10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended February 27, 2009

or

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

For the transition period from      to

Commission File No. 0-12867

3COM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-2605794
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

350 Campus Drive
Marlborough, Massachusetts	01752
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o (Do not check if a smaller reporting company) Smaller reporting company o

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

Yes o No þ

As of March 27, 2009, 387,471,015 shares of the registrant’s common stock were outstanding.

3COM CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 27, 2009
TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Condensed Consolidated Statements of Operations (unaudited) Three and Nine Months Ended February 28, 2009 and 2008		1
Condensed Consolidated Balance Sheets (unaudited) February 28, 2009 and May 31, 2008		2
Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended February 28, 2009 and 2008		3
Notes to Condensed Consolidated Financial Statements (unaudited)		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		33
PART II. OTHER INFORMATION		33
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 4. Submission of Matters to a Vote of Security Holders		44
Item 5. Other Information		44
Item 6. Exhibits		45
SIGNATURES		47
EXHIBITS		48
EX-10.6 2005 Deferred Compensation Plan
EX-10.7 Section 16 Officer Severance Plan
EX-10.8 First Amendment to Employment Agreement - Mao
EX-10.9 First Amendment to Employment Agreement - Sege
EX-10.10 Form of First Amendment to Severance Benefits Agreement
EX-10.11 Form of Second Agreement to Severance Benefits Agreement
EX-10.12 Form of First Amendment to Management Retention Agreement
EX-10.13 Form of First Amendment
EX-10.14 Form of Second Agreement to Management Retention Agreement
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERT OF CEO AND CFO

We use a 52 or 53 week fiscal year ending on the Friday nearest to May 31, with each fiscal quarter ending on the Friday generally nearest August 31, November 30 and February 28. For presentation purposes, the periods are shown as ending on August 31, November 30, February 28 and May 31, as applicable. Our China legal entity follows a calendar year basis of reporting and therefore results for our China-based sales segment is consolidated on a two-month time lag.

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

This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the following aspects of our business: global economic slowdown and effects and strategy; core business strategy to leverage China and emphasize larger enterprise business; China-based sales region strategy, growth, dependence, expected benefits, tax rate, sales from China, and resources needed to comply with Sarbanes-Oxley and manage operations; impact of recent accounting regulations; expected annual amortization expense; environment for enterprise networking equipment; challenges relating to sales growth; trends and goals for segments and regions; pursuit of termination fee; supply of components; research and development focus; execution of our strategy; strategic product and technology development plans; goal of sustaining profitability; short-term management of cash during economic slowdown; intercompany dividends from China; ability to satisfy cash requirements for at least the next twelve months; stock repurchase program; restructuring activities and expected charges to be incurred; expected cost savings from restructuring activities and integration; potential acquisitions and strategic relationships; future contractual obligations; recovery of deferred tax assets and balance of unrecognized tax benefits; reserves; market risk; outsourcing; competition and pricing pressures; expectation regarding base interest rates; impact of foreign currency fluctuations; belief regarding meritorious defenses to litigation claims and effects of litigation; and you can identify these and other forward-looking statements by the use of words such as “may,” “can,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any forward-looking statements.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II Item 1A Risk Factors. All forward-looking statements included in this document are based on our assessment of information available to us at the time this report is filed. We have no intent, and disclaim any obligation, to update any forward-looking statements.

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

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

3COM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
(In thousands, except per share data)	2009			2008			2009			2008
Sales	$	324,707		$	336,390		$	1,021,919		$	973,625
Cost of sales		138,878			156,716			446,671			492,895
Gross profit		185,829			179,674			575,248			480,730
Operating expenses (income):
Sales and marketing		84,241			82,428			259,143			237,617
Research and development		43,729			50,530			137,330			155,039
General and administrative		30,393			26,268			88,799			78,806
Amortization		23,106			25,778			73,330			78,044
Patent dispute resolution		—			—			(70,000	)		—
Restructuring charges		2,860			736			7,361			4,308
Operating expenses, net		184,329			185,740			495,963			553,814
Operating income (loss)		1,500			(6,066	)		79,285			(73,084	)
Interest expense, net		(3,333	)		(2,879	)		(5,131	)		(10,412	)
Other income, net		16,528			10,591			45,298			33,345
Income (loss) before income taxes		14,695			1,646			119,452			(50,151	)
Income tax provision		(12,828	)		(9,486	)		(24,878	)		(11,967	)
Net income (loss)	$	1,867		$	(7,840	)	$	94,574		$	(62,118	)
Basic and diluted net income (loss) per share	$	0.00		$	(0.02	)	$	0.24		$	(0.16	)
Shares used in computing per share amounts:
Basic		384,679			400,142			393,868			398,724
Diluted		386,377			400,142			395,232			398,724

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

1

3COM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	February 28,			May 31,
(In thousands, except per share data)	2009			2008
ASSETS
Current assets:
Cash and equivalents	$	559,961		$	503,644
Notes receivable		85,795			65,116
Accounts receivable, less allowance for doubtful accounts of $14,750 and $12,253, respectively		114,083			116,281
Inventories		107,103			90,831
Other current assets		55,881			34,033
Total current assets		922,823			809,905
Property and equipment, less accumulated depreciation and amortization of $193,494 and $205,835, respectively		43,828			54,314
Goodwill		609,297			609,297
Intangible assets, net		203,838			278,385
Deposits and other assets		21,941			23,229
Total assets	$	1,801,727		$	1,775,130
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	71,636		$	90,280
Current portion of long-term debt		61,000			48,000
Accrued liabilities and other		415,068			366,181
Total current liabilities		547,704			504,461
Deferred taxes and long-term obligations		40,129			22,367
Long-term debt		152,000			253,000
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; none outstanding		—			—
Common stock, $0.01 par value, 990,000 shares authorized; shares issued: 387,269 and 405,656, respectively		2,323,511			2,353,688
Retained deficit		(1,310,672	)		(1,405,247	)
Accumulated other comprehensive income		49,055			46,861
Total stockholders’ equity		1,061,894			995,302
Total liabilities and stockholders’ equity	$	1,801,727		$	1,775,130

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

2

3COM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	February 28,
(In thousands)	2009			2008
Cash flows from operating activities:
Net income (loss)	$	94,574		$	(62,118	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		97,156			102,731
Stock-based compensation expense		18,187			15,413
Impairment of property and equipment		1,150			—
Loss on property and equipment disposals		581			2,227
Gain on investments, net		—			(185	)
Deferred income taxes		(7,466	)		(448	)
Changes in assets and liabilities:
Accounts and notes receivable		(13,560	)		(59,344	)
Inventories		(22,006	)		22,704
Other assets		6,771			7,733
Accounts payable		(20,929	)		(13,447	)
Other liabilities		41,874			(25,297	)
Net cash provided by (used in) operating activities		196,332			(10,031	)
Cash flows from investing activities:
Proceeds from maturities and sales of investments		—			442
Purchases of property and equipment		(12,778	)		(13,269	)
Proceeds from sale of property and equipment		223			944
Net cash used in investing activities		(12,555	)		(11,883	)
Cash flows from financing activities:
Issuances of common stock		3,022			6,124
Repurchases of common stock		(51,383	)		(2,321	)
Repayment of long term debt		(88,000	)		(94,000	)
Net cash used in financing activities		(136,361	)		(90,197	)
Effect of exchange rate changes on cash and equivalents		8,901			18,924
Net change in cash and equivalents during period		56,317			(93,187	)
Cash and equivalents, beginning of period		503,644			559,217
Cash and equivalents, end of period	$	559,961		$	466,030

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

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3COM CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of our financial position as of February 27, 2009 and May 30, 2008, our results of operations for the three and nine months ended February 27, 2009 and February 29, 2008 and our cash flows for the nine months ended February 27, 2009 and February 29, 2008.

We use a 52 or 53 week fiscal year ending on the Friday nearest to May 31. For convenience, the condensed consolidated financial statements have been shown as ending on the last day of the calendar month. Accordingly, the three and nine months shown as ended February 28, 2009 actually ended on February 27, 2009, the three and nine months shown as ended February 28, 2008 actually ended on February 29, 2008, and the balance sheet presented as of May 31, 2008 is actually as of May 30, 2008. The results of operations for the three and nine months ended February 28, 2009 may not be indicative of the results to be expected for the fiscal year ending May 29, 2009 or any other future periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended May 30, 2008.

Goodwill

We apply the provisions of SFAS No. 142 “Goodwill and Other Intangible Assets” to goodwill and intangible assets with indefinite lives which are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. We performed our annual goodwill impairment review as of February 27, 2009 for our TippingPoint segment and December 31, 2008 for our China-based region (as our China-based region reports on a two month lag), and noted no impairment of goodwill or intangible assets with indefinite lives. In making this assessment, we rely on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. Reporting unit valuations have been calculated using a combination of an income approach based on the present value of future cash flows of each reporting unit and a market approach. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in a goodwill impairment in future periods. In conjunction with our annual goodwill impairment tests, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.

Recently issued accounting pronouncements

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”) to improve reporting and to create greater consistency in the accounting and financial reporting of business combinations. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. SFAS No. 141R amends SFAS 109, “Accounting for Income Taxes”, such that adjustments made to valuation allowances on deferred income taxes and acquired income tax contingencies associated with acquisitions that closed prior to

4

the effective date of SFAS No. 141R would apply the provisions of SFAS No. 141R. An entity may not apply SFAS No. 141R before that date. Given that SFAS No. 141R relates to prospective and not historical business combinations, the Company cannot currently determine the potential effects of adoption of SFAS No. 141R may have on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as required in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring that they be treated as equity transactions. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is currently evaluating whether the adoption of SFAS No. 160 will have an effect on its consolidated financial position, results of operations or cash flows.

In February 2008, the FASB issued FASB Staff Position No. SFAS 157-2, “Effective Date of FASB Statement No. 157”, which provides a one-year deferral of the effective date of FAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Effective June 1, 2008, we adopted the provisions of SFAS No. 157 with respect to our financial assets and liabilities recorded at fair value, which had no material impact on our consolidated financial position, results of operations or cash flow. We have not yet determined the impact, if any, of the portion of SFAS No. 157, for which the implementation has been deferred, will have on our consolidated financial position, results of operations or cash flow.

In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS No. 142-3”). FSP FAS No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, “Goodwill and Other Intangible Assets” (“FAS No. 142”). The intent of FSP FAS No. 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS No. 141R “Business Combinations”, and other accepted accounting principles generally accepted in the United States of America. FSP FAS No. 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. We are currently evaluating the potential impact of FSP FAS No. 142-3 on our consolidated results of operations and financial position.

In May 2008, the FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. “The adoption of SFAS No. 162 is not expected to have a material impact on our consolidated results of operations and financial position.

In October 2008, the FASB issued FSP 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (FSP 157-3). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP 157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP 157-3 did not have a significant impact on our consolidated financial statements or the fair values of our financial assets and liabilities.

5

NOTE 2. STOCK-BASED COMPENSATION

In order to determine the fair value of stock options and employee stock purchase plan shares, we use the Black-Scholes option pricing model and apply the single-option valuation approach. In order to determine the fair value of restricted stock awards and restricted stock units we use the closing market price of 3Com common stock on the date of grant. We recognize stock-based compensation expense on a straight-line basis over the requisite service period of time-based vesting awards for stock options, restricted stock awards, restricted stock units, and the employee stock purchase plan. For unvested stock options outstanding as of May 31, 2006, we continue to recognize stock-based compensation expense using the accelerated amortization method prescribed in FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans”.

As of February 28, 2009, total unrecognized stock-based compensation expense relating to unvested employee stock options, restricted stock awards, restricted stock units and employee stock purchase plan, adjusted for estimated forfeitures, was $13.7 million, $4.4 million, $14.1 million and $0.1 million, respectively. These amounts are expected to be recognized over a weighted-average period of 2.4 years for stock options, 2.0 years for restricted stock awards, 2.0 years for restricted stock units and 0.1 years for employee stock purchase plan. If actual forfeitures differ from current estimates, total unrecognized stock-based compensation expense will be adjusted for future changes in estimated forfeitures.

Stock-based compensation expense recognized and disclosed is based on the Black-Scholes option pricing model for estimating the fair value of options granted under the company’s equity incentive plans. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The underlying weighted-average assumptions used in the Black-Scholes model for options and employee stock purchase plan and the estimates of the weighted average grant date fair value per share were as follows for options, restricted stock awards and restricted stock units granted during the three and nine months ended February 28, 2009 and February 28, 2008:

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	February 28,			February 28,			February 28,			February 28,
	2009			2008			2009			2008
Employee stock options:
Volatility		51.3	%		*	%		51.3	%		40.5	%
Risk-free interest rate		1.9	%		*	%		2.6	%		4.7	%
Dividend yield		0.0	%		*	%		0.0	%		0.0	%
Expected life (years)		6.0			*			4.7			3.8
Weighted average grant date fair value	$	1.28		$	*		$	1.04		$	1.49
Restricted stock awards:
Weighted average grant date fair value	$	*		$	*		$	2.28		$	3.90
Restricted stock units:
Weighted average grant date fair value	$	2.51		$	*		$	2.35		$	3.72
Employee Stock Purchase Plan:
Volatility		*	%		*	%		77.7	%		61.1	%
Risk-free interest rate		*	%		*	%		1.2	%		4.0	%
Dividend yield		*	%		*	%		0.0	%		0.0	%
Expected life (years)		*			*			0.5			0.5
Weighted average grant date fair value	$	*		$	*		$	0.90		$	1.60

* No grants during the period

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The following table presents stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations (in thousands):

	Three Months		Three Months		Nine Months		Nine Months
	Ended February		Ended February		Ended February		Ended February
	28, 2009		28, 2008		28, 2009		28, 2008
Cost of sales	$	596	$	496	$	1,916	$	1,403
Sales and marketing		1,599		1,753		4,970		4,146
Research and development		768		1,100		2,545		2,794
General and administrative		3,144		2,195		8,756		7,070
Stock-based compensation expense before tax	$	6,107	$	5,544	$	18,187	$	15,413

Stock Options. As of February 28, 2009, our outstanding stock options as a percentage of outstanding shares were approximately 7.7 percent. Stock option activity for the nine months ended February 28, 2009, was as follows (shares in thousands):

				Weighted
				average
	Number of			exercise
	shares			price
Outstanding May 31, 2008		43,925		$	4.98
Granted		1,403			2.30
Exercised		(979	)		1.48
Cancelled		(14,581	)		5.16
Outstanding February 28, 2009		29,768		$	4.88

As of February 28, 2009, there were approximately 20.0 million options exercisable with a weighted-average exercise price of $5.69 per share. By comparison, there were approximately 25.3 million options exercisable as of February 28, 2008 with a weighted-average exercise price of $5.97 per share.

