<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
3COM CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
5400 BAYFRONT PLAZA
SANTA CLARA, CALIFORNIA 95052-8145
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 23, 1999
------------------------
To The Stockholders:
Our Annual Meeting will be held on Thursday, September 23, 1999, at 10:30
a.m. at 3Com's facility at 5400 Bayfront Plaza, Building 5, Santa Clara,
California. The purpose of the meeting is to:
1. Elect five (5) Class I directors to hold office for a two-year term.
2. Ratify the appointment of Deloitte & Touche LLP as our independent
public accountants for the fiscal year ending June 2, 2000.
3. Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on July 26, 1999 are
entitled to notice of, and to vote at, this meeting and any adjournments. For
ten days prior to the meeting, any stockholder can examine a complete list of
the stockholders entitled to vote at the meeting for any purpose germane to the
meeting during ordinary business hours at our offices at 5400 Bayfront Plaza,
Santa Clara, California 95052-8145.
By Order of the Board of Directors,
[SIGNATURE]
Mark D. Michael
SECRETARY
August 19, 1999
Santa Clara, California
IMPORTANT: PLEASE (I) FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY
CARD IN THE ACCOMPANYING POST-PAID ENVELOPE OR (II) VOTE YOUR SHARES
TELEPHONICALLY OR USE THE INTERNET AS DESCRIBED IN THE VOTING INSTRUCTIONS TO
ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. IF YOU ATTEND THE
MEETING, YOU MAY CHOOSE TO VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN
YOUR PROXY CARD.
<PAGE>
3COM CORPORATION
5400 BAYFRONT PLAZA
SANTA CLARA, CALIFORNIA 95052-8145
------------------------
PROXY STATEMENT
The board of directors of 3Com Corporation, a Delaware corporation, is
soliciting the accompanying proxy for use at our Annual Meeting of Stockholders
to be held on Thursday, September 23, 1999, at 10:30 a.m. local time or any
adjournment, for the purposes set forth in the accompanying Notice of Annual
Meeting. The meeting will be held at our principal executive offices at 5400
Bayfront Plaza, Building 5, Santa Clara, California. Our telephone number is
(408) 326-5000. The date of this Proxy Statement is August 19, 1999, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to our stockholders.
GENERAL INFORMATION
CERTAIN FINANCIAL INFORMATION. Please note that our consolidated financial
statements and related information are included with our 1999 Annual Report to
Stockholders, which is enclosed with this Proxy Statement.
VOTING SECURITIES. Only stockholders of record as of the close of business
on July 26, 1999 (the "Record Date") will be entitled to vote at the meeting and
any adjournment. As of the Record Date, there were 352,040,006 shares of 3Com
common stock outstanding, which figure does not include 7,270,457 shares which
were repurchased by 3Com prior to the record date, but which do not yet appear
on the records of the transfer agent. Stockholders may vote in person or by
proxy. Each holder of shares of common stock is entitled to one vote for each
share of stock held on the proposals presented in this Proxy Statement. There is
no cumulative voting in the election of our directors.
SOLICITATION OF PROXIES. We will pay the cost of soliciting proxies. In
addition to soliciting stockholders by mail and through our regular employees,
we will request banks and brokers, and other custodians, nominees and
fiduciaries, to solicit their customers who have our stock registered in their
names and will reimburse them for their reasonable, out-of-pocket costs. We may
use our officers, directors and others to solicit proxies, personally or by
telephone, facsimile or electronic mail, without additional compensation. We
have also retained Corporate Investor Communications, Inc. to assist in
obtaining proxies for the Annual Meeting from brokers, nominees of stockholders
and institutional investors. The estimated fee for such services, which is not
contingent on the outcome of the voting, is $9,000 plus out-of-pocket expenses.
VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies through the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with that specification. If you do
not indicate a choice on the proxy, your shares will be voted "FOR" all
nominees, "FOR" all other proposals described in this Proxy Statement and as the
proxy holders may determine in their discretion with respect to any other
matters that properly come before the meeting. See "Transaction of Other
Business." A stockholder giving a proxy has the power to revoke his or her
proxy, at any time prior to the time it is voted, by (i) delivering to 3Com's
Secretary either a written instrument revoking the proxy or a duly executed
proxy with a later date, or (ii) attending the meeting and voting in person.
QUORUM. The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
our common stock issued and outstanding on the Record Date. Shares that are
voted "FOR," "AGAINST," "WITHHELD" from or "ABSTAIN" from a matter are treated
as being present at the meeting for purposes of establishing a quorum and are
also treated as shares entitled to vote on that matter at the Annual Meeting
(the "Votes Cast").
<PAGE>
ABSTENTIONS. While there is no definitive statutory or case law authority
in Delaware as to the proper treatment of abstentions, we believe that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
Without controlling precedent to the contrary, we intend to treat abstentions in
this manner. Accordingly, abstentions will have the same effect as a vote
against the proposal.
BROKER NON-VOTES. We will count broker non-votes in determining the
presence or absence of a quorum for the transaction of business, but broker
non-votes will not be counted for purposes of determining the number of Votes
Cast on a particular proposal on which the broker has expressly not voted.
