SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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3Com Corporation
________________________________________________________________________________
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________________________________________________________________________________
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<PAGE>
[LOGO](TM)
3COM
5400 Bayfront Plaza
Santa Clara, California 95052-8145
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 28, 2000
To The Stockholders:
Our Annual Meeting of Stockholders will be held on Thursday, September 28,
2000, at 10:30 a.m. at the 3Com facility located at 5400 Bayfront Plaza,
Building 5, Santa Clara, California. The purpose of the meeting is to:
1. Elect five (5) Class II directors to hold office for a two-year term.
2. Approve an increase in the share reserve under the Company's 1984
Employee Stock Purchase Plan by 9,200,000 shares.
3. Ratify the appointment of Deloitte & Touche LLP as our independent
public accountants for the fiscal year ending June 1, 2001.
4. Consider a stockholder proposal.
5. Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on August 9, 2000 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,
Building 1, Santa Clara, California 95052.
By Order of the Board of Directors,
Mark D. Michael
Secretary
August 28, 2000
Santa Clara, California
--------------------------------------------------------------------------------
IMPORTANT: Please fill in, date, sign and promptly mail the
enclosed proxy card in the accompanying post-paid envelope
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
("3Com"), is soliciting the accompanying proxy for use at our Annual Meeting of
Stockholders ("Annual Meeting") to be held on Thursday, September 28, 2000, 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 28, 2000, 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 financial statements
and related information are included with our fiscal 2000 Annual Report to
Stockholders, which is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of business
on August 9, 2000 (the "Record Date") will be entitled to vote at the meeting
and any adjournment. As of the Record Date, there were 348,973,617 shares of
3Com's common stock issued and outstanding. Stockholders may vote in person or
by proxy. Each holder of shares of common stock is entitled to one vote on the
proposals presented in this Proxy Statement for each share of stock held. 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" the increase in shares under the Company's 1984 Employee Stock
Purchase Plan, "FOR" the ratification of independent public accountants and
"AGAINST" the stockholder proposal. The shares will be voted 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" or "WITHHELD 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>
Casey G. Cowell (2)................................................. 4,659,781 1.3
James E. Cowie (3).................................................. 337,898 *
David W. Dorman (4)................................................. 313,358 *
Jean-Louis Gassee (5)............................................... 204,813 *
Philip C. Kantz (6)................................................. 586,603 *
James R. Long (7)................................................... 144,813 *
Jan Peters (8)...................................................... 144,813 *
Paul G. Yovovich (9)................................................ 1,247,278 *
William F. Zuendt (10).............................................. 706,996 *
Eric A. Benhamou (11)............................................... 8,662,936 2.4
Bruce L. Claflin (12)............................................... 4,574,835 1.3
Ralph B. Godfrey (13)............................................... 842,292 *
Edgar Masri (14).................................................... 842,340 *
Christopher B. Paisley (15)......................................... 2,404,976 *
Janice Roberts (16)................................................. 1,210,587 *
All current directors and executive officers as a group (26 persons) (17) 22,578,547 6.1
</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 2,896,262 shares subject to options held by Mr. Cowell that are
exercisable within 60 days of the Record Date.
(3) Includes 337,898 shares subject to options held by Mr. Cowie that are
exercisable within 60 days of the Record Date.
(4) Includes 180,813 shares subject to options held by Mr. Dorman that are
exercisable within 60 days of the Record Date.
(5) Includes 144,813 shares subject to options held by Mr. Gassee that are
exercisable within 60 days of the Record Date.
(6) Includes 569,599 shares subject to options held by Mr. Kantz that are
exercisable within 60 days of the Record Date. Also includes 31,004 shares
held in the Philip C. and Barbara J. Kantz Trust, Philip C. Kantz and
Barbara J. Kantz, trustees.
(7) Includes 144,813 shares subject to options held by Mr. Long that are
exercisable within 60 days of the Record Date.
2
<PAGE>
(8) Includes 144,813 shares subject to options held by Ms. Peters that are
exercisable within 60 days of the Record Date.
(9) Includes 1,224,878 shares subject to options held by Mr. Yovovich that are
exercisable within 60 days of the Record Date.
(10) Includes 656,301 shares subject to options held by Mr. Zuendt that are
exercisable within 60 days of the Record Date. Also includes 312,000 shares
held in the Zuendt Family Trust, William F. Zuendt and Diane E. Zuendt,
trustees.
(11) Includes 5,773,289 shares subject to options held by Mr. Benhamou that are
exercisable within 60 days of the Record Date.
(12) Includes 1,606,945 shares subject to options held by Mr. Claflin that are
exercisable within 60 days of the Record Date.
(13) Includes 138,778 shares subject to options held by Mr. Godfrey that are
exercisable within 60 days of the Record Date.
(14) Includes 231,471 shares subject to options held by Mr. Masri that are
exercisable within 60 days of the Record Date. Also includes 3,706 shares
held in the Masri Family Trust, Edgar Masri and Sinikka Masri, trustees;
and 2,091 shares held jointly by Edgar Masri, Elias Masri and Wadad Masri.
(15) Includes 1,559,067 shares subject to options held by Mr. Paisley that are
exercisable within 60 days of the Record Date.
(16) Includes 516,871 shares subject to options held by Ms. Roberts that are
exercisable within 60 days of the Record Date. Ms. Roberts served as Senior
Vice President, Global Marketing and Business Development until June 2,
2000; she is no longer an employee of 3Com.
