previously accruing, offered,
          issued or paid as mentioned in this definition;

     "DIVIDENDS" means all dividends, interest and other income paid or payable
     in respect of the Shares, any Further Shares or any Derived Assets;

     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Mortgagor and the Collateral Agent, as amended, supplemented and/or
     restated from time to time in any manner whatsoever;

     "FURTHER SHARES" means all shares (other than the Shares and any shares
     comprised in any Derived Assets) which the Mortgagor and the Collateral
     Agent may at any time agree shall be subject to the Mortgage;

     "MORTGAGE" means the security from time to time constituted by or pursuant
     to this Deed (or intended to be constituted by or pursuant to this Deed) or
     any part thereof;

     "MORTGAGED PROPERTY" means any or all of the rights, title and interest,
     present and future, in and to the Shares, Future Shares and Derived Assets
     expressed to be subject to the security created under Clause 3 (Mortgage)
     of this Deed;

     "POWERS OF ATTORNEY ORDINANCE" means the Powers of Attorney Ordinance
     (Chapter 31 of the Laws of Hong Kong);

     "PROCEEDINGS" means any proceeding, suit or action arising out of or in
     connection with this Deed and/or any other document referred to in this
     Deed.

     "RECEIVER" means a receiver appointed by or on behalf of the Collateral
     Agent under this Deed or pursuant to the Collateral Agent's statutory
     powers, and includes more than one such receiver and substituted receiver;

     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Mortgagor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Mortgagor under or in connection
     with the Facility Agreement; and

     "SHARES" means the shares comprising all the issued capital of Huawei-3Com
     Co., Limited more particularly described in Schedule 1 (Particulars of the
     Shares).



                                       3


1.2  DEFINITIONS IN THE FACILITY AGREEMENT

     Unless a contrary indication appears, a term used in the Facility Agreement
     has the same meaning when used in this Deed.

1.3  CONVEYANCING AND PROPERTY ORDINANCE

     In the context of the rights, powers, privileges, discretions and
     immunities conferred on the Collateral Agent, any Receiver or any Attorney
     (as defined in Clause 15 (Power of Attorney), references to "mortgage" and
     "mortgaged land" in any provision of the Conveyancing and Property
     Ordinance shall, for the purposes of this Deed, be deemed to be references
     to the Mortgage and the Mortgaged Property respectively.

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Mortgagor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time or times and in the
     manner provided for in the Facility Agreement and the Mortgagor hereby
     creates the Mortgage in the Mortgaged Property in the manner and on the
     terms set out in Clause 3 (Mortgage).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each transfer, assignment, mortgage and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or Clause 1.2 (Definitions in the Facility Agreement), any
     reference in this Deed to the Mortgagor, the Collateral Agent or any
     Secured Party shall be construed so as to include their respective
     successors and permitted assigns or transferees.

3.   MORTGAGE

3.1  SHARE MORTGAGE

     Subject to the provisions of Clause 5 (Redemption) below, the Mortgagor, as
     continuing security for the payment and discharge of the Secured
     Indebtedness:

     (A)  assigns and transfers absolutely to ICBC (Asia) Nominee Ltd. or such
          other person as nominated in writing by the Collateral Agent (in each
          case, the "NOMINEE") by way of first legal mortgage all of its rights,
          title and interest in and to the Shares;

     (B)  charges and agrees to mortgage to the Nominee all its rights, title
          and interest in and to any Further Shares and any Derived Assets (with
          the intent that the Mortgage constituted by this Deed with respect to
          any Further Shares and any



                                       4


          shares comprised in any Derived Assets shall, until such shares are
          registered in the name of the Nominee, take effect by way of first
          fixed equitable charge and, upon such shares being so registered,
          shall take effect by way of first legal mortgage); and

     (C)  charges and assigns to the Nominee all its rights, title and interest
          in and to any Dividends which are paid or payable to the Mortgagor
          before the shares to which they relate are registered in the name of
          the Nominee.

4.   COVENANT TO DEPOSIT AND FURTHER ASSURANCES

4.1  THE SHARES AND FURTHER SHARES

     The Mortgagor shall, immediately after the execution of this Deed (or such
     longer period as the Collateral Agent may allow) in the case of the Shares,
     and within two Business Days (or such longer period as the Collateral Agent
     may allow) of each occasion on which the Collateral Agent and the Mortgagor
     agree that any shares shall become Further Shares:-

     (A)  deposit with the Collateral Agent :-

          (i)  all share certificates, documents of title and other documentary
               evidence of ownership in relation to such shares;

          (ii) transfers of such shares duly executed by the Mortgagor or its
               nominee in favour of the Nominee and stamped; and

     (B)  procure that the Nominee is registered as the holder of such shares in
          the register of members of the relevant company and is issued with
          share certificates in respect of such shares.

4.2  DERIVED ASSETS

     In respect of any Derived Assets to which the Mortgagor may be or become
     entitled before the shares to which they relate are registered in the name
     of the Nominee, the Mortgagor shall immediately upon receipt of the
     relevant share certificates, renounceable certificates, letters of
     allotment, documents of title or other evidence of entitlement thereto
     deliver the same to the Collateral Agent duly executed by the Mortgagor (or
     its nominee) in favour of the Nominee and shall promptly take whatever
     steps may be necessary to ensure that the Nominee becomes registered as the
     holder of any shares comprised in such Derived Assets.

4.3  RIGHTS ISSUES

     If the Nominee in its capacity as registered holder of the Mortgaged
     Property receives an offer of rights to subscribe for shares, it shall be
     entitled, subject to prior notice to the Mortgagor, to sell (or allow to be
     sold) such rights nil paid and apply the proceeds in accordance with
     section 2.16(h) of the Facility Agreement, provided that if the



                                       5


     Mortgagor, whether or not it receives any notice from the Nominee of the
     offer of such rights, puts the Collateral Agent in sufficient funds within
     the period allowed for the acceptance of such rights the Nominee shall take
     up such rights and the shares so subscribed shall form part of the
     Mortgaged Property.

4.4  FURTHER ASSURANCES

     In addition to and without prejudice to anything else contained in this
     Deed, the Mortgagor shall, at its own cost, promptly execute and do all
     such deeds, instruments, transfers, renunciations, proxies, notices,
     documents, assurances, acts and things in such form as the Collateral Agent
     may from time to time require:

     (A)  for perfecting, preserving or protecting the Mortgage or the priority
          of the Mortgage; and

     (B)  for facilitating the realisation of the Mortgage or the exercise of
          any rights vested in the Collateral Agent.

4.5  REGISTRATION

     Without limitation to the generality of the Clause 4.4 (Further
     Assurances), the Mortgagor shall make all filings and registrations as may
     be required by applicable laws or requested by the Collateral Agent from
     time to time as may be necessary to perfect, preserve and protect the
     Mortgage.

5.   REDEMPTION

     (A)  Subject always to Clause 11.9 (Discharge Conditional), if the
          Collateral Agent is, acting reasonably, satisfied that:

          (i)  all Secured Indebtedness have been unconditionally and
               irrevocably paid or discharged in full and the Facility Agreement
               has been terminated; or

          (ii) security or a guarantee for the Secured Indebtedness, in each
               case acceptable to the Collateral Agent, has been provided in
               substitution for this Deed,

          then, the Collateral Agent shall, at the request and cost of the
          Mortgagor, promptly discharge, release and/or re-assign, or, as
          appropriate, transfer the benefit of so much of the Mortgaged Property
          as has not been applied by the Collateral Agent in or towards
          satisfaction of the Secured Indebtedness to the Mortgagor or as the
          Mortgagor may direct and, thereafter, the Mortgagor shall have no
          future obligation hereunder.

     (B)  The execution of a discharge, release, re-assignment, transfer or
          partial discharge by the Collateral Agent shall be a good and valid
          release or discharge of the Mortgage constituted by this Clause 3
          (Mortgage) or the relevant part



                                       6


          thereof (as the case may be) and the obligations (or the relevant part
          thereof, as the case may be) of the Mortgagor from this Deed without
          the need for the Mortgagor to be a party thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Mortgagor, do all such things and execute all such
          documents and procure that the Nominee do all such things and execute
          all such documents as may be reasonably necessary to give effect to
          the discharge, release, re-assignment, transfer or partial discharge
          referred to in Sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment, transfer or partial
          discharge pursuant to and in accordance with Sub-clause (A), the
          Collateral Agent shall, at the request and cost of the Mortgagor:

          (i)  promptly procure the redelivery to the Mortgagor of all deeds,
               instruments, certificates and other documents delivered to or
               deposited with or to the order of the Collateral Agent pursuant
               to Clause 4 (Covenant to Deposit and Further Assurances); and

          (ii) promptly give notice to each person (if any) who has received
               notice of the Mortgage pursuant to this Deed of such release,
               discharge, re-assignment and/or transfer,

          in each case to the extent the same relates to such release,
          discharge, re-assignment, transfer or partial discharge.

6.   THE SHARES

6.1  EXERCISE OF POWER

     Until the Mortgage becomes enforceable the Nominee shall exercise in
     respect of the Mortgaged Property all of the powers and rights conferred on
     or exercisable by the registered holder thereof, including any voting
     rights attaching thereto, provided that before the Mortgage becomes
     enforceable, it shall exercise such voting rights in such manner as the
     Mortgagor may direct or shall, at the election of the Collateral Agent,
     appoint a proxy nominated by the Mortgagor to exercise on its behalf such
     voting rights, save however that the obligation of the Nominee to so
     exercise such voting rights or to so appoint a proxy may at any time be
     terminated upon and to the extent of any notice by the Collateral Agent to
     the Mortgagor evidencing its intention thenceforth to exercise such rights
     for the purpose of preserving the value of the Mortgage.

6.2  MORTGAGOR TO PAY CALLS AND OTHER PAYMENTS

     The Mortgagor shall pay all calls or other payments due in respect of any
     part of the Mortgaged Property, and in any case of default by the Mortgagor
     in this respect the Collateral Agent may (but shall not be obliged) if it
     thinks fit make any such payment on behalf of the Mortgagor in which event
     any sums so paid shall be reimbursed on



                                       7


     demand by the Mortgagor to the Collateral Agent and shall, until
     reimbursed, bear interest at the rate provided in section 2.10 of the
     Facility Agreement.

6.3  DIVIDENDS

     The Collateral Agent agrees that until this Deed becomes enforceable it
     shall pay over all amounts received by it by way of dividends from
     Huawei-3Com Co., Limited to the credit of the Debt Service Account.

7.   REPRESENTATIONS AND WARRANTIES

     The Mortgagor represents and warrants to the Collateral Agent that:-

     (A)  it is duly incorporated and validly existing under the laws of the
          Cayman Islands and it has the power and capacity to enter into this
          Deed and grant the security created hereunder;

     (B)  subject only to this Mortgage, it is the sole beneficial owner of the
          Mortgaged Shares;

     (C)  no Lien (other than Permitted Liens) exists on, over or with respect
          to any of the Mortgaged Property;

     (D)  it has not sold, transferred, lent, assigned, parted with its interest
          in, disposed of, granted any option in respect of or otherwise dealt
          with any of its rights, title and interest in and to the Mortgaged
          Property, or agreed to do any of the foregoing (otherwise than
          pursuant to this Deed or as permitted by the Facility Agreement);

     (E)  the Shares, any Further Shares and any shares comprised in any Derived
          Assets are fully paid and there are no moneys or liabilities
          outstanding in respect of any of them;

     (F)  the Shares, any Further Shares and any shares comprised in any Derived
          Assets have been duly authorised and validly issued and are free from
          any restrictions on transfer or rights of pre-emption, save as
          provided in the articles of association of Huawei-3Com Co., Limited;

     (G)  it has the power to enter into, and perform and comply with its
          obligations under, this Deed, and to create the Mortgage;

     (H)  the entry into and performance by it of, the creation of security
          under, and the transactions contemplated by, this Deed do not and will
          not conflict with:

          (i)  any law or regulation applicable to it;

          (ii) its constitutional documents; or



                                       8


          (iii) any agreement or instrument binding upon it or its Subsidiaries
               or any of its or its Subsidiaries' assets.

     (I)  all actions, conditions and things required to be taken, fulfilled and
          done (including the obtaining of any necessary consents) in order to
          (i) enable it lawfully to enter into, and perform and comply with its
          obligations under, this Deed, (ii) ensure that those obligations are
          valid, legal, binding and enforceable, (iii) permit the creation of
          the Mortgage and ensure that (subject to all necessary registrations
          thereof being made) the Mortgage is a valid, legal, binding and
          enforceable first fixed security interest over the Mortgaged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Mortgagor, and (iv) make this Deed admissible in
          evidence in the courts of Hong Kong, have been taken, fulfilled and
          done;

     (J)  the obligations of the Mortgagor under this Deed and (subject to all
          necessary registrations thereof being made) the Mortgage are and will
          be until fully discharged valid, legal, binding and enforceable and
          the Mortgage constitutes a first fixed security interest over the
          Mortgaged Property ranking in priority to the interests of any
          liquidator, administrator or creditor of the Mortgagor; and

     (K)  each of the above representations and warranties will be correct and
          complied with in all respects at all times during the continuance of
          the Mortgage as if repeated then by reference to the then existing
          circumstances.

8.   COVENANTS AND UNDERTAKINGS

8.1  COVENANTS AND UNDERTAKINGS OF THE MORTGAGOR

     The Mortgagor covenants and undertakes with the Collateral Agent that,
     except with the prior written consent of the Collateral Agent:

     (A)  it shall not sell, transfer, lend, assign, exchange, dispose of, grant
          any option in respect of otherwise deal with the whole or any of its
          rights, title and interest in the Mortgaged Property or agree to do
          any of the foregoing other than as expressly permitted or provided for
          in the Facility Agreement or pursuant to this Deed;

     (B)  other than as provided in the Facility Agreement or pursuant to this
          Deed it shall not, nor shall it attempt to, create, incur or permit to
          subsist any Lien on the Mortgaged Property;

     (C)  it shall at all times give to the Collateral Agent such information as
          the Collateral Agent may reasonably require in respect of the
          Mortgaged Property for the purpose of the discharge of the trusts,
          powers, rights, duties, authorities and discretions vested in it
          hereunder or by operation of law;

     (D)  it shall take all action within its power to procure, maintain in
          effect and comply in all material respects with all the terms and
          conditions of all approvals,



                                       9


          authorisations, consents and registrations necessary or appropriate
          for anything provided for on its part in this Deed;

     (E)  it shall take all reasonable steps as may be required by the
          Collateral Agent to allow the Collateral Agent to sell or dispose of
          the Mortgaged Property on or after the Mortgage becomes enforceable;

     (F)  it shall not do or cause or permit to be done, or omit to do anything
          which may in any way adversely prejudice, affect or diminish the value
          of any of the Mortgaged Property;

     (G)  it shall ensure that there are no moneys or liabilities outstanding in
          respect of any of the Mortgaged Property;

     (H)  without prejudice to Clause 8.1(G), it shall punctually pay all
          calls, subscription moneys and other moneys payable on or in respect
          of any of the Mortgaged Property and indemnify and keep indemnified
          the Nominees against any cost, liabilities or expenses which it or
          they may suffer or incur as a result of any failure by the Mortgagor
          to pay the same;

     (I)  it shall ensure that the Shares, any Further Shares and any shares
          comprised in any Derived Assets are free from any restriction on
          transfer or rights of pre-emption, subject to the articles of
          association of Huawei-3Com Co., Limited;

     (J)  it shall ensure that the Mortgage will at all times be a legally valid
          and binding first fixed security interest over the Mortgaged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Mortgagor; and

     (K)  it shall deliver to the Collateral Agent a copy of every circular,
          notice, report, set of accounts or other document received by the
          Mortgagor in respect of or in connection with any of the Mortgaged
          Property forthwith upon receipt by the Mortgagor of such document.

8.2  POWER OF COLLATERAL AGENT TO REMEDY FAILURES

     If at any time the Mortgagor shall fail to comply with or perform any of
     the covenants contained in this Deed or any Credit Document, the Collateral
     Agent shall have the power on behalf of or in the name of the Mortgagor,
     but shall not be under any obligation, to perform the covenants and to take
     such steps which the Collateral Agent may in its discretion consider
     appropriate with a view to remedying or mitigating the consequences of such
     failure but so that the exercise of this power or the failure to exercise
     it shall, in no circumstances, prejudice the other rights of the Collateral
     Agent under this Deed or any Credit Document. The Mortgagor shall on demand
     reimburse to the Collateral Agent all proper costs, expenses and losses
     incurred or sustained by the Collateral Agent in connection with such steps
     and until such costs, expenses and losses are reimbursed the outstanding
     sums shall carry interest in accordance with section 2.10 of the Facility
     Agreement from the date when payment is due to the date of reimbursement
     and such outstanding sums including any accrued interest shall form



                                       10


     part of the Secured Indebtedness. No exercise by the Collateral Agent of
     its powers under this Clause 8.2 (Power of Collateral Agent to Remedy
     Failures) shall render the Collateral Agent liable to account as a
     mortgagee in possession.

8.3  IT IS AGREED BETWEEN THE MORTGAGOR AND THE COLLATERAL AGENT THAT THE
     MORTGAGOR MAY AT ANY TIME AND FROM TIME TO TIME PROCURE HUAWEI-3COM CO.,
     LIMITED TO ISSUE FURTHER SHARES TO IT, PROVIDED THAT ALL SUCH SHARES ISSUED
     SHALL CONSTITUTE FURTHER SHARES FOR THE PURPOSES OF THIS DEED AND SHALL BE
     SUBJECT TO THE MORTGAGE.

9.   DEFAULT PROCEDURE

     The Mortgage shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          Excluded Subsidiaries).

10.  EFFECTS OF THE MORTGAGE BECOMING ENFORCEABLE

10.1 EFFECTS

     After the Mortgage (or the relevant part thereof) shall have become
     enforceable in accordance with Clause 9 (Default Procedure) and without
     prejudice to the powers of the Collateral Agent to appoint a Receiver
     pursuant to Clause 13 (Appointment of Receiver):

     (A)  the Mortgagor's rights or power to deal with the Mortgaged Property
          (whether statutory or otherwise) shall cease and the Collateral Agent
          shall be entitled to deal with, collect in and realise the same in
          such manner as the Collateral Agent thinks fit;

     (B)  the Collateral Agent shall be entitled to exercise all powers in
          respect of the Mortgaged Property provided in Section 51 of and The
          Fourth Schedule to the Conveyancing and Property Ordinance but without
          the necessity to comply with any restrictions imposed by the
          provisions of the said Section 51 or The Fourth Schedule;

     (C)  the Collateral Agent may sell, realise or otherwise dispose of, for
          such consideration (whether payable immediately or by instalments) as
          it shall in its absolute discretion think fit (whether by private sale
          or otherwise), the whole or any part of the Mortgaged Property in
          respect of which the security hereby constituted has become
          enforceable and the Collateral Agent may to the extent that it has not
          already done so, take possession of and hold all or any part of



                                       11


          the Mortgaged Property and accordingly register, or cause to be
          registered all or any of the Mortgaged Property constituting shares in
          its own name or in the name of the Collateral Agent's nominee or
          assignee or in the name of any purchaser thereof and apply any of the
          Mortgaged Property constituting dividends or other distributions in
          cash as if they were proceeds of sale of the Mortgaged Property; and

     (D)  the provisions of paragraph 11 of The Fourth Schedule to the
          Conveyancing and Property Ordinance shall not restrict the exercise by
          the Collateral Agent or any Receiver of its powers hereunder and the
          Mortgage shall become immediately enforceable and the statutory power
          of sale and other powers of sale and appointing a Receiver shall
          become immediately exercisable without any juridical or other
          formality or any presentment, demand, protest or other notice of any
          kind on or at any time after the Mortgage becomes enforceable; and

     (E)  without prejudice to the foregoing, the provisions of the Conveyancing
          and Property Ordinance are expressly extended (subject to Clause 10.9
          (Inconsistency and Conflict)) so that the Collateral Agent may in
          addition to any powers granted it by applicable law, upon and from the
          Mortgage becoming enforceable and upon and subject to the terms and
          conditions of the Facility Agreement) do all such other acts and
          things it may consider necessary or expedient for the realisation or
          preservation of the Mortgage or incidental to the exercise of any of
          the rights conferred on it under or in connection with this Deed or
          the Conveyancing and Property Ordinance and to concur in the doing of
          anything which it has the right to do and to do any such thing jointly
          with any other person.

10.2 ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS

     Subject to the order of priority of payments set out in section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in and about the carrying on and management of any such
     business as contemplated by Clause 10.1 (Effects) or in the exercise of any
     of the powers conferred by Clause 10.1 (Effects) or otherwise in respect of
     the Mortgaged Property and all outgoings which it shall think fit to pay
     out of the profits and income of the Mortgaged Property and the moneys
     received by it in carrying out any business as contemplated by Clause 10.1
     (Effects) and may apply the residue of the said profits, income and moneys
     in the manner provided by section 2.16(h) of the Facility Agreement
     provided that any such expenses shall, in any event, to the extent not
     fully paid or discharged, form or shall be deemed to form part of the
     Secured Indebtedness.

10.3 NO WAIVER

     No failure or delay on the part of the Collateral Agent or any Receiver to
     exercise any right, power or remedy under this Deed will operate as a
     waiver thereof nor will any



                                       12


     single or partial exercise of any right, power or remedy preclude any other
     or further exercise thereof or the exercise of any other right, power or
     remedy.