Accordingly, broker non-votes will not affect the outcome of the voting on a
proposal that requires a majority of the Votes Cast.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following
table sets forth certain information, as of the Record Date, with respect to the
beneficial ownership of 3Com's common stock by (i) each director and
director-nominee of 3Com; (ii) the Chief Executive Officer and each other
executive officer of 3Com included in the Summary Compensation Table; and (iii)
all current executive officers and directors of 3Com as a group.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON STOCK
NAME BENEFICIAL OWNERSHIP(1) OUTSTANDING
- --------------------------------------------- ----------------------- ------------
<S> <C> <C>
James L. Barksdale (2) 120,000 *
Gordon A. Campbell (3) 90,000 *
Casey G. Cowell (4) 1,808,519 *
James E. Cowie (5) 70,000 *
David W. Dorman (6) 111,000 *
Jean-Louis Gassee (7) 60,000 *
Philip C. Kantz (8) 124,004 *
Paul G. Yovovich (9) 276,150 *
William F. Zuendt (10) 407,000 *
Eric A. Benhamou (11) 1,777,879 *
Bruce L. Claflin (12) 181,541 *
Ralph B. Godfrey (13) 159,099 *
Richard W. Joyce (14) 272,456 *
Alan J. Kessler (15) 176,434 *
Janice Roberts (16) 502,107 *
All current directors and executive officers
as a group (25 persons) (17) 8,133,653 2.3
</TABLE>
- ------------------------
* Less than 1%
(1) To our knowledge, except as indicated in the footnotes to this table, the
persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to community property laws where applicable.
(2) Includes 60,000 shares subject to options held by Mr. Barksdale that are
exercisable within 60 days of the Record Date.
(3) Includes 90,000 shares subject to options held by Mr. Campbell that are
exercisable within 60 days of the Record Date.
(4) Includes 45,000 shares subject to options held by Mr. Cowell that are
exercisable within 60 days of the Record Date.
2
<PAGE>
(5) Includes 70,000 shares subject to options held by Mr. Cowie that are
exercisable within 60 days of the Record Date.
(6) Includes 111,000 shares subject to options held by Mr. Dorman that are
exercisable within 60 days of the Record Date.
(7) Includes 60,000 shares subject to options held by Mr. Gassee that are
exercisable within 60 days of the Record Date.
(8) Includes 83,000 shares subject to options held by Mr. Kantz that are
exercisable within 60 days of the Record Date.
(9) Includes 253,750 shares subject to options held by Mr. Yovovich that are
exercisable within 60 days of the Record Date.
(10) Includes 135,000 shares subject to options held by Mr. Zuendt that are
exercisable within 60 days of the Record Date.
(11) Includes 1,366,567 shares subject to options held by Mr. Benhamou that are
exercisable within 60 days of the Record Date.
(12) Includes 180,469 shares subject to options held by Mr. Claflin that are
exercisable within 60 days of the Record Date.
(13) Includes 122,162 shares subject to options held by Mr. Godfrey that are
exercisable within 60 days of the Record Date and 6,600 shares owned by
Mr. Godfrey's spouse.
(14) Includes 265,949 shares subject to options held by Mr. Joyce that are
exercisable within 60 days of the Record Date and 2,483 shares owned by
Mr. Joyce's spouse.
(15) Includes 176,434 shares subject to options held by Mr. Kessler that are
exercisable within 60 days of the Record Date.
(16) Includes 482,395 shares subject to options held by Ms. Roberts that are
exercisable within 60 days of the Record Date.
(17) Includes 5,278,791 shares subject to options held by 15 non-director
executive officers and 10 directors that are exercisable within 60 days of
the Record Date.
As of the Record Date, we did not know of any person who was the beneficial
owner of more than 5% of 3Com's common stock.
3
<PAGE>
ELECTION OF DIRECTORS
The number of directors authorized by 3Com's bylaws is to be fixed by the
board of directors. The exact number is currently fixed at 10. Our bylaws
provide that the directors shall be divided into two classes, with the classes
of directors serving for staggered two-year terms. Class I currently has five
members. A stockholder may not cast votes for more than five nominees. The five
Class I directors to be elected at the 1999 Annual Meeting are to be elected to
hold office until the year 2001 Annual Meeting and until their successors have
been elected and qualified.
3Com's nominees for election at the Annual Meeting of Stockholders to Class
I of the board of directors are Messrs. Cowell, Dorman, Gassee, Yovovich and
Zuendt. If a nominee declines to serve or becomes unavailable for any reason
(although the board of directors knows of no reason to anticipate that this will
occur), the proxies may be voted for such substitute nominee as the board of
directors may designate.
VOTE REQUIRED
If a quorum is present and voting at the Annual Meeting, the five nominees
for Class I director receiving the highest number of affirmative votes will be
elected as Class I directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum, but have no other
legal effect under Delaware law.
NOMINEES AND OTHER DIRECTORS
The following table sets forth the name and age of each nominee and each
director of 3Com whose term of office continues after the Annual Meeting, the
principal occupation of each during the past five years and the period during
which each has served as a director of 3Com. Each nominee is currently serving
as a director of 3Com.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR A TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME DURING PAST FIVE YEARS AGE SINCE
- ------------------------- --------------------------------------------- --- -----------
<S> <C> <C> <C>
Casey G. Cowell Mr. Cowell has been a private investor since 46 1997
June 1997. Mr. Cowell founded U.S. Robotics
Corporation ("USR") in 1976 and served as
Vice Chairman of 3Com from June 1997 to
November 1997. From 1978 until 3Com's
combination with USR in June 1997, Mr. Cowell
served as Chairman of the Board, Chief
Executive Officer and a director of USR. He
also served as President of USR from 1978
until January 1997.