(17) Includes 19,745,370 shares subject to options held by 16 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 is 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 ten. Our Bylaws
provide that the directors shall be divided into two classes, with the classes
of directors serving for staggered two-year terms. Class II currently has five
members. A stockholder may not cast votes for more than five nominees. The five
Class II directors to be elected at the Annual Meeting are to be elected to hold
office until the fiscal 2002 Annual Meeting and until their successors have been
elected and qualified.
3Com's nominees for election at the Annual Meeting to Class II of the Board
of Directors are Messrs. Benhamou, Cowie, Kantz, Long and Peters. 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 II director receiving the highest number of affirmative votes will be
elected as Class II 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. There are no family relationships among any directors or
executive officers.
Nominees for Election as Class II Directors for a Term Expiring in 2002
<TABLE>
<CAPTION>
Director
Name Principal Occupation During Past Five Years Age Since
---------------- ------------------------------------------------------------------ --- --------
<S> <C> <C> <C>
Eric A. Benhamou Mr. Benhamou has been Chief Executive Officer since September 1990 44 1990
and served as President from April 1990 through August 1998. Mr.
Benhamou became Chairman of the Board of Directors in July 1994.
Mr. Benhamou served as 3Com's Chief Operating Officer from April
1990 through September 1990. From October 1987 through April 1990,
Mr. Benhamou held various general manage ment positions within
3Com. Mr. Benhamou serves as Chairman of the Board of Directors of
Palm, Inc., Chairman of the Board of Directors of Cypress
Semiconductor, Inc. and as a member of the Board of Directors of
Legato Systems, Inc. Mr. Benhamou is a member of President
Clinton's Information Technology Advisory Council.
James E. Cowie Mr. Cowie has been a General Partner of Frontenac Company, a 45 1997
private equity investment firm, since 1989. Mr. Cowie served as a
director of U.S. Robotics Corporation ("USR") from March 1994
until USR merged with and into 3Com in June 1997, at which time he
became a director of 3Com.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Director
Name Principal Occupation During Past Five Years Age Since
---------------- ------------------------------------------------------------------ --- --------
<S> <C> <C> <C>
Philip C. Kantz Mr. Kantz has served on the 3Com Board since 1992. Since January 56 1992
1997 until his retirement in July 2000, he has been President,
Chief Executive Officer and a director of TAB Products Co., a
provider of automated file management systems. He has also 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 was
President and Chief Executive Officer of Itel Containers
International Corporation from 1988 through 1991. Previous to that
position, he served as President of the Transportation and
Industrial Funding Corporation and Senior Vice President and
General Manager of GE Capital from 1986 to 1988. Mr. Kantz also
serves as Chairman of the Board of Search Systems Corporation.
James R. Long Mr. Long retired from his position as Executive Vice President of 57 2000
Nortel Networks, a global leader in telephony, data, wireless and
wireline solutions for the Internet, on December 31, 1999. Mr.
Long had served in such position since 1994. Mr. Long also served
as the President of Enterprise Solutions of Nortel Networks from
1997 through 1999, and as the President of Nortel World Trade,
based in London and Hong Kong, from 1994 through 1997. He served
as the Senior Vice President of Nortel's Asia Pacific Division
from 1992 through 1994. Mr. Long has held a variety of senior
management positions for Rolm Company and IBM in both the United
States and abroad. Mr. Long also serves as a board member of NCR
Corporation and Symon Communications.
Jan Peters Ms. Peters has been President and Chief Executive Officer of 49 2000
MediaOne, a leading broadband services and telecommunications
provider, since 1997. From 1995 to 1997, she concurrently served
as the Managing Director of One2One, a UK wireless joint venture
owned by Cable & Wireless and MediaOne Group, as the President and
Chief Executive Officer of US WEST New Vector Group, Inc., a
telecommunications provider, and as the President of Wireless
Operations and Investments for US WEST Media Group, Inc., also a
telecommunications provider. Ms. Peters served as the Chief
Operating Officer of US WEST New Vector Group, Inc., from 1994 to
1995. In 1992 through 1994, she served as the US WEST New Vector
Group, Inc. Vice President of Sales and Distribution. Ms. Peters
also serves as a board member of Mail-Well, Inc. and Primus
Knowledge Solutions, Inc.
</TABLE>
5
<PAGE>
Incumbent Class I Directors Serving for a Term Expiring in 2001
<TABLE>
<CAPTION>
Director
Name Principal Occupation During Past Five Years Age Since
---------------- ------------------------------------------------------------------ --- --------
<S> <C> <C> <C>
Casey G. Cowell Mr. Cowell has been a private investor since June 1997. Mr. Cowell 47 1997
co-founded U.S. Robotics Corporation ("USR"), a leading modem
manufacturer, in 1976. From 1978 until USR merged with and into
3Com 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 1987 until January 1997. Mr. Cowell served
as Vice Chairman of 3Com in 1997. Mr. Cowell is also a director of
CDW Computer Centers, Inc., Xor, Inc., JobsOnline.com, Save.com
and Curious Networks.
David W. Dorman Mr. Dorman has been Chief Executive Officer of Concert, the 46 1995
AT&T-B.T. Global Venture, a global e-commerce service, since April
1999. Prior to that he served as Chief Executive Officer and
President of PointCast, Inc., an Internet news service, from
November 1997 through April 1999, and as Chairman of PointCast,
Inc. from November 1997 through 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, a leading
telecommunications company, was acquired by SBC in August 1997.
Prior to that, Mr. Dorman was associated with Sprint Corporation
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., SAIC Corporation, and TBG Holdings, NV.
Jean-Louis Gassee Mr. Gassee is the Chairman of the Board and Chief Executive 56 1993
Officer of Be, Inc., a personal computing technology company that
he founded in October 1990. Prior to founding Be, Inc., Mr. Gassee
was President of the Products Division at Apple Computer Inc.
where he held various executive positions in Europe and the United
States from 1980 to 1990. Mr. Gassee is also a director of
Electronics For Imaging, Inc., and Logitech, Inc.