10.4 WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Deed must be
     in writing, be express and not implied and may be given subject to any
     conditions which the Collateral Agent considers fit. Any waiver or consent
     shall be effective only in the instance and for the purpose for which it is
     given.

10.5 NO OBLIGATION TO INSURE

     Notwithstanding any provisions to the contrary, the Collateral Agent shall
     not be under any obligation to insure any of the Mortgaged Property or the
     title deeds or other evidence in respect thereof and shall not be
     responsible for any loss which may be suffered as a result of the lack of
     or inadequacy of any such insurance.

10.6 NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Mortgaged Property by any act or omission of
     the Mortgagor or any prior ranking encumbrancer or any other person.

10.7 NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax, duties or levies in respect of the Mortgaged Property
     or any part thereof on any income therefrom or any proceeds thereof.

10.8 NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Mortgage or any security created by the Facility
     Agreement or any of the Credit Documents.

10.9 INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Deed and the provisions
     of any applicable law (including without limitation the Conveyancing and
     Property Ordinance and the Trustee Ordinance (Chapter 29 of the Laws of
     Hong Kong)), the provisions of this Deed shall prevail and such
     inconsistent or conflicting provisions shall be deemed to be expressly
     negated or modified hereby provided that none of the foregoing shall be
     construed as a limitation on the powers of any Receiver.



                                       13


10.10 NO EXEMPTION

     Nothing in this Deed shall exempt the Collateral Agent from or indemnify it
     against any liability which would by rule of law or otherwise attach to it
     in respect of any act of gross negligence or wilful default which it may
     have committed in relation to its duties and/or discretions under this
     Deed.

10.11 SUSPENSE ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Deed (including the proceeds of any conversion of
     currency) after the security created hereunder has become enforceable,
     except where such monies together with all other monies received, recovered
     or realised by the Collateral Agent or any Receiver under this Deed are
     sufficient to satisfy and discharge the Secured Indebtedness in full, may
     in the discretion of the Collateral Agent or the Receiver (provided that
     such action has first been approved by the Collateral Agent) be credited to
     any suspense or impersonal account in the name of the Collateral Agent at
     The Industrial and Commercial Bank of China and may be held in such account
     for so long as the Collateral Agent may think fit (with interest accruing
     thereon at such market rate, if any, as the Collateral Agent may deem fit)
     pending their application from time to time (as the Collateral Agent shall
     be entitled to do in its discretion) in or towards satisfaction of the
     Secured Indebtedness in accordance with the terms of this Deed. Save as
     provided above, no party shall be entitled to withdraw any amount at any
     time standing to the credit of any such suspense or impersonal account.

10.12 NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent security interest affecting the
     Mortgaged Property or (b) the Collateral Agent receives notice of any
     assignment or disposition affecting all or any part of the Mortgaged
     Property or any interest therein to which the Collateral Agent has not
     given its approval or (c) the commencement of the insolvency,
     administration, reorganisation, (other than as part of a solvent
     reconstruction or amalgamation the terms of which have been approved in
     writing by the Collateral Agent), liquidation or dissolution of, or any
     analogous proceeding in respect of, of the Mortgagor, the Collateral Agent
     may open a new account in the name of the Mortgagor (whether or not it
     permits any existing account to continue). If the Collateral Agent does not
     open such a new account, it shall nevertheless be treated as if it had done
     so at the time when the notice was received or was deemed to have been
     received or, as the case may be, the insolvency, administration,
     reorganisation, liquidation, dissolution or other proceeding commenced.
     Thereafter, all payments made by the Mortgagor to the Collateral Agent or
     received by the Collateral Agent for the account of the Mortgagor shall be
     credited or treated as having been credited to the new account and shall
     not operate to reduce the amount secured by this Deed at the time when the
     Collateral Agent received or was deemed to have received such notice or, as
     the case may be, the insolvency, administration, reorganisation,
     liquidation, dissolution or other proceeding commenced.



                                       14


11.  PRESERVATION OF RIGHTS

11.1 SECURITY ADDITIONAL

     The Mortgage and the rights given to the Collateral Agent under this Deed
     shall be in addition to and shall be independent of every guarantee,
     indemnity or other security which the Collateral Agent may at any time hold
     for the Secured Indebtedness and it is hereby declared that no prior
     security held by the Collateral Agent over the whole or any part of the
     Mortgaged Property shall merge in the Mortgage.

11.2 SECURITY CONTINUING

     The Mortgage shall be a continuing security notwithstanding the winding-up
     or dissolution of the Mortgagor or any partial payment, settlement of
     account or other matter whatsoever and in particular (but without prejudice
     to the generality of the foregoing) shall not be considered satisfied by
     any intermediate repayment in satisfaction of all or any of the Secured
     Indebtedness and shall continue in full force and effect until the Secured
     Indebtedness has been discharged and satisfied in full.

11.3 INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement, variation or release with, the Mortgagor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Mortgagor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Mortgage or to the liability of the Mortgagor for the Secured
     Indebtedness.

11.4 RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Deed are cumulative and
     are not, nor are they to be construed as, exclusive of any rights, power or
     remedies provided by law.

11.5 MORTGAGE NOT AFFECTED

     Neither the Mortgage nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Deed or by law nor the liability of the Mortgagor hereunder shall
     be discharged, impaired or otherwise affected by:

     (A)  any time, waiver or consent granted, or any other indulgence or
          concession granted, by the Collateral Agent or any other Secured Party
          to the Mortgagor or any other person; or

     (B)  the taking, holding, variation, compromise, exchange, renewal,
          realisation or release by the Collateral Agent or any other Secured
          Party or any other person of any rights under or in connection with a
          Credit Document, any other security, guarantee, indemnity or other
          document; or



                                       15


     (C)  the refusal or failure to take up, hold, realise, perfect or enforce
          by the Collateral Agent or any other Secured Party or any other person
          any rights under or in connection with a Credit Document, any other
          security, guarantee, indemnity or other document (including, without
          limitation, any failure to comply with any formality or other
          requirement or any failure to realise the full value of any security);
          or

     (D)  the existence of any claim, set-off or other right which the Mortgagor
          may have at any time against the Collateral Agent or any other Secured
          Party or any other person; or

     (E)  the making or absence of any demand for payment or discharge of any
          Secured Indebtedness on the Mortgagor or any other person, whether by
          the Collateral Agent or any other Secured Party or any other person;
          or

     (F)  any arrangement, compromise or settlement entered into by the
          Collateral Agent or any other Secured Party with the Mortgagor or any
          other person; or

     (G)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Mortgagor under a
          Credit Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order; or

     (H)  any variation, amendment, waiver, release, novation, supplement,
          extension (whether of maturity or otherwise) or restatement (in each
          case however fundamental and of whatsoever nature) or replacement of
          any Credit Document, or any other security, guarantee, indemnity or
          other document; or

     (I)  any amendment, variation, novation, supplementation or replacement of
          any agreement between the Secured Parties; or

     (J)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Credit Document or any other security, guarantee,
          indemnity or other document; or

     (K)  any of the obligations of the Mortgagor under any of Credit Document
          or under any other Lien taken in respect of the obligations of the
          Mortgagor under any Credit Document being or becoming illegal,
          invalid, unenforceable, ineffective or impaired in any respect; or

     (L)  any amalgamation, merger or reconstruction that may be effected by the
          Collateral Agent with any other person or any sale or transfer of the
          whole or any part of the undertaking, property and assets of the
          Collateral Agent to any other person; or

     (M)  any amalgamation, merger or reconstruction (other than as part of a
          solvent reconstruction or amalgamation the terms of which have been
          approved by the Collateral Agent), reorganisation, administration,
          administrative or other



                                       16


          receivership or dissolution or liquidation entry into a voluntary
          arrangement of the Mortgagor or any other person; or

     (N)  the insolvency, bankruptcy, winding-up or dissolution of the Mortgagor
          or any change in its status, function, control or ownership; or

     (O)  any change in the constitution of the Mortgagor; or

     (P)  any incapacity, lack of power, authority or legal personality of the
          Mortgagor to enter into or perform any of its obligations under any
          Credit Document to which it is a party or any irregularity in the
          exercise thereof or any lack of authority by any person purporting to
          act on their behalf; or

     (Q)  any exercise, omission to exercise, compromise, renewal or release of
          any rights against the Mortgagor; or

     (R)  any invalidity or irregularity in the execution of this Deed or any
          other Credit Document; or

     (S)  any other act (save for a valid act of release and discharge granted
          by the Collateral Agent), event or omission which, but for this Clause
          11.5 (Mortgage Not Affected) might operate to discharge, impair or
          otherwise affect the Mortgage or the liability of the Mortgagor for
          the Secured Indebtedness or any of the rights, powers or remedies
          conferred upon the Collateral Agent or any Receiver (or their
          respective delegates) by this Deed or by law or the liability of the
          Mortgagor hereunder.

     Without prejudice to the generality of this Clause 11.5, the Mortgagor
     expressly confirms that it intends that its liability for the Secured
     Indebtedness and its obligations under this Deed shall extend from time to
     time to any variation, increase, extension, addition or replacement
     (however fundamental) of or to any of the Credit Documents and/or any
     facility or amount made available under any of the Credit Documents.

11.6 NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Deed is intended to, or shall operate so as to,
     prejudice or affect any guarantee, indemnity or other security of any kind
     whatsoever which the Collateral Agent may have for the Secured Indebtedness
     or any right, remedy or privilege of the Collateral Agent thereunder.

11.7 SCOPE OF RELEASE

     Any receipt, release or discharge of the Mortgage or of any liability
     arising under this Deed may be given by the Collateral Agent and, unless
     expressly stated otherwise, shall not release or discharge the Mortgagor
     from any liability for the same or any other monies which may exist
     independently of this Deed. Where such receipt, release or discharge
     relates only to part of the Mortgaged Property such receipt, release or



                                       17


     discharge shall not prejudice or affect the Mortgage in relation to the
     remainder of the Mortgaged Property, unless expressly stated otherwise.

11.8 FURTHER ADVANCES

     The security created by this Deed is intended to secure any further
     advances made by the Lenders pursuant to the terms of the Facility
     Agreement.

11.9 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Mortgagor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this Clause 11.9 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Mortgage subsequently as if such settlement or discharge had not occurred
     but so that nothing herein shall confer on any Transaction Persons the
     right to claim under this Clause 11.9 (Discharge Conditional) for more than
     the Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment provided that any
     such settlement, reassignment, release or discharge shall become
     unconditional upon the expiry of one month after the maximum period within
     which such settlement, reassignment, release or discharge can be avoided or
     reduced.

11.10 NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Deed or by law:

     (A)  to take any action or obtain judgment in any court against the
          Mortgagor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Mortgagor; or

     (C)  to enforce or seek to enforce the recovery of any moneys and
          liabilities hereby secured or any other security taken in respect of
          any of the obligations of the Mortgagor under any of the Credit
          Documents.

12.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or



                                       18


     become exercisable or be concerned to see whether any such delegation by
     the Collateral Agent shall have lapsed for any reason or been revoked. Any
     sale or other dealing by the Collateral Agent or its delegate or any
     Receiver of or with the Mortgaged Property and any part thereof shall be
     deemed to be within the power of the person effecting the same and the
     receipt by such person of the purchase or other moneys connected therewith
     shall effectively discharge the purchaser or other party to such dealing
     who shall not be concerned with the manner of application of the proceeds
     of sale or other dealing or be in any way answerable therefor.

13.  APPOINTMENT OF RECEIVER

13.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may if requested by the Mortgagor or at any time after
     the Mortgage (or the relevant part thereof) shall have become enforceable
     in accordance with Clause 9 (Default Procedure), appoint one or more
     persons to be a Receiver or Receivers of the whole or any part of the
     Mortgaged Property. The Collateral Agent may:

     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.

13.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Mortgagor) have, in relation to the Mortgaged Property, or as the case may
     be, that part of the Mortgaged Property in respect of which he was
     appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by the Conveyancing and Property Ordinance or otherwise by
          law on mortgagees (whether or not in possession) and receivers
          appointed under the Conveyancing and Property Ordinance; and

     (B)  the power in the name or on behalf and at the cost of the Mortgagor to
          exercise all the powers and rights of an absolute owner of the
          Mortgaged Property or the relevant part thereof and do or omit to do
          anything which the Mortgagor could do.



                                       19


13.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Mortgagor) have the powers specified in Clause 10.1 (Effects).

13.4 RECEIVER TO BE AGENT OF THE MORTGAGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Mortgagor and the Mortgagor shall be solely
     responsible, jointly and severally, for the acts and defaults of such
     Receiver (save in the case of the fraud, negligence, wilful default, breach
     of duty or breach of trust in relation to duties by such Receiver) and for
     payment of such Receiver's remuneration in respect thereof.

13.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.

13.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Mortgage (other than monies paid into a
     suspense account by such Receiver in accordance with Clause 10.11 (Suspense
     Account(s)).

13.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any attorney or
          agent of such party shall be liable to any person in respect of any
          loss or damage whatsoever which arises out of the realisation of the
          Mortgaged Property or any part thereof or from any act, default or
          omission in relation to the Mortgage or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of their respective powers, authorities or
          discretions conferred upon them in relation to the Mortgage or any
          part of it, unless such loss or damage is caused by its or his
          negligence, wilful default, breach of duty, breach of trust or fraud.

     (B)  Without prejudice to the generality of Sub-clause (A), entry into
          possession of the Mortgaged Property shall not render the Collateral
          Agent or the Receiver liable to account as mortgagee in possession or
          liable for any loss on realisation or for any default or omission for
          which a mortgagee in possession might be liable unless such loss or
          damage is caused by its negligence, wilful default,



                                       20


          breach of duty, breach of trust or fraud and, if and whenever the
          Collateral Agent or the Receiver enters into possession of the
          Mortgaged Property, it shall be entitled at any time to go out of such
          possession.

13.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all statutory and other powers of the
     Collateral Agent under the Conveyancing and Property Ordinance (and so that
     the statutory power of sale shall be exercisable without regard to
     paragraph 11 of the Fourth Schedule to the said Ordinance) or otherwise and
     so that such powers shall be and remain exercisable by the Collateral Agent
     in respect of any part of the Mortgaged Property in respect of which no
     Receiver has been appointed and notwithstanding that an appointment under
     the provisions of this Clause 13 (Appointment of Receiver) shall have
     subsisted and been withdrawn in respect of that property or shall be
     subsisting in respect of any other part of the Mortgaged Property.

14.  INDEMNITY

14.1 INDEMNITY

     Without prejudice to any right at law given to trustees, the Mortgagor
     further covenants with and undertakes to each of the Collateral Agent and
     any Receiver or Receivers fully to indemnify and keep indemnified it from
     and against all liabilities, losses, damages, costs and expenses (including
     legal costs and expenses), charges, actions, proceedings, claims and
     demands or any other obligation or liability (including, without
     limitation, in respect of taxes, duties, levies, imposts and other charges
     any indemnity and other amounts which the Collateral Agent is or would
     become obliged to pay, upon payment by the Mortgagor, under such indemnity)
     which it may properly incur (except, having regard to the provisions of any
     Credit Document, insofar as they are incurred because of fraud, negligence,
     wilful default or breach of trust on the part of it whether before or after
     the Mortgage becomes enforceable):

     (A)  in consequence of anything done or purported to be done by the
          Collateral Agent or any Receiver in relation to the Mortgaged Property
          or under this Deed or any Credit Document as a result of or in
          connection with any failure by the Mortgagor to comply with its
          obligations thereunder to the Collateral Agent or any Receiver; or

     (B)  in consequence of any payment in respect of the Secured Indebtedness
          (whether made by the Mortgagor or a third party) being impeached or
          declared void for any reason whatsoever; or

     (C)  in consequence of the breach or non-performance by the Mortgagor of
          any of their respective warranties, representations, covenants or
          undertakings herein contained or otherwise relating to all or any part
          of the Mortgaged Property; or



                                       21


     (D)  in connection with the realisation of the Mortgaged Property
          (including the costs of any proceedings in relation to this Deed or to
          the Secured Indebtedness).

14.2 INTEREST

     The amounts payable to the Collateral Agent or the Receiver under Clauses
     14.1 (Indemnity) and 17 (Stamp Duty and Taxes) shall carry interest in
     accordance with section 2.10 of the Facility Agreement from the date on
     which they were paid or incurred by the Collateral Agent or the Receiver
     (as the case may be) to the date of actual payment to the Collateral Agent
     or, as the case may be, the Receiver under the aforementioned clauses as
     well after as before any judgment and such amounts and interest may be
     debited by the Collateral Agent to any account of the Mortgagor, but shall,
     in any event (to the extent not fully paid or discharged), form part of the
     Secured Indebtedness and accordingly be secured on the Mortgaged Property
     under the Mortgage.

15.  POWER OF ATTORNEY

15.1 APPOINTMENT AND POWERS

     The Mortgagor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this Clause 15.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,

     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may be required (or which the
     Collateral Agent, any person falling within Sub-clause (B) or any Receiver
     appointed hereunder shall reasonably consider requisite) for carrying out
     any obligation imposed on the Mortgagor, as the case may be, by or pursuant
     to this Deed (including but not limited to the obligations of the Mortgagor
     under Clauses 4 (Covenant to Deposit and Further Assurance) and 8
     (Covenants and Undertakings), for carrying out any sale, lease or other
     dealing by the Collateral Agent or any such Receiver into effect, for
     conveying or transferring any legal estate or other interest in the
     Mortgaged Property, for getting in the Mortgaged Property, and generally
     for enabling the Collateral Agent or any person falling within Sub-clause
     (B) or any Receiver to exercise the respective powers conferred on them by
     or pursuant to this Deed or by law provided that the power contained in
     this Clause 15.1 (Appointment and Powers) shall not be exercisable unless
     and until the Mortgage shall have become enforceable. The exercise of such
     power by the Collateral Agent or any person falling within Sub-clause (B)
     or any Receiver shall not put any person dealing with it upon any



                                       22


     inquiry as to whether a Event of Default shall have occurred. Each of the
     Collateral Agent, any person falling within Sub-clause (B) and any Receiver
     shall have full power to delegate the power conferred on it by Clause 15.1
     (Appointment and Powers), but no such delegation shall preclude the
     subsequent exercise of such power by the Collateral Agent or any person
     falling within Sub-clause (B) or any Receiver (as the case may be) itself
     or preclude the Collateral Agent or any person falling within Sub-clause
     (B) or any Receiver (as the case may be) from making a subsequent
     delegation thereof to some other person; any such delegation may be revoked
     by the Collateral Agent or any person falling within Sub-clause 15.1(B) or
     any Receiver (as the case may be) at any time.

15.2 RATIFICATION

     The Mortgagor shall ratify and confirm all transactions lawfully and
     properly entered into by the Collateral Agent or any Receiver or delegate
     of the Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     Clause 15.1 (Appointment and Powers).

15.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is, as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Mortgagor hereby
     acknowledges), granted irrevocably and severally, for value and for
     security as part of the Mortgage to secure the several proprietary
     interests of and the performance of obligations owed to the respective
     donees within the meaning of the Powers of Attorney Ordinance.

16.  SET-OFF AND CURRENCY

16.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder provided that each payment in
          respect of costs and expenses shall be made in Hong Kong dollars if
          incurred in Hong Kong dollars.

     (B)  If any sum due from the Mortgagor under this Deed or any order or
          judgment given or made in relation hereto has to be converted from the
          currency (the "FIRST CURRENCY") in which the same is payable hereunder
          or under such order or judgment into another currency (the "SECOND
          CURRENCY") for the purpose of (a) making or filing a claim or proof
          against the Mortgagor, (b) obtaining an order or judgment in any court
          or other tribunal or (c) enforcing any order or judgment given or made
          in relation hereto then:

          (i)  the Mortgagor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is



                                       23


               suffered as a result of or in connection with the Collateral
               Agent's own fraud, negligence, wilful default, breach of duty or
               breach of trust; and

          (ii) the Collateral Agent shall account to the Mortgagor for the
               amount by which any sum realised by it exceeds the aggregate
               amount of all sums owing to it by the Mortgagor at the time at
               which such profit is realised provided that the Collateral Agent
               shall only be required to make any payment to the Mortgagor in
               relation thereto if at such time all the payment obligations of
               the Mortgagor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or rates of exchange at which the Collateral
          Agent may in the ordinary course of business purchase the first
          currency with the second currency upon receipt of a sum paid to it in
          satisfaction, in whole or in part, of any such order, judgment, claim
          or proof.

16.2 SET-OFF

     The Mortgagor waives, and (where incapable of waiver) agrees not to
     exercise (unless required to do so by law), any right of set-off or
     netting, whether conferred by agreement or law, which it may have against
     the Collateral Agent so that it does not reduce any amount payable by it to
     the Collateral Agent under this Deed.

16.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or for the
     purpose of crediting any monies to the Account or any suspense account
     pursuant to Clause 10.11 (Suspense Account(s)) or making any application
     therefrom or for any other purpose in connection with this Deed, the
     Collateral Agent may (unless otherwise required by law) convert any monies
     received, recovered or realised or subject to application by the Collateral
     Agent under this Deed or any monies to be credited to any such account
     (including the proceeds of any previous conversion under this Clause 16
     (Set-off and Currency)) from their existing currency of denomination into
     such other currency of denomination as the Collateral Agent may reasonably
     think fit and any such conversion shall be effected at such rate or rates
     of exchange as may be agreed by the Collateral Agent in consultation with
     the Mortgagor as being relevant and any rate, method and date so agreed
     shall be binding on the Mortgagor and any costs, expenses or commissions
     incurred in effecting any such conversion shall be deducted from the
     proceeds of any such conversion.