David W. Dorman Mr. Dorman has been Chief Executive Officer 45 1995
of AT&T-B.T. Global Venture since May 1999.
Prior to that, he served as Chief Executive
Officer and President of PointCast, Inc., an
Internet news service, since November 1997,
and as Chairman of PointCast, Inc. since
February 1998. Mr. Dorman served as Executive
Vice President of SBC Communications, Inc.
("SBC"), a diversified telecommunications
company, from August 1997 to November 1997.
Mr. Dorman had been President and Chief
Executive Officer of Pacific Bell Corporation
since July 1994, and Chairman since March
1996, until Pacific Bell Corporation was
acquired by SBC in August 1997. Prior to
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME DURING PAST FIVE YEARS AGE SINCE
- ------------------------- --------------------------------------------- --- -----------
<S> <C> <C> <C>
that, Mr. Dorman was associated with Sprint
Corporation, a communications company, for 13
years, during which time he held several
management positions, most recently as
President of Sprint Business Services from
1993 to 1994. Mr. Dorman is also a director
of Scientific Atlanta, Inc., Science
Applications International Corp. and E-Tek
Dynamics, Inc.
Jean-Louis Gassee Mr. Gassee is the Chairman of the Board and 55 1993
Chief Executive Officer of Be, Incorporated,
a personal computing technology company which
he founded in October 1990. Mr. Gassee is
also a director of Electronics For Imaging,
Inc. and Logitech Inc.
Paul G. Yovovich Mr. Yovovich is a private investor. Mr. 45 1997
Yovovich was a director of USR from 1991
until 3Com's combination with USR in June
1997. Mr. Yovovich served as President of
Advance Ross Corporation, an international
financial services company, from 1993 to
1996. Mr. Yovovich also serves as a director
of Focal Communications Corporation, Comarco,
Inc., APAC Customer Services and the Van
Kampen Open End Funds.
William F. Zuendt Mr. Zuendt retired from his position as 52 1988
President and Chief Operating Officer of
Wells Fargo & Company and Wells Fargo Bank in
July 1997. Mr. Zuendt joined Wells Fargo in
1973. Mr. Zuendt is also a director of Advent
Software, Inc.
INCUMBENT CLASS II DIRECTORS SERVING FOR A TERM EXPIRING IN 2000
James L. Barksdale Mr. Barksdale has been a managing partner at 56 1987
The Barksdale Group since he founded it in
April 1999. Prior to that, he served as
President, Chief Executive Officer and a
director of Netscape Communications
Corporation, an Internet browser company,
from January 1995 to April 1999. Previously,
Mr. Barksdale had been President and Chief
Executive Officer of AT&T Wireless Services
since September 1994. From 1992 to September
1994, Mr. Barksdale had been employed as the
President and Chief Operating Officer of
McCaw Cellular Communications, Inc., and from
1979 to 1992 by Federal Express Corporation.
Mr. Barksdale also serves as a director of
Robert Mondavi Corporation, Sun Microsystems,
Inc., America Online, Inc., Liberate
Technologies, Homegrocer.com, Inc. and
Respond.com, Inc.
Eric A. Benhamou Mr. Benhamou has been 3Com's Chief Executive 43 1990
Officer since September 1990 and also served
as 3Com's President from April 1990 through
August 1998. Mr. Benhamou has been 3Com's
Chairman of the Board of Directors since July
1994. Mr. Benhamou served as 3Com's Chief
Operating
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME DURING PAST FIVE YEARS AGE SINCE
- ------------------------- --------------------------------------------- --- -----------
<S> <C> <C> <C>
Officer from April 1990 through September
1990. From October 1987 through April 1990,
Mr. Benhamou held various general management
positions within 3Com. Mr. Benhamou also
serves as Chairman of the Board of Cypress
Semiconductor, Inc., and as a director of
Legato Systems, Inc. Mr. Benhamou is a member
of President Clinton's Information Technology
Advisory Council.
Gordon A. Campbell Mr. Campbell is the founder and, since 1993, 55 1990
has been President and Chairman of the Board
of Techfarm, Inc., a company formed to launch
technology-based start-up companies. Mr.
Campbell was the founder of Chips and
Technologies, Inc., a company that designs
and distributes very large scale integrated
circuit products, and served as its President
and Chief Executive Officer from December
1984 until November 1993, and as its Chairman
of the Board from December 1984 until
November 1995. Mr. Campbell also serves as a
director of Bell Microproducts, Inc., and as
Chairman of the Board of 3D/Fx Interactive
Inc.
James E. Cowie Mr. Cowie has been a general partner of 44 1997
Frontenac Company, a private equity
investment firm, since 1989. Mr. Cowie served
as a director of USR from March 1994 until
3Com's combination with USR in June 1997, at
which time he became a director of 3Com.