Paul G. Yovovich Mr. Yovovich has been a private investor since 1996, and a 46 1997
principal of Lake Capital, a private investment firm, since
January 2000. Mr. Yovovich had been a director of U.S. Robotics
Corporation from 1991 until USR merged with and into 3Com 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, Lante Corporation, APAC Customer
Services, Inc., and American Media Operations, Inc.
William F. Zuendt Mr. Zuendt retired from his position as President and Chief 53 1988
Operating Officer of Wells Fargo & Company, a diversified
financial services company, and Wells Fargo Bank in July 1997. Mr.
Zuendt joined Wells Fargo in 1973 and became President and Chief
Operating Officer in 1994. Mr. Zuendt is also a director of Advent
Software, Inc., Be, Inc., and Blue Martini Software, Inc.
</TABLE>
6
<PAGE>
Board and Committee Meetings
During the fiscal year ended June 2, 2000 our Board of Directors held 12
meetings, including six regular meetings and six special meetings. We currently
have an audit committee and a compensation committee. We do not have a
nominating committee or a committee performing the functions of a nominating
committee.
During fiscal 2000, 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 2000, our compensation committee met eight times. Eric A.
Benhamou, Chief Executive Officer and Chairman of the Board, 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."
All directors have attended more than 75% of the total number of meetings
of the Board of Directors and committees on which they served.
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, (ii) the four other most highly compensated
executive officers of 3Com (based on salary plus bonus for fiscal 2000) who were
serving as such at the end of fiscal 2000, and (iii) one former executive
officer who was not serving at fiscal year end:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------- -------------------------
Other Restricted Securities
Annual Stock Underlying Other
Name and Fiscal Salary Bonus Compensation Awards Options Compensation
Principal Position Year ($) ($) ($) ($) (#) (1) ($) (2)
----------------------------- ------ ------ ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 2000 $750,000 $275,316 -- -- 1,487,970 $10,500
Chief Executive Officer and 1999 750,000 -- -- -- 1,319,822 10,000
Chairman of the Board 1998 742,500 75,008 -- -- 564,759 5,000
Bruce L. Claflin 2000 650,000 212,095 -- -- 1,137,482 16,648
President and Chief 1999 528,127 -- 320,559 (4) -- 3,716,790 3,033
Operating Officer (3)
Ralph B. Godfrey (5) 2000 425,000 69,339 -- -- 248,035 10,500
Senior Vice President, 1999 443,750 -- -- -- 408,726 10,000
E-Commerce 1998 350,000 28,593 -- -- 569,586 4,303
Edgar Masri 2000 400,000 85,400 -- -- 407,277 18,930
Senior Vice President, 1999 355,917 -- -- -- 467,109 9,438
Business Development 1998 245,334 18,588 -- 150,937 (6) 452,773 782
Christopher B. Paisley (7) 2000 400,000 97,890 -- -- 419,949 13,912
Former Senior Vice President, 1999 392,308 -- -- 420,937 (8) 537,414 7,421
Finance and 1998 385,000 27,268 -- -- 337,890 1,000
Chief Financial Officer
Janice Roberts (9) 2000 400,000 81,575 -- -- 323,094 13,263
Former Senior Vice President, 1999 400,000 -- -- 420,937 (10) 549,482 9,137
Business Development 1998 383,333 26,666 -- -- 337,890 3,765
</TABLE>
----------
(1) The number of shares underlying options granted are shown on a post-Palm
Distribution Adjustment (defined hereafter) basis. On July 27, 2000, 3Com
completed the distribution of Palm, Inc. common stock held by 3Com to 3Com
stockholders (the "Palm Distribution"). As a result of the distribution,
the number of shares of 3Com common stock subject to an option grant were
adjusted by multiplying the pre-Palm Distribution number by 4.827 and the
exercise price per share was adjusted by dividing the pre-Palm
Distribution exercise price by 4.827 (the "Palm Distribution Adjustment").
(2) Represents the value of 3Com's matching contribution under 3Com's 401(k)
plan. 3Com matches 50% of each dollar contributed by the employee up to a
maximum of 6% of target income.
(3) 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.
(4) Includes $294,632 which represents the loss realized by 3Com on the sale
of Mr. Claflin's house in connection with his relocation.
(5) Mr. Godfrey served as Senior Vice President, e-Commerce until August 1,
2000. Mr. Godfrey continues to be employed by 3Com in the role of an
executive advisor with a salary of $20,000 per annum.
8
<PAGE>
(6) Represents the value of 3,000 shares of restricted stock received by Mr.
Masri on October 20, 1997 at a closing price that day of $50.3125. The
restricted stock vests in equal annual increments over a four year period
provided the optionee continues to be employed by us. As of June 2, 2000
the value of the remaining unvested restricted stock was $70,688 based
upon a closing price of $47.125 per share.
(7) Mr. Paisley served as Senior Vice President, Finance and Chief Financial
Officer until May 1, 2000. Mr. Paisley continues to be employed by 3Com
and beginning August 1, 2000, he serves in the role of an executive
advisor with a salary of $20,000 per annum.
(8) Represents the value of 15,000 shares of restricted stock received by Mr.
Paisley on July 22, 1998 at a closing price that day of $28.0625. The
restricted stock vests in equal annual increments over a four year period
provided the optionee continues to be employed by us. As of June 2, 2000
the value of the remaining unvested restricted stock was $530,156 based
upon a closing price of $47.125 per share.