During the nine months ended February 28, 2009 approximately 1.0 million options were exercised at an aggregate intrinsic value of $0.7 million. The exercise intrinsic value above is calculated as the difference between the market value on the exercise date and the exercise price of the options. The closing market value as of February 27, 2009 was $2.22 per share as reported by the NASDAQ Global Select Market. The aggregate intrinsic value of options outstanding and options exercisable as of February 28, 2009 was $1.3 million and $1.3 million, respectively. The aggregate options outstanding and options exercisable intrinsic value is calculated for options that are in-the-money as the difference between the market value as of February 28, 2009 and the exercise price of the options.

Options outstanding that are vested and expected to vest as of February 28, 2009 are as follows:

					Weighted
			Weighted		Average
	Number of		average		Remaining		Aggregate
	Shares		Grant-Date		Contractual		Intrinsic Value
	(in thousands)		Fair Value		Life (in years)		(in thousands)
Vested and expected to vest at February 28, 2009		27,105	$	5.08		3.3	$	1,325

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Restricted Stock Awards. Restricted stock award activity during the nine months ended February 28, 2009 was as follows (shares in thousands):

				Weighted
	Number of			average
	Shares			Grant-Date
	(unvested)			Fair Value
Outstanding May 31, 2008		3,095		$	3.43
Granted		325			2.28
Vested		(734	)		3.94
Forfeited		(745	)		3.75
Outstanding February 28, 2009		1,941		$	2.92

During the nine months ended February 28, 2009 approximately 0.7 million restricted awards with an aggregate fair value of $1.6 million became vested. Total aggregate intrinsic value of restricted stock awards outstanding as of February 28, 2009 was $4.3 million.

Restricted Stock Units. Restricted stock unit activity during the nine months ended February 28, 2009 was as follows (shares in thousands):

	Number of
	Shares
	(unvested)
Outstanding May 31, 2008		5,744
Granted		5,071
Vested		(2,445	)
Forfeited		(1,246	)
Outstanding February 28, 2009		7,124

The weighted average exercise price for all restricted stock units for all periods was $0.00. Total aggregate intrinsic value of restricted stock units outstanding at February 28, 2009 was $15.8 million.

During the nine months ended February 28, 2009 approximately 2.4 million restricted stock units with an aggregate intrinsic value of $5.4 million became vested.

Employee Stock Purchase Plan. We have an employee stock purchase plan (ESPP) under which eligible employees may authorize payroll deductions of up to ten percent of their compensation, as defined, to purchase common stock at a price of 85 percent of the lower of the fair market value as of the beginning or the end of the six-month offering period. We recognized $1.0 million of stock-based compensation expense related to the ESPP in the nine months ended February 28, 2009. Employee stock purchases generally occur only in the quarters ended November 30 and May 31.

NOTE 3. FAIR VALUE

Fair Value Hierarchy

SFAS No. 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 establishes three levels of inputs that may be used to measure fair value:

     Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

     Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.

     Level 3 — Unobservable inputs which are supported by little or no market activity.

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The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In accordance with SFAS 157, we measure our cash equivalents at fair value and classify them within Level 1 or Level 2 of the fair value hierarchy. The classification has been determined based on the manner in which we value our cash equivalents, primarily using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

Assets Measured at Fair Value on a Recurring Basis

Assets measured at fair value on a recurring basis consisted of the following types of instruments and were reported as cash equivalents as of February 28, 2009:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs		Total
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Balance
Assets
Cash equivalents:
Time deposits and government bonds with a maturity less than 3 months	$	—	$	406,118	$	—	$	406,118
Money market fund deposits		136,634		—		—		136,634
Total assets measured at fair value	$	136,634	$	406,118	$	—	$	542,752

NOTE 4. REALTEK PATENT DISPUTE RESOLUTION

On July 11, 2008, 3Com Corporation and Realtek Semiconductor Corp. (the “Realtek Group”) entered into three agreements which document the resolution of a several-year-long patent litigation between the parties and provide for the non-exclusive license by 3Com to the Realtek Group of certain patents and related network interface technology for license fees totaling $70.0 million, all of which was received in the three months ended August 31, 2008.

The basic agreement between 3Com and the Realtek Group documents the resolution of the litigation between the parties and provides for the dismissal of the lawsuit and mutual releases between the parties.

Under the terms of the agreements, the payments are non-refundable and the Company has no future performance obligations, apart from certain customary covenants not to sue Realtek, its customers or its suppliers on the licensed technology, and non-material notice and tax assistance obligations. Accordingly, the $70.0 million was recognized as income in the first quarter of fiscal 2009 in the operating expense (income) section of the Consolidated Statements of Operations.

NOTE 5. RESTRUCTURING CHARGES

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

In fiscal 2004, we continued a broad restructuring of our business to enhance the focus and cost effectiveness of our segments in serving their respective markets. These restructuring efforts continued through fiscal 2009. We took the following specific actions in fiscal 2004 through 2009 (the “Fiscal 2004 – 2009 Actions”):

• reduced our workforce; and

• continued efforts to consolidate and dispose of excess facilities

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Restructuring charges related to these various initiatives resulted in a charge of $2.9 million in the third quarter of fiscal 2009 and a net charge of $0.7 million in the third quarter of fiscal 2008. Net restructuring charges in the third quarter of fiscal 2009 consisted of $2.9 million for severance and outplacement costs. $2.0 million of these costs relate to the integration of our TippingPoint segment. The net restructuring charge in the third quarter of fiscal 2008 resulted from severance, outplacement and other costs of $0.8 million and a net benefit of $0.1 million for adjustments to facilities-related charges. Restructuring charges for the first nine months of fiscal 2009 were $7.4 million, and restructuring charges for the first nine months of fiscal 2008 were $4.3 million. Net restructuring charges in the first nine months of fiscal 2009 consisted of $6.0 million for severance and outplacement costs and $1.4 million related to vacating part of our Marlborough, MA facility for which we ceased use during the second quarter of fiscal 2009. Net restructuring charges in the first nine months of fiscal 2008 consisted of $4.2 million for severance and outplacement costs and $0.1 million related to facilities-related charges.

Accrued liabilities associated with restructuring charges totaled $3.1 million as of February 28, 2009 and are included in the caption “Accrued liabilities and other” in the accompanying condensed consolidated balance sheet. These liabilities are classified as current because we expect to satisfy such liabilities in cash within the next 12 months.

Fiscal 2008 and 2009 Actions

Activity and liability balances related to the fiscal 2008 and 2009 restructuring actions, which were all approved by management as part of the fiscal 2008 and 2009 corporate restructuring plans, are as follows (in thousands):

	Employee						Other
	Separation			Facilities-related			Restructuring
	Expense			Charges			Costs			Total
Balance as of May 31, 2008	$	687		$	—		$	—		$	687
Provisions		5,965			1,283			68			7,316
Payments and non-cash charges		(4,859	)		(319	)		(68	)		(5,246	)
Balance as of February 28, 2009	$	1,793		$	964		$	—		$	2,757

Employee separation expense includes severance pay, outplacement services, medical and other related benefits. Through February 28, 2009, the total reduction in workforce associated with actions initiated during fiscal 2008 included approximately 122 employees who had been separated. In addition, during the nine months ended February 28, 2009, the reduction in workforce was extended with actions initiated in fiscal 2009 to include approximately 82 employees who had been separated. The expense associated with restructuring actions is recognized as severed employees are terminated or over the remaining service period following their notification of termination. Facilities-related charges relate to vacating part of our Marlborough facility for which we ceased use during the second quarter of fiscal 2009.

We expect to complete any remaining activities related to these actions during the coming twelve months.

Fiscal 2004 through 2007 Actions

Activity and liability balances related to the fiscal 2004 — 2007 restructuring actions are as follows (in thousands):

	Employee			Facilities-
	Separation			related
	Expense			Charges			Total
Balance as of May 31, 2008	$	28		$	687		$	715
Provisions (benefits)		(6	)		51			45
Payments and non-cash charges		11			(440	)		(429	)
Balance as of February 28, 2009	$	33		$	298		$	331

Employee separation expense includes severance pay, outplacement services, medical and other related benefits. Facilities-related charges related to revised future lease obligations.

We expect to complete any remaining activities related to these actions during the coming twelve months.

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NOTE 6. INCOME TAXES

The Company provides for income taxes during interim periods based on our estimate of the effective tax rate for the year. Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period in which they occur. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

As of February 28, 2009, we had unrecognized tax benefits, including interest and penalties, of $20.5 million, all of which, if recognized, would affect our effective tax rate. The unrecognized tax benefits are recorded in “Deferred taxes and long-term obligations” on the balance sheet, none of which are expected to be settled in cash in the next twelve months. This balance represents an increase of $2.3 million over the balance at the end of our last fiscal year. In the third quarter the balance decreased by $2.8 million, primarily as a result of the lapsing of the statute of limitations in certain overseas jurisdictions. The increase from the last day of our last fiscal year is due to the recording of approximately $9.1 million related to new uncertain tax positions, partially offset by the settlement of previous positions and the lapsing of the statute of limitations for tax audits in certain overseas jurisdictions. As of February 28, 2009 the accrued interest and penalties related to uncertain tax positions was $2.1 million and zero, respectively, which have been recorded within the balance of unrecognized tax benefits.

During the three months ended August 31, 2008, we effectively settled the examination of a Hong Kong subsidiary’s returns for fiscal years 2000 to 2002, and during the current quarter, we effectively settled the examination of our Israel subsidiary’s returns for fiscal years 2004 to 2006. As a result of these settlements, we recognized previously unrecognized tax benefits of $1.4 million.

We estimate that the balance of unrecognized tax benefits will decrease by approximately $0.1 million over the next twelve months as a result of the expiration of various statutes of limitations.

We have now qualified under the new PRC tax law, effective January 1, 2009, as a new and high technology enterprise, which entitles us to a long-term tax rate of 15 percent in China. Under the previous tax law, we had qualified for tax concessions which entitled our China entity to a zero tax rate for 2004 and 2005, and a rate equal to half of our normal rate for 2006 to 2008. We expect our rate for calendar year 2008 and beyond will be 15%. The impact of the change in the tax rate in China to 15 percent resulted in a $12.1 million charge to our income tax provision for the quarter.

NOTE 7. COMPREHENSIVE (LOSS) INCOME

The components of comprehensive (loss) income, net of tax, are as follows (in thousands):

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2009			2008			2009		2008
Net income (loss)	$	1,867		$	(7,840	)	$	94,574	$	(62,118	)
Other comprehensive income:
Net unrealized loss on investments		—			—			—		(210	)
Change in accumulated translation adjustments		(2,307	)		11,822			2,194		26,071
Total comprehensive (loss) income	$	(440	)	$	3,982		$	96,768	$	(36,257	)

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NOTE 8. NET INCOME (LOSS) PER SHARE

The following represents a reconciliation from basic earnings (loss) per common share to diluted earnings (loss) per common share. Stock options and restricted stock (awards and units) of 29.0 million and 8.2 million, respectively, were outstanding at February 28, 2009, but were not included in the computation of diluted earnings (loss) per share because they were antidilutive. Stock options and restricted stock (awards and units) of 54.7 million and 3.0 million, respectively, were outstanding at February 28, 2008, but were not included in the computation of diluted earnings (loss) per share because they were antidilutive.

	Three Months Ended					Nine Months Ended
	February 28,					February 28,
(in thousands except per share data)	2009		2008			2009		2008
Determination of shares:
Weighted average shares outstanding		384,679		400,142			393,868		398,724
Assumed conversion of dilutive stock options and restricted stock (awards and units)		1,698		—			1,364		—
Diluted weighted average shares outstanding		386,377		400,142			395,232		398,724
Basic earnings (loss) per share	$	0.00	$	(0.02	)	$	0.24	$	(0.16	)
Diluted earnings (loss) per share	$	0.00	$	(0.02	)	$	0.24	$	(0.16	)

NOTE 9. INVENTORIES

The components of inventories are as follows (in thousands):

	February 28,		May 31,
	2009		2008
Finished goods	$	86,516	$	62,055
Work-in-process		4,004		6,119
Raw materials		16,583		22,657
Total	$	107,103	$	90,831

NOTE 10. INTANGIBLE ASSETS, NET

Intangible assets consist of (in thousands, except for weighted average remaining life):

					February 28,									May 31,
					2009									2008
	Weighted									Weighted
	Average									Average
	Remaining									Remaining
	Amortization				Accumulated					Amortization				Accumulated
	Period		Gross		Amortization			Net		Period		Gross		Amortization			Net
Existing technology		3.0	$	382,050	$	(252,802	)	$	129,248		3.6	$	380,254	$	(198,682	)	$	181,572
Trademark	NA			55,502		—			55,502	NA			55,502		—			55,502
Huawei non-compete		0.0		33,016		(33,016	)		—		0.5		33,650		(22,072	)		11,578
OEM agreement		1.2		24,663		(14,166	)		10,497		2.0		24,844		(7,947	)		16,897
Maintenance agreements		2.0		19,000		(12,931	)		6,069		2.7		19,000		(10,556	)		8,444
Other		1.2		20,474		(17,952	)		2,522		2.0		22,176		(17,784	)		4,392
			$	534,705	$	(330,867	)	$	203,838			$	535,426	$	(257,041	)	$	278,385

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NOTE 11. ACCRUED WARRANTY

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

The following table summarizes the activity in the allowance for estimated warranty costs for the nine months ended February 28, 2009 and 2008 (in thousands):

	Nine Months Ended
	February 28,
	2009			2008
Accrued warranty, beginning of period	$	36,897		$	40,596
Cost of warranty claims processed during the period		(23,613	)		(31,040	)
Provision for warranties related to products sold during the period		19,308			29,122
Accrued warranty, end of period	$	32,592		$	38,678

NOTE 12. LONG-TERM DEBT

On May 25, 2007, our subsidiary H3C Holdings Limited (“Borrower”) entered into an amended and restated credit agreement with various lenders, including Goldman Sachs Credit Partners L.P., as Mandated Lead Arranger, Bookrunner, Administrative Agent and Syndication Agent, and Industrial and Commercial Bank of China (Asia) Limited, as Collateral Agent (the “Credit Agreement”). Under the original credit agreement, the Borrower borrowed $430 million in the form of a senior secured term loan in two tranches (Tranche A and Tranche B) to finance a portion of the purchase price for 3Com’s acquisition of 49 percent of H3C Technologies Co., Limited, or H3C. The Borrower and its subsidiaries are referred to collectively as the “H3C Group.”

Interest on borrowings is payable semi-annually on March 28 and September 28, and commenced on September 28, 2007. Interest is accrued at the six month LIBOR rate, plus an applicable margin. The applicable LIBOR rate at February 28, 2009 was 3.70% and, based on the credit spread mandated by the Credit Agreement, the effective interest rate for Tranche A is 5.20% while the effective interest rate for Tranche B is 6.70%. On March 30, 2009, the six month LIBOR rate reset and the new effective rates are 3.29% and 4.79% on Tranches A and B, respectively.

The Borrower’s principal asset is 100 percent of the shares of H3C Technologies Co., Limited. Covenants and other restrictions under the Credit Agreement apply to the H3C Group. Required payments under the loan are generally expected to be serviced by cash flows from the H3C Group, while the loan is secured by assets at the H3C level.