Philip C. Kantz Mr. Kantz has been President, Chief Executive 55 1992
Officer and a director of TAB Products Co., a
provider of automated file management
systems, since January 1997. He served as
President, Chief Operating Officer and a
director of Trans Ocean Ltd., a privately
held transportation equipment leasing
company, from October 1995 to October 1996.
In 1995, he served as President and Chief
Executive Officer of The Sandros Enterprise,
a private consulting firm. From February 1994
to January 1995, he served as President,
Chief Executive Officer and a director of
Transcisco Industries, Inc., an industrial
services company. From October 1992 through
September 1993, Mr. Kantz served as President
and Chief Executive Officer of Genetrix, Inc.
Mr. Kantz also serves as a director of
Franklin Opthalmic Instruments Co., Inc.
</TABLE>
6
<PAGE>
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended May 28, 1999, our board of directors held eight
meetings, which included four regular meetings, two special meetings and two
strategy planning meetings. We currently have an audit committee and a
compensation committee. We do not have a nominating committee or a committee
performing the similar functions of a nominating committee.
During fiscal 1999, our audit committee met four times. The audit committee
makes recommendations to the board of directors regarding engagement of our
independent public accountants, approves services rendered by such accountants,
reviews the activities and recommendations of our internal audit department, and
reviews and evaluates our accounting systems, financial controls and financial
personnel. Messrs. Cowie, Dorman and Zuendt constitute the audit committee.
During fiscal 1999, our compensation committee met nine times. Eric A.
Benhamou, Chairman and Chief Executive Officer, often attends meetings of the
compensation committee, but is not a member of the committee and is not entitled
to vote. The compensation committee reviews salaries and other compensation
arrangements for 3Com officers and other key employees, reviews the
administration of our stock option and stock purchase plans, and advises the
board of directors on general aspects of our compensation and benefit policies.
Messrs. Kantz and Yovovich constitute the compensation committee. For additional
information concerning the compensation committee, see "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION."
During fiscal 1999, Mr. Barksdale attended fewer than 75% of the total
number of meetings of the board of directors. Also, Mr. Cowie attended fewer
than 75% of the aggregate of the total number of meetings of the board of
directors and the audit committee.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
(i) 3Com's Chief Executive Officer, and (ii) the five other most highly
compensated executive officers of 3Com (based on salary plus bonus for fiscal
1999) who were serving as such at the end of fiscal 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------------------- ----------------------------------------
OTHER ANNUAL RESTRICTED STOCK SECURITIES
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS UNDERLYING OPTIONS
PRINCIPAL POSITION YEAR ($) ($)(1) ($) ($) (#)
- ----------------------------------- ------ -------- ------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 1999 $750,000 -- -- -- 273,425
Chairman and Chief Executive 1998 742,500 $75,008 -- -- 117,000
Officer 1997 645,789 42,381 -- -- 150,000
Bruce L. Claflin 1999 528,127 -- $320,559(3) -- 770,000
President and Chief Operating 1998 -- -- -- -- --
Officer (2) 1997 -- -- -- -- --
Ralph B. Godfrey 1999 443,750 -- -- -- 84,675
Senior Vice President, e-Commerce 1998 350,000 28,593 -- -- 118,000
1997 299,299 -- -- $827,500(4) --
Richard W. Joyce 1999 406,165 -- -- -- 111,335
Senior Vice President, Worldwide 1998 266,240 21,985 -- -- 159,250
Sales 1997 285,598 -- -- -- 60,000
Alan J. Kessler 1999 400,000 -- -- -- 83,500
President, Palm Computing, 1998 395,833 29,673 -- -- 52,000
Inc. (5) 1997 330,476 21,158 -- -- 72,000
Janice Roberts 1999 400,000 -- -- 420,938(6) 113,835
Senior Vice President, Marketing 1998 383,333 26,666 -- -- 70,000
and Business Development 1997 287,334 61,130 -- -- 60,000
</TABLE>
- ------------------------
(1) The amount shown includes payments made under 3Com's company-wide
profit-sharing plan known as 3BONUS or 3SHARE. Under that plan, 3Com
expensed approximately two and one-half percent of our income before taxes
in fiscal 1999, three and one-half percent of our income before taxes in
fiscal 1998 and three percent of our income before taxes in fiscal 1997,
after adjustments for certain unusual or nonrecurring income or expense
items. We distributed these amounts at six-month intervals to all employees
worldwide (other than those who are paid commissions), including executive
officers, with the individual payments determined pro rata based on salary
level. None of the 3Com executives received payments from the 3BONUS plan in
fiscal 1999.
(2) In August 1998, Bruce Claflin began serving as President of 3Com, succeeding
Mr. Benhamou, who continues to serve as Chairman of the Board and Chief
Executive Officer.
(3) Includes $294,632 which represents the loss realized by 3Com on the sale of
Mr. Claflin's house in connection with his relocation.
(4) Represents the value of 20,000 shares of restricted stock received by Mr.
Godfrey on August 1, 1996. The closing price of 3Com's stock on that day was
$41.375. The restricted stock vests in equal annual increments over a four
(4) year period.
(5) Prior to June 24, 1999, Mr. Kessler was our Senior Vice President of Global
Customer Service.
8
<PAGE>
(6) Represents the value of 15,000 shares of restricted stock received by Ms.