17.  STAMP DUTY AND TAXES

     The Mortgagor shall pay all stamp duties and similar fees, filing and
     registration fees and other transaction taxes required in relation to or
     for the purpose of procuring the execution, validity and enforceability of
     this Deed and the Mortgage and shall indemnify



                                       24


     the Collateral Agent and each Receiver appointed hereunder against any
     liabilities, costs, claims and expenses resulting from any failure to pay
     or any delay in paying the same on a full indemnity basis.

18.  AMENDMENTS

     This Deed may not be amended, modified or waived in any respect whatsoever,
     without the prior written consent of the Collateral Agent given with
     express reference to this Clause 18 (Amendments) and expressly stated to be
     intended to operate as the Collateral Agent's consent to such amendment,
     modification or waiver on behalf of the Requisite Lenders.

19.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Mortgage has become
     enforceable, apply to the court for an order that the terms of this Deed be
     carried into execution under the direction of the Court and for the
     appointment of a Receiver of the Mortgaged Property or any part thereof and
     for any other order in relation to the administration of the terms of this
     Deed as the Collateral Agent shall deem fit and it may assent to or approve
     any application to the Court made at the instance of the Collateral Agent
     or on its behalf and the Collateral Agent shall be indemnified by the
     Mortgagor against all costs, charges and expenses properly incurred by it
     in relation to any such application or proceedings.

20.  PARTIAL INVALIDITY

     Every provision contained in this Deed shall be severable and distinct from
     every other such provision and if at any time any provision hereof is or
     becomes illegal, invalid or unenforceable in any respect under the law of
     any jurisdiction, neither the legality, validity or enforceability of the
     remaining provisions hereof nor the legality, validity or enforceability of
     such provision under the law of any other jurisdiction shall in any way be
     affected or impaired thereby.

21.  NOTICES

21.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

21.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Deed shall (unless that other person has by 15
     days' written notice to the one specified another address department,
     officer or person as the case may be) be made or delivered to that other
     person at the address identified with its signature below and shall be
     deemed to have been made or delivered (in the case of any communication
     made by letter) when left at that address during normal business hours



                                       25


     on a Business Day (or on the next Business Day if not left during normal
     business hours on a Business Day) or (as the case may be) 5 days (in the
     case of local post) and 10 days (in the case of overseas post) after being
     deposited in the post postage prepaid in an envelope addressed to it at
     that address marked for the attention of any specified department, officer
     or person or (in the case of any communication made by facsimile
     transmission) when sent to the correct facsimile number of the addressee
     identified with its signature below and received in whole and in legible
     form by such addressee provided that any communication or document to be
     made or delivered by the Mortgagor or the Collateral Agent shall be
     effective only when received by the Mortgagor or the Collateral Agent, as
     appropriate, and then only if the same is expressly marked for the
     attention of the department, officer or person identified below with the
     signature of the relevant addressee (or such other department, officer or
     person as the relevant addressee shall from time to time and in each case
     by not less than 3 days' prior notice in writing to the parties hereto have
     specified for this purpose).

21.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Deed shall be in the English language or accompanied by a
     translation thereof into English certified (by an officer of the person
     making or delivering the same) as being a true and accurate translation
     thereof.

22.  ASSIGNMENT

     The Collateral Agent may assign its rights and obligations under this Deed
     to any successor under the Facility Agreement in accordance with section
     9.7 of the Facility Agreement.

23.  COSTS AND EXPENSES

     The Mortgagor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the negotiation, preparation, registration, perfection, preservation
          or enforcement of this Deed and any other document relating thereto;
          and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Mortgagor
          under any of the Credit Documents or the recovery by the Collateral
          Agent or any such Receiver from the Mortgagor of the Secured
          Indebtedness then due and payable.



                                       26


24.  CERTIFICATES AND DETERMINATIONS

     For all purposes, including any Proceedings:

     (a)  a determination by the Collateral Agent; or

     (b)  a copy of a certificate signed by an officer of the Collateral Agent,

     of the amount of any indebtedness comprised in the Secured Indebtedness for
     the time being or at any time shall, in the absence of manifest error, be
     conclusive evidence against the Mortgagor as to the amount thereof.

25.  GOVERNING LAW

     This Deed is governed by Hong Kong law.

26.  JURISDICTION

26.1 HONG KONG COURTS

     The courts of Hong Kong have non-exclusive jurisdiction to settle any
     dispute (a "DISPUTE") arising out of or in connection with this Deed
     (including a dispute regarding the existence, validity or termination of
     this Deed or the consequences of its nullity).

26.2 CONVENIENT FORUM

     The parties agree that the court of Hong Kong are the most appropriate and
     convenient courts to settle Disputes between them and, accordingly, that
     they will not argue to the contrary.

26.3 NON-EXCLUSIVE JURISDICTION

     This Clause 26 (Jurisdiction) is for the benefit of all parties hereto
     other than the Mortgagor. As a result and notwithstanding Clause 26.1 (Hong
     Kong Courts), it does not prevent any party hereto other than the Mortgagor
     from taking Proceedings in any other courts with jurisdiction. To the
     extent allowed by law, the parties hereto other than the Mortgagor may take
     concurrent Proceedings in any number of jurisdictions.

26.4 AGENT FOR SERVICE

     (A)  The Mortgagor irrevocably appoints Huawei-3Com Co., Limited. of Suites
          3013-3014, 30/F One International Finance Centre, 1 Harbour View
          Street, Central, Hong Kong to be its agent for the receipt of Service
          Documents. It agrees that any Service Document may be effectively
          served on it in connection with Proceedings in Hong Kong by service on
          its agent effected in any manner permitted by applicable law.



                                       27


     (B)  If the agent at any time ceases for any reason to act as such, the
          Mortgagor shall appoint a replacement agent having an address for
          service in Hong Kong and shall notify the Collateral Agent of the name
          and address of the replacement agent. Failing such appointment and
          notification, the Collateral Agent shall be entitled by notice to the
          Mortgagor to appoint a replacement agent to act on behalf of the
          Mortgagor. The provisions of this clause applying to service on an
          agent apply equally to service on a replacement agent.

     (C)  "SERVICE DOCUMENT" means a claim form, application notice, order,
          judgment or other document relating to any Proceedings.

27.  EXECUTION AND COUNTERPARTS

     This Deed 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 when taken together
     shall constitute one and the same Deed.

IN WITNESS WHEREOF the parties hereto have caused this Deed to be duly executed
the day and year first above written.



                                       28


                                   SCHEDULE 1

                            PARTICULARS OF THE SHARES



MORTGAGOR              NUMBER AND CLASS OF SHARES
- ---------              --------------------------
                    
H3C HOLDINGS LIMITED   9,705,000 ORDINARY SHARES


Shareholder of and the number and class of shares in Huawei-3Com Co., Limited



                                 EXECUTION PAGES

THE MORTGAGOR

Executed as a Deed by                 )   SEAL AFFIXED
for and on behalf of                  )
H3C HOLDINGS LIMITED                  )   NEAL D. GOLDMAN
in the presence of: JEFFREY M. HELD   )
                                      )

Address: PO Box 309 GT, Ugland House, South Church Street,
         George Town, Grand Cayman, Cayman Islands
Facsimile Number: __________________________
Attention: _________________________________



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal   )
of INDUSTRIAL AND COMMERCIAL                     )
BANK OF CHINA (ASIA) LIMITED                     )   SEAL AFFIXED
in the presence of:                              )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Secretary

Address: 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong
Facsimile Number: 2869 8221
Attention: ________________________________



                                                                  CONFORMED COPY

                               Dated 30 March 2007

                              H3C HOLDINGS LIMITED
                                  as Mortgagor

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
                               as Collateral Agent

                                   ----------

                               H3C SHARE MORTGAGE

                                   ----------

                                Slaughter and May
                               47/F, Jardine House
                               One Connaught Place
                               Central, Hong Kong
                                   (RMGG/AHLL)
                                   HK070540103



                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                            1
2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                        3
3.  MORTGAGE                                                                  3
4.  COVENANT TO DEPOSIT AND FURTHER ASSURANCES                                4
5.  REDEMPTION                                                                5
6.  THE SHARES                                                                6
7.  REPRESENTATIONS AND WARRANTIES                                            7
8.  COVENANTS AND UNDERTAKINGS                                                8
9.  DEFAULT PROCEDURE                                                        10
10. EFFECTS OF THE MORTGAGE BECOMING ENFORCEABLE                             10
11. PRESERVATION OF RIGHTS                                                   14
12. PROTECTION OF PURCHASERS                                                 17
13. APPOINTMENT OF RECEIVER                                                  18
14. INDEMNITY                                                                20
15. POWER OF ATTORNEY                                                        21
16. SET-OFF AND CURRENCY                                                     22
17. STAMP DUTY AND TAXES                                                     23
18. AMENDMENTS                                                               24
19. APPLICATION TO COURT                                                     24
20. PARTIAL INVALIDITY                                                       24
21. NOTICES                                                                  24
22. ASSIGNMENT                                                               25
23. COSTS AND EXPENSES                                                       25
24. CERTIFICATES AND DETERMINATIONS                                          26
25. GOVERNING LAW                                                            26
26. JURISDICTION                                                             26
27. EXECUTION AND COUNTERPARTS                                               27

SCHEDULE 1                                                                   28
Particulars of the Shares                                                    28

EX-10.58

                                                                   Exhibit 10.58

                                                                  CONFORMED COPY

THIS SHARE CHARGE is made as a deed on 29 March 2007

BETWEEN:

(1)  3COM TECHNOLOGIES, a company incorporated under the laws of the Cayman
     Islands whose registered office is at c/o Maples and Calder,
     Attorneys-at-Law, Ugland House, South Church Street, George Town, Grand
     Cayman, Cayman Islands (the "CHARGOR"); and

(2)  INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a limited liability
     company incorporated under the laws of Hong Kong whose registered office is
     at 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in its
     capacity as collateral agent, the "COLLATERAL AGENT", which expression
     shall, wherever the context so admits, include such entity and all other
     persons from time to time acting in such capacity).

WHEREAS:

(A)  By the Facility Agreement, the Lenders have agreed to make Term Loans to
     the Borrower upon the terms and subject to the conditions contained
     therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor has agreed to enter into this Deed.

NOW THIS DEED WITNESSES as follows:

1.   INTERPRETATION AND DEFINITIONS

1.1  DEFINITIONS

     In this Deed, unless the context otherwise requires:

     "BORROWER" means H3C Holdings Limited;

     "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which
     banks are generally open for business in Hong Kong;

     "CHARGE" means the security from time to time constituted by or pursuant to
     this Deed (or intended to be constituted by or pursuant to this Deed) or
     any part thereof;

     "CHARGED PROPERTY" means any or all of the rights, title and interest,
     present and future, in and to the Shares, Further Shares and Derived Assets
     expressed to be subject to the security created under Clause 3 (Charge) of
     this Deed;

     "CONVEYANCING AND PROPERTY ORDINANCE" means the Conveyancing and Property
     Ordinance (Cap. 219) of the laws of Hong Kong;

Equitable Share Charge



                                        2


     "DEBT SERVICE ACCOUNT" means the bank account defined as such in the
     Borrower Charge over Bank Accounts entered into on 22 March 2007 by H3C
     Holdings Limited and the Collateral Agent;

     "DERIVED ASSETS" means all shares, rights or other property of a capital
     nature which accrue or are offered, issued or paid at any time (by way of
     bonus, rights, redemption, conversion, exchange, substitution,
     consolidation, subdivision, preference, warrant, option, purchase or
     otherwise) in respect of:

     (A)  the Shares; or

     (B)  any Further Shares; or

     (C)  any shares, rights or other property previously accruing, offered,
          issued or paid as mentioned in this definition;

     "DIVIDENDS" means all dividends, interest and other income paid or payable
     in respect of the Shares, any Further Shares or any Derived Assets;

     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Chargor and the Collateral Agent, as amended, supplemented and/or restated
     from time to time in any manner whatsoever;

     "FURTHER SHARES" means all shares (other than the Shares and any shares
     comprised in any Derived Assets) which the Chargor and the Collateral Agent
     may at any time agree shall be subject to the Charge;

     "POWERS OF ATTORNEY ORDINANCE" means the Powers of Attorney Ordinance (Cap.
     31) of the laws of Hong Kong;

     "RECEIVER" means a receiver appointed by or on behalf of the Collateral
     Agent under this Deed or pursuant to the Collateral Agent's statutory
     powers, and includes more than one such receiver and substituted receiver;

     "SECURED INDEBTEDNESS" means the moneys, liabilities and obligations
     (whether actual or contingent and whether owed jointly and severally or in
     any other capacity whatsoever) of the Chargor which are, or are expressed
     to be, or may at any time in the future be due and owing to the Collateral
     Agent (whether for its own account or as agent or trustee for the Secured
     Parties) or to any of the Secured Parties under or in connection with the
     Facility Agreement together with all costs, charges and expenses incurred
     by the Collateral Agent or any Secured Party which are, or are expressed to
     be, or may become due and owing by the Chargor under or in connection with
     the Facility Agreement; and

     "SHARES" means the shares comprising all the issued capital of Huawei-3Com
     Co., Limited more particularly described in Schedule 1 (Particulars of the
     Shares).





                                        3


1.2  DEFINITIONS IN THE FACILITY AGREEMENT

     Unless a contrary indication appears, a term used in the Facility Agreement
     has the same meaning when used in this Deed.

1.3  CONVEYANCING AND PROPERTY ORDINANCE

     In the context of the rights, powers, privileges, discretions and
     immunities conferred on the Collateral Agent, any Receiver or any Attorney
     (as defined in Clause 15 (Power of Attorney), references to "mortgage" and
     "mortgaged land" in any provision of the Conveyancing and Property
     Ordinance shall, for the purposes of this Deed, be deemed to be references
     to the Charge and the Charged Property respectively.

2.   COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS

2.1  COVENANT TO PAY

     The Chargor hereby covenants with the Collateral Agent that it shall pay
     and discharge the Secured Indebtedness at the time and in the manner
     provided for in the Facility Agreement and the Chargor hereby creates the
     Charge in the Charged Property in the manner and on the terms set out in
     Clause 3 (Charge).

2.2  NATURE OF SECURED INDEBTEDNESS

     Each transfer, assignment, mortgage and charge hereunder expressed to be
     to, each undertaking and agreement hereunder expressed to be to or with,
     and each representation and warranty hereunder expressed to be given to,
     the Collateral Agent is to, with or, as the case may be, given to the
     Collateral Agent for itself and as agent and trustee for the Secured
     Parties from time to time. Without prejudice to the generality of the
     foregoing or Clause 1.2 (Definitions in the Facility Agreement), any
     reference in this Deed to the Chargor, the Collateral Agent or any Secured
     Party shall be construed so as to include their respective successors and
     permitted assigns or transferees.

2.3  LIMITED RECOURSE

     The maximum liability of the Chargor hereunder shall be limited to an
     amount equal to the amount recovered through the enforcement of the
     security over the Charged Property provided by the Chargor hereunder, and
     if the amount so recovered is less than the aggregate amount otherwise
     payable by the Chargor to the Secured Parties and the Collateral Agent
     hereunder, the liability of the Chargor shall be limited to such amounts
     recovered and the Collateral Agent shall have no rights to sue the Chargor
     for payment of any amount expressed to be payable under Clause 2.1 hereof
     or otherwise under this Deed except to the extent necessary for such
     enforcement.



                                        4


3.   CHARGE

3.1  The Chargor, as beneficial owner and as continuing security for the payment
     and discharge of all Secured Indebtedness, charges all its rights, title
     and interest in and to the Charged Property by way of first fixed charge in
     favour of the Collateral Agent.

3.2  TRANSFER

     It is acknowledged and agreed that the Chargor shall be entitled to, and
     shall, transfer all of the Shares to the Borrower as envisaged by the
     Facility Agreement, including section 5.11 thereof, notwithstanding the
     creation of this Charge, and that upon the Shares being registered in the
     name of the Borrower pursuant to such transfer the Collateral Agent shall,
     at the cost of the Chargor, promptly discharge, release and/or re-assign
     or, as appropriate, transfer the benefit of so much of the Charged Property
     as has not been applied by the Collateral Agent in or towards satisfaction
     of the Secured Indebtedness, to the Chargor or as the Chargor may direct
     and, thereafter, the Chargor shall have no further obligation hereunder.

4.   COVENANT TO DEPOSIT AND FURTHER ASSURANCES

4.1  THE SHARES AND FURTHER SHARES

     The Chargor shall, as soon as reasonably practicable (so as to permit time
     for the transfer into the Chargor's name of 4,755,450 Shares purchased from
     Seller pursuant to the Acquisition) as envisaged by section 5.11 of the
     Facility Agreement in the case of the Shares, and within two Business Days
     (or such longer period as the Collateral Agent may allow) of each occasion
     on which the Collateral Agent and the Chargor agree that any Shares shall
     become Further Shares, deposit with the Collateral Agent:-

     (A)  all share certificates, documents of title and other documentary
          evidence of ownership in relation to such shares; and

     (B)  transfers of such shares duly executed by the Chargor or its nominee
          with the name of the transferee left blank or, if the Collateral Agent
          so requires, duly executed by the Chargor or its nominee in favour of
          the Collateral Agent (or the Collateral Agent's nominee) and stamped,
          and such other documents as the Collateral Agent may require to enable
          the Collateral Agent (or the Collateral Agent's nominee) or, after the
          Charge becomes enforceable, any purchaser to be registered as the
          owner of, or otherwise to obtain legal title to, such shares;

     (C)  an executed letter of resignation and authorisation from each director
          of Huawei-3Com Co., Limited, in a form satisfactory to the Collateral
          Agent; and

     (D)  a resolution of the Board of Directors approving the transfers
          referred to in Sub-clause (B).



                                        5


4.2  DERIVED ASSETS

     The Chargor shall, within three Business Days of the accrual, offer, issue
     or payment of any Derived Assets, deliver or pay to the Collateral Agent or
     procure the delivery or payment to the Collateral Agent of:-

     (A)  all such Derived Assets or the share certificates, renounceable
          certificates, letters of allotment, documents of title and other
          documentary evidence of ownership in relation to them; and

     (B)  transfers of any shares comprised in such Derived Assets duly executed
          by the Chargor or its nominee with the name of the transferee left
          blank or, if the Collateral Agent so requires, duly executed by the
          Chargor or its nominee in favour of the Collateral Agent (or the
          Collateral Agent's nominee) and stamped, and such other documents as
          the Collateral Agent may require to enable the Collateral Agent (or
          the Collateral Agent's nominee) or, after the Charge becomes
          enforceable, any purchaser to be registered as the owner of, or
          otherwise to obtain legal title to, the shares comprised in such
          Derived Assets.

4.3  FURTHER ASSURANCES

     In addition to and without prejudice to anything else contained in this
     Deed, the Chargor shall, at its own cost, promptly execute and do all such
     deeds, instruments, transfers, renunciations, proxies, notices, documents,
     assurances, acts and things in such form as the Collateral Agent may from
     time to time require:-

     (A)  for converting the Charge to a legal mortgage over the Charged
          Property pursuant to an exercise of the Collateral Agent's right under
          Clause 10 (Effects of the Charge becoming Enforceable) of this Deed;

     (B)  for perfecting, preserving or protecting the Charge or the priority of
          the Charge; and

     (C)  for facilitating the realisation of the Charge or the exercise of any
          rights vested in the Collateral Agent.

4.4  REGISTRATION

     Without limitation to the generality of the Clause 4.3 (Further
     Assurances), the Chargor shall make all filings and registrations as may be
     required by applicable laws or requested in writing by the Collateral Agent
     from time to time as may be necessary to perfect, preserve and protect the
     Charge.



                                        6


5.   REDEMPTION

     (A)  Subject always to Clause 11.9 (Discharge Conditional), if the
          Collateral Agent is satisfied, acting reasonably, that:

          (i)  all Secured Indebtedness have been unconditionally and
               irrevocably paid or discharged in full and the Facility Agreement
               has been terminated;

          (ii) security or a guarantee for the Secured Indebtedness, in each
               case acceptable to the Collateral Agent, has been provided in
               substitution for this Deed; or

          (iii) all of the Shares have been transferred to the Borrower, and
               such Shares have been registered in the name of the Borrower as
               contemplated by Clause 3.2 (Transfer),

          then, the Collateral Agent shall at the request and cost of the
          Chargor, promptly discharge, release and/or re-assign, or, as
          appropriate, transfer the benefit of so much of the Charged Property
          as has not been applied by the Collateral Agent in or towards
          satisfaction of the Secured Indebtedness to the Chargor or as the
          Chargor may direct and, thereafter, the Chargor shall have no future
          obligation hereunder.

     (B)  The execution of a discharge, release, re-assignment, transfer or
          partial discharge by the Collateral Agent shall be a good and valid
          release or discharge of the Charge constituted by this Clause 3
          (Charge) or the relevant part thereof (as the case may be) and the
          obligations (or the relevant part thereof, as the case may be) of the
          Chargor from this Deed without the need for the Chargor to be a party
          thereto.

     (C)  The Collateral Agent hereby agrees that it shall, at the request and
          cost of the Chargor, do all such things and execute all such documents
          and procure that its nominees do all such things and execute all such
          documents as may be reasonably necessary to give effect to the
          discharge, release, re-assignment, transfer or partial discharge
          referred to in Sub-clauses (A) and (B).

