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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 25, 2008
3COM CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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0-12867
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94-2605794 |
(State or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
350 Campus Drive
Marlborough, Massachusetts
01752
(Address of Principal Executive Offices)
(Zip Code)
Registrants telephone number, including area code: (508) 323-1000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
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ITEM 1.02 |
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Termination of a Material Definitive Agreement |
3Com Corporation (the Company) has terminated the Agreement and Plan of Merger (the Merger
Agreement) dated as of September 28, 2007 by and among the Company, Diamond II Holdings, Inc., a
corporation organized under the laws of the Cayman Islands (Newco), and Diamond II Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Newco (Merger Sub). Pursuant to the terms
of the Merger Agreement, Merger Sub would have been merged with and into the Company, and as a result the
Company would have continued as the surviving corporation and a wholly owned subsidiary of Newco. Newco
is controlled by Bain Capital Fund IX, L.P. 3Com terminated the Merger Agreement, by letters dated April 25,
2008 and April 29, 2008, as a result of Newcos failure to consummate the merger in accordance with the Merger
Agreement. As previously disclosed, the Company intends to seek payment of the $66 million termination fee from
Newco under the Merger Agreement.
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ITEM 5.02 |
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Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers. |
Departure of Edgar Masri as CEO.
On April 29, 2008, we announced that effective at the close of business on April 29, 2008 Edgar
Masri has left his office as President and Chief Executive Officer of 3Com, his membership on our
Board of Directors and his title as Chairman and Chief Executive Officer of our China-based H3C
Technologies Co., Limited subsidiary. In connection with his departure, Mr. Masri will receive his
previously-disclosed severance benefits under his existing employment arrangements with 3Com
Corporation.
Appointment of Robert Mao as CEO.
On April 29, 2008, our Board of Directors appointed Robert Y. L. Mao as our new Chief Executive
Officer, effective on April 30, 2008. Mr. Mao will also assume the role of Chairman and Chief
Executive Officer of our H3C subsidiary. Mr. Mao will remain as a member of our Board of
Directors, a position he has held since March 2007.
Prior to assuming his new role at 3Com, Mr. Mao, 64, was most recently our Executive Vice
President, Corporate Development from August 2006 to March 2007. Mr. Mao has over 30 years of
experience in the telecommunications and IT industries. Before joining 3Com, Mr. Mao was President
and Chief Executive Officer of Greater China for Nortel Networks from September 1997 to May 2006
and Regional President of Greater China for Alcatel from September 1995 to September 1997. Nortel
and Alcatel are global suppliers of communication equipment serving both service provider and
enterprise customers. At these positions, Mr. Mao managed operations in the Peoples Republic of
China, Taiwan, Hong Kong and Macao. Mr. Mao also held senior managerial and technical positions at
Alcatel and ITT in Asia and the U.S. Mr. Mao holds a Masters degree from Cornell University in
Material Science and Metallurgical Engineering and earned a Masters in Management from MIT. Mr.
Mao is the past Vice Chairman of the Board of Governors of the Pacific Telecommunication Council
(2003-2005). Mr. Mao serves on the Board of Hurray! Holding Co., Ltd., a wireless value-added
services provider.