Roberts on July 22, 1998. The closing price of 3Com's stock on that day was
$28.0625. The restricted stock vests in equal annual increments over a four
(4) year period.
The following table provides information concerning grants of options to
purchase our common stock made during fiscal 1999 to the executive officers
listed in the Summary Compensation Table:
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE PRICE FOR OPTION TERM(4)
OPTIONS FISCAL YEAR PER SHARE EXPIRATION --------------------------
NAME GRANTED(#)(1) 1999(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ----------------------------------- ------------- ------------ -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 175,000 * $24.0000 6/1/08 $ 2,641,357 $ 6,693,718
54,675 * 25.5000 9/1/08 876,813 2,222,016
43,750 * 38.6875 11/30/08 1,064,453 2,697,534
Bruce L. Claflin 560,000 2.9569 28.8750 7/13/08 10,169,226 25,770,816
140,000 * 28.0625 7/22/08 2,470,770 6,261,416
21,875 * 25.5000 9/1/08 350,805 889,009
48,125 * 38.6875 11/30/08 1,170,899 2,967,287
Ralph B. Godfrey 52,500 * 24.0000 6/1/08 792,407 2,008,116
20,050 * 25.5000 9/1/08 321,538 814,841
12,125 * 38.6875 11/30/08 295,006 747,602
Richard W. Joyce 70,000 * 24.0000 6/1/08 1,056,543 2,677,487
23,835 * 25.5000 9/1/08 382,237 968,665
17,500 * 38.6875 11/30/08 425,781 1,079,013
Alan J. Kessler 52,500 * 24.0000 6/1/08 792,407 2,008,116
17,875 * 25.5000 9/1/08 286,658 726,448
13,125 * 38.6875 11/30/08 319,336 809,260
Janice Roberts 70,000 * 24.0000 6/1/08 1,056,543 2,677,487
23,835 * 25.5000 9/1/08 382,237 968,665
20,000 * 38.6875 11/30/08 486,607 1,233,158
</TABLE>
- ------------------------
* Less than 1%
(1) All of the above options are subject to the terms of our 1983 Stock Option
Plan (the "1983 Option Plan") or 1994 Stock Option Plan (the "1994 Option
Plan") and are exercisable only as they vest. The options granted to each
executive officer vest and become exercisable in equal annual increments
over a four (4) year period provided the optionee continues to be employed
by us.
(2) Based on a total of 18,938,977 shares granted to all employees in fiscal
1999.
(3) All options were granted at an exercise price equal to the fair market value
of our common stock on the date of grant.
(4) Potential realizable values are net of exercise price, but before deduction
of taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only, based on the Securities and Exchange Commission
rules, and do not represent our estimate of future stock prices. No gain to
an optionee is possible without an increase in stock price, which will
benefit all stockholders commensurately. A zero percent gain in stock price
will result in zero dollars for the optionee. Actual realizable values, if
any, on stock option exercises are dependent on the future performance of
our common stock, overall market conditions and the option holders'
continued employment through the vesting period.
9
<PAGE>
The following table provides the specified information concerning option
exercises during fiscal 1999 and the exercisable and unexercisable options held
as of May 28, 1999, by the executive officers listed in the Summary Compensation
Table:
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 5/28/99 (#) 5/28/99(1) ($)
ACQUIRED ON VALUE --------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 200,000 $ 8,625,498 1,162,398 516,175 $15,530,295 $678,786
Bruce L. Claflin -- -- -- 770,000 -- 39,648
Ralph B. Godfrey -- -- 50,524 222,175 310,573 403,997
Richard W. Joyce 60,000 2,039,217 151,678 329,273 89,770 526,951
Alan J. Kessler 30,000 810,894 98,840 187,500 -- 206,305
Janice Roberts -- -- 390,436 232,335 3,918,254 275,076
</TABLE>
- ------------------------
(1) Based on a fair market value of $27.3125 per share as of May 28, 1999, the
closing sale price of our common stock on that date as reported by the
Nasdaq National Market System.
EMPLOYMENT, SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
We have entered into Management Retention Agreements with Mr. Benhamou, Mr.
Claflin, Mr. Godfrey, Mr. Joyce, Mr. Kessler and Ms. Roberts and other senior
executives of 3Com. Under the terms of these agreements, if, within 24 months in
the case of Messrs. Benhamou and Claflin (or 12 months in the case of the other
officers) of a Change of Control, one of these officers is involuntarily
terminated other than for cause or voluntarily terminates his or her employment
for good reason, he or she will receive: (i) a lump-sum payment equal to 200%
(in the case of Messrs. Benhamou and Claflin) or 100% (in the case of the other
officers) of such officer's annual base salary and target bonus, based on
reaching 100% of the target; (ii) continued coverage of such officer's benefits
until the earlier of two years from the date of termination or the officer
receives comparable benefits from another employer; (iii) a bonus payment equal
to the pro-rata share of his or her target bonus; and (iv) the acceleration in
full of his or her stock options. If such officer's employment is terminated for
any other reason, the officer will receive severance or other benefits only to
the extent he or she would be entitled to receive those benefits under 3Com's
then existing severance or benefit plans or pursuant to any other written
agreement. If the benefits provided under the agreement constitute parachute
payments under Section 280G of the Internal Revenue Code and are subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, then Messrs.