(9) Ms. Roberts served as Senior Vice President, Business Development and
President 3Com Ventures until June 2, 2000. As of August 1, 2000, she was
no longer an employee of 3Com but, at the request of and on behalf of
3Com, she continues to represent us as a director of several companies in
which 3Com has an investment.
(10) Represents the value of 15,000 shares of restricted stock received by Ms.
Roberts on July 22, 1998 at a closing price that day of $28.0625. The
restricted stock vests in equal annual increments over a four year period
provided the optionee continues to be employed by us. As of June 2, 2000
the value of the remaining unvested restricted stock was $530,156 based
upon a closing price of $47.125 per share.
9
<PAGE>
The following table provides information concerning grants of options to
purchase our common stock made during fiscal 2000 to the executive officers
listed in the Summary Compensation Table:
OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------------
% of Total
Number of Options Potential Realizable Value at
Securities Granted to Assumed Annual Rates of
Underlying Employees Exercise Stock Price Appreciation for
Options in Fiscal Price Per Option Term (4)
Granted(#) Year Share Expiration -----------------------------
Name (1) (2) 2000 ($/sh) (2)(3) Date 5% ($) 10% ($)
-------------------- ---------- ---------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 1,013,670 1.03 $5.5417 7/21/09 $ 3,532,816 $ 8,952,848
99,243 * 5.2180 6/14/09 325,676 825,328
263,554 * 5.9820 9/13/09 991,500 2,512,655
111,503 * 8.9212 12/10/09 625,589 1,585,365
Bruce L. Claflin 772,320 * 5.5417 7/21/09 2,691,669 6,821,218
79,404 * 5.2180 6/14/09 260,573 660,342
200,803 * 5.9820 9/13/09 755,428 1,914,403
84,955 * 8.9212 12/10/09 476,639 1,207,897
Ralph B. Godfrey 29,493 * 5.2180 6/14/09 96,784 245,270
156,877 * 5.5417 7/21/09 546,745 1,385,560
40,788 * 5.9820 9/13/09 153,446 388,863
20,877 * 8.9212 12/10/09 117,129 296,827
Edgar Masri 277,552 * 5.5417 7/21/09 967,319 2,451,375
36,202 * 5.2180 6/14/09 118,802 301,068
72,164 * 5.9820 9/13/09 271,482 687,989
21,359 * 8.9212 12/10/09 119,837 303,690
Christopher B. Paisley 277,552 * 5.5417 7/21/09 967,319 2,451,375
39,702 * 5.2180 6/14/09 130,286 330,171
72,164 * 5.9820 9/13/09 271,482 687,989
30,531 * 8.9212 12/10/09 171,292 434,088
Janice Roberts 39,702 * 5.5417 6/14/09 130,286 330,171
205,147 * 5.2180 7/21/09 714,975 1,811,886
53,338 * 5.9820 9/13/09 200,661 508,513
24,907 * 8.9212 12/10/09 139,742 354,134
</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") 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. The options have a term of 10 years from
the date of grant.
(2) The number of shares underlying options and the exercise price per share
are shown on a post-Palm Distribution Adjustment basis.
(3) All options were granted at an exercise price equal to the fair market
value of our common stock on the date of grant.
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<PAGE>
(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.
The following table provides the specified information concerning option
exercises during fiscal 2000 and the exercisable and unexercisable options held
as of June 2, 2000, by the executive officers listed in the Summary Compensation
Table:
AGGREGATED OPTION EXERCISES IN FISCAL
2000 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money
Shares Acquired Options at 6/2/00 (#) (1) Options at 6/2/00 (2) ($)
on Value ------------------------------- -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Benhamou 226,948 $7,738,148 1,231,807 528,078 $29,437,778 $9,007,122
Bruce L. Claflin 20,469 351,753 172,032 813,149 3,037,770 14,777,449
Ralph B. Godfrey -- -- 163,319 160,765 3,120,094 3,064,437
Edgar Masri -- -- 125,935 154,619 2,835,341 2,851,494
Christopher B. Paisley 135,000 5,057,626 764,354 188,001 21,876,660 2,957,217
Janice Roberts 273,000 11,745,288 246,895 169,811 2,767,262 2,591,504
</TABLE>
----------
(1) The number of shares are shown on a pre-Palm Distribution Adjustment
basis.
(2) Based on a fair market value of $47.125 per share as of June 2, 2000, the
closing sale price of our common stock on that date as reported by the
Nasdaq National Market.
Employment, Severance and Change-of-Control Arrangements
It is 3Com's practice to enter into Management Retention Agreements with
its senior executive officers. Under the terms of these agreements, if, within
24 months of a Change of Control (as defined below), such officer 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 100% of annual base salary and target bonus, based on reaching 100% of
the target (for the Chief Executive Officer and Chief Operating Officer, the
payment is equal to 200% of annual base salary and target bonus); (ii) continued
coverage of employee benefits until the earlier of two years from the date of
termination or he or she receives comparable benefits from another employer;
(iii) a bonus payment equal to the pro-rata share of target bonus; and (iv) the
acceleration in full of stock options. If such officer's employment is
terminated for any other reason, he or she 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. For the Chief Executive Officer and Chief Operating
Officer, 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 such
officers 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
tax.
As defined in the Management Retention Agreements, a "Change of 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
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<PAGE>
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) for persons primarily associated with a business unit, the sale or
disposition to third parties of all or substantially all of any of the Carrier
Systems, Commercial and Consumer Networks, Palm or comparable business unit
other than such a merger or disposition to a person or persons who beneficially
own at least 50% of the combined voting power of our outstanding securities at
the time of such sale. 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.