Borrowings under the Credit Agreement may be prepaid in whole or in part without premium or penalty. The Borrower will be required to make mandatory prepayments using net proceeds from H3C Group (i) asset sales, (ii) insurance proceeds and (iii) equity offerings or debt incurrence. In addition, to the extent there exists excess cash flow as defined under the Credit Agreement, the Borrower will be required to make annual prepayments. Any excess cash flow amounts not required to prepay the loan may be distributed to and used by the Company outside of the H3C Group, provided certain conditions are met.

H3C and all other existing and future subsidiaries of the Borrower (other than PRC subsidiaries or small “excluded subsidiaries”) will guarantee all obligations under the loans and are referred to as “Guarantors”. The loan obligations are secured by (1) first priority security interests in all assets of the Borrower and the Guarantors, including their bank accounts, and (2) a first priority security interest in 100 percent of the capital stock of the Borrower and H3C and the PRC subsidiaries of H3C.

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The Borrower must maintain a minimum debt service coverage, minimum interest coverage, maximum capital expenditures and a maximum total leverage ratio. Negative covenants restrict, among other things, (i) the incurrence of indebtedness by the Borrower and its subsidiaries, (ii) the making of dividends and distributions to the Company outside of the H3C Group, (iii) the ability to make investments including in new subsidiaries, (iv) the ability to undertake mergers and acquisitions and (v) sales of assets. As of February 28, 2009, the H3C Group’s net assets were $836.9 million and are subject to these dividend restrictions. Also, cash dividends from the PRC subsidiaries to H3C, and H3C to the Borrower, will be subject to restricted use pending payment of principal, interest and excess cash flow prepayments. Standard events of default apply.

Remaining payments of the $213 million principal are due as follows on September 28, of each year as follows, (in thousands):

Calendar year	3Com fiscal year	Tranche A		Tranche B
2009	2010	$	46,000	$	2,000
2010	2011		46,000		2,000
2011	2012		—		20,000
2012	2013		—		97,000

Accrued interest at February 27, 2009 related to the long-term debt was $3.5 million and was paid on March 30, 2009.

As of February 27, 2009, we were in compliance with all of our debt covenants.

On March 30, 2009, the Company made a voluntary prepayment of $13.0 million of principal, for which the Company did not incur a penalty. The prepayment was applied to reduce our fiscal year 2013 Tranche B principal balance. This prepayment constitutes the entire estimated amount we believe we will be required to pay in September 2009 as part of the mandatory excess cash flow prepayment. The prepayment amount was classified as current debt in the consolidated balance sheet as of February 28, 2009.

NOTE 13. SEGMENT INFORMATION

In the prior fiscal year we reported H3C, Data and Voice Business Unit (“DVBU”), TippingPoint Security business (“TippingPoint”) and Corporate as segments. In the first quarter of fiscal 2009, we realigned the manner in which we manage our business and internal reporting, and based on the information provided to our chief operating decision-maker (CODM) for purposes of making decisions about allocating resources and assessing performance, we have two primary businesses, our Networking business and TippingPoint Security business. Accordingly, our previously reported segment information has been restated to reflect our new operating and reporting structure. Our Networking business consists of the following sales regions as operating segments: China-based, Asia Pacific Region excluding China-based sales region (APR), Europe Middle East and Africa (EMEA), Latin America (LAT), and North America (NA) regions. The APR, EMEA, LAT and NA operating segments have been aggregated given their similar economic characteristics, products, customers and processes, and have been consolidated as one reportable segment, “Rest of World”. The China-based sales region does not meet the aggregation criteria at this time.

The China-based and Rest of World reporting segments benefit from shared support services on a world-wide basis. The costs associated with providing these shared central functions are not allocated to the China-based and Rest of World reporting segments and instead are reported and disclosed under the caption “Central Functions”. Central Functions consist of indirect cost of sales, such as supply chain operations expenses, and centralized operating expenses, such as research and development, indirect sales and marketing, and general and administrative support.

Management evaluates the China-based sales region and the Rest of World sales region performance based on segment contribution profit. Segment contribution profit for these regions is defined as “gross profit” (as defined in the next sentence) less segment direct sales and marketing expenses. “Gross profit” for these regions is defined as sales less standard cost of sales. Our TippingPoint Security business segment is measured on segment profit (loss). Gross profit for the TippingPoint segment is defined as sales less cost of sales. This measure includes all operating costs except those items included in “Eliminations and Other”. Eliminations and other include intercompany sales eliminations, stock-based compensation expense, amortization of intangible assets, restructuring in all periods as well as purchase accounting inventory related adjustments and Realtek patent dispute resolution where applicable.

14

Summarized financial information of our results of operations by segment for the three and nine months ended February 28, 2009 and 2008 is as follows.

	Three Months Ended February 28, 2009
	Networking Business							TippingPoint
			Rest of					Security
			World					Business
	China-based		Sales		Central			Tipping		Eliminations/
(in thousands)	Sales Region		Region		Functions			Point		Other				Total
Sales	$	190,385	$	102,836	$	—		$	33,284	$	(1,798	)  a	$	324,707
Gross profit		128,160		61,365		(25,326	)		22,226		(596	)  b		185,829
Direct sales & marketing expenses		36,581		23,360		—			10,282		1,371	b		71,594
Segment contribution profit (loss)		91,579		38,005		(25,326	)		11,944		(1,967	)		114,235
Other operating expenses		—		—		68,394			11,129		33,212	c		112,735
Segment income	$	—	$	—	$	—		$	815	$	—
Operating income													$	1,500

	Three Months Ended February 28, 2008
	Networking Business							TippingPoint
			Rest of					Security
			World					Business
	China-based		Sales		Central			Tipping			Eliminations/
	Sales Region		Region		Functions			Point			Other			Total
Sales	$	179,668	$	134,531	$	—		$	23,639		$	(1,448	)  a	$	336,390
Gross profit		114,600		77,523		(28,474	)		16,578			(553	)  b		179,674
Direct sales & marketing expenses		33,001		25,151		—			8,827			1,753	b		68,732
Segment contribution profit (loss)		81,599		52,372		(28,474	)		7,751			(2,306	)		110,942
Other operating expenses		—		—		75,701			8,510			32,797	c		117,008
Segment profit	$	—	$	—	$	—		$	(759	)	$	—
Operating loss														$	(6,066	)

15

	Nine Months Ended February 28, 2009
	Networking Business							TippingPoint
			Rest of					Security
			World					Business
	China-based		Sales		Central			Tipping		Eliminations/
(in thousands)	Sales Region		Region		Functions			Point		Other			Total
Sales	$	565,597	$	368,838	$	—		$	92,499	$	(5,015	)  a	$	1,021,919
Gross profit		375,588		215,479		(76,707	)		62,804		(1,916	)  b		575,248
Direct sales & marketing expenses		106,194		77,254		—			30,873		4,742	b		219,063
Segment contribution profit (loss)		269,394		138,225		(76,707	)		31,931		(6,658	)		356,185
Other operating expenses		—		—		219,593			31,181		26,126	c		276,900
Segment profit	$	—	$	—	$	—		$	750	$	—
Operating income													$	79,285

	Nine Months Ended February 28, 2008
	Networking Business							TippingPoint
			Rest of					Security
			World					Business
	China-based		Sales		Central			Tipping			Eliminations/
	Sales Region		Region		Functions			Point			Other			Total
Sales	$	490,120	$	411,035	$	—		$	74,892		$	(2,422	)  a	$	973,625
Gross profit		304,784		228,277		(90,492	)		50,740			(12,579	)  b		480,730
Direct sales & marketing expenses		89,496		71,782		—			27,676			4,146	b		193,100
Segment contribution profit (loss)		215,288		156,495		(90,492	)		23,064			(16,725	)		287,630
Other operating expenses		—		—		234,080			23,830			102,804	c		360,714
Segment loss	$	—	$	—	$	—		$	(766	)	$	—
Operating loss														$	(73,084	)

a  –	Represents eliminations for inter-company revenue between Networking and TippingPoint during the respective periods.
b  –	Includes stock based compensation in all periods and purchase accounting inventory related adjustments in the nine months ended February 28, 2008.
c  –	Includes stock based compensation, amortization, and restructuring in all periods plus Realtek patent dispute resolution in the nine months ended February 28, 2009 and acquisition related expenses in the nine months ended February 28, 2008.

As of February 28, 2009 assets of our TippingPoint segment were $229.0 million. We do not allocate assets between our China-based sales region, our Rest of World sales region and our Central Functions. Assets associated with this group in the aggregate are $1,572.7 million as of February 28, 2009. As of February 28, 2009 goodwill related to our TippingPoint segment and China-based sales region were $153.4 million and $455.9 million, respectively.

16

Certain product groups accounted for a significant portion of our sales. Security product sales include both sales of security products in our Networking and TippingPoint Security businesses. Sales from these product groups as a percentage of total sales for the respective periods are as follows (in thousands, except percentages):

	Three Months Ended								Nine Months Ended
	February 28,								February 28,
	2009				2008				2009				2008
Networking equipment	$	259,045	80	%	$	280,529	83	%	$	830,405	82	%	$	799,258	82	%
Security		43,553	13	%		30,459	9	%		122,682	12	%		97,004	10	%
Services		11,892	4	%		10,309	3	%		34,583	3	%		29,292	3	%
Voice		10,217	3	%		15,093	5	%		34,249	3	%		48,071	5	%
Total	$	324,707			$	336,390			$	1,021,919			$	973,625

NOTE 14. GEOGRAPHIC INFORMATION

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

	Three Months Ended February 28,				Nine Months Ended February 28,
	2009		2008		2009		2008
China	$	183,758	$	169,864	$	544,136	$	459,725
Europe, Middle East, and Africa		52,982		75,368		181,348		218,239
North America		43,300		42,871		144,461		155,478
Asia Pacific (except China)		23,850		27,059		81,147		76,306
Latin and South America		20,817		21,228		70,827		63,877
Total	$	324,707	$	336,390	$	1,021,919	$	973,625

All non-Original Equipment Manufacturer (OEM) partner sales are reported in geographic categories based on the location of the end customer. Sales to OEM partners are included in the geographic categories based upon the hub locations of the OEM partners.

NOTE 15. LITIGATION

We are a party to lawsuits in the normal course of our business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the outcome of claims against the Company described below are uncertain. We believe that we have meritorious defenses in the matters set forth below in which we are named as a defendant. An unfavorable resolution of the lawsuits in which we are defendants as described below, could adversely affect our business, financial position, results of operations, or cash flow. The Company does not believe that the ultimate disposition of these matters will have a material adverse effect on the Company’s financial position.

On December 5, 2001, TippingPoint and two of its current and former officers and directors, as well as the managing underwriters in TippingPoint’s initial public offering, were named as defendants in a purported class action lawsuit filed in the United States District Court for the Southern District of New York. The lawsuit, which is part of a consolidated action that includes over 300 similar actions, is captioned In re Initial Public Offering Securities Litigation, Brian Levey vs. TippingPoint Technologies, Inc., et al. (Civil Action Number 01-CV-10976). The principal allegation in the lawsuit is that the defendants participated in a scheme to manipulate the initial public offering and subsequent market price of TippingPoint’s stock (and the stock of other public companies) by knowingly assisting the underwriters’ requirement that certain of their customers had to purchase stock in a specific initial public offering as a condition to being allocated shares in the initial public offerings of other companies. In relation to TippingPoint, the purported plaintiff class for the lawsuit is comprised of all persons who purchased TippingPoint stock from March 17, 2000 through December 6, 2000. The suit seeks rescission of the purchase prices paid by purchasers of shares of TippingPoint common stock. On September 10, 2002, TippingPoint’s counsel and counsel for the plaintiffs entered into an agreement pursuant to which the plaintiffs dismissed, without prejudice, TippingPoint’s former and current officers and directors from the lawsuit. In March 2009, TippingPoint signed a settlement agreement with the plaintiffs. On April 2, 2009, all the parties to the lawsuit (including all plaintiffs, issuers and underwriters) filed settlement documents with the District Court. The settlement, if approved by the District Court, will fully dispose of all claims at issue in this lawsuit.

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Any direct financial impact of the settlement is expected to be borne by TippingPoint’s insurers. The settlement remains subject to numerous conditions, including preliminary and final approval by the District Court. If the settlement does not occur for any reason and the litigation against TippingPoint continues, we intend to defend this action vigorously, but cannot make any predictions about the outcome. To the extent necessary, we will seek indemnification and/or contribution from the underwriters in TippingPoint’s initial public offering pursuant to its underwriting agreement with the underwriters. However, there can be no assurance that indemnification or contribution will be available to TippingPoint or enforceable against the underwriters.

On December 22, 2006, Australia’s Commonwealth Scientific and Research Organization (CSIRO) filed suit in the United States District Court for the Eastern District of Texas (Tyler Division) against several manufacturers and suppliers of wireless products, including 3Com, seeking money damages and injunctive relief. CSIRO alleges that the manufacture, use, and sale of wireless products compliant with the IEEE 802.11(a), 802.11(g), or draft 802.11(n) wireless standards infringes on CSIRO’s patent, U.S. Patent No. 5,487,069. On March 9, 2007, 3Com filed its answer, denying infringement and claiming invalidity and unenforceability of the CSIRO patent, among other defenses. A Markman Opinion, wherein disputed terms in CSIRO’s patent are construed by the Court, issued on August 14, 2008. Trial is scheduled to commence April 13, 2009. The majority of 3Com’s wireless products are supplied to the Company under OEM Purchase and Development Agreements that impose substantial intellectual property indemnifications obligations upon 3Com’s suppliers. However, there can be no assurance that indemnification will be available and we cannot make any predictions as to the outcome of this litigation, but intend to vigorously defend the matter.

On July 31, 2008, the Company filed a lawsuit in the Delaware Chancery Court against Diamond II Holdings, Inc., an entity controlled by affiliates of Bain Capital Partners, LLC. The lawsuit seeks interpretation and enforcement of the provisions of the Merger Agreement and Plan of Merger by among 3Com, Diamond II Holdings, Inc., and Diamond II Acquisition Corp., dated as of September 28, 2007. The litigation is in furtherance of our efforts to enforce the provisions of the now-terminated Merger Agreement related to the termination fee. 3Com cannot assure you it will be able to collect this fee.

NOTE 16. STOCK REPURCHASE PROGRAM

On September 24, 2008, our board of directors authorized a stock repurchase program of up to $100 million, effective for one year. Stock repurchases under this program may be made through open-market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The stock repurchase program may be limited or terminated at any time without prior notice.

During the second quarter of fiscal 2009 the Company repurchased approximately $50.0 million of common stock under the authorized stock repurchase program. We purchased approximately 21.3 million shares at an average price of $2.35 per share, including commission costs of $0.03 per share. The repurchased shares have been retired and have been recorded as a reduction of common stock within stockholders’ equity at February 28, 2009. We made no repurchases under this program in the third quarter of fiscal 2009. We currently have suspended further purchases of stock under this plan, although we are authorized to repurchase the remaining $50 million of common stock under the authorized stock program and may do so at any time without prior notice.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion should be read in conjunction with the condensed consolidated financial statements and the related notes that appear elsewhere in this document.