     (D)  Upon any release, discharge, re-assignment, transfer or partial
          discharge pursuant to and in accordance with Sub-clause (A), the
          Collateral Agent shall, at the request and cost of the Chargor:

          (i)  promptly procure the redelivery to the Chargor, if it requests
               the same, of all deeds, instruments, certificates and other
               documents delivered to or deposited with or to the order of the
               Collateral Agent pursuant to Clause 4 (Covenant to Deposit and
               Further Assurances); and



                                        7


          (ii) promptly give notice to each person (if any) who has received
               notice of the Charge pursuant to this Deed of such release,
               discharge, re-assignment and/or transfer,

          in each case to the extent the same relates to such release,
          discharge, re-assignment, transfer or partial discharge.

6.   THE SHARES

6.1  CHARGOR TO PAY CALLS AND OTHER PAYMENTS

     The Chargor shall pay all calls or other payments due in respect of any
     part of the Charged Property, and in any case of default by the Chargor in
     this respect the Collateral Agent may (but shall not be obliged) if it
     thinks fit make any such payment on behalf of the Chargor in which event
     any sums so paid shall be reimbursed on demand by the Chargor to the
     Collateral Agent and shall, until reimbursed, bear interest at the rate
     provided in section 2.10 of the Facility Agreement.

6.2  All Dividends declared and distributed shall be paid directly to the Debt
     Service Account in the amounts provided for in section 5.21 of the Facility
     Agreement and the Chargor undertakes to procure that Huawei-3Com Co.,
     Limited pays such Dividends to such accounts in such respective amounts.

7.   REPRESENTATIONS AND WARRANTIES

     The Chargor represents and warrants to the Collateral Agent that:-

     (A)  it is duly incorporated and validly existing under the laws of the
          Cayman Islands and it has the power and capacity to enter into this
          Charge and grant the security created hereunder;

     (B)  subject only to this Charge it is the sole beneficial owner of the
          Shares;

     (C)  no Lien (other than the Permitted Liens) exists on, over or with
          respect to any of the Charged Property;

     (D)  it has not sold, transferred, lent, assigned, parted with its interest
          in, disposed of, granted any option in respect of or otherwise dealt
          with any of its rights, title and interest in and to the Charged
          Property, or agreed to do any of the foregoing (otherwise than
          pursuant to this Deed or as permitted by the Facility Agreement);

     (E)  the Shares, any Further Shares and any shares comprised in any Derived
          Assets are fully paid and there are no moneys or liabilities
          outstanding in respect of any of them;

     (F)  the Shares, any Further Shares and any shares comprised in any Derived
          Assets have been duly authorised and validly issued and are free from
          any



                                        8


          restrictions on transfer or rights of pre-emption, subject to the
          articles of association of Huawei-3Com Co., Limited;

     (G)  it has the power to enter into, and perform and comply with its
          obligations under, this Deed, and to create the Charge;

     (H)  the entry into and performance by it of, the creation of security
          under, and the transactions contemplated by, this Charge do not and
          will not conflict with:

          (i)  any law or regulation applicable to it;

          (ii) its constitutional documents; or

          (iii) any agreement or instrument binding upon or its Subsidiaries or
               any of its or its Subsidiaries' assets;

     (I)  all actions, conditions and things required to be taken, fulfilled and
          done (including the obtaining of any necessary consents) in order to
          (i) enable it lawfully to enter into, and perform and comply with its
          obligations under, this Deed, (ii) ensure that those obligations are
          valid, legal, binding and enforceable, (iii) permit the creation of
          the Charge and ensure that (subject to all necessary registrations
          thereof being made) the Charge is a valid, legal, binding and
          enforceable first fixed security interest over the Charged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Chargor, and (iv) make this Deed admissible in
          evidence in the courts of the Cayman Islands, Hong Kong and any other
          relevant jurisdiction, have been taken, fulfilled and done;

     (J)  the obligations of the Chargor under this Deed and (subject to all
          necessary registrations thereof being made) the Charge are and will be
          until fully discharged valid, legal, binding and enforceable and the
          Charge constitutes a first fixed security interest over the Charged
          Property ranking in priority to the interests of any liquidator,
          administrator or creditor of the Chargor; and

     (K)  each of the above representations and warranties will be correct and
          complied with in all respects at all times during the continuance of
          the Charge as if repeated then by reference to the then existing
          circumstances.

8.   COVENANTS AND UNDERTAKINGS

8.1  COVENANTS AND UNDERTAKINGS OF THE CHARGOR

     The Chargor covenants and undertakes with the Collateral Agent that, except
     with the consent of the Collateral Agent:

     (A)  it shall not sell, transfer, lend, assign, exchange, dispose of, grant
          any option in respect of or otherwise deal with the whole or any of
          its rights, title and interest in the Charged Property or agree to do
          any of the foregoing other than as



                                        9


          expressly permitted or provided for in the Facility Agreement or
          pursuant to this Deed;

     (B)  other than as provided in the Facility Agreement or pursuant to this
          Deed it shall not, nor shall it attempt to, create, incur or permit to
          subsist any Lien on the Charged Property;

     (C)  it shall at all times give to the Collateral Agent such information as
          the Collateral Agent may reasonably require in respect of the Charged
          Property for the purpose of the discharge of the trusts, powers,
          rights, duties, authorities and discretions vested in it hereunder or
          by operation of law;

     (D)  it shall take all action within its power to procure, maintain in
          effect and comply in all material respects with all the terms and
          conditions of all approvals, authorisations, consents and
          registrations necessary or appropriate for anything provided for on
          its part in this Deed;

     (E)  it shall take all reasonable steps as may be required by the
          Collateral Agent to allow the Collateral Agent to sell or dispose of
          the Charged Property on or after the Charge becomes enforceable;

     (F)  it shall not do or cause or permit to be done, or omit to do anything
          which may in any way adversely prejudice, affect or diminish the value
          of any of the Charged Property;

     (G)  it shall ensure that there are no moneys or liabilities outstanding in
          respect of any of the Charged Property;

     (H)  without prejudice to Clause 8.1(G), it shall punctually pay all calls,
          subscription moneys and other moneys payable on or in respect of any
          of the Charged Property and indemnify and keep indemnified the
          Collateral Agent (and the Collateral Agent's nominees) against any
          cost, liabilities or expenses which it or they may suffer or incur as
          a result of any failure by the Chargor to pay the same;

     (I)  it shall ensure that the Shares, any Further Shares and any shares
          comprised in any Derived Assets are free from any restriction on
          transfer or rights of pre-emption, subject to the articles of
          association of Huawei-3Com Co., Limited;

     (J)  it shall ensure that the Charge will at all times be a legally valid
          and binding first fixed security interest over the Charged Property
          ranking in priority to the interests of any liquidator, administrator
          or creditor of the Chargor; and

     (K)  it shall deliver to the Collateral Agent a copy of every circular,
          notice, report, set of accounts or other document received by the
          Chargor in respect of or in connection with any of the Charged
          Property forthwith upon receipt by the Chargor of such document.



                                       10


8.2  POWER OF COLLATERAL AGENT TO REMEDY FAILURES

     If at any time the Chargor shall fail to comply with or perform any of the
     covenants contained in this Deed or any Credit Document, the Collateral
     Agent shall have the power on behalf of or in the name of the Chargor, but
     shall not be under any obligation, to perform the covenants and to take
     such steps which the Collateral Agent may in its discretion, consider
     appropriate with a view to remedying, or mitigating the consequences of
     such failure but so that the exercise of this power or the failure to
     exercise it shall, in no circumstances, prejudice the other rights of the
     Collateral Agent under this Deed or any Credit Document. The Chargor shall
     on demand reimburse to the Collateral Agent all proper costs, expenses and
     losses incurred or sustained by the Collateral Agent in connection with
     such steps and until such costs, expenses and losses are reimbursed the
     outstanding sums shall carry interest in accordance with section 2.10 of
     the Facility Agreement from the date when payment is due to the date of
     reimbursement and such outstanding sums including any accrued interest
     shall form part of the Secured Indebtedness. No exercise by the Collateral
     Agent of its powers under this Clause 8.2 (Power of Collateral Agent to
     Remedy Failures) shall render the Collateral Agent liable to account as a
     mortgagee in possession.

8.3  ISSUE OF FURTHER SHARES

     It is agreed between the Chargor and the Collateral Agent that the Chargor
     may at any time and from time to time procure the Borrower to issue further
     shares to it, provided that all such shares issued shall constitute Further
     Shares for the purposes of this Deed and shall be subject to the Charge.

9.   DEFAULT PROCEDURE

     The Charge shall become immediately enforceable:

     (A)  automatically upon the occurrence of any Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except with
          respect to Excluded Subsidiaries); and

     (B)  at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          Excluded Subsidiaries).

10.  EFFECTS OF THE CHARGE BECOMING ENFORCEABLE

10.1 EFFECTS

     After the Charge (or the relevant part thereof) shall have become
     enforceable in accordance with Clause 9 (Default Procedure) and without
     prejudice to the powers of the Collateral Agent to appoint a Receiver
     pursuant to Clause 13 (Appointment of Receiver):



                                       11


     (A)  the Collateral Agent shall be entitled to convert the Charge to a
          legal mortgage over the Charged Property by completing the transfer of
          the Charged Property to the Collateral Agent (or its nominee) and to
          have its name (or the name of its nominee) entered onto the relevant
          register of members; and

     (B)  the Chargor's rights or power to deal with the Charged Property
          (whether statutory or otherwise) shall cease and the Collateral Agent
          shall be entitled to deal with, collect in and realise the same in
          such manner as the Collateral Agent thinks fit; and

     (C)  the Collateral Agent shall be entitled to exercise all powers in
          respect of the Charged Property provided in Section 51 of and The
          Fourth Schedule to the Conveyancing and Property Ordinance but without
          the necessity to comply with any restrictions imposed by the
          provisions of the said Section 51 or The Fourth Schedule; and

     (D)  the Collateral Agent may sell, realise or otherwise dispose of, for
          such consideration (whether payable immediately or by instalments) as
          it shall in its absolute discretion think fit (whether by private sale
          or otherwise), the whole or any part of the Charged Property in
          respect of which the security hereby constituted has become
          enforceable and the Collateral Agent may to the extent that it has not
          already done so, take possession of and hold all or any part of the
          Charged Property and accordingly register, or cause to be registered
          all or any of the Charged Property constituting shares in its own name
          or in the name of the Collateral Agent's nominee or assignee or in the
          name of any purchaser thereof and apply any of the Charged Property
          constituting dividends or other distributions in cash as if they were
          proceeds of sale of the Charged Property; and

     (E)  the provisions of paragraph 11 of The Fourth Schedule to the
          Conveyancing and Property Ordinance shall not restrict the exercise by
          the Collateral Agent or any Receiver of its powers hereunder and the
          Charge shall become immediately enforceable and the statutory power of
          sale and other powers of sale and appointing a Receiver shall become
          immediately exercisable without any juridical or other formality or
          any presentment, demand, protest or other notice of any kind on or at
          any time after the Charge becomes enforceable; and

     (F)  without prejudice to the foregoing, the provisions of the Conveyancing
          and Property Ordinance are expressly extended (subject to Clause 10.10
          (Inconsistency and Conflict)) so that the Collateral Agent may in
          addition to any powers granted it by applicable law, upon and from the
          Charge becoming enforceable and upon and subject to the terms and
          conditions of the Facility Agreement) do all such other acts and
          things it may consider necessary or expedient for the realisation or
          preservation of the Charged Property or incidental to the exercise of
          any of the rights conferred on it under or in connection with this
          Deed or the Conveyancing and Property Ordinance and to concur in the
          doing of anything which it has the right to do and to do any such
          thing jointly with any other person.



                                       12


10.2 OBLIGATIONS OF CHARGOR

     After the Charge has become enforceable:-

     (A)  all Dividends shall be paid to and retained by the Collateral Agent,
          and any such moneys which may be received by the Chargor shall,
          pending such payment, be segregated from any other property of the
          Chargor and held in trust for the Collateral Agent; and

     (B)  the Chargor shall procure that all voting and other rights relating to
          the Charged Property are exercised in accordance with such
          instructions (if any) as may from time to time be given to the Chargor
          by the Collateral Agent, and the Chargor shall deliver to the
          Collateral Agent such forms of proxy or other appropriate forms of
          authorisation to enable the Collateral Agent to exercise such voting
          and other rights.

10.3 ENTITLEMENT TO PAY EXPENSES AND OUTGOINGS

     Subject to the order of priority of payments set out in section 2.16(h) of
     the Facility Agreement, the Collateral Agent may pay and discharge the
     expenses incurred (whether by the Collateral Agent, any Receiver or any
     other person) in and about the carrying on and management of any such
     business as contemplated by Clause 10.1 (Effects) or in the exercise of any
     of the powers conferred by Clause 10.1 (Effects) or otherwise in respect of
     the Charged Property and all outgoings which it shall think fit to pay out
     of the profits and income of the Charged Property and the moneys received
     by it in carrying out any business as contemplated by Clause 10.1 (Effects)
     and may apply the residue of the said profits, income and moneys in the
     manner provided by section 2.16(h) of the Facility Agreement provided that
     any such expenses shall, in any event, to the extent not fully paid or
     discharged, form or shall be deemed to form part of the Secured
     Indebtedness.

10.4 NO WAIVER, REMEDIES CUMULATIVE

     No failure or delay on the part of the Collateral Agent or any Receiver to
     exercise any right, power or remedy under this Deed will operate as a
     waiver thereof nor will any single or partial exercise of any right, power
     or remedy preclude any other or further exercise thereof or the exercise of
     any other right, power or remedy.

10.5 WAIVERS TO BE IN WRITING

     Any waiver and any consent by the Collateral Agent under this Deed must be
     in writing, be express and not implied and may be given subject to any
     conditions which the Collateral Agent considers fit. Any waiver or consent
     shall be effective only in the instance and for the purpose for which it is
     given.



                                       13


10.6 NO OBLIGATION TO INSURE

     Notwithstanding any provisions to the contrary, the Collateral Agent shall
     not be under any obligation to insure any of the Charged Property or the
     title deeds or other evidence in respect thereof and shall not be
     responsible for any loss which may be suffered as a result of the lack of
     or inadequacy of any such insurance.

10.7 NO RESPONSIBILITY FOR LOSSES

     The Collateral Agent shall not be responsible for any loss or diminution in
     the value occasioned to the Charged Property by any act or omission of the
     Chargor or any prior ranking encumbrancer or any other person.

10.8 NO RESPONSIBILITY FOR TAX

     The Collateral Agent shall have no responsibility whatsoever to any person
     as regards any deficiency which might arise because the Collateral Agent is
     subject to any tax, duties or levies in respect of the Charged Property or
     any part thereof on any income therefrom or any proceeds thereof.

10.9 NO LIABILITY

     The Collateral Agent shall not be liable for any failure, omission or
     defect in perfecting the Charge or any security created by the Facility
     Agreement or any of the Credit Documents.

10.10 INCONSISTENCY AND CONFLICT

     To the maximum extent permitted by applicable law, where any inconsistency
     or conflict exists between the provisions of this Deed and the provisions
     of any applicable law (including without limitation the Conveyancing and
     Property Ordinance and the Trustee Ordinance (Chapter 29 of the Laws of
     Hong Kong)), the provisions of this Deed shall prevail and such
     inconsistent or conflicting provisions shall be deemed to be expressly
     negated or modified hereby provided that none of the foregoing shall be
     construed as a limitation on the powers of any Receiver.

10.11 NO EXEMPTION

     Nothing in this Deed shall exempt the Collateral Agent from or indemnify it
     against any liability which would by rule of law or otherwise attach to it
     in respect of any act of gross negligence or wilful default which it may
     have committed in relation to its duties and/or discretions under this
     Deed.

10.12 SUSPENSE ACCOUNT(S)

     All monies received, recovered or realised by the Collateral Agent or a
     Receiver under this Deed (including the proceeds of any conversion of
     currency) after the security created hereunder has become enforceable,
     except where such monies together with



                                       14


     all other monies received, recovered or realised by the Collateral Agent or
     any Receiver under this Deed are sufficient to satisfy and discharge the
     Secured Indebtedness in full, may in the discretion of the Collateral Agent
     or the Receiver (provided that such action has first been approved by the
     Collateral Agent) be credited to any suspense or impersonal account in the
     name of the Collateral Agent at Industrial and Commercial Bank of China and
     may be held in such account for so long as the Collateral Agent may think
     fit (with interest accruing thereon at such market rate, if any, as the
     Collateral Agent may deem fit) pending their application from time to time
     (as the Collateral Agent shall be entitled to do in its discretion) in or
     towards satisfaction of the Secured Indebtedness in accordance with the
     terms of this Deed. Save as provided above, no party shall be entitled to
     withdraw any amount at any time standing to the credit of any such suspense
     or impersonal account.

10.13 NEW ACCOUNT

     At any time following (a) the Collateral Agent receiving notice (either
     actual or constructive) of any subsequent Charge affecting the Charged
     Property or (b) the Collateral Agent receives notice of any assignment or
     disposition affecting all or any part of the Charged Property or any
     interest therein to which the Collateral Agent has not given its approval
     or (c) the commencement of the insolvency, administration, reorganisation
     (other than as part of a solvent reconstruction or amalgamation the terms
     of which have been approved in writing by the Collateral Agent),
     liquidation or dissolution of, or any analogous proceeding in respect of,
     of the Chargor, the Collateral Agent may open a new account in the name of
     the Chargor (whether or not it permits any existing account to continue).
     If the Collateral Agent does not open such a new account, it shall
     nevertheless be treated as if it had done so at the time when the notice
     was received or was deemed to have been received or, as the case may be,
     the insolvency, administration, reorganisation, liquidation, dissolution or
     other proceeding commenced. Thereafter, all payments made by the Chargor to
     the Collateral Agent or received by the Collateral Agent for the account of
     the Chargor shall be credited or treated as having been credited to the new
     account and shall not operate to reduce the amount secured by this deed at
     the time when the Collateral Agent received or was deemed to have received
     such notice or, as the case may be, the insolvency, administration,
     reorganisation, liquidation, dissolution or other proceeding commenced.

11.  PRESERVATION OF RIGHTS

11.1 SECURITY ADDITIONAL

     The Charge and the rights given to the Collateral Agent under this Deed
     shall be in addition to and shall be independent of every guarantee,
     indemnity or other security which the Collateral Agent may at any time hold
     for the Secured Indebtedness and it is hereby declared that no prior
     security held by the Collateral Agent over the whole or any part of the
     Charged Property shall merge in the Charge.



                                       15


11.2 SECURITY CONTINUING

     The Charge shall be a continuing security notwithstanding the winding-up or
     dissolution of the Chargor or any partial payment, settlement of account or
     other matter whatsoever and in particular (but without prejudice to the
     generality of the foregoing) shall not be considered satisfied by any
     intermediate repayment in satisfaction of all or any of the Secured
     Indebtedness and shall continue in full force and effect until the Secured
     Indebtedness has been discharged and satisfied in full.

11.3 INDULGENCE AND RELEASE

     The Collateral Agent may (with the prior written consent of the Requisite
     Lenders) in its discretion grant time or other indulgence, or make any
     other arrangement variation or release with, the Chargor or any other
     person (whether or not party hereto and whether or not jointly liable with
     the Chargor) in respect of the Secured Indebtedness or of any other
     security therefor or guarantee in respect thereof without prejudice either
     to the Charge or to the liability of the Chargor for the Secured
     Indebtedness.

11.4 RIGHTS CUMULATIVE

     The rights, powers and remedies provided in this Deed are cumulative and
     are not, nor are they to be construed as, exclusive of any rights, power or
     remedies provided by law.