Additionally, we also have an employment agreement with Mr. Claflin for a
two-year term that expires on August 21, 2000. Under such agreement, Mr. Claflin
is entitled to guaranteed continuation of salary and stock option vesting for
the two-year term of the agreement if he is involuntarily terminated without
cause.
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.
Compensation of Directors
Members of the Board who are not 3Com employees received an annual retainer
during fiscal 2000 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 for 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 administrator of the
Director Plan. All options have a five-year term, are immediately exercisable
(subject to 3Com's right to repurchase any unvested shares) as long as the
option holder continues to serve on the Board or a committee. An additional
option to purchase the number of shares of our common stock then established by
the committee is automatically granted to each Outside Director following the
vesting in full of the option previously received. During fiscal 2000, options
were granted under the Director Plan for the following number of shares and at
the per share exercise prices shown: Mr. Cowie: 168,945 shares at $5.5417 per
share; Mr. Dorman: 144,810 shares at $5.5417 per share; Mr. Yovovich: 168,945
shares at $5.5417 per share; Mr. Gassee: 144,810 shares at $5.4640 per share;
Mr. Zuendt: 193,080 shares at $5.4640 per share, and 24,135 shares at $14.1004
per share; Mr. Cowell: 144,810 shares at $9.1801 per share; and Mr. Kantz:
144,810 shares at $9.1801 per share, and 24,135 shares at $14.1004 per share.
The foregoing number of shares subject to options and per share exercise price
are shown on a post-Palm Distribution Adjustment basis.
12
<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, except as
described below, all filing requirements applicable to our executive officers,
directors and more than 10% Stockholders were complied with in a timely manner
during fiscal 2000. With respect to Form 3's, Janet L. Soderstrom and Dennis
Connors each failed to file their Form 3's on a timely basis. With respect to
Form 4's, Irfan Ali filed one report late relating to a restricted stock award
transaction; William F. Zuendt filed one report late relating to a cash
transaction; Steve Rowley filed one report late relating to six same-day-sale
transactions; Janice Roberts filed one report late relating to five
same-day-sale transactions; Edgar Masri filed one report late relating to an
open market sale; Alan J. Kessler filed one report late relating to two
same-day-sale transactions; Richard Joyce filed one report late relating to two
same-day-sale transactions; Randy Heffner filed one report late relating to
three same-day-sale transactions; and John H. Hart filed one report late
relating to two same-day-sale transactions.
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 continues to face intense
competition for executives who can meet the unique challenges and opportunities
of the networking industry. Additionally, 3Com is making fundamental changes to
its business and therefore faces unique challenges associated with the strategic
refocusing and transformation of the company, which is currently underway. Many
of 3Com's executives have other highly attractive and less risky alternatives.
With attention focused on our strategy to successfully complete the 3Com
business transition, our compensation program's goals are to:
o Attract, retain and motivate highly-qualified executive officers who
can provide operational and strategic excellence that will produce
on-going success and transformation of the company;
o Align compensation for the executive officers with 3Com's business
objectives and performance; and
o Align incentives for executive officers with the interests of
stockholders to maximize revenue growth and stockholder value.
In designing executive compensation for fiscal 2001, 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' and
broader high-technology market 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. The committee also examines
emerging trends and practices in the overall high technology market place. 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 our compensation programs.
Consistent with competitive practices, we also use a cash bonus plan based on
achievement of financial
13
<PAGE>
performance and key operational objectives. In fiscal 2000, 3Com executives
participated 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. Of the 20
companies in this peer group, 16 are included in the S&P Technology Sector Index
used in our performance graph. 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 sustained individual performance, contribution to our results and
internal comparison of duties and responsibilities.
Cash Bonus. In order to help recruit, retain and motivate executives with
market-competitive incentives in the current business environment, in fiscal
2000, we provided a cash bonus program for executives, based on performance,
which was targeted at market median levels. In fiscal 2001, we will employ
similar performance measures for quarterly cash bonus opportunities. In
addition, there will be a one-time opportunity for executives to earn a bonus
accelerator upon achieving targets associated with transformation of 3Com's
performance and exceeding operating plan targets and industry growth rates.
Equity-Based Compensation
Executive equity grants are determined using the Black-Scholes option
pricing model to estimate value of 3Com stock option grants against a
Black-Scholes valuation of grants by our peer group competitors. 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.
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.
During fiscal 2000, one-half of the target grants for this program were
awarded at the beginning of the fiscal year. The balance of the option grants
were earned and awarded on the basis of achieving revenue and earnings per share
targets for each quarter during the fiscal year. In fiscal 2000, executive bonus
option grants were awarded for the first, second and fourth quarters.
For fiscal 2001, the annual grant was made at the beginning of the fiscal
year in order to maximize alignment of executives with increasing shareholder
value and to bring our annual grant practice more in line with competitive
practices.
CEO Compensation
The Chief Executive Officer's salary and performance stock option grants
follow the policies set forth above. Mr. Benhamou's base annual salary for
fiscal 2000 was $750,000, unchanged from fiscal 1999. For fiscal 2001, Mr.
Benhamou's base salary will continue to be $750,000, and any cash bonus
compensation in fiscal 2001 will be based upon achieving performance objectives
as set forth in the executive cash bonus plan. For fiscal 2001, 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 cash incentives directly tied to
achieving specific targets and by granting stock options which become valuable
and exercisable only if he continues to serve at 3Com and the price of our stock
subsequently rises.