BUSINESS OVERVIEW

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

We have undergone significant change in recent years, including:

§	Significant changes to our executive leadership;
§	The formation and subsequent 100 percent acquisition of our China-based subsidiary, H3C;
§	Financing a portion of the purchase price for our acquisition of H3C by entering into a $430 million senior secured credit agreement;
§	Restructuring activities, which included outsourcing of information technology, certain manufacturing activities in our Networking business, significant headcount reductions in other functions, and selling excess facilities;
§	Integration activities following our H3C acquisition, including in our research and development and supply chain organizations and integrating our TippingPoint segment; and
§	Changing our reporting segments to align with the way we manage our business.

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

§	Networking;
§	Security;
§	Voice; and
§	Services.

We have introduced multiple new products targeted at the small, medium and large enterprise markets, including modular and multi-service switches and routers; converged IP solutions such as voice, video and surveillance; security; and unified switching solutions. Our recent product introductions and future product strategy are designed to offer a compelling value proposition to our customers, by leveraging open platform technology with options to integrate best-of-breed application solutions directly into their networks.

Business Environment and Future Trends

We operate today in a rapidly changing business environment due to the severe credit and adverse market conditions in many of the world’s economies. The current global financial crisis has led to significant business slowdowns around the world. It is therefore increasingly difficult to predict future business conditions in the market for enterprise networking equipment. Our business is highly dependent on the Chinese economy, which has experienced strong growth in recent years. While we believe that China may be less affected than other regions by the global economic slowdown, it is now experiencing the effects of the downturn and our growth has slowed in China. While we believe our China business has been resilient in this market environment, it is difficult to predict the extent of the slowdown on our China business at this time. During our fourth quarter, which is our China business’ calendar first quarter, our China-based business as well as many of its customers shutdown for two weeks for the Chinese New Year. For our operations outside of China, which we call “Rest of World,” we expect the challenging business environment to continue in the foreseeable future. In Rest of World, we are experiencing reduced demand for our products, delayed or cancelled purchases and longer sales cycles. Our Rest of World operations have been adversely impacted by the global economic crisis.

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Our strategy to address these adverse business conditions is to market our solutions as providing exceptional quality for a good value and to remain competitive in the enterprise market. At the same time, we recognize that global spending on networking products and solutions is likely to continue to be under significant pressure for the foreseeable future.

Networking industry analysts and participants differ widely in their assessments concerning the prospects for mid to long-term industry growth, especially in light of the current weakness in many of the major global economies. Industry factors and trends also present significant challenges in the medium-term. Such factors and trends include intense competition in the market for higher end, enterprise core routing and switching products and aggressive product pricing by competitors targeted at gaining share in the small to medium-sized business market.

We believe that long-term success in this environment requires us to (1) be a global technology leader, (2) increase our revenue and take market share from competitors outside of China, (3) increase and sustain our profitability and (4) increase our generation of cash from operations.

Technology Strategy

We believe our principal research and development base in China provides a strong foundation for our global product development. Our strategy involves continuing our tradition of innovation, using China as a home market to introduce new products in the networking equipment industry and related markets and providing leading solutions for global markets.

Revenue and Market Share Goals

We believe that our differentiated, comprehensive product portfolio which provides end-to-end IP solutions based on open standards offers a compelling value proposition for customers, particularly in the current economic environment.

Our intention is to leverage our global footprint to more effectively sell these products. A key element of our strategy is to increasingly focus on direct-touch sales to larger enterprise and government accounts in all of our regions.

We hope to achieve our goal of revenue growth by executing on three region-centric growth strategies as follows:

• China - In China, we have been successful in direct-touch sales to enterprise and government customers, and selling our offerings to the carrier market through our Huawei OEM relationship. We do, however, expect declining sales to Huawei. To maintain a leadership position in China, we intend to increase our focus on direct-touch sales as well as pursue other channels into the carrier market. We believe that growing market share in China will be more challenging than in the past given that we already have a significant enterprise networking market share in China. We also intend to continue to introduce innovative new product offerings in the China market, such as IP video surveillance and IP storage, which may offer additional growth opportunities.

Our strategy involves leveraging our significant China-based engineering team and strong brand of networking solutions designed for enterprise and government accounts into greater success in markets outside of China, as further described below.

• Emerging markets outside of China - We expect to target growth opportunities outside of China in other developing markets. We believe that our successful penetration of the Chinese market has positioned us to grow sales in developing markets generally.

• Developed global markets - Our ability to achieve our goal of sales growth in developed markets depends to a substantial degree on our ability to take market share from our competitors. Our strategy is to focus on larger enterprise and government accounts and to implement this strategy we intend to increase go to market resources to address this opportunity. Our initiatives include increasing enterprise sales by offering these customers our comprehensive end to end solutions and highlighting our products’ price to performance value proposition and energy efficiency. As discussed earlier, the results of these efforts have been hampered by the global economic slowdown.

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Profitability and Cash Generation Objectives

We believe that our long-term success is also dependent on our ability to increase our overall profit and cash generation. We believe that by continuing to deliver on the integration of our worldwide operations we can achieve further operational efficiencies which will allow us to support our continued investment in sales and marketing that we require to grow our business. We may also continue to require certain targeted investments in the integration of our business infrastructure designed to drive more profitable near and long-term growth. Integration has involved, and is expected to continue to involve, consolidation, streamlining and aligning our product line management, research and development and supply chain activities, among others.

For our TippingPoint business we plan to focus on growing its top line and improving operational efficiency and segment profitability. We plan to achieve operational efficiency by integrating supply chain and finance activities, among others. We also plan to leverage our existing sales channels and global footprint to more effectively sell TippingPoint products and services.

Segment Reporting

In the prior fiscal year we reported H3C, Data and Voice Business Unit (“DVBU”), TippingPoint Security business (“TippingPoint”) and Corporate as segments. In the first quarter of fiscal 2009, we realigned the manner in which we manage our business and internal reporting and based on the information provided to our chief operating decision-maker (CODM) for purposes of making decisions about allocating resources and assessing performance, we have two primary businesses, our Networking business and TippingPoint Security business. Accordingly, our previously reported segment information has been restated to reflect our new operating and reporting structure. Our Networking business consists of the following sales regions as operating segments: China-based, Asia Pacific excluding China (APR), Europe Middle East and Africa (EMEA), Latin America (LAT), and North America (NA) regions. The APR, EMEA, LAT and NA operating segments have been aggregated given their similar economic characteristics, products, customers and processes, and have been consolidated as one reportable segment, “Rest of World”. The China-based region does not meet the aggregation criteria at this time.

The China-based and Rest of World operating segments benefit from shared support services on a world-wide basis. The costs associated with providing these shared support services are not allocated to the China-based and Rest of World operating segments and instead are reported and disclosed under the caption “Central Functions”. Central Functions consist of indirect cost of sales, such as supply chain operations expenses, and centralized operating expenses, such as research and development, indirect sales and marketing, and general and administrative support.

Summary of Three Months Ended February 28, 2009 Financial Performance

§	Our sales in the three months ended February 28, 2009 were $324.7 million, compared to sales of $336.4 million in the three months ended February 28, 2008, a decrease of $11.7 million, or 3.5 percent.
§	Our gross margin improved to 57.2 percent in the three months ended February 28, 2009 from 53.4 percent in the three months ended February 28, 2008.
§	Our operating expenses (income) in the three months ended February 28, 2009 were $184.3 million, compared to $185.7 million in the three months ended February 28, 2008, a net decrease of $1.4 million, or 0.8 percent.
§	Our net income in the three months ended February 28, 2009 was $1.9 million, compared to a net loss of $7.8 million in the three months ended February 28, 2008.
§	Our balance sheet contains cash and equivalents of $560.0 million as of February 28, 2009, compared to cash and equivalents of $503.6 million at the end of fiscal 2008. The balance sheet also includes debt of $213 million with $61 million classified as a current liability as of February 28, 2009 compared with debt of $301 million with $48 million classified as a current liability at the end of fiscal 2008.

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Summary of Nine Months Ended February 28, 2009 Financial Performance

§	Our sales in the nine months ended February 28, 2009 were $1,021.9 million, compared to sales of $973.6 million in the nine months ended February 28, 2008, an increase of $48.3 million, or 5.0 percent.
§	Our gross margin improved to 56.3 percent in the nine months ended February 28, 2009 from 49.4 percent in the nine months ended February 28, 2008.
§	Our operating expenses (income) in the nine months ended February 28, 2009 were $496.0 million, compared to $553.8 million in the nine months ended February 28, 2008, a net decrease of $57.8 million, or 10.4 percent. Included in operating expenses (income) for the nine months ended February 28, 2009 is $70.0 million of income related to the Realtek patent dispute resolution.
§	Our net income in the nine months ended February 28, 2009 was $94.6 million, compared to a net loss of $62.1 million in the nine months ended February 28, 2008. Included in net income for the nine months ended February 28, 2009 is $70.0 million of income related to the Realtek patent dispute resolution.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are described in Annual Report on Form 10-K for the fiscal year ended May 31, 2008. There have been no significant changes to these policies during the nine months ended February 28, 2009. These policies continue to be those that we feel are most important to a reader’s ability to understand our financial results.

RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED FEBRUARY 28, 2009 AND 2008

The following table sets forth, for the periods indicated, the percentage of total sales represented by the line items reflected in our condensed consolidated statements of operations:

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2009			2008			2009			2008
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		42.8			46.6			43.7			50.6
Gross profit margin		57.2			53.4			56.3			49.4
Operating expenses (income):
Sales and marketing		25.9			24.5			25.3			24.5
Research and development		13.5			15.0			13.4			15.9
General and administrative		9.4			7.8			8.7			8.1
Amortization		7.1			7.7			7.2			8.0
Realtek patent resolution		—			—			(6.8	)		—
Restructuring charges		0.8			0.2			0.7			0.4
Operating expenses, net		56.7			55.2			48.5			56.9
Operating income (loss)		0.5			(1.8	)		7.8			(7.5	)
Interest expense, net		(1.0	)		(0.9	)		(0.5	)		(1.1	)
Other income, net		5.1			3.2			4.4			3.4
Income (loss) before income taxes		4.6			0.5			11.7			(5.2	)
Income tax provision		(4.0	)		(2.8	)		(2.4	)		(1.2	)
Net income (loss)		0.6	%		(2.3	)%		9.3	%		(6.4	)%

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Sales

Consolidated sales for the three and nine months ended February 28, 2009 and 2008 by segment were as follows (dollars in millions):

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2009			2008			2009			2008
China-based sales region	$	190.4		$	179.7		$	565.6		$	490.1
Rest of World sales region		102.8			134.5			368.8			411.0
TippingPoint security business		33.3			23.6			92.5			74.9
Eliminations and other		(1.8	)		(1.4	)		(5.0	)		(2.4	)
Consolidated sales	$	324.7		$	336.4		$	1,021.9		$	973.6

Sales in our China-based sales region increased $10.7 million or 6.0 percent, in the three months ended February 28, 2009 and increased $75.5 million, or 15.4 percent in the nine months ended February 28, 2009 compared to the same periods in the previous fiscal year. The increase in sales in the three months ended February 28, 2009 is attributable to appreciation of $14.4 million on the Renminbi as well as increased direct-touch sales of $9.6 million in China, partially offset by decreased sales of $10.1 million to Huawei and decreased sales of $3.5 million in Hong Kong and Japan. The increase in the nine months ended February 28, 2009 is primarily attributable to appreciation of $46.2 million on the Renminbi as well as increased direct-touch sales of $29.3 million and increased sales to Huawei of $6.7 million, partially offset by decreased sales of $6.6 million in Hong Kong and Japan.

Sales in our Rest of World sales region decreased $31.7 million or 23.6 percent, in the three months ended February 28, 2009 and decreased $42.2 million, or 10.3 percent in the nine months ended February 28, 2008 compared to the same periods in the previous fiscal year. The decrease in sales in the three months ended February 28, 2009 is primarily attributable to decreased sales in all regions due primarily to decreased volume as we are experiencing longer sales cycles, delayed or cancelled purchases and reduced incoming orders because of the global economic downturn. We also believe that our SMB business has been impacted more significantly than our larger enterprise business. The decrease in sales in the nine months ended February 28, 2009 is primarily attributable to decreased sales in our SMB business in North America and Europe. These decreases were partially offset by increased sales in our LAT and APR regions where our sales to larger enterprise and government accounts accounted for increased sales compared to prior periods, primarily during the first two quarters of fiscal 2009.

Sales in our TippingPoint security business increased $9.7 million, or 40.8 percent, in the three months ended February 28, 2009 and increased $17.6 million, or 23.5 percent in the nine months ended February 28, 2009 compared to the same periods in the previous fiscal year. The increase in sales in the three months ended February 28, 2009 is primarily attributable to increased software sales of $6.5 million and increased maintenance revenue of $3.0 million due to an increased number of maintenance contracts. Sales for the three months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales. We are seeing continued interest in security products and services even in the economic downturn. The increase in sales in the nine months ended February 28, 2009 is primarily related to increased maintenance revenue of $9.2 million due to increased maintenance contracts as well as $8.4 million increased software sales due primarily to large account sales. Sales in the nine months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales.

Eliminations and other increased by $0.4 million in the three months ended February 28, 2009 and increased $2.6 million in the nine months ended February 28, 2009 compared to the same period in the previous fiscal year. This increase in both periods is primarily due to increased sales from our TippingPoint segment to our Rest of World sales region.

Consolidated revenues decreased by $11.7 million or 3.5 percent, in the three months ended February 28, 2009 but increased by $48.3 million, or 5.0 percent, in the nine months ended February 28, 2009 compared to the same period in the previous fiscal year.

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Sales by major product categories are as follows (dollars in millions):

	Three Months Ended								Nine Months Ended
	February 28,								February 28,
	2009				2008				2009				2008
Networking	$	259.0	80	%	$	280.5	83	%	$	830.4	82	%	$	799.3	82	%
Security		43.6	13	%		30.5	9	%		122.7	12	%		97.0	10	%
Services		11.9	4	%		10.3	3	%		34.6	3	%		29.3	3	%
Voice		10.2	3	%		15.1	5	%		34.2	3	%		48.0	5	%
Total	$	324.7	100	%	$	336.4	100	%	$	1,021.9	100	%	$	973.6	100	%

Networking revenue includes sales of our Layer 2 and Layer 3 stackable 10/100/1000 managed switching lines, our modular switching lines, routers, IP storage and our small to medium-sized enterprise market products. Sales of our networking products decreased $21.5 million or 7.7 percent in the three months ended February 28, 2009 and increased $31.1 million or 3.9 percent in the nine months ended February 28, 2009 compared to the same period in the previous fiscal year. The decrease in the three months ended February 28, 2009 is primarily related to decreased sales in our Rest of World segment, partially offset by an increase in China, primarily due to appreciation of the Renminbi. Decreased sales in our Rest of World segment related primarily to decreased sales in our EMEA, North America and APR regions, sales in these regions decreased $21.6 million, $4.1 million and $3.3 million, respectively. The primary reasons for the decreased sales in these regions related primarily to decreased volume due to longer sales cycles, delayed or cancelled purchases and reduced incoming orders due to the global economic downturn. The increase in the nine months ended February 28, 2009 is primarily attributable to appreciation of the Renminbi, and to a lesser extent, increased direct-touch sales in China, partially offset by decreased sales in Western Europe and North America due to longer sales cycles, delayed or cancelled purchases and reduced incoming orders due to adverse business conditions relating to the global economic downturn.