On April 29, 2008, we entered into an employment agreement for an at-will employment arrangement
with Mr. Mao to become our new Chief Executive Officer. The terms of Mr. Maos employment with us
include:
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A base salary of $650,000 per year (the Base Salary); |
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Eligibility to receive a semi-annual cash incentive payment for the achievement of
company and individual performance goals established by the Board of Directors or the
Compensation Committee, with an annual target of 100% of base salary and with a guaranteed
target payment for FY09 (the Target Annual Incentive); |
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An obligation of the Company to grant 7-year non-qualified stock options to purchase 2
million shares of the Companys common stock at an exercise price equal to the closing
price of our common stock on the first Tuesday of the month following the month in which
Mr. Mao commences employment with us (the First Tuesday Date), which options will vest as
to 25% of the underlying shares on each anniversary of |
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the grant date over 4 years assuming Mr. Maos continued employment with us on each
scheduled vesting date; |
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An obligation of the Company to grant 1.5 million shares of restricted stock to Mr. Mao
on the First Tuesday Date, which restricted stock will vest as to 33.33% on each
anniversary of the grant date over 3 years assuming Mr. Maos continued employment with us
on each scheduled vesting date; |
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Purchase of term life insurance for the benefit of Mr. Mao in agreed-upon amounts; |
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Severance benefits for involuntary termination of Mr. Maos employment by us without
cause, or Mr. Maos voluntary termination of his employment with us for good reason, other
than in connection with a change in control, include: |
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Continued payment of Base Salary and Target Annual Incentive for the
year in which the termination occurs, for 12 months, paid in accordance with the
Companys normal payroll practices; |
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12 months of accelerated vesting of outstanding equity awards (other
than performance-based awards), provided that if the termination or
resignation occurs after April 29, 2009, in addition, Mr. Maos initial grants
described above shall fully vest and if such termination or resignation is after
December 31, 2009, any grants made in calendar year 2009 shall also fully vest; |
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Extension of the exercise period for vested stock options to the
earlier of (i) 165 days from the termination date; and (ii) the original term of
the option; |
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Reimbursement for premiums paid for continued health benefits under
Company health plans under COBRA until the earlier of: (i) eighteen months from the
termination date, or (ii) the date upon which Mr. Mao becomes eligible for similar
coverage elsewhere; |
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Conversion of basic term life insurance in effect immediately prior to
termination until the earlier of one year or eligibility for similar coverage by
another employer; |
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The foregoing is subject to the requirement that Mr. Mao sign a release
agreement containing (i) a release of claims against the Company, (ii) a one-year
non-solicitation agreement, (iii) a one-year non-competition agreement and (iv) a
non-disparagement agreement; and |
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If additional taxes would result due to IRC Section 409A, the Company
will accrue payments otherwise due during the first six months after termination
and pay them in a lump sum on the date that is six months and one day after the
termination date. |
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Change of control severance benefits including: |
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Solely in the event that Mr. Mao is involuntarily terminated (other
than for cause, death or disability) or voluntarily terminates his employment for
good reason, in each case within three months prior to, or within twelve months
following, a change of control, the following benefits apply: |
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Continued payment of Base Salary for 24 months, paid in accordance with
the Companys normal payroll practices; |
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Two payments, each equal to 100% of Target Annual Incentive for the year
in which termination occurs, payable at the time bonuses are normally paid; |
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Full vesting of outstanding equity awards (other than performance-based
awards); |
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Extension of the exercise period for vested stock options to the earlier
of (i) 165 days from the termination date; and (ii) the original term of
the option; |
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Reimbursement for premiums paid for continued health benefits under
Company health plans under COBRA until the earlier of: (i) eighteen months
from the termination date, or (ii) the date upon which Mr. Mao becomes
eligible for similar coverage elsewhere; and |
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Conversion of basic term life insurance in effect immediately prior to
termination until the earlier of one year or eligibility for similar
coverage by another employer. |
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The foregoing is subject to the requirement that Mr. Mao sign a release
agreement containing (i) a release of claims against the Company, (ii) a one-year
non-solicitation agreement, (iii) a one-year non-competition agreement and (iv) a
non-disparagement agreement; |
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If additional taxes would result: |
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due to IRC Section 409A, the Company will accrue payments otherwise due
during the first six months after termination and pay them in a lump sum on
the date that is six months and one day after the termination date; and |
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due to IRC Section 280G, the Company shall make payments to Mr. Mao
sufficient to pay such taxes and additional payments to cover the taxes on
the original payment itself. |
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Specified travel and transit benefits. |
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Tax equalization. Acknowledging Mr. Maos intention to spend a
significant time managing our operations in China, 3Com will pay the difference in
taxes incurred as a result of Mr. Maos actual compensation and the amount he would
have incurred had he performed all of his work in the United States, plus a
gross-up payment on the additional payment to account for the additional taxes on
such payment. |
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Tax preparation and legal fees up to a specified limit. |
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An agreement by Mr. Mao not to solicit employment for any employee of the Company, an
agreement not to compete with the Company and an agreement not to disparage the Company, in
each case during the term of his employment with the Company until the one year anniversary
following termination of employment. |
The foregoing description of Mr. Maos employment terms is qualified in its entirety by reference
to the provisions of the Employment Agreement attached as Exhibit 10.1 to this Current Report on
Form 8-K.
Appointment of Ronald Sege as President and COO; Election to Board of Directors.
On April 29, 2008, our Board of Directors appointed Ronald Sege as our new President and Chief
Operating Officer, effective on April 30, 2008. In addition, on April 29, 2008, Mr. Sege was
elected to our Board of Directors following the recommendation of the Boards Nominating and
Governance Committee. Mr. Seges election is effective on April 30, 2008 and his initial term
expires at the 2008 Annual Meeting of Stockholders (currently scheduled to be held in September
2008).
