Bruce Claflin Employment Agreement

EXHIBIT 10.26


3COM CORPORATION


BRUCE CLAFLIN EMPLOYMENT AGREEMENT


This Agreement is made by and between 3Com Corporation (the "Company"), and Bruce Claflin ("Executive").


DUTIES AND SCOPE OF EMPLOYMENT.


(a) POSITIONS; CEO EMPLOYMENT COMMENCEMENT DATE; DUTIES. Executive's coverage under this Agreement shall commence upon the date this Agreement has been signed by both parties hereto. On January 1, 2001 (the "CEO Employment Commencement Date"), Executive shall be promoted to Chief Executive Officer. As of the CEO Employment Commencement Date, the Company shall employ the Executive as the President and Chief Executive Officer of the Company reporting to the Board of Directors of the Company (the "Board"). The period of Executive's employment hereunder is referred to herein as the "Employment Term." During the Employment Term, Executive shall render such business and professional services in the performance of his duties, consistent with Executive's position within the Company, as shall reasonably be assigned to him by the Board.


(b) OBLIGATIONS. During the Employment Term, Executive shall devote his full business efforts and time to the Company. Executive agrees, during the Employment Term, not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board; provided, however, that Executive may serve in any capacity with any civic, educational or charitable organization, or as a member of corporate Boards of Directors or committees thereof, without the approval of the Board, unless there is a conflict of interest.


(c) EMPLOYEE BENEFITS. During the Employment Term, Executive shall be eligible to participate in the employee benefit plans maintained by the Company that are applicable to other senior management to the full extent provided for under those plans.


AT-WILL EMPLOYMENT. Executive and the Company understand and acknowledge that Executive's employment with the Company constitutes "at-will" employment. Subject to the Company's obligation to provide severance benefits as specified herein and in the Management Retention Agreement previously entered into by and between Executive and the Company (the "Management Retention Agreement"), Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive.


COMPENSATION.


(d) BASE SALARY. While employed by the Company, the Company shall pay the Executive as compensation for his services a base salary at the annualized rate of $750,000 (the "Base Salary"). Such salary shall be paid periodically in accordance with normal Company payroll practices and subject to the usual, required withholding. Executive's Base Salary shall be reviewed


annually by the Compensation Committee of the Board for possible adjustments in light of Executive's performance and competitive data.


(e) BONUSES. Executive shall be eligible to earn a target bonus under the Company's Short-Term Cash Incentive Plan equal to 100% of Base Salary (the "Target Bonus"). Executive's performance shall be evaluated by the Compensation Committee of the Board of Directors based upon performance criteria specified by that committee. The actual bonus may be smaller or greater than the Target Bonus, based on the Compensation Committee's satisfaction with the achievement levels.


(f) STOCK OPTION. As of the CEO Employment Commencement Date, Executive shall be granted a stock option (the "Stock Option") to purchase a total of one million (1,000,000) shares of Company common stock with a per share exercise price equal to 100% of the fair market value on date upon which this Agreement has been executed by both parties. The Stock Option shall be for a term of ten years (or shorter upon termination of employment or consulting relationship with the Company) and, subject to accelerated vesting as set forth elsewhere herein and in the Management Retention Agreement, shall vest as to 25% of the shares (i.e., 250,000 shares) on each anniversary of the CEO Employment Commencement Date, so as to be 100% vested on the four year anniversary thereof, conditioned upon Executive's continued employment or consulting relationship with the Company as of each vesting date. Except as specified otherwise herein, the Stock Option is in all respects subject to the terms, definitions and provisions of the Company's 1983 Stock Option Plan and the standard form of stock option agreement thereunder, which documents are incorporated herein by reference. Executive shall be considered for annual stock option grants according to the competitive market, as is currently the practice at the Company. Executive shall have one year following termination of employment to exercise the Stock Option and all stock options granted to him by the Company, including stock options granted prior to as well as on or after the CEO Employment Commencement Date. All of Executive's stock options shall vest 100% if they are not assumed (or equivalent options substituted) in a Change of Control as defined in the Management Retention Agreement.


(g) RESTRICTED STOCK. On the Employment Commencement Date, Executive shall purchase one hundred thousand (100,000) shares of the Company's Common Stock (the "Restricted Stock"), at a price per share equal to 100% of the par value of the shares on the date of purchase. Subject to accelerated vesting as provided elsewhere in this Agreement and in the Management Retention Agreement, the Restricted Stock shall vest as to 25% of the shares (i.e., 25,000 shares) on each anniversary of the CEO Employment Commencement Date, so as to be 100% vested on the four year anniversary thereof, conditioned upon Executive's continued employment or consulting relationship with the Company as of each vesting date. This purchase is subject to Executive entering into the Company's form of Restricted Stock Purchase Agreement which provides the Company with the right to purchase unvested shares at the original purchase price in the event of Executive's termination of employment or consulting relationship and other standard terms and conditions, subject to accelerated vesting as specified in Section 3(e) hereof.


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(h) SEVERANCE.


(i) VOLUNTARY TERMINATION FOR GOOD REASON; INVOLUNTARY TERMINATION OTHER THAN FOR CAUSE. If Executive's employment with the Company terminates due to (i) a "Voluntary Termination for Good Reason" (as defined in the Management Retention Agreement) where the grounds for t ...