Security revenue includes our TippingPoint™ products and services, as well as other security products, such as our embedded firewall, or EFW and virtual private network, or VPN, products. Sales of our security products increased $13.1 million or 43.0 percent in the three months ended February 28, 2009 and $25.7 million, or 26.5 percent for the nine months ended February 28, 2009 compared to the same period in the previous fiscal year. The increase in sales in the three months ended February 28, 2009 is primarily attributable to increased TippingPoint software sales of $6.5 million and increased maintenance revenue of $3.0 million due to an increased number of maintenance contracts. Sales for the three months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales. Also contributing to the increase was $3.4 million of increased China-bases security sales. The increase in sales in the nine months ended February 28, 2009 is primarily related to increased maintenance revenue of $9.2 million due to increased maintenance contracts as well as $8.4 million increased hardware sales due primarily to large account sales, as well as increased in sales of security products in our China-based sales region. Sales for the three months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales.

Services revenue includes professional services and maintenance contracts, excluding TippingPoint maintenance which is included in security revenue. Services revenue increased $1.6 million or 15.4 percent in the three months ended February 28, 2009 and $5.3 million, or 18.1 percent, in the nine months ended February 28, 2009 compared to the same periods in the previous fiscal year. The increase in the three and nine months ended February 28, 2009 was driven primarily by increased service sales tied to growth in our China-based sales region of our networking business.

Voice revenue includes our VCX™ and NBX^® voice-over-internet protocol, or VoIP, product lines, as well as voice gateway offerings. Sales of our Voice products decreased $4.9 million or 32.3 percent in the three months ended February 28, 2009 and $13.8 million, or 28.8 percent, in the nine months ended February 28, 2009 compared to the same periods in the previous fiscal year. The decrease in the three months ended February 28, 2009 is primarily due to decreased sales in all five of our regions. The most significant decreases occurred in our China, EMEA and North America regions. The primary reasons for the decrease in these regions relate to longer sales cycles, delayed or cancelled purchases and reduced incoming orders due to adverse business conditions relating to the global economic downturn. The decrease in the nine months ended February 28, 2009 is primarily related to decreased sales in our North America region and to a lesser extend decreased sales in our EMEA region.

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Gross Margin

Gross margin for the three and nine months ended February 28, 2009 and 2008 by segment was as follows:

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2009			2008			2009			2008
Networking business		55.8	%		51.9	%		54.9	%		47.7	%
TippingPoint security business		66.6	%		69.9	%		67.7	%		67.7	%
Consolidated gross margin		57.2	%		53.4	%		56.3	%		49.4	%

Gross margin in our Networking business improved 3.9 points to 55.8 percent in the three months ended February 28, 2009 from 51.9 percent, and 7.2 points to 54.9 percent in the nine months ended February 28, 2009 from 47.7 percent in the same periods in the previous fiscal year. The improvement in gross profit margin for the three and nine months ended February 28, 2009 is attributable to a change in product mix primarily in all regions to more profitable enterprise related business as well as to reduced costs. The reduced costs primarily relate to a change in our customer service delivery model. During the year we changed from an outsourced service provider in the year ago period to a more cost effective hybrid model involving the use of both outsourced and in-house resources.

Gross margin in our TippingPoint security business decreased 3.3 points to 66.6 percent in the three months ended February 28, 2009 from 69.9 percent in the same period of the previous fiscal year. In the nine months ended February 28, 2009 gross margin remained flat at 67.7 percent from the same period of the previous fiscal year. The decline in the three months ended February 28, 2009 is explained primarily by increased inventory related reserves recorded on older products during the period due to product transitions.

Gross margin on a consolidated basis increased 3.8 points to 57.2 percent in the three months ended February 28, 2009 from 53.4 percent, and 6.9 percent to 57.2 percent in the nine months ended February 28, 2009 from 49.4 percent in the same period in the previous fiscal year. This increase in the three and nine months ended February 28, 2009 is due principally to the items discussed above, as well as the absence of purchase accounting related adjustments in the current period that were present in the same period of the previous fiscal year.

Operating Expenses (Income)

	Three Months Ended										Nine Months Ended
	February 28,				Change						February 28,					Change
(dollars in millions)	2009		2008		$			%			2009			2008		$			%
Sales and marketing	$	84.2	$	82.4	$	1.8			2	%	$	259.1		$	237.6	$	21.5			9	%
Research and development		43.7		50.5		(6.8	)		(13	)%		137.3			155.0		(17.7	)		(11	)%
General and administrative		30.4		26.3		4.1			16	%		88.8			78.8		10.0			13	%
Amortization		23.1		25.8		(2.7	)		(10	)%		73.4			78.1		(4.7	)		(6	)%
Patent dispute resolution		—		—		—			*			(70.0	)		—		(70.0	)		*
Restructuring		2.9		0.7		2.2			314	%		7.4			4.3		3.1			71	%
Total	$	184.3	$	185.7	$	(1.4	)		(1	)%	$	496.0		$	553.8	$	(57.8	)		(10	)%

* - percentage calculation not meaningful.

Sales and Marketing. The most significant factors in the increase in the three months ended February 28, 2009 compared to the same period in fiscal 2008 was the increased investment in our direct-touch sales force in our China-based sales region, partially offset by cost saving initiatives in our North America region. The most significant factors in the increase in the nine months ended February 28, 2009 compared to the same period in fiscal 2008 were the increased investment in our direct-touch sales force in our China-based sales region and in our EMEA region as well as increased compensation expense.

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Research and Development. The most significant factor contributing to the decrease in the three and nine months ended February 28, 2009 compared to the same periods in fiscal 2008 was continued savings from integration of research and development in all regions in our Networking business. The majority of the decrease resulted from the migration of the Company’s research and development functions to China, specifically a decrease in headcount of 124 employees from the third quarter of fiscal 2008 to the third quarter of fiscal 2009 as the Company eliminated duplicate testing activities, resulting in most of the decreased expense.

General and Administrative. The most significant factors in the increase in the three months ended February 28, 2009 compared to the same period in fiscal 2008 were increased accruals in connection with litigation matters of $2.4 million, increased accounts receivable reserves due to the weakening economy of $2.4 million and an impairment charge related to the value of our Hemel land of $1.2 million. These increases were partially offset by of the absence in the current period of acquisition related costs from the terminated acquisition by affiliates of Bain Capital Partners compared to the same period of the prior fiscal year. The most significant factors in the increase in the nine months ended February 28, 2009 compared to the same periods in fiscal 2008 were increased compensation expense, increased accruals connection with litigation matters, increased depreciation expense and an impairment charge related to the value of our Hemel land. These increases were partially offset by the absence of acquisition related costs from the terminated acquisition by affiliates of Bain Capital Partners in the current period compared to the same period of the prior fiscal year.

Amortization. Amortization decreased $2.7 million and $4.8 million in the three and nine months ended February 27, 2009, respectively, when compared to the same periods in the previous fiscal year. The decrease in the three and nine months ended February 28, 2009 is primarily due to decreased amortization expense due to one of our intangible assets becoming fully depreciated in the fourth quarter of fiscal 2008 and our Huawei non-compete agreement becoming fully amortized at the end of our second quarter of fiscal 2009 partially offset by currency translation adjustments due to the strengthening of the Renminbi recorded in the current period.

Patent dispute resolution.

The Company and Realtek Group reached an agreement with respect to certain networking technologies of the Company that resolved a long-standing patent dispute between the companies. Under the terms of the agreement, Realtek paid the Company $70.0 million, all of which was received in the three months ended August 31, 2008.

The Company recognized the full $70.0 million as operating income in the first quarter of fiscal 2009.

Restructuring Charges

Net restructuring charges in the three months ended February 28, 2009 consisted of $2.9 million for severance and outplacement costs. Net restructuring charges in the nine months ended February 28, 2009 consisted of $6.0 million for severance and outplacement costs and $1.4 million for facilities-related charges.

Net restructuring charges in the three months ended February 28, 2008 resulted from severance, outplacement and other costs of $0.8 million and a $0.1 million benefit for facilities-related charges. Net restructuring charges in the nine months ended February 28, 2008 resulted from severance, outplacement and other costs of $4.1 million and $1.2 million for facilities-related charges.

See Note 5 to Condensed Consolidated Financial Statements for a more detailed discussion of restructuring charges.

Interest Expense, Net

In the three and nine months ended February 28, 2009, the Company incurred $3.3 million and $5.1 million, respectively, in net interest expense, versus net interest expense of $2.9 million and $10.4 million in same periods of the prior fiscal year. The increase in the three months ended February 28, 2009 was primarily related to decreased interest income earned due to decreased rates and balances associated with our notes receivable in China. This increase is mostly offset by decreased interest expense due to the decreased principal balance of our long term debt due to scheduled and voluntary payments of principal, coupled with a lower LIBOR rate on the loan. The decrease in the nine months ended February 28, 2009 in interest expense was primarily due to the decreased principal balance of our long term debt due to scheduled and voluntary payments of principal, coupled with a lower LIBOR rate on the loan, as well as increased interest income earned on an increased average balance of cash and notes receivable during most of the period.

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Other Income, Net

Other income, net was $16.5 million in the three months ended February 28, 2009, an increase of $5.9 million compared to the three months ended February 28, 2008. Other income, net was $45.3 million in the nine months ended February 28, 2009, an increase of $12.0 million compared to the nine months ended February 28, 2008. The increase in the three and nine months ended February 28, 2009 was primarily due to an increase in an operating subsidy under a program run by the Chinese tax authorities in the form of a partial refund of VAT taxes collected by our H3C legal entity from purchasers of software products due to increased sales. This increase was also driven by net foreign currency gains in the current period. The VAT payments are taken into income on a cash basis when actually received. The timing of the receipt of VAT refunds, and the continuation of the program, are subject to the discretion of the Chinese VAT authorities.

Income Tax Provision

Our income tax provision was $12.8 million for the three months ended February 28, 2009, an increase of $3.3 million when compared to the corresponding period in the previous fiscal year. $12.1 million of the tax provision for the current quarter relates to a change in the applicable tax rate in China. We have now qualified under the new PRC tax law, effective January 1, 2008, as a new and high technology enterprise, which entitles us to a long-term tax rate of 15% in China. Under the previous tax law, we had qualified for tax concessions which entitled our China entity to a zero tax rate for 2004 and 2005, and a rate equal to half of our normal rate for 2006 to 2008. We expect that our long-term rate will be 15%. However, calendar year 2008 is the final year of our tax concessions under the old law and the first year of our 15% reduced rate under the new law. There is currently some uncertainty as to whether we can continue to enjoy the benefit of the final year of our concessions at the same time as the reduced rate under the new law. The final determination of our 2008 statutory income tax rate in China is subject to approval by the local tax office and we expect them to consider the complex rules concerning existing concessions under the transition rules, as well as guidance from the PRC State Tax Administration, in granting this approval. Until this uncertainty is clarified, accounting rules require us to provide for income tax for 2008 at the full 15% rate. The remainder of the income tax provision for the current quarter was the result of providing for taxes in certain foreign jurisdictions at various statutory rates. In the corresponding period in the previous fiscal year, $6.1 million of the total income tax provision was as a result of revaluing our China-related deferred tax assets and liabilities to reflect a change in the Chinese tax regulations. The remainder of the income tax provision for the corresponding quarter was the result of providing for taxes in certain foreign jurisdictions at various statutory rates.

Our income tax provision was $24.9 million for the nine months ended February 28, 2009, an increase of $12.9 million when compared to the corresponding period in the previous fiscal year. This represents an effective rate for the fiscal year to date of 20.8%. In the corresponding period in the previous fiscal year there was no effective rate as a result of overall operating losses. The income tax provision for the nine months ended February 28, 2009 was adversely affected by the Chinese tax rate issue discussed above. The remainder of the income tax provision for that period was the result of providing for taxes in certain foreign jurisdictions at various statutory rates. The income tax provision for the corresponding period was adversely affected by the Chinese tax rate issue discussed above. In addition, in the corresponding period we had a favorable final resolution on an insurance settlement that resulted in a release of $1.6 million of tax provisions as well as a discrete benefit of $0.5 million related to refunds of state taxes for prior periods. The remainder of the income tax provision for the corresponding period was the result of providing for taxes in certain foreign jurisdictions at various statutory rates.

Net Income (Loss)

Our net income in the three months ended February 28, 2009 was $1.9 million, a $9.7 million improvement from a net loss of $7.8 million in the previous fiscal period. The improvement was primarily driven by increased sales in China, primarily due to appreciation of the Renminbi, higher margins in China, decreased cost of sales due to integration efforts and a change from an outsourced service provider in the year ago period to a hybrid of outsourced and in-house performance of services to our customers as well as decreased research and development costs due to integration, partially offset by increased general and administrative and sales and marketing expenses. Our net income in the nine months ended February 28, 2009 was $94.6 million, a $156.7 million improvement from a net loss of $62.1 million in the same period in the previous fiscal year. The improvement was primarily driven by our Realtek patent dispute resolution of $70.0 million, as well as increased sales and decreased cost of sales due to integration efforts and a change from an outsourced service provider in the year ago period to a hybrid of outsourced and in-house performance of services to our customers, partially offset by increased sales and marketing expenses.

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Segment Analysis (tables in thousands)

The results of our regional Networking segments, Central Functions, and our TippingPoint Security business as our CODM reviews their profitability are presented below.

China-based sales region:

	Three months ended				Nine months ended
	February 28,				February 28,
	2009		2008		2009		2008
Sales	$	190,385	$	179,668	$	565,597	$	490,120
Gross profit (a)		128,160		114,600		375,588		304,784
Direct sales and marketing expenses		36,581		33,001		106,194		89,496
Segment contribution profit	$	91,579	$	81,599	$	269,394	$	215,288

Segment contribution profit in the three months ended February 28, 2009 increased $10.0 million to $91.6 million when compared to the same period of the prior fiscal year. Segment contribution profit in the nine months ended February 28, 2009 increased $54.1 million to $269.4 million when compared to the same period of the prior fiscal year. Segment contribution profit is standard profit less segment direct sales and marketing expenses. The increase in the three and nine months ended February 28, 2009 was primarily driven by increased sales and gross profit, partially offset by increased direct sales and marketing expenses due to increased investment in our direct-touch sales force.

a – Gross profit is defined for this region as standard margin, which is sales less standard cost of sales.