Before assuming a consulting role as an advisor to our Board in March and April of 2008, Mr. Sege,
51, most recently served as President and Chief Executive Officer of Tropos Networks, Inc. a
provider of wireless broadband networks, from 2004 to 2008. He is currently on Tropos Board of
Advisors. Prior to Tropos, Mr. Sege was President and Chief Executive Officer of Ellacoya
Networks, Inc. a provider of broadband service optimization solutions based on deep packet
inspection technology, from 2001-2004. Prior to Ellacoya, Mr. Sege was Executive Vice President of
Lycos, Inc., the internet search engine, from 1998-2001. Prior to Lycos, Mr. Sege spent nine years
at 3Com Corporation, from 1989-1998, serving in a variety of senior management roles including
Executive Vice President, Global Systems Business Unit. Mr. Sege holds an MBA from Harvard
University and a BA from Pomona College.
On April 29, 2008, we entered into an employment agreement for an at-will employment arrangement
with Mr. Sege to become our new President and Chief Operating Officer. The terms of Mr. Seges
employment with us include:
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A base salary of $500,000 per year (the Base Salary); |
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Eligibility to receive a semi-annual cash incentive payment for the achievement of
company and individual performance goals established by the Board of Directors or the
Compensation Committee, with an annual target of 80% of base salary and with a guaranteed
target payment for FY09 (the Target Annual Incentive); |
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As an inducement to his employment with us, an obligation of the Company to grant 7-year
non-qualified stock options to purchase 2 million shares of the Companys common stock at
an exercise price equal to the closing price of our common stock on the first Tuesday of
the month following the month in which Mr. Sege commences employment with us (the First
Tuesday Date), which options will vest as to 25% of the underlying shares on each
anniversary of the grant date over 4 years assuming Mr. Seges continued employment with us
on each scheduled vesting date; |
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As an inducement to his employment with us, an obligation of the Company to grant 1
million shares of restricted stock to Mr. Sege on the First Tuesday Date, which restricted
stock will vest as to 33.33% on each anniversary of the grant date over 3 years assuming
Mr. Seges continued employment with us on each scheduled vesting date; |
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Purchase of term life insurance for the benefit of Mr. Sege in agreed-upon amounts; |
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Severance benefits for involuntary termination of Mr. Seges employment by us without
cause, or Mr. Seges voluntary termination of his employment with us for good reason, other
than in connection with a change of control, include: |
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Continued payment of Base Salary and Target Annual Incentive for the
year in which the termination occurs, for 12 months, paid in accordance with the
Companys normal payroll practices; |
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12 months of accelerated vesting of outstanding equity awards (other
than performance-based awards); |
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Extension of the exercise period for vested stock options to the
earlier of (i) 165 days from the termination date; and (ii) the original term of
the option; |
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Reimbursement for premiums paid for continued health benefits under
Company health plans under COBRA until the earlier of: (i) eighteen months from the
termination date, or (ii) the date upon which Mr. Sege becomes eligible for similar
coverage elsewhere; and |
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Conversion of basic term life insurance in effect immediately prior to
termination until the earlier of one year or eligibility for similar coverage by
another employer. |
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Good reason for Mr. Sege includes failure to appoint Mr. Sege as CEO
of 3Com by April 30, 2011, or the appointment of a person other than Mr. Mao as CEO
of 3Com. |
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Enhanced severance in this circumstance includes (x) full acceleration
of unvested equity (other than performance-based awards) in the case of
failure to appoint Mr. Sege as CEO by April 30, 2011 or the appointment of
another as CEO after April 29, 2010 and (y) acceleration of 50% of unvested
equity (other than performance-based awards) in the case of appointment of
another as CEO prior to April 30, 2010. |
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The foregoing is subject to the requirement that Mr. Sege sign a
release agreement containing (i) a release of claims against the Company, (ii) a
one-year non-solicitation agreement and (iii) a non-disparagement agreement; and |
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If additional taxes would result due to IRC Section 409A, the Company
will accrue payments otherwise due during the first six months after termination
and pay them in a lump sum on the date that is six months and one day after the
termination date. |
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Change of control severance benefits including: |
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Solely in the event that Mr. Sege is involuntarily terminated (other
than for cause, death or disability) or voluntarily terminates his employment for
good reason, in each case within three months prior to, or within twelve months
following, a change of control, the following benefits apply: |
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Continued payment of Base Salary for 24 months, paid in accordance with
the Companys normal payroll practices; |
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Two payments, each equal to 100% of Target Annual Incentive for the year
in which termination occurs, payable at the time bonuses are normally paid; |
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Full vesting of outstanding equity awards (other than performance-based
awards); |
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Extension of the exercise period for vested stock options to the earlier
of (i) 165 days from the termination date; and (ii) the original term of
the option; |
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Reimbursement for premiums paid for continued health benefits under