14
<PAGE>
Tax Deductibility
3Com is subject to Section 162(m) of the Internal Revenue Code, which
imposes a limitation on the deductibility of nonperformance based compensation
in excess of $1 million paid to Named Executive Officers. 3Com believes that
compensation resulting from the exercise of stock options granted by 3Com is
deductible as performance based compensation. 3Com intends to comply with the
provisions of Section 162(m) so as to preserve the related federal income tax
deductions, although individual exceptions may occur. 3Com, however, has not
sought to qualify its cash bonus plan for executives under Section 162(m) as
deductible compensation.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Philip C. Kantz
Paul G. Yovovich
15
<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, 1995 and ending on June 2, 2000 (fiscal year end)(2).
[GRAPHIC OMITTED]
DATA POINTS FOR PERFORMANCE GRAPH
<TABLE>
<CAPTION>
May 31, May 28 June 2
------------------------------------------------ -------- --------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3Com(3) 100 154 152 79 85 131
S&P 500 100 128 166 217 263 290
S&P Technology 100 132 193 240 389 565
Sector
</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, 1995 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 4, 1995, we effected a
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 have been adjusted to take into account the stock
splits. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.
(3) On July 27, 2000, the date of the Palm Distribution, the closing stock
price for 3Com's common stock was $64.5625, which would be equivalent to a
total cumulative return of $201.76 on that date, assuming $100.00
investment in 3Com's common stock on May 31, 1995.
16
<PAGE>
PROPOSAL TO APPROVE AN INCREASE IN THE SHARE RESERVE
UNDER THE 3COM CORPORATION 1984 EMPLOYEE STOCK PURCHASE PLAN
BY 9,200,000 SHARES
The Board of Directors has approved an increase in the number of shares of
3Com's common stock reserved under the 1984 Employee Stock Purchase Plan (the
"1984 Purchase Plan") by 9,200,000 shares, and the stockholders are being asked
to approve the same increase at the Annual Meeting. As of June 2, 2000,
2,740,960 shares of 3Com's common stock (excluding the 9,200,000 shares now
proposed for stockholder approval) were available for future purchases under the
1984 Purchase Plan. The Board believes that the adoption of this proposal is in
the best interests of 3Com for the reasons discussed below.
3Com seeks to attract, motivate and retain talented and enterprising
employees by rewarding performance and encouraging behavior that will improve
our profitability. We believe that the 1984 Purchase Plan plays an important
role in achieving these objectives by encouraging broad employee stock
ownership. Stock purchase plans are found to be a prevalent practice among high
technology companies. We believe that equity-based incentive programs for all
our employees help ensure a tight link between the interests of the stockholders
and the interests of our employees, and enhance our ability to continue
recruiting and retaining top talent. Management believes that the continued
operation of the 1984 Purchase Plan necessitates an increase in the share
reserve under the 1984 Purchase Plan.
Summary of Provisions of the 1984 Purchase Plan
The summary of the 1984 Purchase Plan included in this Proxy Statement is
qualified in its entirety by the specific language of the 1984 Purchase Plan, as
amended. Copies of the 1984 Purchase Plan are available to any stockholder upon
request addressed to Mark D. Michael, Senior Vice President, General Counsel and
Secretary, 3Com Corporation, 5400 Bayfront Plaza, Santa Clara, CA 95052-8145.
Administration and Share Reserve. The 1984 Purchase Plan is administered by
the Board of Directors or a committee of the Board. Since its inception ten
years ago, a total of 22,000,000 shares of 3Com's common stock have been
reserved for issuance under the 1984 Purchase Plan and 19,259,040 shares have
been issued upon purchase as of June 2, 2000. This proposal seeks stockholder
approval to increase the number of shares reserved for issuance under the 1984
Purchase Plan to 31,200,000 shares.
Eligibility. Any employee of 3Com or any present or future subsidiary
corporation of 3Com (including any officer or director who is also an employee)
is eligible to participate in the 1984 Purchase Plan as long as the employee is
customarily employed for at least 20 hours per week. No person who owns or holds
options to purchase, or who as a result of participation in the 1984 Purchase
Plan would own or hold options to purchase, 5% or more of 3Com's common stock is
entitled to participate in the 1984 Purchase Plan. As of June 2, 2000,
approximately 12,000 employees participated in the 1984 Purchase Plan. All
employees are eligible to participate in the 1984 Purchase Plan.
Participation in an Offering. Each offering of our common stock under the
1984 Purchase Plan is for a period of twenty-four months, with a new offering
purchase period starting every six months. Offerings under the 1984 Purchase
Plan commence on the first trading day in October and the first trading day of
April of each year. Participation in the 1984 Purchase Plan is limited to
eligible employees who authorize payroll deductions pursuant to the 1984
Purchase Plan. At present, such payroll deductions may not exceed 10% of base
pay. Once an employee becomes a participant in the 1984 Purchase Plan, the
employee will automatically participate in each successive Offering until such
time as the employee withdraws from the 1984 Purchase Plan or the employee's
employment terminates.
Purchase Price. The purchase price per share at which the shares of our
common stock are sold under the 1984 Purchase Plan generally will be equal to
85% of the lesser of the fair market value of the common stock on (a) the first
day of the applicable Offering period or (b) the last day of a six month
purchase period. The closing price of 3Com's common stock as reported on the
Nasdaq National Market was $17.3125 per share on August 9, 2000.
17
<PAGE>
Shares Purchased. The number of shares of 3Com's common stock a participant
purchases in each Offering is determined by dividing the total amount of payroll
deductions withheld from the participant's compensation by the purchase price
per share. Participants may not purchase shares of 3Com's common stock having a
fair market value exceeding $25,000 in any calendar year. For this purpose, the
fair market value of 3Com's common stock purchased in a given Offering is
determined as of the first day of that Offering. Furthermore, a participant may
not purchase more than 4,000 shares in a single Offering, although this limit
may be adjusted by the Board of Directors from time to time to reflect
fluctuations in the fair market value of 3Com's common stock to the extent
permitted by law. Any cash not applied to the purchase of shares is returned to
the participant except for cash insufficient to purchase a single share of
3Com's common stock at the end of the Offering.