11.5 SECURITY NOT AFFECTED

     Neither the Charge nor any of the rights, powers and remedies conferred
     upon the Collateral Agent or any Receiver (or their respective delegates)
     by this Deed or by law nor the liability of the Chargor hereunder shall be
     discharged, impaired or otherwise affected by:

     (A)  any time, waiver or consent granted, or any other indulgence or
          concession granted, by the Collateral Agent or any other Secured Party
          to the Chargor or any other person; or

     (B)  the taking, holding, variation, compromise, exchange, renewal,
          realisation or release by the Collateral Agent or any other Secured
          Party or any other person of any rights under or in connection with a
          Credit Document, any other security, guarantee, indemnity or other
          document; or

     (C)  the refusal or failure to take up, hold, realise, perfect or enforce
          by the Collateral Agent or any other Secured Party or any other person
          any rights under or in connection with a Credit Document, any other
          security, guarantee, indemnity or other document (including, without
          limitation, any failure to comply with any formality or other
          requirement or any failure to realise the full value of any security);
          or



                                       16


     (D)  the existence of any claim, set-off or other right which the Chargor
          may have at any time against the Collateral Agent or any other Secured
          Party or any other person; or

     (E)  the making or absence of any demand for payment or discharge of any
          Secured Indebtedness on the Chargor or any other person, whether by
          the Collateral Agent or any other Secured Party or any other person;
          or

     (F)  any arrangement, compromise or settlement entered into by the
          Collateral Agent or any other Secured Party with the Chargor or any
          other person; or

     (G)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of the Chargor under a
          Credit Document resulting from any insolvency, liquidation or
          dissolution proceedings or from any law, regulation or order; or

     (H)  any variation, amendment, waiver, release, novation, supplement,
          extension (whether of maturity or otherwise) or restatement (in each
          case however fundamental and of whatsoever nature) or replacement of
          any Credit Document, or any other security, guarantee, indemnity or
          other document; or

     (I)  any amendment, variation, novation, supplementation or replacement of
          any agreement between the Secured Parties; or

     (J)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Credit Document or any other security, guarantee,
          indemnity or other document; or

     (K)  any of the obligations of the Chargor under any of Credit Document or
          under any other Lien taken in respect of the obligations of the
          Chargor under any Credit Document being or becoming illegal, invalid,
          unenforceable, ineffective or impaired in any respect; or

     (L)  any amalgamation, merger or reconstruction that may be effected by the
          Collateral Agent with any other person or any sale or transfer of the
          whole or any part of the undertaking, property and assets of the
          Collateral Agent to any other person; or

     (M)  any amalgamation, merger or reconstruction (other than as part of a
          solvent reconstruction or amalgamation the terms of which have been
          approved by the Collateral Agent), reorganisation, administration,
          administrative or other receivership or dissolution or liquidation
          entry into a voluntary arrangement of the Chargor or any other person;
          or

     (N)  the insolvency, bankruptcy, winding-up or dissolution of the Chargor
          or any change in its status, function, control or ownership; or

     (O)  any change in the constitution of the Chargor; or



                                       17


     (P)  any incapacity, lack of power, authority or legal personality of the
          Chargor to enter into or perform any of its obligations under any
          Credit Document to which it is a party or any irregularity in the
          exercise thereof or any lack of authority by any person purporting to
          act on their behalf; or

     (Q)  any exercise, omission to exercise, compromise, renewal or release of
          any rights against the Chargor; or

     (R)  any invalidity or irregularity in the execution of this Deed or any
          other Credit Document; or

     (S)  any other act (save for any valid act of release and discharge granted
          by the Collateral Agent), event or omission which, but for this Clause
          11.5 (Security Not Affected) might operate to discharge, impair or
          otherwise affect the Charge or the liability of the Chargor for the
          Secured Indebtedness or any of the rights, powers or remedies
          conferred upon the Collateral Agent or any Receiver (or their
          respective delegates) by this Deed or by law or the liability of the
          Chargor hereunder.

     Without prejudice to the generality of this Clause 11.5 (Security Not
     Affected), the Chargor expressly confirms that it intends that its
     liability for the Secured Indebtedness and its obligations under this Deed
     shall extend from time to time to any variation, increase, extension,
     addition or replacement (however fundamental) of or to any of the Credit
     Documents and/or any facility or amount made available under any of the
     Credit Documents.

11.6 NO PREJUDICE TO OTHER SECURITY

     Nothing contained in this Deed is intended to, or shall operate so as to,
     prejudice or affect any guarantee, indemnity or other security of any kind
     whatsoever which the Collateral Agent may have for the Secured Indebtedness
     or any right, remedy or privilege of the Collateral Agent thereunder.

11.7 SCOPE OF RELEASE

     Any receipt, release or discharge of the Charge or of any liability arising
     under this Deed may be given by the Collateral Agent and, unless expressly
     stated otherwise, shall not release or discharge the Chargor from any
     liability for the same or any other monies which may exist independently of
     this Deed. Where such receipt, release or discharge relates only to part of
     the Charged Property such receipt, release or discharge shall not prejudice
     or affect the Charge in relation to the remainder of the Charged Property,
     unless expressly stated otherwise.



                                       18


11.8 FURTHER ADVANCES

     The security created by this Deed is intended to secure any further
     advances made by the Lenders pursuant to the terms of the Facility
     Agreement.

11.9 DISCHARGE CONDITIONAL

     Any settlement, reassignment, release or discharge between the Chargor on
     the one part and the Collateral Agent or any Receiver (or their respective
     delegates) on the other (the Collateral Agent, any Receiver and their
     respective delegates being referred to in this Clause 11.9 (Discharge
     Conditional) as the "TRANSACTION PERSON(S)") shall be conditional upon no
     security or payment by any person in respect of the Secured Indebtedness
     being avoided or reduced by virtue of any provisions of law or enactments
     (including but not limited to those relating to bankruptcy, insolvency or
     liquidation) for the time being in force and, in the event of any such
     security or payment being so avoided or reduced, the Transaction Person(s)
     shall be entitled, to recover the value or amount of such payment and the
     Charge subsequently as if such settlement or discharge had not occurred but
     so that nothing herein shall confer on any Transaction Persons the right to
     claim under this Clause 11.9 (Discharge Conditional) for more than the
     Collateral Agent would be entitled to claim in aggregate hereunder in
     respect of such avoided or reduced security or payment provided that any
     such settlement, reassignment, release or discharge shall become
     unconditional upon the expiry of one month after the maximum period within
     which such settlement, reassignment, release or discharge can be avoided or
     reduced.

11.10 NO CONDITIONS TO EXERCISE OF RIGHTS

     Neither the Collateral Agent nor any Receiver nor any of their respective
     delegates shall be obliged before exercising any of the rights, powers or
     remedies conferred upon them by this Deed or by law:

     (A)  to take any action or obtain judgment in any court against the
          Chargor;

     (B)  to make or file any claim or proof in a winding-up or dissolution of
          the Chargor; or

     (C)  to enforce or seek to enforce the recovery of any moneys and
          liabilities hereby secured or any other security taken in respect of
          any of the obligations of the Chargor under any of the Credit
          Documents.

12.  PROTECTION OF PURCHASERS

     No purchaser or other person dealing with the Collateral Agent or its
     delegate or any Receiver appointed hereunder shall be bound to see or
     inquire whether the right of the Collateral Agent or such Receiver to
     exercise any of its or his powers has arisen or become exercisable or be
     concerned to see whether any such delegation by the Collateral Agent shall
     have lapsed for any reason or been revoked. Any sale or other dealing by
     the Collateral Agent or its delegate or any Receiver of or with the Charged



                                       19


     Property and any part thereof shall be deemed to be within the power of the
     person effecting the same and the receipt by such person of the purchase or
     other moneys connected therewith shall effectively discharge the purchaser
     or other party to such dealing who shall not be concerned with the manner
     of application of the proceeds of sale or other dealing or be in any way
     answerable therefor.

13.  APPOINTMENT OF RECEIVER

13.1 APPOINTMENT AND REMOVAL

     The Collateral Agent may if requested by the Chargor or at any time after
     the Charge (or the relevant part thereof) shall have become enforceable in
     accordance with Clause 9 (Default Procedure), appoint one or more persons
     to be a Receiver or Receivers of the whole or any part of the Charged
     Property. The Collateral Agent may:

     (A)  remove any Receiver previously appointed hereunder; and

     (B)  appoint another person or other persons as Receiver or Receivers,
          either in the place of a Receiver so removed or who has otherwise
          ceased to act or to act jointly with a Receiver or Receivers
          previously appointed hereunder.

     If at any time and by virtue of any such appointment(s) any two or more
     persons shall hold office as Receivers of the same assets or income, each
     one of such Receivers shall be entitled (unless the contrary shall be
     stated in any of the deed(s) or other instrument(s) appointing them) to
     exercise all the powers and discretions hereby conferred on Receivers
     individually and to the exclusion of the other or others of them.

13.2 POWERS OF RECEIVERS

     Every Receiver for the time being holding office by virtue of an
     appointment made by the Collateral Agent hereunder shall (subject to any
     limitations or restrictions expressed in the deed or other instrument
     appointing him but notwithstanding any winding-up or dissolution of the
     Chargor) have, in relation to the Charged Property, or as the case may be,
     that part of the Charged Property in respect of which he was appointed:

     (A)  all the powers (as varied and extended by the provisions hereof)
          conferred by the Conveyancing and Property Ordinance or otherwise by
          law on mortgagees (whether or not in possession) and receivers
          appointed under the Conveyancing and Property Ordinance; and

     (B)  the power in the name or on behalf and at the cost of the Chargor to
          exercise all the powers and rights of an absolute owner of the Charged
          Property or the relevant part thereof and do or omit to do anything
          which the Chargor could do.



                                       20


13.3 ADDITIONAL POWERS OF RECEIVERS

     In addition and without prejudice to the generality of the foregoing every
     Receiver shall (notwithstanding any winding-up or dissolution of the
     Chargor) have the powers specified in Clause 10.1 (Effects).

13.4 RECEIVER TO BE AGENT OF THE CHARGOR

     Every Receiver so appointed shall be deemed at all times and for all
     purposes to be the agent of the Chargor and the Chargor shall be solely
     responsible, jointly and severally, for the acts and defaults of such
     Receiver (save in the case of the fraud, negligence, wilful default, breach
     of duty or breach of trust in relation to duties by such Receiver) and for
     payment of such Receiver's remuneration in respect thereof.

13.5 REMUNERATION OF RECEIVER

     Every Receiver shall be entitled to remuneration for his services at a
     reasonable rate to be fixed by agreement between him and the Collateral
     Agent (or, failing such agreement, to be fixed by the Collateral Agent)
     appropriate to the work and responsibilities involved upon the basis of
     charging from time to time adopted in accordance with his current practice
     or the current practice of his firm.

13.6 MONIES ACTUALLY PAID BY RECEIVER

     Only monies actually paid by the Receiver to the Collateral Agent in
     satisfaction of the Secured Indebtedness shall be capable of being applied
     by the Collateral Agent in satisfaction thereof. The Receiver shall pay
     over to the Collateral Agent any monies realised by the Receiver as a
     result of the enforcement of the Charge (other than monies paid into a
     suspense account by such Receiver in accordance with Clause 10.12 (Suspense
     Account(s)).

13.7 LIMITATION OF LIABILITY

     (A)  Neither the Collateral Agent nor the Receiver nor any attorney or
          agent of such party shall be liable to any person in respect of any
          loss or damage whatsoever which arises out of the realisation of the
          Charged Property or any part thereof or from any act, default or
          omission in relation to the Charge or from any exercise or
          non-exercise, or the attempted or purported exercise of, or the
          failure to exercise any of their respective powers, authorities or
          discretions conferred upon them in relation to the Charge or any part
          of it, unless such loss or damage is caused by its or his negligence,
          wilful default, breach of duty, breach of trust or fraud.

     (B)  Without prejudice to the generality of Sub-clause (A), entry into
          possession of the Charged Property shall not render the Collateral
          Agent or the Receiver liable to account as mortgagee in possession or
          liable for any loss on realisation or for any default or omission for
          which a mortgagee in possession might be liable unless such loss or
          damage is caused by its negligence, wilful default,



                                       21


          breach of duty, breach of trust or fraud and, if and whenever the
          Collateral Agent or the Receiver enters into possession of the Charged
          Property, it shall be entitled at any time to go out of such
          possession.

13.8 POWER OF APPOINTMENT ADDITIONAL

     The foregoing powers of appointment of a Receiver shall be in addition to
     and not to the prejudice of all statutory and other powers of the
     Collateral Agent under the Conveyancing and Property Ordinance (and so that
     the statutory power of sale shall be exercisable without regard to
     paragraph 11 of the Fourth Schedule to the said Ordinance) or otherwise and
     so that such powers shall be and remain exercisable by the Collateral Agent
     in respect of any part of the Charged Property in respect of which no
     Receiver has been appointed and notwithstanding that an appointment under
     the provisions of this Clause 13 (Appointment of Receiver) shall have
     subsisted and been withdrawn in respect of that property or shall be
     subsisting in respect of any other part of the Charged Property.

14.  INDEMNITY

14.1 INDEMNITY

     Without prejudice to any right at law given to trustees, the Chargor
     further covenants with and undertakes to each of the Collateral Agent and
     any Receiver or Receivers fully to indemnify and keep indemnified it from
     and against all liabilities, losses, damages, costs and expenses (including
     legal costs and expenses), charges, actions, proceedings, claims and
     demands or any other obligation or liability (including, without
     limitation, in respect of taxes, duties, levies, imposts and other charges
     any indemnity and other amounts which the Collateral Agent is or would
     become obliged to pay, upon payment by the Chargor, under such indemnity)
     which it may properly incur (except, having regard to the provisions of any
     Credit Document, insofar as they are incurred because of fraud, negligence,
     wilful default or breach of trust on the part of it whether before or after
     the Charge becomes enforceable):

     (A)  in consequence of anything done or purported to be done by the
          Collateral Agent or any Receiver in relation to the Charged Property
          or under this Deed or any Credit Document as a result of or in
          connection with any failure by the Chargor to comply with its
          obligations thereunder to the Collateral Agent or any Receiver; or

     (B)  in consequence of any payment in respect of the Secured Indebtedness
          (whether made by the Chargor or a third party) being impeached or
          declared void for any reason whatsoever; or

     (C)  in consequence of the breach or non-performance by the Chargor of any
          of their respective warranties, representations, covenants or
          undertakings herein contained or otherwise relating to all or any part
          of the Charged Property; or



                                       22


     (D)  in connection with the realisation of the Charged Property (including
          the costs of any proceedings in relation to this Deed or to the
          Secured Indebtedness).

14.2 INTEREST

     The amounts payable to the Collateral Agent or the Receiver under Clauses
     14.1 (Indemnity) and 17 (Stamp Duty and Taxes) shall carry interest in
     accordance with section 2.10 of the Facility Agreement from the date on
     which they were paid or incurred by the Collateral Agent or the Receiver
     (as the case may be) to the date of actual payment to the Collateral Agent
     or, as the case may be, the Receiver under the aforementioned clauses as
     well after as before any judgment and such amounts and interest may be
     debited by the Collateral Agent to any account of the Chargor, but shall,
     in any event (to the extent not fully paid or discharged), form part of the
     Secured Indebtedness and accordingly be secured on the Charged Property
     under the Charge.

15.  POWER OF ATTORNEY

15.1 APPOINTMENT AND POWERS

     The Chargor hereby irrevocably appoints the following (each an "ATTORNEY"
     and collectively the "ATTORNEYS", and acting solely or jointly with the
     other Attorneys), namely:

     (A)  the Collateral Agent;

     (B)  each and every person to whom the Collateral Agent shall from time to
          time have duly delegated the exercise of the power of attorney
          conferred by this Clause 15.1 (Appointment and Powers); and

     (C)  any Receiver appointed hereunder and for the time being holding
          office,

     to be its attorney or attorneys and in its name and otherwise on its behalf
     and as its act and deed to sign, seal, execute, deliver, perfect and do all
     deeds, instruments, acts and things which may be required (or which the
     Collateral Agent, any person falling within Sub-clause (B) or any Receiver
     appointed hereunder shall reasonably consider requisite) for carrying out
     any obligation imposed on the Chargor, as the case may be, by or pursuant
     to this Deed (including but not limited to the obligations of the Chargor
     under Clauses 4 (Covenant to Deposit and Further Assurance) and 8
     (Covenants and Undertakings), for carrying out any sale, lease or other
     dealing by the Collateral Agent or any such Receiver into effect, for
     conveying or transferring any legal estate or other interest in the Charged
     Property, for getting in the Charged Property, and generally for enabling
     the Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver to exercise the respective powers conferred on them by or pursuant
     to this Deed or by law provided that the power contained in this Clause
     15.1 (Appointment and Powers) shall not be exercisable unless and until the
     Charge shall have become enforceable. The exercise of such power by the
     Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver shall not put any person dealing with it upon any enquiry as to
     whether an Event of Default shall have occurred. Each of the Collateral



                                       23


     Agent, any person falling within Sub-clause (B) and any Receiver shall have
     full power to delegate the power conferred on it by Clause 15.1
     (Appointment and Powers), but no such delegation shall preclude the
     subsequent exercise of such power by the Collateral Agent or any person
     falling within Sub-clause (B) or any Receiver (as the case may be) itself
     or preclude the Collateral Agent or any person falling within Sub-clause
     (B) or any Receiver (as the case may be) from making a subsequent
     delegation thereof to some other person; any such delegation may be revoked
     by the Collateral Agent or any person falling within Sub-clause (B) or any
     Receiver (as the case may be) at any time.

15.2 RATIFICATION

     The Chargor shall ratify and confirm all transactions lawfully and properly
     entered into by the Collateral Agent or any Receiver or delegate of the
     Collateral Agent in the exercise of the Collateral Agent's or such
     Receiver's respective powers and all transactions lawfully and properly
     entered into, documents executed and things done by the Collateral Agent or
     such Receiver or delegate by virtue of the power of attorney given by
     Clause 15.1 (Appointment and Powers).

15.3 ACKNOWLEDGEMENT OF CONSIDERATION

     The power of attorney hereby granted is as regards the Collateral Agent,
     its delegates and any such Receiver (and as the Chargor hereby
     acknowledges) granted irrevocably and severally, for value and for security
     as part of the Charge to secure the several proprietary interests of and
     the performance of obligations owed to the respective donees within the
     meaning of the Powers of Attorney Ordinance.

16.  SET-OFF AND CURRENCY

16.1 CURRENCY OF ACCOUNT

     (A)  Except where specifically provided otherwise, US dollars are the
          currency of account and payment for each and every sum at any time due
          to the Collateral Agent hereunder provided that each payment in
          respect of costs and expenses shall be made in Hong Kong dollars if
          incurred in Hong Kong dollars.

     (B)  If any sum due from the Chargor under this Deed or any order or
          judgment given or made in relation hereto has to be converted from the
          currency (the "FIRST CURRENCY") in which the same is payable hereunder
          or under such order or judgment into another currency (the "SECOND
          CURRENCY") for the purpose of (a) making or filing a claim or proof
          against the Chargor, (b) obtaining an order or judgment in any court
          or other tribunal or (c) enforcing any order or judgment given or made
          in relation hereto then:

          (i)  the Chargor shall indemnify and hold harmless the Collateral
               Agent from and against any loss suffered except to the extent
               that such loss is suffered as a result of or in connection with
               the Collateral Agent's own fraud, negligence, wilful default,
               breach of duty or breach of trust; and



                                       24


          (ii) the Collateral Agent shall account to the Chargor for the amount
               by which any sum realised by it exceeds the aggregate amount of
               all sums owing to it by the Chargor at the time at which such
               profit is realised provided that the Collateral Agent shall only
               be required to make any payment to the Chargor in relation
               thereto if at such time all the payment obligations of the
               Chargor hereunder to the Collateral Agent are satisfied,

          in each case where such loss or excess arises as a result of any
          discrepancy between (1) the rate of exchange used for such purpose to
          convert the sum in question from the first currency into the second
          currency and (2) the rate or rates of exchange at which the Collateral
          Agent may in the ordinary course of business purchase the first
          currency with the second currency upon receipt of a sum paid to it in
          satisfaction, in whole or in part, of any such order, judgment, claim
          or proof.

16.2 SET-OFF

     The Chargor waives, and (where incapable of waiver) agrees not to exercise
     (unless required to do so by law), any right of set-off or netting, whether
     conferred by agreement or law, which it may have against the Collateral
     Agent so that it does not reduce any amount payable by it to the Collateral
     Agent under this Deed.

16.3 CURRENCY CONVERSION

     For the purpose of the satisfaction of the Secured Indebtedness or for the
     purpose of crediting any monies to the Account or any suspense account
     pursuant to Clause 10.12 (Suspense Account(s)) or making any application
     therefrom or for any other purpose in connection with this Deed, the
     Collateral Agent may (unless otherwise required by law) convert any monies
     received, recovered or realised or subject to application by the Collateral
     Agent under this Deed or any monies to be credited to any such account
     (including the proceeds of any previous conversion under this Clause 16
     (Set-off and Currency)) from their existing currency of denomination into
     such other currency of denomination as the Collateral Agent may reasonably
     think fit and any such conversion shall be effected at such rate or rates
     of exchange as may be agreed by the Collateral Agent in consultation with
     the Chargor as being relevant and any rate, method and date so agreed shall
     be binding on the Chargor and any costs, expenses or commissions incurred
     in effecting any such conversion shall be deducted from the proceeds of any
     such conversion.

17.  STAMP DUTY AND TAXES

     The Chargor shall pay all stamp duties and similar fees, filing and
     registration fees and other transaction taxes required in relation to or
     for the purpose of procuring the execution, validity and enforceability of
     this Deed and the Charge and shall indemnify the Collateral Agent and each
     Receiver appointed hereunder against any liabilities, costs, claims and
     expenses resulting from any failure to pay or any delay in paying the same
     on a full indemnity basis.



                                       25


18.  AMENDMENTS

     This Deed may not be amended, modified or waived in any respect whatsoever,
     without the prior written consent of the Collateral Agent given with
     express reference to this Clause 18 (Amendments) and expressly stated to be
     intended to operate as the Collateral Agent's consent to such amendment,
     modification or waiver on behalf of the Requisite Lenders.

19.  APPLICATION TO COURT

     The Collateral Agent may, at any time after the Charge has become
     enforceable, apply to the court for an order that the terms of this Deed be
     carried into execution under the direction of the Court and for the
     appointment of a Receiver of the Charged Property or any part thereof and
     for any other order in relation to the administration of the terms of this
     Deed as the Collateral Agent shall deem fit and it may assent to or approve
     any application to the Court made at the instance of the Collateral Agent
     or on its behalf and the Collateral Agent shall be indemnified by the
     Chargor against all costs, charges and expenses properly incurred by it in
     relation to any such application or proceedings.

20.  PARTIAL INVALIDITY

     Every provision contained in this Deed shall be severable and distinct from
     every other such provision and if at any time any provision hereof is or
     becomes illegal, invalid or unenforceable in any respect under the law of
     any jurisdiction, neither the legality, validity or enforceability of the
     remaining provisions hereof nor the legality, validity or enforceability of
     such provision under the law of any other jurisdiction shall in any way be
     affected or impaired thereby.