Rest of World sales region:

	Three months ended				Nine months ended
	February 28,				February 28,
	2009		2008		2009		2008
Sales	$	102,836	$	134,531	$	368,838	$	411,035
Gross profit (a)		61,365		77,523		215,479		228,277
Direct sales and marketing expenses		23,360		25,151		77,254		71,782
Segment contribution profit	$	38,005	$	52,372	$	138,225	$	156,495

Segment contribution profit in the three months ended February 28, 2009 decreased $14.4 million to $38.0 million when compared to the same period of the prior fiscal year. Segment contribution profit in the nine months ended February 28, 2009 decreased $18.3 million to $138.2 million when compared to the same period of the prior fiscal year. Segment contribution profit is standard profit less segment direct sales and marketing expenses. The decrease in the three months ended February 28, 2009 primarily relates to decreased sales in all regions due to the weakening of the global economy, partially offset by decreased sales and marketing expenses due to cost saving initiatives in our North America region. The decrease in the nine months ended February 28, 2009 primarily relates to decreased sales in our EMEA and North America regions due to the weakening of the global economy as well as increased direct sales and marketing expenses in our EMEA region as we continue to invest in our direct touch sales force.

a – Gross profit is defined for this region as standard margin, which is sales less standard cost of sales.

Central Functions:

	Three months ended						Nine months ended
	February 28,						February 28,
	2009			2008			2009			2008
Gross profit (a)	$	(25,326	)	$	(28,474	)	$	(76,707	)	$	(90,492	)
Operating expenses		68,394			75,701			219,593			234,080
Total costs and expenses	$	93,720		$	104,175		$	296,300		$	324,572

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Total costs and expenses in the three months ended February 28, 2009 decreased $10.5 million to $93.7 million when compared to the same period of the prior fiscal year. Total costs and expenses in the nine months ended February 28, 2009 decreased $28.3 million to $296.3 million when compared to the same period of the prior fiscal year. Total expenses include supply chain costs and operating expenses exclusive of those items contained in Eliminations and Other. The decrease in the three and nine months ended February 28, 2009 was due primarily to a change from an outsourced service provider for customer service activities in the year ago period to a hybrid model, involving the use of both outsourced and in-house resources in the delivery of customer services in the current period. In addition we continued to realize savings from integration of research and development in all regions in our Networking business, partially offset by increased costs to support the multi-national expansion of our business.

a – Gross profit represents indirect cost of sales, such as supply chain operations expenses; these costs not allocated to the sales regions.

TippingPoint Security business:

	Three months ended					Nine months ended
	February 28,					February 28,
	2009		2008			2009		2008
Sales	$	33,284	$	23,639		$	92,499	$	74,892
Gross profit		22,226		16,578			62,804		50,740
Operating expenses		21,411		17,337			62,054		51,506
Segment profit (loss)	$	815	$	(759	)	$	750	$	(766	)

TippingPoint segment profit in the three months ended February 28, 2009 was $0.8 million compared to segment loss of $0.8 million in the same period of the prior fiscal year. TippingPoint segment profit in the nine months ended February 28, 2009 was $0.8 million compared to a segment loss of $0.8 million in the same period of the prior fiscal year. Segment profit is gross profit less operating expenses, exclusive of those items contained in Eliminations and Other. The increase in the three and nine months ended November 30, 2008 was due primarily to increased sales primarily attributable to increased software sales of $6.5 million and increased maintenance revenue of $3.0 million due to an increased number of maintenance contracts. Sales for the three months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales., The sales increase was partially offset by increased inventory reserves, increased accounts receivable reserves and a charge related to a retention plan bonus for the TippingPoint employees. The increase in segment profit in the nine months ended February 28, 2009 is primarily related to increased sales due to increased maintenance revenue of $9.2 million due to increased maintenance contracts as well as $8.4 million increased software sales due primarily to large account sales. Sales in the nine months ended February 28, 2008 included a $3.2 million revenue adjustment primarily associated with the deferral of certain Federal Government sales.

Goodwill

We apply the provisions of SFAS No. 142 “Goodwill and Other Intangible Assets” to goodwill and intangible assets with indefinite lives which are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. We performed our annual goodwill impairment review as of February 27, 2009 for our TippingPoint segment and December 31, 2008 for our China-based region (as our China-based region reports on a two month lag), and noted no impairment of goodwill or intangible assets with indefinite lives. In making this assessment, we rely on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. Reporting unit valuations have been calculated using a combination of an income approach based on the present value of future cash flows of each reporting unit and a market approach. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in a goodwill impairment in future periods. In conjunction with our annual goodwill impairment tests, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents as of February 28, 2009 were $560.0 million, an increase of $56.4 million compared to the balance of $503.6 million as of May 31, 2008. The following table shows the major components of our condensed consolidated statements of cash flows for the nine months ended February 28, 2009 and 2008:

	Nine Months Ended
	February 28,
(In millions)	2009			2008
Cash and equivalents, beginning of period	$	503.6		$	559.2
Net cash provided by (used in) operating activities		196.3			(10.0	)
Net cash used in investing activities		(12.5	)		(11.9	)
Net cash used in financing activities		(136.3	)		(90.2	)
Currency impact on cash		8.9			18.9
Cash and equivalents, end of period	$	560.0		$	466.0

Goodwill

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Net cash provided by operating activities was $196.3 million for the nine months ended February 28, 2009 compared to $10.0 million of cash used in the nine months ended February 28, 2008. The primary factor in the increase was the strong cash generation from our China operations. More specifically, the $206.3 million dollar increase is primarily a result of net income in the nine months ended February 28, 2009 of $94.6 million compared to at net loss of $62.1 million in the same period of the previous fiscal year as well as working capital increases during the nine months ended February 28, 2009 of approximately $7.9 million compared to working capital increases in the same period of the prior fiscal year of approximately $67.7 million. The primary reasons for the increase in net income relates to our Realtek patent dispute resolution of $70.0 million, as well as increased sales and decreased cost of sales due to integration efforts and a change from an outsourced service provider in the year ago period to a hybrid of outsourced and in-house performance of services to our customers, partially offset by increased sales and marketing expenses.

The net change in operating assets and liabilities of ($7.9) million was primarily related to an increase in inventory of ($22.0) million, mostly due to inventory that was not consumed during the period due to decreased sales in the third quarter. The change was also impacted by a decrease in accounts payable of ($20.9) million, primarily due to the timing of payments. The change was also impacted by an increase in accounts and notes receivable of ($13.6) million, primarily due to increased sales in our China-based sales region. The decrease in operating liabilities was partially offset by increased other liabilities of $41.9 million, primarily relating to increased compensation reserves primarily related to our China-based sales region’s EARP and LTI bonus accruals as well as increased compensation accruals also related to our China-based sales region.

Net cash used in investing activities was $12.5 million for the nine months ended February 28, 2009, resulting primarily from outflows related to purchases of property and equipment.

On September 24, 2008, our board of directors authorized a stock repurchase program of up to $100 million, effective for one year. The timing and actual number of shares repurchased will depend on a variety of factors and we cannot determine at this time the amount of cash we will use under this program. We have already purchased approximately half of the authorized amount under this program. We currently have suspended further purchases of stock under this plan, although we are authorized to repurchase the remaining $50 million of common stock under the authorized stock program and may do so at any time without prior notice.

Net cash used in financing activities was $136.3 million in the nine months ended February 28, 2009. During the nine months ended February 28, 2009, we made a principal payment of $88.0 million related to our long term debt, $40 million of which was a voluntary prepayment. In addition, we repurchased $51.4 million of shares of stock, of which $50 million was part of our stock repurchase program discussed above. This was partially offset by proceeds of $3.0 million from issuances of our common stock upon exercise of stock options.

With respect to our debt payment obligations for the next year, we are required to make interest payments in March and September 2009 and a $48 million principal payment in September 2009. We made a voluntary prepayment of $13 million on March 30, 2009, which falls in our fourth quarter. This prepayment constitutes the entire estimated amount we believe we will be required to pay in September 2009 as part of the mandatory excess cash flow prepayment.

As of February 28, 2009, bank-issued standby letters of credit and guarantees totaled $6.3 million, including $5.4 million relating to potential foreign tax, custom, and duty assessments.

We have H3C EARP cash commitments expected to be paid during the first half of calendar 2009 of approximately $25 million.

We currently have no material capital expenditure purchase commitments other than ordinary course purchases of computer hardware, software and leasehold improvements.

On December 30, 2008 our H3C subsidiary, which operates our China-based business, renewed the lease for its Hangzhou, China headquarters, effective January 1, 2009. The lease is for a three-year term from January 1, 2009 through and including December 31, 2011. Under the terms of the lease agreement with landlord Huawei Technologies, H3C will pay rent of approximately RMB 34,003,653 (or USD 5 million) per year.

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In recent years, we have generated most of our positive cash flow from our China operations. Our capital requirements in Rest of World have been met from cash flow from operations as well as from existing cash balances and permitted dividends from China. Dividends from our China operations to our Rest of World operations are generally subject to the following restrictions: (1) a 10 percent reserve requirement imposed by PRC law (capped at 50% of registered capital), (2) a 5% withholding tax imposed by the PRC on profits earned on or after January 1, 2008 and (3) a credit agreement restriction limiting our ability to dividend cash outside of the H3C Group and requiring that a specified percentage of excess cash flow from China be annually used to prepay debt. There are also procedural requirements for making dividends out of China that involve administrative filings with government agencies. Although the government process is generally not substantive in nature, its requirements may dictate when we can pay a dividend. As of February 27, 2009 the H3C Group’s net assets were $836.9 million and are subject to these dividend restrictions.

An important exception to the credit agreement restriction permits us to annually dividend from China to Rest of World the percentage of H3C’s excess cash flow that is not required to be prepaid to the banks under the terms of the agreement, provided that certain conditions are met. We used this exception in 2008 to make a $33.1 million dividend and, assuming we meet all of these conditions and comply with regulatory requirements, we anticipate having the ability to dividend a substantially higher amount in 2009. We have no prepayment penalty on our loan and at this time our cash and cash equivalents balances significantly exceed our outstanding principal loan balance.

In Rest of World we currently do not generate positive cash flow and are experiencing adverse impacts from the global economic slowdown. As a result of these factors, we intend to more aggressively prudently manage cash and monitor discretionary cash spending, especially in periods prior to receipt of any available and permitted annual dividend payments from China.

We currently believe that our existing cash and cash equivalents and cash from operations will be sufficient to satisfy our anticipated cash requirements for at least the next 12 months.

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” to improve reporting and to create greater consistency in the accounting and financial reporting of business combinations. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. SFAS No. 141R amends SFAS 109, such that adjustments made to valuation allowances on deferred income taxes and acquired income tax contingencies associated with acquisitions that closed prior to the effective date of SFAS No. 141R would apply the provisions of SFAS No. 141R. An entity may not apply SFAS No. 141R before that date. Given that SFAS No. 141R relates to prospective and not historical business combinations, the Company cannot currently determine the potential effects adoption of SFAS No. 141R may have on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way as required in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring that they be treated as equity transactions. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is currently evaluating whether the adoption of SFAS No. 160 will have an effect on its consolidated financial position, results of operations or cash flows.

In February 2008, the FASB issued FASB Staff Position No. SFAS 157-2, “Effective Date of FASB Statement No. 157”, which provides a one-year deferral of the effective date of FAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Effective June 1, 2008, we adopted the provisions of SFAS No. 157 with respect to our financial assets and liabilities recorded at fair value. We have not yet determined the impact, if any, of the portion of SFAS No. 157, for which the implementation has been deferred, will have on our consolidated financial position, results of operations or cash flow.

In April 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS No. 142-3”). FSP FAS No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, “Goodwill and Other Intangible Assets” (“FAS No. 142”). The intent of FSP FAS No. 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS No. 141R “Business Combinations”, and other U.S. generally accepted accounting principles. FSP FAS No. 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. We are currently evaluating the potential impact of FSP FAS No. 142-3 on our consolidated results of operations and financial position.

In May 2008, the FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The adoption of SFAS No. 162 has not had a material impact on our consolidated results of operations and financial position.

In October 2008, the FASB issued FSP 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (FSP 157-3). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP 157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP 157-3 did not have a significant impact on our consolidated financial statements or the fair values of our financial assets and liabilities.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We no longer hold any marketable equity traded securities as of February 27, 2009.

ITEM 4. CONTROLS AND PROCEDURES

Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of February 27, 2009, our disclosure controls and procedures were effective.

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

There have been no changes in our internal control over financial reporting that occurred during the three months ended February 27, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 15 to the Notes to the Condensed Consolidated Financial Statements is incorporated by reference herein.

ITEM 1A. RISK FACTORS

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

Risk Related to Current Severe Global Economic Conditions and Related Credit Crisis

Our Operating Results May be Adversely Affected by Current Unfavorable Economic and Credit Conditions in Many Regions of the World.

The business conditions in which we operate are subject to rapid and unpredictable change due to the global economic crisis. Many of the world’s economies are in turmoil and severe recession. Very tight credit conditions have made it harder for businesses to access needed capital. These factors have contributed to significant slowdowns in the technology industry in general, and in many of the specific markets and geographies in which we operate, resulting in:

• reduced demand for our products in many regions as a result of constraints on information technology-related capital spending by our customers, particularly in the developed markets in North America and Europe;

• risk of excess and obsolete inventories;

• longer sales cycles;

• delayed and/or cancelled purchases due to factors such as tight credit conditions and unfavorable local currency translation (noting that we denominate sales in USD in most locations outside of China); and

• risk of longer cash cycles as customers take longer to pay us for products and services and some customers deal with insolvency issues.

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Our business is heavily dependent on China, a country whose historic strong growth rates have slowed significantly over the last year. The challenges we have seen in two of our other major regions, North America and Western Europe, have worsened in the last several months. Further, the worldwide slowdown appears to have expanded to many countries in other geographies in which we operate, such as Eastern Europe, Asia Pacific (ex-China), the Middle East and Latin America.

We cannot predict the duration or severity of the current global economic crisis, and we cannot know the ultimate extent of its impact on our industry. This makes it more challenging to predict our future performance. If global economic and credit conditions in the major regions in which we operate, particularly in China, persist, spread, or deteriorate further, or if we cannot respond with strategies that maximize our ability to perform in this challenging business environment, we may experience a material and negative impact on business, operating results and financial condition.

Risks Related to Historical Losses and Secured Indebtedness

While we earned a profit in the first three quarters of our 2009 fiscal year, we have incurred significant net losses in recent fiscal periods, including $228.8 million for the fiscal year ended May 30, 2008, and we may not be able to sustain or increase this profitability in the future.

While we returned to profitability in our 2009 fiscal year, we have incurred significant net losses for many years prior and cannot assure you that we will be able to sustain this profitability, or, if sustained, increase it. We face a number of challenges that have affected our operating results during the current and past several fiscal years. Specifically, we have experienced, and may continue to experience, the following:

• declining sales in certain regions;

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

• significant senior leadership and other management changes;

• significant non-cash accounting charges;

• increased sales and marketing expense as part of a strategy to help grow our market share;

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

• interest expense resulting from our senior secured loan.