Withdrawal. A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future Offerings.
Amendment or Termination. The Board of Directors may at any time amend or
terminate the 1984 Purchase Plan, except that approval of 3Com's stockholders
within twelve months of the adoption of such amendment is required to increase
the number of shares authorized for issuance under the 1984 Purchase Plan or to
change the designation of corporations whose employees may purchase shares of
3Com's common stock under the 1984 Purchase Plan. The 1984 Purchase Plan will
terminate when all of the shares reserved for issuance under the 1984 Purchase
Plan have been issued or when earlier terminated by the Board of Directors.
Summary of United States Federal Income Tax Consequences of the 1984 Purchase
Plan
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
1984 Purchase Plan, and does not attempt to describe all potential tax
consequences. Tax consequences are complex and subject to change, and a
taxpayer's particular situation may be such that some variation from the
described rules is applicable. Participants should consult their own tax
advisors prior to the disposition of any shares of common stock acquired
pursuant to the 1984 Purchase Plan.
If a participant disposes of shares purchased under the 1984 Purchase Plan
within two years from the first day of the Offering or within one year from the
date of purchase (a "disqualifying disposition"), the participant will realize
ordinary income in the year of such disposition equal to the amount by which the
fair market value of the stock on the date the stock was purchased exceeds the
purchase price. The amount of the ordinary income will be added to the
participant's basis in the shares, and any additional gain or resulting loss
recognized on the disposition of the shares will be a capital gain or loss. A
capital gain or loss will be long-term if the participant's holding period is
more than twelve months, otherwise it will be short-term.
If the participant disposes of shares more than two years after the date
the underlying right to purchase shares was granted and more than one year after
the date the stock was purchased, the participant will realize ordinary income
in the year of disposition equal to the lesser of (a) the excess of the fair
market value of the shares on the date of disposition over the purchase price or
(b) 15% of the fair market value of the shares on the first day of the Offering
in which those shares were purchased. The amount of any ordinary income will be
added to the participant's basis in the shares, and any additional gain
recognized upon the disposition after such basis adjustment will be a long-term
capital gain. If the fair market value of the shares on the date of disposition
is less than the purchase price, there will be no ordinary income and any loss
recognized will be a long-term capital loss.
If the participant still owns the shares at the time of death, the lesser
of (a) the excess of the fair market value of the shares on the date of death
over the purchase price or (b) 15% of the fair market value of the shares on the
first day of the Offering in which those shares were purchased, will constitute
ordinary income in the year of death.
3Com will be entitled to a deduction in the year of a disqualifying
disposition equal to the amount of ordinary income recognized by the participant
as result of the disposition. In all other cases, no deduction is allowed to
3Com.
18
<PAGE>
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the Votes Cast at the Annual Meeting,
at which a quorum is present, either in person or by proxy, is required for
approval of this proposal.
The Board believes that the proposed amendment to the 1984 Purchase Plan is
in the best interest of the Company and the stockholders for the reasons stated
above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THIS PROPOSAL TO INCREASE THE SHARE RESERVE UNDER THE 3COM
CORPORATION 1984 EMPLOYEE STOCK PURCHASE PLAN BY 9,200,000 SHARES.
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 1, 2001. 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.
Vote Required
The affirmative vote of a majority of the Votes Cast is required for
approval of this proposal. 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. 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 1, 2001.
19
<PAGE>
STOCKHOLDER PROPOSAL
Occasionally, we receive suggestions from our stockholders. Some are
received as formal stockholder proposals. All are given careful attention by
3Com and, in the past, management has adopted a number of suggestions made.
3Com has received a stockholder proposal. The authors and proponents of the
following stockholder resolution are John C. Harrington, P.O. Box 6108, Napa,
California 94981, and Global Exchange, 2017 Mission Street, Suite 303, San
Francisco, California 94110 (collectively, the "Proponents"). The Proponents
have requested the Company to include the following proposal and supporting
statement in its Proxy Statement for the Annual Meeting of Stockholders. Mr.
Harrington beneficially owns 400 shares and Global Exchange beneficially owns
100 shares of 3Com's common stock. The stockholder proposal is quoted verbatim
in italics, below.
Management of 3Com disagrees strongly with the adoption of the resolution
proposed below and asks stockholders to read through Management's response,
which follows the stockholder proposal.
Proponents' Proposal:
"US BUSINESS PRINCIPLES FOR HUMAN RIGHTS
OF WORKERS IN CHINA
WHEREAS: our company's business practices in China respect human and labor
rights of workers. The eleven principles below were designed to commit a company
to a widely accepted and thorough set of human and labor rights standards for
China. They were defined by the International Labor Organization, the United
Nations Covenants on Economic, Social and Cultural Rights, and Civil, and
Political Rights. They have been signed by the Chinese government and China's
national laws.
(1) No goods or products produced within our company's facilities or those
of suppliers shall be manufactured by bonded labor, forced labor, within prison
camps or as part of reform-through-labor or reeducation-through-labor programs.
(2) Our facilities and suppliers shall adhere to wages that meet workers'
basic needs, fair and decent working hours, and at a minimum, to the wage and
hour guidelines provided by China's national labor laws.
(3) Our facilities and suppliers shall prohibit the use of corporal
punishment, any physical, sexual or verbal abuse or harassment of workers.
(4) Our facilities and suppliers shall use production methods that do not
negatively affect the worker's occupational safety and health.