21.  NOTICES

21.1 COMMUNICATIONS IN WRITING

     Each communication to be made hereunder shall be made in writing and,
     unless otherwise stated, shall be made by facsimile or letter.

21.2 ADDRESSES

     Any communication or document to be made or delivered by one person to
     another pursuant to this Deed shall (unless that other person has by 15
     days' written notice to the one specified another address department,
     officer or person as the case may be) be made or delivered to that other
     person at the address identified with its signature below and shall be
     deemed to have been made or delivered (in the case of any communication
     made by letter) when left at that address during normal business hours on a
     Business Day (or on the next Business Day if not left during normal
     business hours on a Business Day) or (as the case may be) 5 days (in the
     case of local post) and 10 days (in the case of overseas post) after being
     deposited in the post postage prepaid in an envelope addressed to it at
     that address marked for the attention of any specified department, officer
     or person or (in the case of any communication made by facsimile



                                       26


     transmission) when sent to the correct facsimile number of the addressee
     identified with its signature below and received in whole and in legible
     form by such addressee provided that any communication or document to be
     made or delivered by the Chargor or the Collateral Agent shall be effective
     only when received by the Chargor or the Collateral Agent, as appropriate,
     and then only if the same is expressly marked for the attention of the
     department, officer or person identified below with the signature of the
     relevant addressee (or such other department, officer or person as the
     relevant addressee shall from time to time and in each case by not less
     than 3 days' prior notice in writing to the parties hereto have specified
     for this purpose).

21.3 ENGLISH LANGUAGE

     Each communication and document made or delivered by one party to another
     pursuant to this Deed shall be in the English language or accompanied by a
     translation thereof into English certified (by an officer of the person
     making or delivering the same) as being a true and accurate translation
     thereof.

22.  ASSIGNMENT

     The Collateral Agent may assign its rights and obligations under this Deed
     to any successor under the Facility Agreement in accordance with section
     9.7 of the Facility Agreement.

23.  COSTS AND EXPENSES

     The Chargor further covenants with and undertakes to the Collateral Agent
     and any Receiver appointed by the Collateral Agent hereunder or by law
     (including more than one such receiver and any substitute receiver) to
     reimburse or pay to the Collateral Agent or such Receiver (on the basis of
     full indemnity) the amount of all proper costs, charges, liabilities and
     expenses including costs, charges or expenses incurred by the Collateral
     Agent or such Receiver or any attorney, manager, agent or delegate in
     connection with:

     (A)  the negotiation, preparation, registration, perfection, preservation
          or enforcement of this Deed and any other document relating thereto;
          and

     (B)  the proper exercise or the attempted proper exercise by or on behalf
          of the Collateral Agent or such Receiver of any of the powers of the
          Collateral Agent or such Receiver or any other action properly taken
          by or on behalf of the Collateral Agent with a view to or in
          connection with the enforcement of any obligations of the Chargor
          under any of the Credit Documents or the recovery by the Collateral
          Agent or any such Receiver from the Chargor of the Secured
          Indebtedness then due and payable.

24.  CERTIFICATES AND DETERMINATIONS

     For all purposes, including any Proceedings (as defined in Clause 26.3
     (Non-Exclusive Jurisdiction):



                                       27


     (a)  a determination by the Collateral Agent; or

     (b)  a copy of a certificate signed by an officer of the Collateral Agent,

     of the amount of any indebtedness comprised in the Secured Indebtedness for
     the time being or at any time shall, in the absence of manifest error, be
     conclusive evidence against the Chargor as to the amount thereof.

25.  GOVERNING LAW

     This Deed is governed by Hong Kong law.

26.  JURISDICTION

26.1 HONG KONG COURTS

     The courts of Hong Kong have non-exclusive jurisdiction to settle any
     dispute (a "DISPUTE") arising out of or in connection with this Deed
     (including a dispute regarding the existence, validity or termination of
     this Deed or the consequences of its nullity).

26.2 CONVENIENT FORUM

     The parties agree that the courts of Hong Kong are the most appropriate and
     convenient courts to settle Disputes between them and, accordingly, that
     they will not argue to the contrary.

26.3 NON-EXCLUSIVE JURISDICTION

     This Clause 26 (Jurisdiction) is for the benefit of all parties hereto
     other than the Chargor. As a result and notwithstanding Clause 26.1 (Hong
     Kong Courts), it does not prevent any party hereto other than the Chargor
     from taking proceedings relating to a Dispute ("PROCEEDINGS") in any other
     courts with jurisdiction. To the extent allowed by law, the parties hereto
     other than the Chargor may take concurrent Proceedings in any number of
     jurisdictions.

26.4 AGENT FOR SERVICE

     (A)  The Chargor irrevocably appoints Huawei-3Com Co., Limited of Suites
          3013-3014, 30/F One International Finance Centre, 1 Harbour View
          Street, Central, Hong Kong to be its agent for the receipt of Service
          Documents. It agrees that any Service Document may be effectively
          served on it in connection with Proceedings in Hong Kong by service on
          its agent effected in any manner permitted by applicable law.

     (B)  If the agent at any time ceases for any reason to act as such, the
          Chargor shall appoint a replacement agent having an address for
          service in Hong Kong and shall notify the Collateral Agent of the name
          and address of the replacement agent. Failing such appointment and
          notification, the Collateral Agent shall be



                                       28


          entitled by notice to the Chargor to appoint a replacement agent to
          act on behalf of the Chargor. The provisions of this clause applying
          to service on an agent apply equally to service on a replacement
          agent.

     (C)  "SERVICE DOCUMENT" means a claim form, application notice, order,
          judgment or other document relating to any Proceedings.

27.  EXECUTION AND COUNTERPARTS

     This Deed 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 when taken together
     shall constitute one and the same Deed.

IN WITNESS WHEREOF the parties hereto have caused this Deed to be duly executed
the day and year first above written.



                                       29


                                   SCHEDULE 1

                            PARTICULARS OF THE SHARES



CHARGOR             NUMBER AND CLASS OF SHARES
- -------             --------------------------
                 
3COM TECHNOLOGIES   9,705,000 ORDINARY SHARES


Shareholder of and the number and class of shares in Huawei-3Com Co., Limited



                                 EXECUTION PAGES

THE CHARGOR

Executed as a Deed by                 )   SEAL AFFIXED
for and on behalf of                  )
3COM TECHNOLOGIES                     )   NEAL D. GOLDMAN
in the presence of: JEFFREY M. HELD   )

Address: PO Box 309 GT, Ugland House, South Church Street, George Town, Grand
         Cayman, Cayman Islands

Facsimile Number: ____________________________

Attention: ___________________________________



                                 EXECUTION PAGES

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal   )
of INDUSTRIAL AND COMMERCIAL                     )   SEAL AFFIXED
BANK OF CHINA (ASIA) LIMITED                     )
in the presence of:                              )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Secretary

Address: 33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: 2869 8221

Attention: ____________________________



                                                                  CONFORMED COPY

                               Dated 29 March 2007

                                3COM TECHNOLOGIES
                                   as Chargor

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED
                               as Collateral Agent

                                   ----------

                           H3C EQUITABLE SHARE CHARGE

                                   ----------

                                Slaughter and May
                               47/F, Jardine House
                               One Connaught Place
                               Central, Hong Kong
                                   (RMGG/AHLL)
                                   HK070540109



                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.  INTERPRETATION AND DEFINITIONS                                             1
2.  COVENANT TO PAY AND NATURE OF SECURED INDEBTEDNESS                         3
3.  CHARGE                                                                     4
4.  COVENANT TO DEPOSIT AND FURTHER ASSURANCES                                 4
5.  REDEMPTION                                                                 6
6.  THE SHARES                                                                 7
7.  REPRESENTATIONS AND WARRANTIES                                             7
8.  COVENANTS AND UNDERTAKINGS                                                 8
9.  DEFAULT PROCEDURE                                                         10
10. EFFECTS OF THE CHARGE BECOMING ENFORCEABLE                                10
11. PRESERVATION OF RIGHTS                                                    14
12. PROTECTION OF PURCHASERS                                                  18
13. APPOINTMENT OF RECEIVER                                                   19
14. INDEMNITY                                                                 21
15. POWER OF ATTORNEY                                                         22
16. SET-OFF AND CURRENCY                                                      23
17. STAMP DUTY AND TAXES                                                      24
18. AMENDMENTS                                                                25
19. APPLICATION TO COURT                                                      25
20. PARTIAL INVALIDITY                                                        25
21. NOTICES                                                                   25
22. ASSIGNMENT                                                                26
23. COSTS AND EXPENSES                                                        26
24. CERTIFICATES AND DETERMINATIONS                                           26
25. GOVERNING LAW                                                             27
26. JURISDICTION                                                              27
27. EXECUTION AND COUNTERPARTS                                                28
SCHEDULE 1                                                                    29
Particulars of the Shares                                                     29

EX-10.59

                                        1


                                                                   Exhibit 10.59

                                                                  CONFORMED COPY

This DEED OF CHARGE (this "DEED") is made on the 3rd day of April 2007


BY:

HUAWEI - 3 COM CO., LIMITED, a company incorporated with limited liability in
Hong Kong, whose registered office is at Suites 3013-3014, 30/F, One
International Finance Centre, 1 Harbour View Street, Central, Hong Kong and
whose register number is 0868316 (the "CHARGOR");

IN FAVOUR OF:

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a company incorporated
with limited liability in Hong Kong, whose registered office is at 33/F, ICBC
Tower, 3 Garden Road, Central, HK (the "CHARGEE").

WHEREAS

A.   As of the date hereof, HANGZHOU HUAWEI-3COM TECHNOLOGY CO., LTD. ("WFOE")
     is a wholly foreign-owned enterprise duly established under the laws of the
     People's Republic of China with a registered capital of US$80 million;

B.   The Chargor owns one hundred per cent. (100%) of the equity interests in
     WFOE;

C.   H3C Holdings Limited (the "BORROWER"), a company incorporated in the Cayman
     Islands with limited liability and holder of one hundred per cent. (100%)
     of the shares in the Chargor, has secured a senior facility of up to US$430
     million provided by various lenders (the "LENDERS") under a secured credit
     and guaranty agreement dated 22 March 2007 as amended, supplemented and/or
     restated from time to time in any manner whatsoever (the "FACILITY
     AGREEMENT") which Facility Agreement contains a guarantee by, among others,
     the Chargor;

D.   To secure the performance by the Chargor of its obligations under the
     Facility Agreement, the Chargor has agreed to charge to the Chargee the one
     hundred per cent. (100%) equity interests owned by the Chargor in WFOE (the
     "CHARGE").

NOW THIS DEED WITNESSES AS FOLLOWS:

SECTION 1

DEFINITIONS AND INTERPRETATION

In this Deed, unless the context otherwise stipulates, the following words and
expressions shall have the meanings ascribed to them below:

WFOE Charge



                                        2


1.1  APPROVAL AUTHORITY means the Ministry of Commerce of the People's Republic
     of China or its relevant local agency;

1.2  CHARGED INTERESTS means the one hundred per cent. (100%) equity interests
     owned by the Chargor in WFOE;

1.3  REGISTRATION AUTHORITY means the People's Republic of China State
     Administration for Industry and Commerce or its authorized branch;

1.4  SECURED LIABILITIES means all present and future obligations and
     liabilities of the Chargor (whether actual or contingent and whether owed
     jointly or severally or in any other capacity whatever) which are, or are
     expressed to be, or may at any time in the future become due, owing or
     payable to the Chargee (whether for its own account or as agent or trustee
     for the Secured Parties) or to any of the other Secured Parties under or in
     connection with the Facility Agreement or this Deed, together with all
     costs, charges and expenses incurred by the Chargee or any Secured Parties
     which are, or are expressed to be, or may become due, owing or payable by
     the Chargor under or in connection with the Facility Agreement or this
     Deed;

1.5  References to "Chargor" and "Chargee" shall, in each case, include their
     respective agents, successors, permitted assigns and any person who
     acquires rights therefrom;

1.6  The Chargor or Chargee may, in this Deed, be individually referred to as a
     "Party" and collectively as the "Parties";

1.7  Unless otherwise defined herein, all capitalized terms used in this Deed
     shall have the meanings ascribed to them in the Facility Agreement.

SECTION 2

CHARGED INTERESTS

2.1  The Chargor agrees to charge, and the Chargee agrees to accept the charge
     of, the Charged Interests. The Chargor hereby grants a security interest of
     first priority in the Charged Interests to the Chargee as security for the
     prompt and full performance of the Chargor's obligations under the Facility
     Agreement.

2.2  Prior to the occurrence of any of the events set forth in Section 10.1
     below, the Chargor shall have the right to exercise the voting rights
     pertaining to the Charged Interests, and shall be entitled to all dividend
     distributions attaching thereto.



                                        3


SECTION 3

SCOPE OF SECURITY

3.1  The scope of security over the Charged Interests shall cover all the rights
     and interests to which the Secured Parties are entitled under the Facility
     Agreement, as well as any compensations, damages and the reasonable
     expenses incurred by the Secured Parties in exercising their rights
     associated with the Charge.

SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE CHARGOR

The Chargor hereby represents and warrants to the Chargee at the date hereof
that:

4.1  each of the Chargor and WFOE (a) is duly organized, validly existing and in
     good standing (where such concept is applicable in the relevant
     jurisdiction) under the laws of its jurisdiction of organization, (b) has
     all requisite power and authority to own and operate its properties, to
     carry on its business as now conducted and as proposed to be conducted, to
     enter into this Deed and to carry out the transactions contemplated herein,
     and (c) is qualified to do business and in good standing (where such
     concept is applicable in the relevant jurisdiction) in every jurisdiction
     where its assets are located and wherever necessary to carry out its
     business and operations, except in jurisdictions where the failure to be so
     qualified or in good standing has not had, and could not be reasonably
     expected to have, a Material Adverse Effect;

4.2  it has the power to enter into this Deed and to perform all its obligations
     hereunder. It is its own and true intention to execute this Deed. This
     Deed, when duly executed, will constitute valid, legal and binding
     obligations enforceable against the Chargor in accordance with the terms
     hereof;

4.3  the execution of this Deed and the performance of the obligations hereunder
     by the Chargor will not result in violation of (a) any laws and regulations
     of the People's Republic of China currently in force; or (b) any material
     contract, oral or written, concluded with any third party which is binding
     on the Chargor; or (c) any constitutional document of the Chargor or WFOE,
     including without limitation the articles of association of the Chargor or
     WFOE;

4.4  All the equity interest of WFOE has been duly authorized and validly
     existing and is fully paid and non-assessable. the Chargor is the legal
     owner of the Charged Interests. There are no encumbrances on the Charged
     Interests; nor is there any dispute arising in connection with the title to
     or the right of disposal of the Charged Interests; nor is


                                        4


     there any pending or threatened claim, litigation, investigation,
     arbitration or administrative proceedings (whether civil or criminal) which
     may affect the Charged Interests;

4.5  all information provided by the Chargor to the Chargee in relation to the
     Secured Interests or this Deed is true, accurate and complete as at the
     date of such provision;

4.6  to the best knowledge of the Chargor, there is no arbitration, litigation
     or administrative proceedings which may adversely affect the Chargor's
     financial status or ability to perform its obligations hereunder; and

4.7  the Chargor has paid its capital contributions in full to WFOE, and has not
     violated any applicable laws or regulations in respect of registered
     capital, such as failing to make timely contribution or illicit withdrawal
     of capital contributions.

The above representations and warranties by the Chargor are continuing and shall
remain valid until all the obligations of the Chargor under the Facility
Agreement are fully performed, and shall be deemed to be re-stated by the
Chargor in full as of the date of any amendments or supplements to this Deed.

SECTION 5

REPRESENTATIONS AND WARRANTIES OF THE CHARGEE

The Chargee hereby represents and warrants to the Chargor at the date hereof
that:

5.1  it has the power to enter into this Deed and to perform all its obligations
     hereunder; and

5.2  the execution of this Deed and the performance of its obligations hereunder
     will not result in the violation of any laws or regulations of jurisdiction
     of incorporation currently in force.

SECTION 6

UNDERTAKINGS OF THE CHARGOR

The Chargor undertakes:

6.1  upon the execution of this Deed, to or cause WFOE to immediately record the
     particulars of the Charge in the register of shareholders of WFOE;

6.2  as soon as practicable after the execution of this Deed but in any event
     within five (5) Business Days of the date hereof, to or cause WFOE to
     submit all such documents as



                                        5


     the Approval Authority shall require for the purpose of examining and
     approving the Charge on the terms and conditions hereof;

6.3  as soon as practicable but within five (5) Business Days after the Approval
     Authority approves the Charge on the terms and conditions hereof, to or
     cause WFOE to file such approval with the Registration Authority, and to
     obtain a certificate or other evidence of registration;

6.4  upon completion of the procedures described in Sections 6.1 to 6.3 above,
     to provide the Chargee with photocopies of all documents submitted or
     received by the Chargor pursuant to such procedures, and to confirm with
     the Chargee the completion of such formalities in a manner acceptable to
     the Chargee;

6.5  to comply with all laws and regulations in connection with this Deed and to
     perform its responsibilities and obligations hereunder;

6.6  not to sell, assign, transfer or otherwise dispose of the legal or
     beneficial interests in the Charged Interests or any part thereof, or to
     create or permit to create any other encumbrance on the Charged Interests,
     except with the prior written consent of the Chargee;

6.7  to take all necessary or appropriate actions, including but not limited to
     bringing a claim or defending a claim, so as to protect its title to the
     Charged Interests;

6.8  to notify the Chargee in writing of the details of any litigation,
     arbitration or administrative proceedings, with claim of US$200,000 or more
     in relation to the Charged Interests within seven days after the Chargor
     becomes or should have become aware of such event;

6.9  in the event of any increase of equity interests of WFOE after execution of
     this Deed (whether permitted by the Chargee or not), to procure all of the
     increased equity interest be charged to the Chargee and all necessary
     amendment or supplement to this Deed be executed by the relevant parties
     with the same terms and conditions herein;

6.10 not to do or cause or permit to be done anything which in any way
     depreciates, jeopardizes or otherwise prejudices, or may potentially
     depreciate, jeopardize or otherwise prejudice the value of the Charged
     Interests; and

6.11 without the Chargee's prior written consent (which in the case of (a) below
     shall not be unreasonably withheld or delayed), not to engage in any of the
     following activities:



                                        6


     a.   to propose or cause to be proposed any amendment to the articles of
          association of WFOE other than amendments in the form set forth in
          Annex A hereto; or

     b.   to take any other action that may harm any of the Chargee's rights
          under this Deed.

The above undertakings by the Chargor are continuing and shall remain valid
until all the obligations of the Chargor under this Deed are fully performed.

SECTION 7

OBLIGATIONS OF THE CHARGEE

7.1  The Chargee shall cooperate with and provide necessary assistance to the
     Chargor in procuring the approval for and the filing of the Charge.

SECTION 8

DURATION AND RELEASE OF CHARGE

8.1  Subject to Sections 12.1 and 12.2, if the Chargee is satisfied that:

     a.   all Secured Liabilities have been unconditionally and irrevocably paid
          or discharged in full and none of the Lenders has any further
          liability or obligation to advance any funds under the Facility
          Agreement;

     b.   security or a guarantee for the Secured Liabilities, in each case
          acceptable to the Chargee, has been provided in substitution for this
          Deed; or

     c.   the Chargor is unconditionally entitled pursuant to any provision of
          the Facility Agreement to have the Charged Interests or any part
          thereof released from the Charge constituted by this Deed,

     then, subject to section 8.2 below, the Chargee shall at the request and
     cost of the Chargor take whatever action is necessary to release the
     Charged Interests (or, in the case of (c) above, the relevant part thereof)
     from the Charge created under this Deed.

8.2  Subject to the laws and regulations of People's Republic of China, any
     settlement, reassignment, release or discharge between the Chargor and the
     Chargee shall be conditional upon no security or payment by any person in
     respect of the Secured Liabilities being avoided or reduced by virtue of
     any provisions of law or enactments (including but not limited to those
     relating to bankruptcy, insolvency or liquidation) for the



                                        7


     time being in force and, in the event of any such security or payment being
     so avoided or reduced, the Chargee shall be entitled to recover the value
     or amount of such payment as if such settlement or discharge had not
     occurred but so that nothing herein shall confer on the Chargee the right
     to claim under this Section for more than the Chargee or the Secured
     Parties would be entitled to claim in aggregate under the Facility
     Agreement in respect of such avoided or reduced security or payment.

SECTION 9

EFFECT OF THE CHARGE

9.1  Unless laws and regulations contain mandatory provisions to the contrary,
     the Charge created by this Deed shall not be impaired by:

     a.   the unenforceability or invalidity of any other contracts, deeds or
          documents;

     b.   the grant of time or grace in any other respect granted by the Chargee
          to the Chargor or any other persons; or

     c.   any other acts, things or events of any nature, which would prejudice
          the Chargee's rights hereunder or under any other document.

9.2  Failure or delay by the Chargee in the exercise of any rights, powers or
     remedies under this Deed or any applicable laws or regulations shall not
     operate as a waiver or such rights, powers or remedies.

9.3  This Deed shall be legally binding upon the respective successors and
     permitted assigns of the Parties.

SECTION 10

EXERCISE OF CHARGE

10.1 The Chargee shall have the right to exercise its rights with respect to the
     Charged Interests in accordance with applicable laws and the terms and
     conditions of this Deed:

     a.   automatically upon occurrence of an Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except in respect
          of Excluded Subsidiaries); and

     b.   at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other



                                        8


          Event of Default (including those described in sections 8.1(f) or
          8.1(g) of the Facility Agreement with respect to the Excluded
          Subsidiaries).