Benhamou and Claflin shall receive (i) a payment sufficient to pay such excise
tax and (ii) an additional payment sufficient to pay the taxes arising as a
result of such payments, and the other officers shall either pay the excise tax
or have their benefits reduced so that the excise tax is not triggered,
whichever is economically superior to them.
As defined in the agreements, a "Change in Control" means: (i) the
acquisition by any person of 50% or more of the total voting power of our then
outstanding securities; (ii) the consummation of the sale or disposition of all
or substantially all of our assets; (iii) the consummation of a merger or
consolidation of 3Com where the outstanding securities immediately prior thereto
no longer represent at least 50% of the voting power immediately after such
merger or consolidation; (iv) a change in the composition of the board of
directors during any two consecutive years, such that a majority consists of
persons who are not either directors who were in office when the agreement was
entered into or whose nominations were approved by a majority of the directors
who were in office not in connection with a transaction described in (i) through
(iii) above; or (v) the sale or disposition to third parties (other than
pursuant to a spin-off or
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<PAGE>
similar transaction) of all or substantially all of any major business division.
Moreover, we have entered into similar agreements with other executive officers
that provide lesser benefits upon similar trigger events.
Options granted under the 1994 Option Plan contain provisions pursuant to
which outstanding options must either become fully vested and immediately
exercisable prior to a "transfer of control" transaction or must be assumed in
the transaction, and all unexercised options terminate to the extent they are
not assumed upon such "transfer of control" as defined under the 1994 Option
Plan. For purposes of the 1994 Option Plan, a transfer of control is a change in
ownership in which our stockholders immediately prior to the ownership change do
not retain, directly or indirectly, at least a majority of the beneficial
interest in our voting stock after the ownership change.
Options granted under the 1983 Option Plan and the 1994 Option Plan have
their vesting accelerated as to 50% of the unvested shares subject thereto if an
executive or employee optionee is terminated without cause within 12 months
after a "transfer of control" transaction.
Options granted under the 3Com Corporation Director Stock Option Plan (the
"Director Plan") contain provisions pursuant to which all outstanding options
granted under the Director Plan will become fully vested and immediately
exercisable upon a merger or acquisition of 3Com where 3Com is not the survivor
or upon the sale of substantially all of the assets of 3Com.
In fiscal 1999, we made severance payments pursuant to employment agreements
with Richard Edson and Ross W. Manire, former employees of 3Com.
COMPENSATION OF DIRECTORS
Members of the board who are not 3Com employees received an annual retainer
during fiscal 1999 as follows: lead director of the board: $30,000; audit
committee members: $25,000 each; compensation committee members: $25,000 each;
other directors: $20,000 each; plus reimbursement of travel expenses by members
of the board who reside outside of the local area.
Outside directors receive options to purchase common stock pursuant to the
Director Plan. The Director Plan provides for the initial automatic grant of an
option to purchase shares of our common stock to each director of 3Com who is
not a 3Com employee ("outside director"), with a maximum of 60,000 shares to be
subject to each such option (or 80,000 shares for the "lead" director). In
addition, each outside director is automatically granted an option to purchase
shares of our common stock upon becoming a member of the audit or compensation
committee, with a maximum of 24,000 shares to be subject to each such option.
The actual number of shares to be subject to the options granted for board of
directors and committee service is established by the board of directors. All
options have a five-year term, are immediately exercisable (subject to 3Com's
right to repurchase any unvested shares) and vest over two years as long as the
option holder continues to serve on the board of directors or a committee. An
additional option to purchase the number of shares of our common stock then
established by the director stock option committee is automatically granted to
each outside director following the vesting in full of the option previously
received. During fiscal 1999, options were granted under the Director Plan for
the following number of shares and at the exercise prices shown: Mr. Campbell:
30,000 shares at a per share exercise price of $30.4375; Mr. Dorman: 5,000
shares at a per share exercise price of $30.4375; and Mr. Zuendt: 45,000 shares
at a per share exercise price of $30.4375.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, Messrs. Kantz and Yovovich served as members of the
compensation committee of 3Com's board of directors.
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our executive officers, directors and persons who beneficially own more
than 10% of our common stock to file initial reports of ownership and reports of
changes in ownership with the SEC. These persons are required by SEC regulations
to furnish 3Com with copies of all Section 16(a) forms filed by such persons.
Based on our review of such forms furnished to us and written
representations from certain reporting persons, we believe that, with the
following exceptions, all filing requirements applicable to our executive
officers, directors and more than 10% Stockholders were complied with during
fiscal 1999: John F. McClelland and Steve Rowley each failed to file their Form
3 on a timely basis.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
In the current business environment, 3Com faces intense competition for
executives who can master the unique challenges and opportunities of the
converged networking market. Our compensation program's goals are to:
- enable us to attract, retain and motivate highly-qualified executive
officers who can provide operational and strategic excellence that will
produce on-going success;
- align compensation for the executive officers with 3Com's business
objectives and performance; and
- align incentives for executive officers with the interests of stockholders
to maximize stockholder value.