To sustain profitability, we must maintain or increase our sales, and if we cannot do that, we may need to further reduce costs. As we have implemented significant cost reduction programs over the last several years, it may be difficult to make significant further cost reductions without in turn impacting our sales. In addition, we may choose to reinvest some or all of any realized cost savings in future growth opportunities. Any of these events or occurrences will likely cause our expense levels to continue to be at levels above our desired model.

If we cannot overcome these challenges, reduce our expenses and/or increase our revenue, we may not be able to sustain profitability.

The terms and requirements of our H3C secured indebtedness could adversely affect our financial condition and ability to grow our business.

We now have, and for the foreseeable future will continue to have, a significant amount of indebtedness. As of February 27, 2009, our total debt balance was $213 million, of which $61 million is classified as a current liability.

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

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

• limit our ability to obtain additional financing;

• require the dedication of a substantial portion of our cash flow from operations to satisfy debt obligations, reducing the availability of capital to finance operations and growth;

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

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

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Covenants in the agreements governing our senior secured loan materially restrict our H3C subsidiary’s operations based in China, including H3C’s ability to incur debt, pay dividends, make certain investments and payments, make acquisitions of other businesses and encumber or dispose of assets. In addition, in the event H3C’s financial results do not meet our plans, the failure to comply with the financial covenants contained in the loan agreements could lead to a default. An event of default, if not cured or waived, could have a material adverse effect on us because the lenders will be able to accelerate all outstanding amounts under the loan or foreclose on the collateral (which consists primarily of our H3C business). In addition, if the LIBOR rate increases, our interest obligations, which are based on LIBOR, will increase. Our interest obligations are also dependent on our “leverage ratio,” as defined under the credit agreement; if the ratio increases above specified levels (i.e., because H3C financial results decrease), our interest obligations will increase. Any of these actions could result in a material adverse effect on our business and financial condition.

In recent years, we have generated most of our positive cash flow from operations from our China business, and our operations outside of China have been mostly cash flow negative. The credit agreement limits our ability to dividend cash outside of China (i.e., outside of the H3C group) and requires that a substantial portion of H3C’s cash flow be used to pay down debt obligations. Accordingly, we cannot use cash generated in China to fund our operations outside of China (except under certain conditions we are permitted to dividend outside of China a portion of H3C’s annual excess cash flow (as defined by the credit agreement)). Because available and permitted dividends under the credit agreement are determined by H3C’s consolidated excess cash flow and leverage ratio (as defined under the Credit Agreement), if H3C’s results decrease, the permitted dividends, if any, we can make to Rest of World will likely decrease. If we do not generate or maintain appropriate cash on hand on a worldwide basis to finance operations and make investments where needed or desired, our business results and growth objectives may suffer; in particular, our cash balances outside of China could fall below our desired levels, particularly if we do not meet the conditions necessary to dividend cash from China.

Risks Related to China-based Sales region and Dependence Thereon

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

For the fiscal quarter ended February 27, 2009, our China-based sales region accounted for approximately 59 percent of our consolidated revenue. Our China-based sales region is subject to specific risks relating to its ability to:

• maintain a leading position in the networking equipment market in China;

• develop and execute strategies to operate successfully in the current global economic downturn, which has begun to negatively impact the Chinese economy and our China-based business;

• build profitable operations in other emerging markets throughout the world, but particularly in the Asia Pacific region;

• offer new and innovative products and services to attract and retain a larger customer base;

• increase awareness of the H3C brand and continue to develop customer loyalty;

• respond to rapidly changing competitive market conditions;

• respond to changes in the regulatory environment;

• manage risks associated with intellectual property rights;

• maintain effective control of costs and expenses; and

• attract, retain and motivate qualified personnel.

In China, we face competition from domestic Chinese industry participants, and as a foreign-owned business, may not be as successful in selling to Chinese customers, particularly those in the public sector, to the extent that such customers favor Chinese-owned competitors.

We expect that a significant portion of our sales will continue to be derived from our China-based sales region for the foreseeable future. As a result, we are subject to economic, political, legal and social developments in China and surrounding areas; we discuss risks related to the PRC in further detail below. In addition, because we already have a significant percentage of the market share in China for enterprise networking products, our opportunities to grow market share in China are more limited than in the past. Our China-based sales region has experienced growth since its inception in part due to the growth in China’s technology industry, which may not be representative of future growth or be sustainable. We cannot assure you that our China-based sales region’s historical financial results are indicative of its future operating results or future financial performance, or that its profitability will be sustained.

Given the significance of our China-based sales region to our financial results, if it is not successful, our business will likely be adversely affected.

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We are dependent on Huawei Technologies, or Huawei, as a significant customer; if, as expected, Huawei reduces its business with us, it could materially adversely affect our business results.

We derive a material portion of our sales from Huawei, which formerly held a significant investment in our H3C subsidiary. In the three months ended February 27, 2009, which includes results from our China-based region’s December 31, 2008 quarter, Huawei accounted for approximately 29 percent of the revenue for our China-based sales region and approximately 17 percent of our consolidated revenue. Huawei’s percentage of our China-based sales region’s revenues has been trending downward from 46 percent during the 3 months ended November 30, 2006, to the current level, and we expect this downward trend to continue. We further expect that Huawei will in the future reduce its business with us and, accordingly, that its purchases in absolute dollars will decrease. Huawei does not have any minimum purchase requirements under our existing OEM agreement, which expires in November 2010. We risk the possibility that Huawei sources products from another vendor or internally develops the products it currently purchases from us. If any of these events occur, it will likely have an adverse impact on our sales and business performance. In order to minimize any adverse impact on our results from any decreased sales to Huawei that may occur, we need to successfully execute on our business strategies including, without limitation, increasing direct touch sales of enterprise-class products outside of China. If we are not successful in these efforts, the risks described above may be heightened.

Risk Related to Core Business Strategy

If we cannot increase our enterprise account business outside of China, leveraging China as our “home market,” we likely will not reach our growth and profitability goals.

We strive to be increasingly successful in direct-touch sales for larger enterprise and government accounts in all geographic regions, particularly outside of China. In China, we are already an established provider of networking equipment to enterprise-class customers under the H3C brand. Our strategy involves leveraging China as our “home market” for enterprise-class solutions, developing and introducing new products in China and then marketing and selling them to other regions in the global marketplace. We call this strategy “China-out.”

To increase market share outside of China and develop a global enterprise brand we must be increasingly successful in capturing larger enterprise and government opportunities (in addition to our small-and-medium size business). Such efforts will likely require a greater investment in sales and marketing, as well as the provision and maintenance of a global service organization that can respond to these customers. The sales cycle is generally longer for enterprise accounts (possibly yielding uneven and unpredictable revenue from quarter to quarter) when compared to our small-and-medium-size business. We also expect intense competition from larger industry participants, many of whom possess a significantly larger market share and installed base than us. We will also need to be perceived by decision making officers of large enterprises as committed for the long-term to the high-end networking business. We will also need to compete favorably on the offering of features and functionality that these enterprise customers demand; if our competitors are more effective at such efforts, our ability to convert pipeline opportunities into sales will suffer. In addition, our recent push to further expand sales to large enterprises may be disruptive in a variety of ways, including the risk our increased direct-touch sales efforts are perceived by existing channel partners as competitive or viewed by market participants as indicating a diminished focus on the small and medium business market. Finally, we will need to maintain an infrastructure that permits us to effectively document, process, manage, ship and account for these larger transactions.

If we fail to manage a transition outside of China to a business model focused more heavily on enterprise-class business, we will not achieve our business goals and our business results may suffer.

Our “China-out” strategy also involves execution of our integration efforts. Our H3C acquisition significantly increased the size, scope and complexity of 3Com, and we have since taken actions designed to maximize the potential of our integrated company. Overall, we seek to address the different cultures, languages and business processes of the two companies, and to leverage H3C and its strong brand on a global basis. Integration efforts may include streamlined research and development/engineering functions; coordinated product line management efforts; integrated sales and marketing and supply chain functions; new branding strategies; and continued exploration of further initiatives to reduce expenses and unify the companies. If we are not successful in executing the integration strategies we choose to implement, our business may be harmed.

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Risk Related to Personnel

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

Competition for qualified employees is intense. If we fail to attract, hire, or retain qualified personnel, our business will be harmed. We have experienced significant turnover in our senior management team outside of China in the last several years and we may continue to experience change at this level. If we cannot retain qualified senior managers, and provide stability in the senior management team to enable them to work together for an extended period of time, our business may not succeed.

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

Risks Related to Competition

Intense competition in the market for networking solutions and new or developing product markets could prevent us from increasing revenue and profitability.

The market for networking solutions is intensely competitive. In particular, Cisco maintains a significant leadership position in this market and several of its products compete directly with our products. Cisco’s substantial resources and market leadership have enabled it to compete aggressively. Purchasers of networking solutions may choose Cisco’s products because of its broader product line and strong reputation in the networking market. In addition, Cisco may have developed, or could in the future develop, new technologies that directly compete with our products or render our products obsolete. We cannot assure you we will be able to compete successfully against Cisco.

We also compete with several other significant companies in the networking industry. Some of our current and potential competitors have greater market leverage, longer operating histories, greater financial, technical, sales, marketing and other resources, more name recognition and larger installed customer bases. Additionally, we may face competition from new or previously unknown companies that may offer new competitive networking solutions and/or alternative technologies that displace the need for some of our products or services. We also face the possibility that consolidation in our industry could result in two or more of our competitors becoming a single competitor with greater resources, broader sales coverage and superior products.

As we focus on new market opportunities – for example, IP storage and IP video surveillance and other advanced technologies and emerging technologies – we will increasingly compete with large telecommunications equipment suppliers as well as startup companies. We cannot assure you we will compete favorably against these competitors for these market opportunities.

In order to remain competitive, we must, among other things, invest significant resources in developing new products with superior performance at lower prices than our competitors, enhance our current products and maintain customer satisfaction. If we fail to do so, our products may not compete favorably with those of our competitors and our revenue and profitability could suffer.

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Our competition with Huawei in the enterprise networking market could have a material adverse effect on our sales and our results of operations, particularly if Huawei increases its level of competition against us.

As Huawei expands its operations, offerings and markets, there could be increasing instances where we compete directly with Huawei in the enterprise networking market. As a significant customer of our China-based segment, Huawei has had, and continues to have, access to H3C products for resale. This access enhances Huawei’s current ability to compete directly with us both in China and in the rest of the world. In addition, Huawei’s obligation not to offer or sell enterprise class, and small-to-medium size business (or SMB), routers and switches that are competitive with H3C products recently expired. Accordingly, we are now subject to the risk of increased competition from Huawei. Huawei currently sells enterprise-class products purchased from us to carrier customers, and it is possible Huawei will also market and sell more directly to enterprise customers in the future. Moreover, Huawei maintains a strong presence within China and the Asia Pacific region and possesses significant competitive resources, including vast engineering talent and ownership of the assets of Harbour Networks, a China-based competitor that possesses enterprise networking products and technology. We cannot predict whether Huawei will compete with us. If Huawei increases its competition with us, or if we do not compete favorably with Huawei, it is likely that our business results, particularly in the Asia Pacific region and specifically in China, will be materially and negatively affected.

Risks Related to Business and Technology Strategy

Our industry is characterized by a short product life cycle, and we may not be successful at identifying and responding to new and emerging market, technology and product opportunities, or at responding quickly enough to technologies or markets that are in decline.

Our success depends on our ability to:

• identify new market and product opportunities;

• predict which technologies and markets will see declining demand;

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

• gain market acceptance of new products and solutions; and

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

Accordingly, our business will likely suffer if:

• there is a delay in introducing new products;

• we lose key channel partners;

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

• our products cost more to produce than we expect.

The enterprise networking industry in which we compete is characterized by rapid changes in technology and customer requirements and evolving industry standards. For example, our success depends on the convergence of technologies (such as voice, video and data) and the timely adoption and market acceptance of industry standards. Slow market acceptance of new technologies, products, or industry standards could adversely affect our sales or overall results of operations. In addition, if our technology is not included in an industry standard on a timely basis or if we fail to achieve timely certification of compliance to industry standards for our products, our sales of such products or our overall results of operations could be adversely affected.

We rely on our large research and development base in Beijing, China to develop and design most of our new technologies, products and solutions. These engineers develop products for all of the global markets in which we participate and must design solutions for the developed world as well as for China and other emerging markets. Developed markets may have different products features and customer requirements than emerging markets, and we must timely develop product solutions that satisfy our customers on a worldwide basis. If we are not successful at these efforts, our business will suffer.

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Risks Related to Operations and Distribution Channels

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

We distribute many of our products through two-tier distribution channels that include distributors and value added resellers, or VARs. In some instances, we also use a system integrator. A significant portion of our sales is concentrated among a few distributors; our two largest distributors accounted for a combined 11 percent of our consolidated revenue for the three months ended February 27, 2009. If either of these distributors reduces its business with us, our sales and overall results of operations could be adversely affected.

We work closely with our distributors to monitor channel inventory levels and ensure that appropriate levels of products are available to resellers and end users. We maintain target ranges for channel inventory levels for supply on hand at our distributors. Partners with a below-average inventory level may incur “stock outs” that would adversely impact our sales. Our distribution agreements typically provide that our distributors may cancel their orders on short notice with little or no penalty. If our channel partners reduce their levels of inventory of our products, our sales would be negatively impacted during the period of change.

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

Our supply chain function involves the management of numerous external suppliers, vendors and contract manufacturers. We source component parts for our products from numerous vendors and outsource principally all of our manufacturing, a significant portion of our logistics and fulfillment functions and a portion of our service and repair functions. If we cannot adequately manage our supply chain, our business results and financial condition will likely suffer. Our ability to manage our supply chain successfully is subject to the following risks, among others:

• our ability to accurately forecast demand for our products and services;

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

• we may experience disruptions to our logistics.

We cannot be certain that in the future our suppliers will be able or willing to meet our demand for components in a timely and cost-effective manner. There has been a trend toward consolidation of vendors of electronic components. Our reliance on a smaller number of vendors and the inability to quickly switch vendors increases the risk of logistics disruptions, unfavorable price fluctuations, or disruptions in supply. From time-to-time, supplies of certain key components have become tighter. We risk adverse impact to our gross margin to the extent there is a resulting increase in component costs and time necessary to obtain these components.

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

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

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

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

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

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

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

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

Due to our dependence on China, if China were to experience a broad and prolonged economic slowdown, our results of operations would suffer. China has begun to feel the effects of the global economic slowdown, and government efforts to restore growth rates may not be effective. The Chinese government has also from time-to-time implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

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

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

If PRC tax benefits available to us in China are reduced or repealed, our profitability or cash flow could suffer.