10.2 If any one or more events set forth in Section 10.1 occurs, then subject to
     the relevant laws and regulations, the Chargee shall have the right to do
     any of the following in respect of the Charged Interests:

     a.   to sell the Charged Interests of any part thereof either by auction or
          any other means and use the proceeds to pay for all costs, expenses,
          losses, debts payable and expenditures incurred in connection with the
          enforcement of the Charge and any outstanding Secured Liabilities to
          the extent permitted by the laws and regulations of People's Republic
          of China; or

     b.   to dispose of the Charged Interests in any other manner permitted by
          applicable laws and regulations.

10.3 If any one or more events set forth in Section 10.1 occurs, without
     limiting this Section 10 but always subject to the laws and regulations of
     the People's Republic of China, all rights of the Chargor set forth under
     Section 2.2 above shall cease immediately. At the request of the Chargee
     but at the cost of the Chargor and subject to the aforesaid laws and
     regulations:

     a.   the Chargor shall procure that all dividends derived from WFOE are
          paid directly to the Chargee;

     b.   the Chargor shall procure that the Chargee is entitled to exercise all
          the voting rights in respect of the Charged Interests; and

     c.   the Chargor shall take, in a timely manner, all actions necessary for
          the Chargee to exercise its rights under Section 10.3b above,
          including, without limitation, procuring the then incumbent directors
          of WFOE to resign, appointing as the new director(s) person(s)
          designated by the Chargee of WFOE and registering the change of
          directors with the Registration Authority.

     After the Charged Interests become enforceable in accordance with the terms
     and conditions of this Deed, all amounts received or recalled by the
     Chargee from time to time as a result of its exercise of the rights granted
     hereunder or the enforcement on the Charged Interests shall be applied in
     accordance with the terms of section 2.16(h) of the Facility Agreement.

10.4 When the Chargee disposes of the Charged Interests, the Chargor shall, at
     the request of the Chargee, provide and cause WFOE to provide such
     assistance as the Chargor



                                        9


     may request, including providing the Chargee or its agent with such
     documents as may be required; obtaining, or assisting with the attainment
     of all necessary approvals; and completing the registration formalities in
     connection with the disposal of the Charged Interests with the competent
     governmental authorities.

SECTION 11

ASSIGNMENT OF THE RIGHTS AND OBLIGATIONS HEREUNDER

11.1 The Chargor shall not assign any of its rights and obligations hereunder to
     any third party without the prior written consent of the Chargee.

11.2 To the extent permitted under laws of the People's Republic of China, the
     Chargee may assign its rights and obligations hereunder to any third party
     designated by the Chargee, provided that written notice is served to the
     Chargor before such transfer, and such assignment shall be reported to and
     be subject to the approval of the Approval Authority and filed with the
     Registration Authority.

SECTION 12

EFFECTIVENESS, REVISION AND TERMINATION OF THIS DEED

12.1 This Deed, once signed and sealed by the representatives of the Parties,
     shall be binding on them and shall take effect immediately.

12.2 The Charge shall take effect immediately after the following conditions are
     satisfied:

     a.   particulars of the Charge has been duly recorded in the register of
          shareholders of WFOE;

     b.   approval on the Charge has been granted by the Approval Authority; and

     c.   the Charge has been filed with the Registration Authority.

12.3 Neither the Chargor nor the Chargee may revise or terminate this Deed
     unilaterally. This Deed can only be revised or terminated by a written
     agreement reached by the Parties upon consultation.

12.4 This Deed shall terminate and the Charge shall be discharged in accordance
     with Sections 8 above. Following the termination of this Deed, the Chargor
     shall or shall cause WFOE to make corresponding amendments to the register
     of shareholders of WFOE and proceed with all other formalities required for
     discharging the Charge constituted by this Deed.



                                       10


SECTION 13

ENTIRE AGREEMENT AND SEVERABILITY

13.1 This Deed constitutes the entire agreement of the Parties relating to the
     subject matter hereof and supersedes all previous negotiations,
     representations or contracts, either oral or written, among the Parties
     relating to such subject matter.

13.2 If any one or more provisions contained in this Deed are held by a court of
     competent jurisdiction to be invalid, illegal or unenforceable in any
     respect, the validity, legality and enforceability of the remaining
     provisions contained herein and the validity, legality and enforceability
     of such provision under the law of any other jurisdiction shall not in any
     way be affected or impaired in any respect. The Parties shall negotiate in
     good faith to replace the invalid, illegal or unenforceable provisions with
     valid provisions which minimise any economic effect on either Party
     resulting from the amendment.

SECTION 14

GOVERNING LAW AND DISPUTE SETTLEMENT

14.1 The execution, validity, construction, performance, amendment,
     interpretation and termination of this Deed and the settlement of any
     dispute arising from this Deed shall be governed by the existing laws that
     have been officially promulgated and are publicly available in the People's
     Republic of China. When such laws of the People's Republic of China do not
     cover a certain matter, international legal principles and practices shall
     apply.

14.2 Any dispute or discrepancy arising from, or in connection with, the
     execution, validity, construction, performance, amendment, interpretation
     or termination hereof shall first be settled by the Parties through
     amicable negotiation. If the Parties fail to settle any dispute through
     amicable negotiation within 90 days after such dispute or discrepancy
     occurring, the Parties shall submit the dispute or discrepancy for final
     resolution by arbitration in Shenzhen in accordance with the arbitration
     rules of the China International Economic and Trade Arbitration Commission
     ("CIETAC") for the time being in force, which rules are deemed to be
     incorporated by reference in this section. The arbitral award shall be
     final and binding upon the Parties.

14.3 The arbitration tribunal shall consist of three arbitrators. The claimant
     and the respondent shall each appoint one arbitrator. The third arbitrator
     shall be appointed by the chairman of CIETAC and shall not be a national of
     China unless the parties agree otherwise.



                                       11


SECTION 15

NOTICE

15.1 Notices or other communications required to be given by any Party under
     this Deed shall be in Chinese and English, and shall be delivered
     personally, or by mail through an internationally recognized courier or
     facsimile to the address of the other Party set forth below or to any other
     address notified by the other Party from time to time. Any notice or
     communication: (i) if delivered personally, shall be deemed to have been
     served on the date of delivery; (ii) if posted by mail, shall be deemed to
     have been served on the fourth day after the mail is delivered to an
     internationally recognized courier; and (iii) if sent by facsimile, shall
     be deemed to have been served at the time of receipt as indicated in the
     transmission confirmation.

     CHARGOR

     Address:   Huawei-3Com Co., Limited
                c/o 3Com Corporation
                350 Campus Drive
                Marlborough, MA 01752
                cc: Huawei-3Com Co., Limited
                East of Liuhe Road
                Zhijiang Science Park
                Hangzhou, PR China 310053

     Facsimile: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

     Attention: Chief Administrative and Legal Officer/Chief Financial Officer
                (3Com Corporation)
                cc: Chief Financial Officer/General Counsel
                (Huawei-3Com co., Limited)

     CHARGEE

     Address:   Industrial and Commercial Bank of China (Asia) Limited
                33/F, ICBC Tower, 3 Garden Road
                Central, HK

     Facsimile: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

     Attention: Mr Peter Sham and Ms Rachel To



                                       12


SECTION 16

CHANGE IN LAW

After the date hereof, if any competent authority amends, supplements, abolishes
or makes a new interpretation of the relevant laws, administrative regulations
or local rules or provisions, or formulates different implementing measures
thereof (collectively the "CHANGE"), or enacts new laws, regulations, decrees or
rules (collectively the "NEW RULES"), the following provisions shall apply:

16.1 If the Change or the New Rules are more favourable to any Party than the
     relevant laws, administrative regulations or local rules or provisions that
     are effective on the date of this Deed (and the other Party will not be
     materially and adversely affected thereby), both Parties shall promptly
     apply to procure such benefits as brought by the Change or the New Rules,
     and both Parties shall use their respective best endeavours to cause such
     application to be approved.

16.2 If the economic interest of any Party herein is materially and adversely
     affected, directly or indirectly, as a result of such Change or New Rules,
     this Deed shall continue to be performed in accordance with the original
     terms. If the adverse impact on the economic interest of any Party cannot
     be resolved in accordance with the provisions of this Deed, after the
     affected Party notifies the other Party, both Parties shall promptly
     negotiate to make all necessary amendments to this Deed to protect the
     economic interests of the affected Party.

SECTION 17

MISCELLANEOUS

17.1 This Deed is written and executed in both Chinese and English with 12
     originals (and each Party shall hold two (2) originals) with another eight
     (8) originals available for submitting to Approval Authority. The two
     language versions shall be equally authentic and have the same legal
     effect.

17.2 This Deed may be executed in any number of counterparts and by the Parties
     in separate counterparts, each of which when so executed shall be deemed to
     be an original and all of which when taken together shall constitute one
     and the same Deed.



                                       13


          ANNEX A FORM OF AMENDMENTS TO ARTICLES OF ASSOCIATION OF WFOE



                                 EXECUTION PAGES

THE CHARGOR

Executed as a deed by affixing the common seal of )   SEAL AFFIXED
HUAWEI-3COM CO., LIMITED                          )   NEAL D. GOLDMAN
in the presence of:                               )   DONALD M. HALSTED, III

Neal D. Goldman
Director

Donald M. Halsted, III
Director

Address:          ___________________________

Facsimile Number: ___________________________

Attention:        ___________________________



                                 EXECUTION PAGES

THE CHARGEE

Executed as a deed by affixing the common seal of )
INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)    )   SEAL AFFIXED
LIMITED                                           )
in the presence of:                               )


WONG YUEN FAI STANLEY
Director


CHEUNG PUI LING CATHY
Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

Attention:        ______________________________________



                               DATED 3 APRIL 2007

                           HUAWEI - 3COM CO., LIMITED

                                  IN FAVOUR OF

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

                                   ----------

                                 DEED OF CHARGE

                                   ----------



                                    CONTENTS




                                                                            PAGE
                                                                            ----
                                                                         
SECTION 1                                                                     1
DEFINITIONS AND INTERPRETATION                                                1
SECTION 2                                                                     2
CHARGED INTERESTS                                                             2
SECTION 3                                                                     3
SCOPE OF SECURITY                                                             3
SECTION 4                                                                     3
REPRESENTATIONS AND WARRANTIES OF THE CHARGOR                                 3
SECTION 5                                                                     4
REPRESENTATIONS AND WARRANTIES OF THE CHARGEE                                 4
SECTION 6                                                                     4
UNDERTAKINGS OF THE CHARGOR                                                   4
SECTION 7                                                                     6
OBLIGATIONS OF THE CHARGEE                                                    6
SECTION 8                                                                     6
DURATION AND RELEASE OF CHARGE                                                6
SECTION 9                                                                     7
EFFECT OF THE CHARGE                                                          7
SECTION 10                                                                    7
EXERCISE OF CHARGE                                                            7
SECTION 11                                                                    9
ASSIGNMENT OF THE RIGHTS AND OBLIGATIONS HEREUNDER                            9
SECTION 12                                                                    9




                                                                         
EFFECTIVENESS, REVISION AND TERMINATION OF THIS DEED                          9
SECTION 13                                                                   10
ENTIRE AGREEMENT AND SEVERABILITY                                            10
SECTION 14                                                                   10
GOVERNING LAW AND DISPUTE SETTLEMENT                                         10
SECTION 15                                                                   11
NOTICE                                                                       11
SECTION 16                                                                   12
CHANGE IN LAW                                                                12
SECTION 17                                                                   12
MISCELLANEOUS                                                                12
ANNEX A FORM OF AMENDMENTS TO ARTICLES OF ASSOCIATION OF WFOE                13

EX-10.60

                                       1

                                                                   Exhibit 10.60

                                                                  CONFORMED COPY

This DEED OF CHARGE (this "DEED") is made on the 3rd day of April 2007

BY:

HUAWEI - 3 COM CO., LIMITED, a company incorporated with limited liability in
Hong Kong, whose registered office is at Suites 3013-3014, 30/F, One
International Finance Centre, 1 Harbour View Street, Central, Hong Kong and
whose register number is 0868316 (the "CHARGOR");

IN FAVOUR OF:

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a company incorporated
with limited liability in Hong Kong, whose registered office is at 33/F, ICBC
Tower, 3 Garden Road, Central, HK (the "CHARGEE").

WHEREAS

A.   As of the date hereof, HANGZHOU QUEENHIVE SOFTWARE CO., LTD. ("QUEENHIVE")
     is a wholly foreign-owned enterprise duly established under the laws of the
     People's Republic of China with a registered capital of US$8 million;

B.   The Chargor owns one hundred per cent. (100%) of the equity interests in
     Queenhive;

C.   H3C Holdings Limited (the "BORROWER"), a company incorporated in the Cayman
     Islands with limited liability and holder of one hundred per cent. (100%)
     of the shares in the Chargor, has secured a senior facility of up to US$430
     million provided by various lenders (the "LENDERS") under a secured credit
     and guaranty agreement dated 22 March 2007 as amended, supplemented and/or
     restated from time to time in any manner whatsoever (the "FACILITY
     AGREEMENT") which Facility Agreement contains a guarantee by, among others,
     the Chargor;

D.   To secure the performance by the Chargor of its obligations under the
     Facility Agreement, the Chargor has agreed to charge to the Chargee the one
     hundred per cent. (100%) equity interests owned by the Chargor in Queenhive
     (the "CHARGE").

NOW THIS DEED WITNESSES AS FOLLOWS:

SECTION 1

DEFINITIONS AND INTERPRETATION

In this Deed, unless the context otherwise stipulates, the following words and
expressions shall

Queenhive Charge



                                       2


have the meanings ascribed to them below:

1.1  APPROVAL AUTHORITY means the Ministry of Commerce of the People's Republic
     of China or its relevant local agency;

1.2  CHARGED INTERESTS means the one hundred per cent. (100%) equity interests
     owned by the Chargor in Queenhive;

1.3  REGISTRATION AUTHORITY means the People's Republic of China State
     Administration for Industry and Commerce or its authorized branch;

1.4  SECURED LIABILITIES means all present and future obligations and
     liabilities of the Chargor (whether actual or contingent and whether owed
     jointly or severally or in any other capacity whatever) which are, or are
     expressed to be, or may at any time in the future become due, owing or
     payable to the Chargee (whether for its own account or as agent or trustee
     for the Secured Parties) or to any of the other Secured Parties under or in
     connection with the Facility Agreement or this Deed, together with all
     costs, charges and expenses incurred by the Chargee or any Secured Parties
     which are, or are expressed to be, or may become due, owing or payable by
     the Chargor under or in connection with the Facility Agreement or this
     Deed;

1.5  References to "Chargor" and "Chargee" shall, in each case, include their
     respective agents, successors, permitted assigns and any person who
     acquires rights therefrom;

1.6  The Chargor or Chargee may, in this Deed, be individually referred to as a
     "Party" and collectively as the "Parties";

1.7  Unless otherwise defined herein, all capitalized terms used in this Deed
     shall have the meanings ascribed to them in the Facility Agreement.

SECTION 2

CHARGED INTERESTS

2.1  The Chargor agrees to charge, and the Chargee agrees to accept the charge
     of, the Charged Interests. The Chargor hereby grants a security interest of
     first priority in the Charged Interests to the Chargee as security for the
     prompt and full performance of the Chargor's obligations under the Facility
     Agreement.



                                       3


2.2  Prior to the occurrence of any of the events set forth in Section 10.1
     below, the Chargor shall have the right to exercise the voting rights
     pertaining to the Charged Interests, and shall be entitled to all dividend
     distributions attaching thereto.

SECTION 3

SCOPE OF SECURITY

3.1  The scope of security over the Charged Interests shall cover all the rights
     and interests to which the Secured Parties are entitled under the Facility
     Agreement, as well as any compensations, damages and the reasonable
     expenses incurred by the Secured Parties in exercising their rights
     associated with the Charge.

SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE CHARGOR

The Chargor hereby represents and warrants to the Chargee at the date hereof
that:

4.1  each of the Chargor and Queenhive (a) is duly organized, validly existing
     and in good standing (where such concept is applicable in the relevant
     jurisdiction) under the laws of its jurisdiction of organization, (b) has
     all requisite power and authority to own and operate its properties, to
     carry on its business as now conducted and as proposed to be conducted, to
     enter into this Deed and to carry out the transactions contemplated herein,
     and (c) is qualified to do business and in good standing (where such
     concept is applicable in the relevant jurisdiction) in every jurisdiction
     where its assets are located and wherever necessary to carry out its
     business and operations, except in jurisdictions where the failure to be so
     qualified or in good standing has not had, and could not be reasonably
     expected to have, a Material Adverse Effect;

4.2  it has the power to enter into this Deed and to perform all its obligations
     hereunder. It is its own and true intention to execute this Deed. This
     Deed, when duly executed, will constitute valid, legal and binding
     obligations enforceable against the Chargor in accordance with the terms
     hereof;

4.3  the execution of this Deed and the performance of the obligations hereunder
     by the Chargor will not result in violation of (a) any laws and regulations
     of the People's Republic of China currently in force; or (b) any material
     contract, oral or written, concluded with any third party which is binding
     on the Chargor; or (c) any constitutional document of the Chargor or
     Queenhive, including without limitation the articles of association of the
     Chargor or Queenhive;



                                       4


4.4  All the equity interest of Queenhive has been duly authorized and validly
     existing and is fully paid and non-assessable. the Chargor is the legal
     owner of the Charged Interests. There are no encumbrances on the Charged
     Interests; nor is there any dispute arising in connection with the title to
     or the right of disposal of the Charged Interests; nor is there any pending
     or threatened claim, litigation, investigation, arbitration or
     administrative proceedings (whether civil or criminal) which may affect the
     Charged Interests;

4.5  all information provided by the Chargor to the Chargee in relation to the
     Secured Interests or this Deed is true, accurate and complete as at the
     date of such provision;

4.6  to the best knowledge of the Chargor, there is no arbitration, litigation
     or administrative proceedings which may adversely affect the Chargor's
     financial status or ability to perform its obligations hereunder; and

4.7  the Chargor has paid its capital contributions in full to Queenhive, and
     has not violated any applicable laws or regulations in respect of
     registered capital, such as failing to make timely contribution or illicit
     withdrawal of capital contributions.

The above representations and warranties by the Chargor are continuing and shall
remain valid until all the obligations of the Chargor under the Facility
Agreement are fully performed, and shall be deemed to be re-stated by the
Chargor in full as of the date of any amendments or supplements to this Deed.

SECTION 5

REPRESENTATIONS AND WARRANTIES OF THE CHARGEE

The Chargee hereby represents and warrants to the Chargor at the date hereof
that:

5.1  it has the power to enter into this Deed and to perform all its obligations
     hereunder; and

5.2  the execution of this Deed and the performance of its obligations hereunder
     will not result in the violation of any laws or regulations of jurisdiction
     of incorporation currently in force.

SECTION 6

UNDERTAKINGS OF THE CHARGOR

The Chargor undertakes:



                                       5


6.1  upon the execution of this Deed, to or cause Queenhive to immediately
     record the particulars of the Charge in the register of shareholders of
     Queenhive;

6.2  as soon as practicable after the execution of this Deed but in any event
     within five (5) Business Days of the date hereof, to or cause Queenhive to
     submit all such documents as the Approval Authority shall require for the
     purpose of examining and approving the Charge on the terms and conditions
     hereof;

6.3  as soon as practicable but within five (5) Business Days after the Approval
     Authority approves the Charge on the terms and conditions hereof, to or
     cause Queenhive to file such approval with the Registration Authority, and
     to obtain a certificate or other evidence of registration;

6.4  upon completion of the procedures described in Sections 6.1 to 6.3 above,
     to provide the Chargee with photocopies of all documents submitted or
     received by the Chargor pursuant to such procedures, and to confirm with
     the Chargee the completion of such formalities in a manner acceptable to
     the Chargee;

6.5  to comply with all laws and regulations in connection with this Deed and to
     perform its responsibilities and obligations hereunder;

6.6  not to sell, assign, transfer or otherwise dispose of the legal or
     beneficial interests in the Charged Interests or any part thereof, or to
     create or permit to create any other encumbrance on the Charged Interests,
     except with the prior written consent of the Chargee;

6.7  to take all necessary or appropriate actions, including but not limited to
     bringing a claim or defending a claim, so as to protect its title to the
     Charged Interests;

6.8  to notify the Chargee in writing of the details of any litigation,
     arbitration or administrative proceedings, with claim of US$200,000 or more
     in relation to the Charged Interests within seven days after the Chargor
     becomes or should have become aware of such event;

6.9  in the event of any increase of equity interests of Queenhive after
     execution of this Deed (whether permitted by the Chargee or not), to
     procure all of the increased equity interest be charged to the Chargee and
     all necessary amendment or supplement to this Deed be executed by the
     relevant parties with the same terms and conditions herein;



                                       6


6.10 not to do or cause or permit to be done anything which in any way
     depreciates, jeopardizes or otherwise prejudices, or may potentially
     depreciate, jeopardize or otherwise prejudice the value of the Charged
     Interests; and

6.11 without the Chargee's prior written consent (which in the case of (a) below
     shall not be unreasonably withheld or delayed), not to engage in any of the
     following activities:

     a.   to propose or cause to be proposed any amendment to the articles of
          association of Queenhive other than amendments in the form set forth
          in Annex A hereto; or

     b.   to take any other action that may harm any of the Chargee's rights
          under this Deed.