In designing executive compensation for fiscal 2000, we retained an outside
consultant to perform a comprehensive assessment of compensation for our Chief
Executive Officer and other executive officers. The services rendered by the
consultant to the compensation committee included surveying competitors'
practices, assessing the mix of compensation components relative to competitive
practices, evaluating the linkage between pay and performance, and recommending
compensation strategies.
We emphasize performance-based compensation that is competitive with the
marketplace, and the importance of clearly communicating performance objectives.
We annually review our compensation practices by comparing them to surveys of
other companies against which we compete in business or for talent, and other
companies of comparable size and complexity. We then set objective compensation
parameters based on this review.
Our compensation program for all employees includes both cash-and
equity-based elements. Because it is most directly linked to our stockholders'
interests, equity-based compensation is emphasized in the design of our
compensation programs. Consistent with competitive practices, we also use a cash
bonus plan based on achievement of financial performance objectives. However,
for fiscal 1999, we emphasized long-term equity incentives and did not provide a
cash bonus program for executives. In fiscal 2000, 3Com executives will
participate in a short-term cash bonus incentive targeted at market median
levels.
CASH COMPENSATION
SALARY. We set a base salary range for each executive officer, including
the Chief Executive Officer, by reviewing the base salary for comparable
positions of a broad peer group, including competing companies similar in size
and companies against which we compete in business or for talent. Base pay is
targeted between the midpoint and the 60th percentile of market on the basis of
external salary data from independent surveys. We set individual salaries for
each executive officer relative to this range based on
12
<PAGE>
sustained individual performance, contribution to our results, and internal
comparison of duties and responsibilities.
CASH BONUS. We did not provide any cash bonus program for executives in
fiscal 1999 because the substitution of an equity bonus opportunity provided
greater focus on delivering long-term results. In order to recruit, retain and
motivate executives with market-competitive incentives in the current business
environment, in fiscal 2000, there will be a cash bonus program for executives,
based on performance, which will be targeted at market median levels.
EQUITY-BASED COMPENSATION
Options granted to executive officers are subject to vesting over time.
Initial or "new-hire" options are typically granted to executive officers when
they first join 3Com. Thereafter, options may be granted to each executive
officer if specified performance goals are achieved ("performance options"). The
relevant performance goals and range of potential option grants are established
by the board of directors and communicated early in each fiscal year.
Performance options focus the efforts of executive officers on achieving our
critical operational targets, including revenue performance and earnings per
share, that will enhance our value in the marketplace. All options that we grant
are issued with an exercise price at the then-current fair market value and thus
become valuable and exercisable only if the executive officer continues to serve
at 3Com and the price of our stock subsequently increases.
In order to enhance retention of key executives, we changed the timing of
fiscal 1999 performance option grants. Half of the target grants for this
program were awarded at the beginning of the fiscal year. Additional option
grants could be earned and awarded on the basis of achieving revenue and
earnings per share targets for each quarter during the fiscal year. The number
of additional options granted depended upon the percentage of the performance
objectives that were achieved by the officers and the company. For fiscal 2000,
we will continue the same grant pattern and practice, based on targets for
revenue and economic value added.
In fiscal 1999, executive bonus option grants were awarded for the first,
second and fourth quarters.
CEO COMPENSATION
The Chief Executive Officer's salary and performance stock option grants
follow the policies set forth above. Mr. Benhamou's base salary for fiscal 1999
was $750,000. For fiscal 2000, Mr. Benhamou's base salary will continue to be
$750,000, and any cash bonus compensation in fiscal 2000 will be based upon
achieving performance objectives as set forth in the executive cash bonus plan.
For fiscal 2000, Mr. Benhamou's target annual incentive will be consistent with
market cash incentives. Mr. Benhamou's compensation package was designed to be
strongly aligned with the interests of stockholders by making his short-term
cash incentives and long-term equity incentives directly tied to achieving
specific targets.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Philip C. Kantz
Paul G. Yovovich
13
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the cumulative total return on our
common stock with the cumulative total return of the Standard & Poor's 500 Stock
Index and the Standard & Poor's Technology Sector Index (1) for the period
commencing on May 31, 1994 and ending on May 28, 1999 (fiscal year end)(2).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
3COM CORPORATION S&P 500 S&P TECHNOLOGY SECTOR
<S> <C> <C> <C>
May 31, 1994 $100 $100 $100
May 31, 1995 $272 $120 $144
May 31, 1996 $419 $154 $191
May 31, 1997 $413 $200 $277
May 31, 1998 $216 $261 $346
May 28, 1999 $232 $316 $561
</TABLE>
DATA POINTS FOR PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MAY 31, MAY 28,
------------------------------- -------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
3Com 100 272 419 413 216 232
S&P 500 100 120 154 200 261 316
S&P Technology Sector 100 144 191 277 346 561
</TABLE>
- ------------------------
(1) The S&P Technology Sector Index was previously called the S&P High Tech
Composite Index.
(2) Assumes that $100.00 was invested on May 31, 1994 in our common stock and
each index, and that all dividends were reinvested. No cash dividends have
been declared on our common stock. On August 16, 1994, we effected a 2-for-1
stock split (payable in the form of a 100% stock dividend) on each
outstanding share. On August 4, 1995, we effected a further 2-for-1 stock
split (payable in the form of a 100% stock dividend) on each outstanding
share. Our cumulative total return for the fiscal years prior to the stock
split has been adjusted to take into account the stock splits. Stockholder
returns over the indicated period should not be considered indicative of
future stockholder returns.