Company health plans under COBRA until the earlier of: (i) eighteen months
from the termination date, or (ii) the date upon which Mr. Sege becomes
eligible for similar coverage elsewhere; and |
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Conversion of basic term life insurance in effect immediately prior to
termination until the earlier of one year or eligibility for similar
coverage by another employer. |
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The foregoing is subject to the requirement that Mr. Sege sign a
release agreement containing (i) a release of claims against the Company, (ii) a
one-year non-solicitation agreement and (iii) a non-disparagement agreement; |
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If additional taxes would result: |
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due to IRC Section 409A, the Company will accrue payments otherwise due
during the first six months after termination and pay them in a lump sum on
the date that is six months and one day after the termination date; and |
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due to IRC Section 280G, the Company shall make payments to Mr. Sege
sufficient to pay such taxes and additional payments to cover the taxes on
the original payment itself. |
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An agreement by Mr. Sege not to solicit employment for any employee of the Company and
an agreement not to disparage the Company, in each case during the term of his employment
with the Company until the one year anniversary following termination of employment. |
The foregoing description of Mr. Seges employment terms is qualified in its entirety by reference
to the provisions of the Employment Agreement attached as Exhibit 10.2 to this Current Report on
Form 8-K.
Grants to Certain Executives |
On April 29, 2008, the Compensation Committee of the Board of Directors of 3Com approved equity
grants to the following named executive officers and the current CFO in the amounts opposite their
names below:
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Restricted stock (#) |
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Common stock underlying options (#) |
Jay Zager |
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EVP, CFO |
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150,000 |
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400,000 |
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Neal Goldman |
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EVP, CALO |
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175,000 |
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475,000 |
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These equity grants vest in four equal installments, every six months over a two year period. The
options have a seven-year term and will have an exercise price equal to the closing price of our
common stock on the first Tuesday of the month following the month in which the grant was made.
Safe Harbor
This Form 8-K contains forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, including forward-looking statements
regarding our new Chief Executive Officer and new President and Chief Operating Officer, and our
intent to pursue the termination fee under the Merger Agreement with affiliates of Bain Capital.
These statements are neither promises nor guarantees, but involve risks and uncertainties that
could cause actual results to differ materially from those set forth in the forward-looking
statements, including, without limitation, risks relating to: our ability to obtain the
termination fee; and other risks detailed in the Companys filings with the SEC, including those
discussed in the Companys quarterly report filed with the SEC on Form 10-Q for the fiscal quarter
ended February 29, 2008. 3Com Corporation does not intend, and disclaims any obligation, to update
any forward-looking information contained in this Form 8-K or with respect to the announcements
described herein.
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ITEM 9.01 |
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Financial Statements and Exhibits |
(c) Exhibits
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Exhibit Number |
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Description |
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10.1
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3Com Corporation Employment Agreement, dated as of April 29, 2008, between the registrant and
Robert Mao* |
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10.2
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3Com Corporation Employment Agreement, dated as of April 29, 2008, between the registrant and
Ronald Sege* |
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99.1
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Press release entitled 3COM ANNOUNCES SENIOR LEADERSHIP CHANGES TO ACCELERATE GLOBAL
BUSINESS PLAN dated as of April 29, 2008. |
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* |
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Indicates a management contract or compensatory plan |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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3COM CORPORATION
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Date: April 29, 2008 |
By: |
/s/ NEAL D. GOLDMAN
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Neal D. Goldman |
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Executive Vice President and Chief
Administrative and Legal Officer |
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Exhibit Index
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Exhibit Number |
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Description |
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10.1
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3Com Corporation Employment Agreement, dated as of April 29, 2008, between the registrant and
Robert Mao* |
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10.2
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3Com Corporation Employment Agreement, dated as of April 29, 2008, between the registrant and
Ronald Sege* |
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99.1
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Press release entitled 3COM ANNOUNCES SENIOR LEADERSHIP CHANGES TO ACCELERATE GLOBAL
BUSINESS PLAN dated as of April 29, 2008. |
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* |
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Indicates a management contract or compensatory plan |