The above undertakings by the Chargor are continuing and shall remain valid
until all the obligations of the Chargor under this Deed are fully performed.

SECTION 7

OBLIGATIONS OF THE CHARGEE

7.1  The Chargee shall cooperate with and provide necessary assistance to the
     Chargor in procuring the approval for and the filing of the Charge.

SECTION 8

DURATION AND RELEASE OF CHARGE

8.1  Subject to Sections 12.1 and 12.2, if the Chargee is satisfied that:

     a.   all Secured Liabilities have been unconditionally and irrevocably paid
          or discharged in full and none of the Lenders has any further
          liability or obligation to advance any funds under the Facility
          Agreement;

     b.   security or a guarantee for the Secured Liabilities, in each case
          acceptable to the Chargee, has been provided in substitution for this
          Deed; or

     c.   the Chargor is unconditionally entitled pursuant to any provision of
          the Facility Agreement to have the Charged Interests or any part
          thereof released from the Charge constituted by this Deed,


                                       7


     then, subject to section 8.2 below, the Chargee shall at the request and
     cost of the Chargor take whatever action is necessary to release the
     Charged Interests (or, in the case of (c) above, the relevant part thereof)
     from the Charge created under this Deed.

8.2  Subject to the laws and regulations of People's Republic of China, any
     settlement, reassignment, release or discharge between the Chargor and the
     Chargee shall be conditional upon no security or payment by any person in
     respect of the Secured Liabilities being avoided or reduced by virtue of
     any provisions of law or enactments (including but not limited to those
     relating to bankruptcy, insolvency or liquidation) for the time being in
     force and, in the event of any such security or payment being so avoided or
     reduced, the Chargee shall be entitled to recover the value or amount of
     such payment as if such settlement or discharge had not occurred but so
     that nothing herein shall confer on the Chargee the right to claim under
     this Section for more than the Chargee or the Secured Parties would be
     entitled to claim in aggregate under the Facility Agreement in respect of
     such avoided or reduced security or payment.

SECTION 9

EFFECT OF THE CHARGE

9.1  Unless laws and regulations contain mandatory provisions to the contrary,
     the Charge created by this Deed shall not be impaired by:

     a.   the unenforceability or invalidity of any other contracts, deeds or
          documents;

     b.   the grant of time or grace in any other respect granted by the Chargee
          to the Chargor or any other persons; or

     c.   any other acts, things or events of any nature, which would prejudice
          the Chargee's rights hereunder or under any other document.

9.2  Failure or delay by the Chargee in the exercise of any rights, powers or
     remedies under this Deed or any applicable laws or regulations shall not
     operate as a waiver or such rights, powers or remedies.

9.3  This Deed shall be legally binding upon the respective successors and
     permitted assigns of the Parties.



                                       8


SECTION 10

EXERCISE OF CHARGE

10.1 The Chargee shall have the right to exercise its rights with respect to the
     Charged Interests in accordance with applicable laws and the terms and
     conditions of this Deed:

     a.   automatically upon occurrence of an Event of Default described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement (except in respect
          of Excluded Subsidiaries); and

     b.   at the request of (or with the consent of) the Requisite Lenders and
          upon notice to the Borrower by the Administrative Agent, upon the
          occurrence of any other Event of Default (including those described in
          sections 8.1(f) or 8.1(g) of the Facility Agreement with respect to
          the Excluded Subsidiaries).

10.2 If any one or more events set forth in Section 10.1 occurs, then subject to
     the relevant laws and regulations, the Chargee shall have the right to do
     any of the following in respect of the Charged Interests:

     a.   to sell the Charged Interests of any part thereof either by auction or
          any other means and use the proceeds to pay for all costs, expenses,
          losses, debts payable and expenditures incurred in connection with the
          enforcement of the Charge and any outstanding Secured Liabilities to
          the extent permitted by the laws and regulations of People's Republic
          of China; or

     b.   to dispose of the Charged Interests in any other manner permitted by
          applicable laws and regulations.

10.3 If any one or more events set forth in Section 10.1 occurs, without
     limiting this Section 10 but always subject to the laws and regulations of
     the People's Republic of China, all rights of the Chargor set forth under
     Section 2.2 above shall cease immediately. At the request of the Chargee
     but at the cost of the Chargor and subject to the aforesaid laws and
     regulations:

     a.   the Chargor shall procure that all dividends derived from Queenhive
          are paid directly to the Chargee;

     b.   the Chargor shall procure that the Chargee is entitled to exercise all
          the voting rights in respect of the Charged Interests; and



                                       9


     c.   the Chargor shall take, in a timely manner, all actions necessary for
          the Chargee to exercise its rights under Section 10.3b above,
          including, without limitation, procuring the then incumbent directors
          of Queenhive to resign, appointing as the new director(s) person(s)
          designated by the Chargee of Queenhive and registering the change of
          directors with the Registration Authority.

     After the Charged Interests become enforceable in accordance with the terms
     and conditions of this Deed, all amounts received or recalled by the
     Chargee from time to time as a result of its exercise of the rights granted
     hereunder or the enforcement on the Charged Interests shall be applied in
     accordance with the terms of section 2.16(h) of the Facility Agreement.

10.4 When the Chargee disposes of the Charged Interests, the Chargor shall, at
     the request of the Chargee, provide and cause Queenhive to provide such
     assistance as the Chargor may request, including providing the Chargee or
     its agent with such documents as may be required; obtaining, or assisting
     with the attainment of all necessary approvals; and completing the
     registration formalities in connection with the disposal of the Charged
     Interests with the competent governmental authorities.

SECTION 11

ASSIGNMENT OF THE RIGHTS AND OBLIGATIONS HEREUNDER

11.1 The Chargor shall not assign any of its rights and obligations hereunder to
     any third party without the prior written consent of the Chargee.

11.2 To the extent permitted under laws of the People's Republic of China, the
     Chargee may assign its rights and obligations hereunder to any third party
     designated by the Chargee, provided that written notice is served to the
     Chargor before such transfer, and such assignment shall be reported to and
     be subject to the approval of the Approval Authority and filed with the
     Registration Authority.

SECTION 12

EFFECTIVENESS, REVISION AND TERMINATION OF THIS DEED

12.1 This Deed, once signed and sealed by the representatives of the Parties,
     shall be binding on them and shall take effect immediately.

12.2 The Charge shall take effect immediately after the following conditions are
     satisfied:



                                       10


     a.   particulars of the Charge has been duly recorded in the register of
          shareholders of Queenhive;

     b.   approval on the Charge has been granted by the Approval Authority; and

     c.   the Charge has been filed with the Registration Authority.

12.3 Neither the Chargor nor the Chargee may revise or terminate this Deed
     unilaterally. This Deed can only be revised or terminated by a written
     agreement reached by the Parties upon consultation.

12.4 This Deed shall terminate and the Charge shall be discharged in accordance
     with Sections 8 above. Following the termination of this Deed, the Chargor
     shall or shall cause Queenhive to make corresponding amendments to the
     register of shareholders of Queenhive and proceed with all other
     formalities required for discharging the Charge constituted by this Deed.

SECTION 13

ENTIRE AGREEMENT AND SEVERABILITY

13.1 This Deed constitutes the entire agreement of the Parties relating to the
     subject matter hereof and supersedes all previous negotiations,
     representations or contracts, either oral or written, among the Parties
     relating to such subject matter.

13.2 If any one or more provisions contained in this Deed are held by a court of
     competent jurisdiction to be invalid, illegal or unenforceable in any
     respect, the validity, legality and enforceability of the remaining
     provisions contained herein and the validity, legality and enforceability
     of such provision under the law of any other jurisdiction shall not in any
     way be affected or impaired in any respect. The Parties shall negotiate in
     good faith to replace the invalid, illegal or unenforceable provisions with
     valid provisions which minimise any economic effect on either Party
     resulting from the amendment.

SECTION 14

GOVERNING LAW AND DISPUTE SETTLEMENT

14.1 The execution, validity, construction, performance, amendment,
     interpretation and termination of this Deed and the settlement of any
     dispute arising from this Deed shall be governed by the existing laws that
     have been officially promulgated and are publicly available in the People's
     Republic of China. When such laws of the People's Republic



                                       11


     of China do not cover a certain matter, international legal principles and
     practices shall apply.

14.2 Any dispute or discrepancy arising from, or in connection with, the
     execution, validity, construction, performance, amendment, interpretation
     or termination hereof shall first be settled by the Parties through
     amicable negotiation. If the Parties fail to settle any dispute through
     amicable negotiation within 90 days after such dispute or discrepancy
     occurring, the Parties shall submit the dispute or discrepancy for final
     resolution by arbitration in Shenzhen in accordance with the arbitration
     rules of the China International Economic and Trade Arbitration Commission
     ("CIETAC") for the time being in force, which rules are deemed to be
     incorporated by reference in this section. The arbitral award shall be
     final and binding upon the Parties.

14.3 The arbitration tribunal shall consist of three arbitrators. The claimant
     and the respondent shall each appoint one arbitrator. The third arbitrator
     shall be appointed by the chairman of CIETAC and shall not be a national of
     China unless the parties agree otherwise.

SECTION 15

NOTICE

15.1 Notices or other communications required to be given by any Party under
     this Deed shall be in Chinese and English, and shall be delivered
     personally, or by mail through an internationally recognized courier or
     facsimile to the address of the other Party set forth below or to any other
     address notified by the other Party from time to time. Any notice or
     communication: (i) if delivered personally, shall be deemed to have been
     served on the date of delivery; (ii) if posted by mail, shall be deemed to
     have been served on the fourth day after the mail is delivered to an
     internationally recognized courier; and (iii) if sent by facsimile, shall
     be deemed to have been served at the time of receipt as indicated in the
     transmission confirmation.

     CHARGOR

     Address:     Huawei-3Com Co., Limited
                  c/o 3Com Corporation
                  350 Campus Drive
                  Marlborough, MA 01752
                  cc: Huawei-3Com Co., Limited
                  East of Liuhe Road
                  Zhijiang Science Park



                                       12


                  Hangzhou, PR China 310053

     Facsimile:   [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

     Attention:   Chief Administrative and Legal Officer/Chief Financial Officer
                  (3Com Corporation)
                  cc: Chief Financial Officer/General Counsel
                  (Huawei-3Com co., Limited)

     CHARGEE

     Address:     Industrial and Commercial Bank of China (Asia) Limited
                  33/F, ICBC Tower, 3 Garden Road
                  Central, HK

     Facsimile:   [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

     Attention:   Mr Peter Sham and Ms Rachel To

SECTION 16

CHANGE IN LAW

After the date hereof, if any competent authority amends, supplements, abolishes
or makes a new interpretation of the relevant laws, administrative regulations
or local rules or provisions, or formulates different implementing measures
thereof (collectively the "CHANGE"), or enacts new laws, regulations, decrees or
rules (collectively the "NEW RULES"), the following provisions shall apply:

16.1 If the Change or the New Rules are more favourable to any Party than the
     relevant laws, administrative regulations or local rules or provisions that
     are effective on the date of this Deed (and the other Party will not be
     materially and adversely affected thereby), both Parties shall promptly
     apply to procure such benefits as brought by the Change or the New Rules,
     and both Parties shall use their respective best endeavours to cause such
     application to be approved.

16.2 If the economic interest of any Party herein is materially and adversely
     affected, directly or indirectly, as a result of such Change or New Rules,
     this Deed shall continue to be performed in accordance with the original
     terms. If the adverse impact on the economic interest of any Party cannot
     be resolved in accordance with the provisions of this Deed,



                                       13


     after the affected Party notifies the other Party, both Parties shall
     promptly negotiate to make all necessary amendments to this Deed to protect
     the economic interests of the affected Party.

SECTION 17

MISCELLANEOUS

17.1 This Deed is written and executed in both Chinese and English with 12
     originals (and each Party shall hold two (2) originals) with another eight
     (8) originals available for submitting to the Approval Authority and any
     branch thereof. The two language versions shall be equally authentic and
     have the same legal effect.

17.2 This Deed may be executed in any number of counterparts and by the Parties
     in separate counterparts, each of which when so executed shall be deemed to
     be an original and all of which when taken together shall constitute one
     and the same Deed.



                                       14


ANNEX A FORM OF AMENDMENTS TO ARTICLES OF ASSOCIATION OF QUEENHIVE



                                 EXECUTION PAGES

THE CHARGOR

Executed as a deed by affixing the common seal of   ) SEAL AFFIXED
HUAWEI-3COM CO., LIMITED                            ) NEAL D. GOLDMAN
in the presence of:                                 ) DONALD M. HALSTED

Neal D. Goldman
Director

Donald M. Halsted, III
Director

Address: ____________________________

Facsimile Number: ___________________

Attention: __________________________



                                 EXECUTION PAGES

THE CHARGEE

Executed as a deed by affixing the common seal of   )
INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)      ) SEAL AFFIXED
LIMITED                                             )
in the presence of:                                 )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

Attention:        __________________________________________



                                                                  CONFORMED COPY

                               DATED 3 APRIL 2007

                           HUAWEI - 3COM CO., LIMITED

                                  IN FAVOUR OF

             INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED

                                   ----------

                                 DEED OF CHARGE

                                   ----------



                                    CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
SECTION 1                                                                     1
DEFINITIONS AND INTERPRETATION                                                1

SECTION 2                                                                     2
CHARGED INTERESTS                                                             2

SECTION 3                                                                     3
SCOPE OF SECURITY                                                             3

SECTION 4                                                                     3
REPRESENTATIONS AND WARRANTIES OF THE CHARGOR                                 3

SECTION 5                                                                     4
REPRESENTATIONS AND WARRANTIES OF THE CHARGEE                                 4

SECTION 6                                                                     5
UNDERTAKINGS OF THE CHARGOR                                                   5

SECTION 7                                                                     6
OBLIGATIONS OF THE CHARGEE                                                    6

SECTION 8                                                                     6
DURATION AND RELEASE OF CHARGE                                                6

SECTION 9                                                                     7
EFFECT OF THE CHARGE                                                          7

SECTION 10                                                                    8
EXERCISE OF CHARGE                                                            8

SECTION 11                                                                    9
ASSIGNMENT OF THE RIGHTS AND OBLIGATIONS HEREUNDER                            9




                                                                         
SECTION 12                                                                    9
EFFECTIVENESS, REVISION AND TERMINATION OF THIS DEED                          9

SECTION 13                                                                   10
ENTIRE AGREEMENT AND SEVERABILITY                                            10

SECTION 14                                                                   10
GOVERNING LAW AND DISPUTE SETTLEMENT                                         10

SECTION 15                                                                   11
NOTICE                                                                       11

SECTION 16                                                                   12
CHANGE IN LAW                                                                12

SECTION 17                                                                   13
MISCELLANEOUS                                                                13

ANNEX A FORM OF AMENDMENTS TO ARTICLES OF ASSOCIATION OF QUEENHIVE           14

EX-10.61

                                                                   Exhibit 10.61

                                                                  CONFORMED COPY

THIS DEED OF RELEASE is made on 30 March 2007

BY:

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED, a limited liability
company incorporated under the laws of Hong Kong whose registered office is at
33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong (in its capacity as
collateral agent, the "COLLATERAL AGENT"),

in favour of:

3COM TECHNOLOGIES, a company incorporated under the laws of the Cayman Islands
whose registered office is at Ugland House, South Church Street, George Town,
Grand Cayman, Cayman Islands (the "CHARGOR").

WHEREAS:

(A)  By the Facility Agreement, the Lenders made Term Loans to the Borrower upon
     the terms and subject to the conditions contained therein.

(B)  As security for the Chargor's obligations under the Facility Agreement, the
     Chargor entered into the H3C Equitable Share Charge.

(C)  In accordance with the provisions of the H3C Equitable Share Charge, all of
     the Shares having been transferred to the Borrower, and such Shares having
     been registered in the name of the Borrower, the Collateral Agent wishes to
     release the Chargor from its obligations under the H3C Equitable Share
     Charge.

NOW THIS DEED WITNESSES as follows:

1.   DEFINITIONS

1.1  In this Deed:

     "FACILITY AGREEMENT" means the senior secured credit and guaranty agreement
     dated 22 March 2007 and signed by or on behalf of, amongst others, the
     Chargor and the Collateral Agent, as amended, supplemented and/or restated
     from time to time in any manner whatsoever.

1.2  Unless a contrary indication appears, a term used in the Facility Agreement
     and the H3C Equitable Share Charge has the same meaning when used in this
     Deed.

2.   RELEASES

2.1  Subject always to Clause 11.9 (Discharge Conditional) of the H3C Equitable
     Share Charge, the Collateral Agent hereby releases and discharges the
     Chargor from all of its obligations, undertakings and covenants contained
     in or arising under the H3C Equitable Share Charge, whether past, present
     or future, actual or contingent.

Deed of Release



                                       2


2.2  The Collateral Agent agrees and undertakes to deliver to the Chargor (or at
     the direction of the Chargor) at the Chargor's expense (such delivery to,
     or at the direction of, the Chargor being in full satisfaction of the
     Collateral Agent's obligation under this clause 2.2) all documents of
     title, certificates and other documents (if any) presently held by the
     Collateral Agent in relation to the Charged Property.

3.   FURTHER ACTS

     The Collateral Agent shall (at the Chargor's expense) assist the Chargor in
     the doing of all assurances, deeds, acts and things (including without
     limitation the giving of notices, the termination of any filings and/or
     registrations, and the making of any further filings and/or registrations
     consequent upon this Deed) as the Chargor may reasonably request in writing
     after the date hereof in connection with the discharges, transfers,
     assignments and releases contained in Clause 2.

4.   GOVERNING LAW AND JURISDICTION

     This Deed shall be governed by, and construed in accordance with, the laws
     of Hong Kong and the parties hereto irrevocably submit to the non-exclusive
     jurisdiction of the courts of Hong Kong.

IN WITNESS WHEREOF the parties hereto have duly executed this Deed the day and
year first above written.



                                 EXECUTION PAGE

THE COLLATERAL AGENT

Executed as a deed by affixing the common seal  )
of INDUSTRIAL AND COMMERCIAL                    )
BANK OF CHINA (ASIA) LIMITED                    )          SEAL AFFIXED
in the presence of:                             )

WONG YUEN FAI STANLEY
Director

CHENG PUI LING CATHY
Secretary

Address:          33rd Floor, ICBC Tower, 3 Garden Road, Central, Hong Kong

Facsimile Number: [PERSONAL INFORMATION OMITTED FOR SECURITY PURPOSES]

Attention: __________________________



                                                                  CONFORMED COPY

                               Dated 30 March 2007

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

                                  in favour of

                                3COM TECHNOLOGIES
                                   AS CHARGOR

                                   ----------

                                 DEED OF RELEASE

                                   ----------

                                Slaughter and May
                            47th Floor, Jardine House
                               One Connaught Place
                               Central, Hong Kong
                                   (RMGG/AHLL)

                                  (HK070570124)

EX-21.1

                                                                               .
                                                                               .
                                                                               .


EXHIBIT 21.1

                              List of Subsidiaries*



Name                                    Jurisdiction
- ----                                    ------------
                                     
3Com Europe Ltd.                           England
3Com APR Pte Ltd.                         Singapore
3Com Technologies                       Cayman Islands
H3C Technologies Co., Limited ("H3C")     Hong Kong
Hangzhou H3C Technologies Co., Ltd.**       China


*    Omits subsidiaries that, considered in the aggregate as a single
     subsidiary, do not constitute a significant subsidiary as of the end of the
     2007 fiscal year(using the definition of "significant subsidiary" in Rule
     1-02(w) of Regulation S-X).

**   100%-owned by H3C.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 33-92053, 33-2171, 33-17848 (Post-Effective Amendment No. 1), 33-33803, 33-33807, 33-39323, 33-36911, 33-45176, 33-45231, 33-45233, 33-56952, 33-58708, 33-72158, 033-55265 (Post-Effective Amendment No. 1), 033-60379, 033-63547, 333-11639, 333-15923, 333-29099, 333-70459, 333-74371, 333-34726, 333-44508, 333-50992, 333-59504, 333-64988, 333-76764, 333-109983, 333-122441, 333-129785 and 333-144322 of 3Com Corporation on Form S-8 of our report dated July 31, 2007, relating to the financial statements and financial statement schedule of 3Com Corporation (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 123(Revised), Share-Based Payment) and of our report dated July 31, 2007, relating to management’s report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of 3Com Corporation for the year ended June 1, 2007.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
July 31, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Edgar Masri, certify that:

1.	I have reviewed this Annual Report on Form 10-K of 3Com Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2007

/s/ EDGAR MASRI  

Edgar Masri 

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Jay Zager, certify that:

1.	I have reviewed this Annual Report on Form 10-K of 3Com Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2007

/s/ JAY ZAGER  

Jay Zager 

Executive Vice President, Finance and Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Edgar Masri, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of 3Com Corporation on Form 10-K for the fiscal year ended June 1, 2007 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of 3Com Corporation.

Date: July 31, 2007	By:	/s/ EDGAR MASRI
		Name:	Edgar Masri
		Title:	President and Chief Executive Officer

I, Jay Zager, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of 3Com Corporation on Form 10-K for the fiscal year ended June 1, 2007 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of 3Com Corporation.

Date: July 31, 2007	By:	/s/ JAY ZAGER
		Name:	Jay Zager
		Title:	Executive Vice President, Finance and Chief Financial Officer