(5) Our facilities and suppliers shall prohibit any police or military
presence designed to prevent workers from exercising their rights.
(6) We shall undertake to promote the following freedoms among our
employees and the employees of our suppliers: freedom of association and
assembly, including the rights to form unions and bargain collectively; freedom
of expression, and freedom from arbitrary arrest or detention.
(7) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on age, gender,
marital status, pregnancy, ethnicity or region of origin.
(8) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on labor, political or
religious activity, or on involvement in demonstrations, past records of arrests
or internal exile for peaceful protest, or membership in organizations committed
to non-violent social or political change.
(9) Our facilities and suppliers shall use environmentally responsible
methods of production that have minimum adverse impact on land, air and water
quality.
20
<PAGE>
(10) Our facilities and suppliers shall prohibit child labor, at a minimum
comply with guidelines on minimum age for employment within China's national
labor laws.
(11) We will issue annual statements to the Human Rights for Workers in
China Working Group detailing our efforts to uphold these principles and to
promote these basic freedoms.
RESOLVED: Stockholders request the Board of Directors to make all possible
lawful efforts to implement and/or increase activity on each of the principles
named above in the People's Republic of China.
SUPPORTING STATEMENT: As U.S. companies import more goods, consumer and
shareholder concern is growing about working conditions in China that fall below
basic standards of fair and humane treatment. We hope that our company can prove
to be a leader in its industry and embrace these principles."
Management's Response
The Board of Directors unanimously recommends a vote "against" the proposal
for the following reasons:
o 3Com's operations in China are de minimis and are not significantly related
to 3Com's business. During our fiscal year recently ended June 2, 2000,
gross sales from our operations in China comprised approximately 1.6% of
3Com's gross sales. Although our accounting methods do not provide us with
the exact percentage of 3Com's total assets that are committed to our
operations in China, or the exact percentage of 3Com's net earnings from
our operations in China, our operations in China primarily relate to sales
and marketing activities. We believe that our China operations comprised
substantially less than 5% of 3Com's total assets at June 2, 2000 and that
net earnings from those operations comprised substantially less than 5% of
3Com's net earnings for the fiscal year ended June 2, 2000.
o 3Com's operations are global, and we conduct business all around the world.
Recent developments in trade relations with China are expected to have an
influence on the conditions under which American companies conduct business
in China. We cite two related developments in particular. First, the United
States government endorsed the admittance of China to the World Trade
Organization this year. Second, the United States House of Representatives
has passed legislation that confers upon China permanent normal trade
relations status. This legislation is expected to pass in the United States
Senate and subsequently to be signed into law. This legislation provides
for the establishment of a specific agency to monitor the status of human
rights in China.
For the reasons stated above, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "AGAINST" approval of the stockholder proposal regarding U.S. Business
Principles for Human Rights of Workers in China.
Vote Required and Board Recommendation
Approval of the stockholder proposal set forth above requires the
affirmative vote of a majority of the Votes Cast. Proxies received by us will be
voted "AGAINST" the stockholder proposal unless a contrary vote is specified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" THE
STOCKHOLDER PROPOSAL DESCRIBED ABOVE.
21
<PAGE>
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders that are intended for inclusion in our proxy
statement relating to the fiscal 2001 Annual Meeting of Stockholders must be
received by us at our offices at 5400 Bayfront Plaza, Santa Clara, California
95052-8145, not later than April 30, 2001 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 set
forth in our Bylaws, which are described below under "Transaction of Other
Business."
If a stockholder wishes to present a proposal at our annual meeting in the
year 2001 and the proposal is not intended to be included in the proxy statement
relating to that meeting, the stockholder must give us advance notice prior to
June 30, 2001, which is the deadline determined in accordance with the Bylaws.
If a stockholder gives notice of such a proposal after the bylaw deadline, the
stockholder will not be permitted to present the proposal to the stockholders
for a vote at the meeting.
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
Mark D. Michael
Secretary
August 28, 2000
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<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 28, 2000 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 28, 2000, and a copy of 3Com's fiscal
2000 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 IN HEREIN, FOR THE INCREASE
IN SHARES RESERVED UNDER THE 1984 EMPLOYEE STOCK PURCHASE PLAN, FOR THE
RATIFICATION OF ACCOUNTANTS, AGAINST THE STOCKHOLDER PROPOSAL 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.
(PLEASE SIGN ON THE REVERSE)
<PAGE>
|X| Please mark votes as
in this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
1. ELECTION OF FIVE CLASS II DIRECTORS
TO SERVE A TWO-YEAR TERM EXPIRING IN 2002
Nominees:
Eric Benhamou
James E. Cowie
Phillip Kantz
James Long
Jan Peters
FOR WITHHELD
all nominees from all
nominees
|_| |_|
|_|____________________________________________________
For all nominees except those written on the line above.
2. To approve an increase in the share FOR AGAINST ABSTAIN
reserve under the Company's 1984
Employee Stock Purchase Plan by |_| |_| |_|
9,200,000 shares.
3. To ratify the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as independent public
accountants for the fiscal year ending |_| |_| |_|
June 1, 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE FOLLOWING:
4. To approve a stockholder proposal FOR AGAINST ABSTAIN
regarding US business practices for
human rights of workers in China. |_| |_| |_|
5. With discretionary authority, upon such other matters as may
properly come before the meeting.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please date and sign exactly as
your name or names appear herein. Signature:_________________ Date: _________
Corporate or partnership proxies
should be signed in full
corporate or partnership name by Signature:_________________ Date: _________
an authorized person. Persons
signing in a fiduciary capacity
should indicate their full
title in such capacity.