14
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has selected Deloitte & Touche LLP as our independent
public accountants for the fiscal year ending June 2, 2000. Deloitte & Touche
LLP has acted in this capacity since its appointment in fiscal 1980. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting,
will be given the opportunity to make a statement, if he or she so desires, and
will be available to respond to appropriate questions.
In the event ratification by the stockholders of the appointment of Deloitte
& Touche LLP as our independent public accountants is not obtained, the board of
directors will reconsider such appointment.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast is required for
approval of this proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 2, 2000.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders that are intended for inclusion in our proxy
statement relating to the 2000 Annual Meeting of Stockholders must be received
by us at our offices at 5400 Bayfront Plaza, Santa Clara, California 95052-8145,
not later than June 23, 2000, and must satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals in order to be
included in our proxy statement for that meeting. Stockholder proposals that are
not intended to be included in our proxy materials for such meeting but that are
intended to be presented by the stockholder from the floor are subject to the
advance notice procedures described below under "Transaction of Other Business."
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the board of
directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
Any stockholder may present a matter from the floor for consideration at a
meeting so long as certain procedures are followed. Under our bylaws, in order
for a matter to be deemed properly presented by a stockholder, timely notice
must be delivered to us, or mailed and received by us, not later than 90 days
prior to the next Annual Meeting (under the assumption that the next Annual
Meeting will occur on the same calendar day as the day of the most recent Annual
Meeting). As to each proposed matter, the notice must include the following: (a)
a brief description of the business desired to be brought before the meeting and
reasons for conducting such business at the meeting; (b) the name and address,
as they appear on our books, of the stockholder proposing such business; (c) the
class and number of shares of our stock that are beneficially owned by the
stockholder; and (d) any material interest of the stockholder in such business.
The presiding officer of the meeting may refuse to acknowledge any matter not
made in compliance with the foregoing procedure.
By Order of the Board of Directors
[SIGNATURE]
Mark D. Michael
SECRETARY
August 19, 1999
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<PAGE>
700202-001
1610-PS-99
<PAGE>
3COM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Eric A. Benhamou and Mark D. Michael, and
either of them, as proxyholders and attorneys-in-fact of the undersigned, with
full power of substitution, to vote all shares of stock that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of 3Com Corporation, to
be held at 5400 Bayfront Plaza, Building 5, Santa Clara, California 95052-8145
on Thursday, September 23, 1999 at 10:30 a.m., local time, and at any
continuation or adjournment thereof, with all the powers that the undersigned
would have if personally present at the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement, dated August 19, 1999, and a copy of 3Com's 1999 Annual
Report to Stockholders. The undersigned hereby expressly revokes any and all
proxies heretofore given or executed by the undersigned with respect to the
shares of stock represented by this Proxy and, by filing this Proxy with the
Secretary of 3Com, gives notice of such revocation.
WHERE NO CONTRARY CHOICE IS INDICATED BY THE STOCKHOLDER, THIS PROXY, WHEN
RETURNED, WILL BE VOTED FOR EACH NOMINEE SET FORTH BELOW, FOR THE RATIFICATION
OF ACCOUNTANTS AND WITH DISCRETIONARY AUTHORITY UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE TIME IT IS VOTED.
<PAGE>
/X/ Please mark votes
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
1. Election of five Class I
directors to serve a
two-year term expiring
in 2001.
Nominees:
Casey G. Cowell
David W. Dorman
Jean-Louis Gassee
Paul G. Yovovich
William F. Zuendt
FOR WITHHELD
all nominees from all
nominees
/ / / /
/ / _________________________________________
For all nominees except those written on the
line above.
2. To ratify the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as independent public / / / / / /
accountants for the fiscal year ending
June 2, 2000.
3. With discretionary authority, upon such FOR AGAINST ABSTAIN
other matters as may properly come / / / / / /
before the meeting.
Please date and sign exactly as your name or names appear herein. Corporate or
partnership proxies should be signed in full corporate or partnership name by an
authorized person. Persons signing in a fiduciary capacity should indicate their
full title in such capacity.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature: _______________________________________ Date:______________________
Signature: _______________________________________ Date:______________________
<PAGE>
[3COM LOGO]
VOTING INSTRUCTIONS FOR BENEFICIAL STOCKHOLDERS OF 3COM CORPORATION
YOUR VOTE IS IMPORTANT
<TABLE>
<S> <C>
VOTE BY INTERNET: VOTE BY TELEPHONE:
It's fast and convenient. It's fast and convenient.
The web site address is Call toll free on a touch tone phone using the
http://www.proxyvote.com 800 number shown on your Proxy Card.
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy Statement. 1. Read the accompanying Proxy Statement and
Proxy Card.
2. Go to http://www.proxyvote.com 2. Call the toll free number shown on your
Proxy Card.
3. Enter your 12 digit control number listed 3. Enter your 12 digit control number listed
on your Proxy Card. on your Proxy Card.
4. Follow the instructions shown. 4. Follow the recorded instructions.
</TABLE>
PLEASE DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY INTERNET OR TELEPHONE.