Effective January 1, 2008, a new corporate income tax rate of 25 percent (phased-in over time for certain companies) applies to companies subject to income tax in China. Companies which benefited from preferential tax rates and rulings under the previous Chinese tax law can continue to enjoy those concessions, subject to transitional rules. In our case, our principal operating subsidiary in China (H3C) was entitled to tax concessions which began in 2004. These concessions exempted H3C from the PRC income tax for 2004 and 2005 and entitle it to a 50 percent reduction in income tax in 2006-2008. (H3C maintains a calendar fiscal year end.) Accordingly, calendar 2008 will be the final year of the 50 percent reduction. Although the regular rate under the new tax law is 25 percent, the new tax law also provides for a reduced tax rate of 15 percent for companies which qualify as “new and high technology” enterprises. Our H3C subsidiary in China has now qualified for this reduced 15% rate under the new tax law. Therefore we currently expect that our long-term rate in China will be 15%. However, calendar year 2008 is the final year of our tax concessions under the old law and the first year of our 15% reduced rate under the new law. There is currently some uncertainty as to whether we can continue to enjoy the benefit of the final year of our concessions at the same time as the reduced rate under the new law. The final determination of our 2008 statutory income tax rate in China is subject to approval by the local tax office and we expect them to consider the complex rules concerning existing concessions under the transition rules, as well as guidance from the PRC State Tax Administration, in granting this approval. Until this uncertainty is clarified, accounting rules require us to provide for income tax for 2008 at the full 15% rate.

Dividends declared and paid by our Chinese subsidiary are currently subject to a 5% withholding tax discussed below.

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If tax benefits we currently enjoy are withdrawn or reduced, or if new taxes are introduced which have not applied to us before, there would likely be a resulting increase to our statutory tax rates in the PRC. Increases to tax rates in the PRC, where we are profitable, could adversely affect our results of operations and cash flow.

If the Chinese VAT Authorities discontinue the VAT Software Subsidy Program, our results will likely be adversely affected

We benefit from a program run by the Chinese Value-Added Tax, or VAT, authorities which effectively provides us with subsidy payments based on a percentage of the VAT collected by H3C from purchasers of our software. We have recorded substantial income from this program since inception. The VAT subsidy payments are recorded in “other income” on a cash basis when actually received from the government. The timing of the receipt of payments is subject to the discretion of the Chinese tax authorities who must approve our application for the subsidy. The program itself is subject to the complete discretion of the Chinese tax authorities and may be discontinued at any time. If this program is discontinued, our results of operations will likely be adversely affected.

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

Chinese regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with Chinese accounting standards and regulations. Our principal operating entity in China is required to set aside a portion of its after-tax profits – currently 10 percent up to 50% of registered capital — according to Chinese accounting standards and regulations to fund certain reserves. The Chinese government also imposes controls on the conversion of Renminbi into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. These restrictions may in the future limit our ability to receive dividends or repatriate funds from China or impact the timing of such payments. In addition, as discussed elsewhere in this Risk Factors section, the credit agreement governing our senior secured loan also imposes significant restrictions on our ability to dividend or make other payments from China to our other segments. Because available and permitted dividends under the credit agreement are determined by H3C’s consolidated excess cash flow and leverage ratio (as defined under the Credit Agreement), if H3C’s results decrease, the permitted dividends, if any, we can make to Rest of World will likely decrease. Finally, under a new PRC tax law all distributions of earnings realized from 2008 onwards from our PRC subsidiaries to our subsidiary in Hong Kong will be subject to a withholding tax at a rate of 5%. Our main PRC subsidiary generates the cash used to pay principal and interest on our H3C loan (through dividend flows from the PRC to Hong Kong and then to the Cayman Islands). Accordingly, we will in the future be required to earn proportionately higher profits in the PRC to service principal and interest on our loan, or be forced to fund any deficiencies from cash generated from other geographies. In sum, if we do not generate or maintain appropriate cash on hand on a worldwide basis to finance operations and make investments where needed or desired, our business results and growth objectives may suffer; in particular, our cash balances outside of China could fall below our desired levels.

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

Approximately 53 percent of our sales and a portion of our costs are denominated in Renminbi, the Chinese currency. At the same time, our senior secured bank loan – which we intend to service and repay primarily through cash flow from our China-based operations – is denominated in US dollars. In July 2005, China uncoupled the Renminbi from the U.S. dollar and let it float in a narrow band against a basket of foreign currencies. The Renminbi could appreciate or depreciate relative to the U.S. dollar. Any movement of the Renminbi may materially and adversely affect our cash flows, revenues, operating results and financial position, and may make it more difficult for us to service our U.S. dollar-denominated senior secured bank loan. More specifically, if the Renminbi appreciates in value as compared with the U.S. dollar, our reported revenues will derive a beneficial increase due to currency translation; and if the Renminbi depreciates, our revenues will suffer due to such depreciation. This currency translation impacts our expenses as well, but to a lesser degree. In some of our historical periods, we have benefited from the currency translation of Renminbi, but our results may in the future be harmed by it.

Our sales around the world are generally denominated in Renminbi (in China) and in US Dollars (in the rest of the world). We use those two currencies to price our products and generally do not accept local currencies as payment for product. When we sell our products in countries outside of China and the U.S. to customers in countries whose currencies have been devalued against the Renminbi or the US Dollar, the currency fluctuation causes the cost of our products to these customers to be higher. We generally do not provide currency exchange risk protection to our customers. For these reasons, when the Renminbi or US Dollar is stronger against local currencies, we may experience delayed or cancelled purchases or general business softness in the relevant region.

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We do not currently hedge the currency risk in China through foreign exchange forward contracts or otherwise and China employs currency controls restricting Renminbi conversion, limiting our ability to engage in currency hedging activities in China. Various foreign exchange controls are applicable to us in China, and such restrictions may in the future make it difficult for H3C or us to repatriate earnings, which could have an adverse effect on our cash flows and financial position.

Risks Related to Intellectual Property

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

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

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

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

Whether we are defending the assertion of intellectual property rights against us, or asserting our intellectual property rights against others, intellectual property litigation can be complex, costly, protracted, and highly disruptive to business operations because it may divert the attention and energies of management and key technical personnel. Further, plaintiffs in intellectual property cases often seek injunctive relief and the measures of damages in intellectual property litigation are complex and often subjective and uncertain. In addition, such litigation may subject us to counterclaims or other retaliatory actions that could increase its costs, complexity, uncertainty and disruption to the business. Thus, the existence of this type of litigation, or any adverse determinations related to such litigation, could subject us to significant liabilities and costs. Any one of these factors could adversely affect our sales, gross margin, overall results of operations, cash flow or financial position.

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

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

Many of our competitors, such as telecommunications, networking, and computer equipment manufacturers, have large intellectual property portfolios, including patents that may cover technologies that are relevant to our business. In addition, many smaller companies, universities, patent holding companies and individual inventors have obtained or applied for patents in areas of technology that may relate to our business. The industries in which we operate continue to be aggressive in assertion, licensing and litigation of patents and other intellectual property rights. It is very expensive to defend claims of patent infringement and we expect over time to incur significant time and expense to defend our portfolio.

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In the course of our business, we receive claims of infringement or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties. We evaluate the validity and applicability of these intellectual property rights, and determine in each case whether to negotiate licenses or cross-licenses to incorporate or use the proprietary technologies, protocols, or specifications in our products, and whether we have rights of indemnification against our suppliers, strategic partners or licensors. If we are unable to obtain and maintain licenses on favorable terms for intellectual property rights required for the manufacture, sale, and use of our products, particularly those that must comply with industry standard protocols and specifications to be commercially viable, our financial position or results of operations could be adversely affected. In addition, if we are alleged to infringe the intellectual property rights of others, we could be required to seek licenses from others or be prevented from manufacturing or selling our products, which could cause disruptions to our operations or the markets in which we compete. Finally, even if we have indemnification rights in respect of such allegations of infringement from our suppliers, strategic partners or licensors, we may not be able to recover our losses under those indemnity rights.

Many of our networking products use open source software, or OSS, licenses. Because OSS is often compiled from multiple components developed by numerous independent parties and usually comes “as is” and without indemnification, OSS is more vulnerable to third party intellectual property infringement claims. Some of the more prominent OSS licenses, such as the GNU General Public License, are the subject of litigation. It is possible that a court could hold such licenses to be unenforceable or someone could assert a claim for proprietary rights in a program developed and distributed under them. Any ruling by a court that these licenses are not enforceable or that open source components of our product offerings may not be liberally copied, modified or distributed may have the effect of preventing us from selling or developing all or a portion of our products. If any of the foregoing occurred, it could cause a material adverse impact on our business.

Risks Related to the Trading Market

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

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

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

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

• our ability to execute on our strategic plan, including our core business strategy to leverage China and emphasize larger enterprise business;

• general economic conditions, such as the current global economic crisis;

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

• announcements by our competitors or significant customers.

Over the past several years, the stock market has experienced significant price and volume fluctuations that have affected the stock prices of many technology companies. These factors, as well as general economic and political conditions or investors’ concerns regarding the credibility of corporate financial statements and the accounting profession, may have a material adverse affect on the market price of our stock in the future. For example, many companies have recently experienced sharp decreases and/or downward pressure on their stock prices as a result of the current global economic downturn.

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We may be required to record additional significant charges to earnings if our goodwill or intangible assets become impaired.

Under accounting principles generally accepted in the United States, we review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill and other non-amortizing intangible assets are tested for impairment at least annually. The carrying value of our goodwill or amortizable assets may not be recoverable due to factors such as reduced estimates of future cash flows and slower growth rates in our industry or in any of our business units. Estimates of future cash flows are based on an updated long-term financial outlook of our operations. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates. For example, if one of our business units does not meet its near-term and longer-term forecasts, the goodwill assigned to the business unit could be impaired. Similarly, a significant decline in our stock price and/or market capitalization may result in goodwill impairment for one or more business units. We may be required to record a charge to earnings in our financial statements during a period in which an impairment of our goodwill or amortizable intangible assets is determined to exist, which may negatively impact our results of operations. For example, in the three-month period ended May 30, 2008, we took a charge of $158.0 million relating to impairment of the goodwill of our TippingPoint segment.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes repurchases of our stock, including shares surrendered to satisfy tax withholding obligations, in the quarter ended February 28, 2009:

							Total Number of
							Shares		Approximate Dollar
	Total						Purchased as		Value of Shares
	Number				Average		Part of Publicly		that May Yet Be
	of Shares				Price Paid		Announced Plans or		Purchased Under the
Period	Purchased				per Share		Programs(1)		Plans or Programs
November 29, 2008 through December 26, 2008		4,762	(2	)	$	2.12		—	$	50,046,813
December 27, 2008 through January 23, 2009		29,981	(2	)		2.46		—		50,046,813
January 24, 2009 through February 27, 2009		299,738	(2	)		2.42		—		50,046,813
Total		334,481			$	2.42		—	$	50,046,813

(1)	On September 24, 2008, our Board of Directors approved a stock repurchase program providing for repurchases of up to $100.0 million through September 23, 2009.
(2)	Consists of shares surrendered to us to satisfy tax withholding obligations that arose upon the vesting of restricted stock awards and units of 4,762 in December 2008, 29,981 in January 2009 and 299,738 in February 2009.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

44

ITEM 6. EXHIBITS

Exhibit		Incorporated by Reference					Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
2.1	Master Separation and Distribution Agreement between the Registrant and Palm, Inc. effective as of December 13, 1999	10-Q	002-92053		2.1	4/4/00
2.2	Indemnification and Insurance Matters Agreement between the Registrant and Palm, Inc.	10-Q	002-92053		2.11	4/4/00
2.3	Agreement and Plan of Merger, dated December 13, 2004, by and among the Registrant, Topaz Acquisition Corporation and TippingPoint Technologies, Inc.	8-K	000-12867		2.1	12/16/04
2.4	Securities Purchase Agreement by and among 3Com Corporation, 3Com Technologies, Huawei Technologies Co., Ltd. and Shenzen Huawei Investment & Holding Co., Ltd., dated as of October 28, 2005	8-K/A	000-12867		2.1	3/30/06
2.5	Stock Purchase Agreement by and between Shenzhen Huawei Investment & Holding Co., Ltd. and 3Com Technologies, dated as of December 22, 2006	8-K	000-12867		10.1	12/27/06
2.6	Agreement and Plan of Merger by and among 3Com Corporation, Diamond II Holdings Inc. and Diamond II Acquisition Corp., dated September 28, 2007	8-K/A	000-12867		2.1	9/28/07
3.1	Corrected Certificate of Merger filed to correct an error in the Certificate of Merger	10-Q	002-92053		3.4	10/8/99
3.2	Registrant’s Bylaws, as amended on December 10, 2008	8-K	000-12867		3.1	12/16/08
3.3	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock	10-Q	000-12867		3.6	10/11/01
4.1	Third Amended and Restated Preferred Shares Rights Agreement, dated as of November 4, 2002 (“Rights Agreement”)	8-A/A	000-12867		4.1	11/27/02
4.2	Amendment No. 1 to Rights Agreement, dated as of September 28, 2007	8-K	000-12867		4.1	9/28/07
10.1	3Com Corporation 2003 Stock Plan, as amended and restated effective January 1, 2009*	8-K	000-12867		10.2	1/6/09
10.2	Form of Stock Option Agreement – 2003 Stock Plan*	8-K	000-12867		10.1	12/18/08
10.3	Form of Restricted Stock Unit Agreement – 2003 Stock Plan*	8-K	000-12867		10.2	12/18/08
10.4	Form of Restricted Stock Grant Agreement – 2003 Stock Plan*	8-K	000-12867		10.3	12/18/08
10.5	Form of Stock Appreciation Right Agreement – 2003 Stock Plan*	8-K	000-12867		10.4	12/18/08
10.6	3Com Corporation 2005 Deferred Compensation Plan, Amended & Restated effective as of January 1, 2009*						X
10.7	3Com Corporation Section 16 Officer Severance Plan, Amended & Restated						X

45

Exhibit			Incorporated by Reference					Filed
Number	Exhibit Description	Form		File No.	Exhibit		Filing Date	Herewith
	effective as of January 15, 2009*
10.8	First Amendment to Employment Agreement, effective as of January 1, 2009 – Robert Y. L. Mao*							X
10.9	First Amendment to Employment Agreement, effective as of January 1, 2009 – Ronald A. Sege*							X
10.10	Form of First Amendment to Severance Benefits Agreement — Executives*							X
10.11	Form of Second Amendment to Severance Benefits Agreement — Executives*							X
10.12	Form of First Amendment to Management Retention Agreement – Mr. Goldman*							X
10.13	Form of First Amendment to Management Retention Agreement – All Other Executives*							X
10.14	Form of Second Amendment to Management Retention Agreement – All Other Executives*							X
10.15	Hangzhou Manufacture Base Tenancy Agreement for No. 310 Liuhe Road, Binjiang District, Hangzhou, Zhejiang, China, effective January 1, 2009, by and between Huawei Technologies Co., Ltd., as landlord, and Hangzhou H3C Technologies Co., Ltd., as tenant	8-K		000-12867		10.1	1/6/09
31.1	Certification of Principal Executive Officer							X
31.2	Certification of Principal Financial Officer							X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002							X

* Indicates a management contract or compensatory plan

46

SIGNATURES

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 thereunto duly authorized.

			3Com Corporation (Registrant)
Dated:	April 8, 2009	By:	/s/ Jay Zager
			Jay Zager
			Executive Vice President, Finance and Chief Financial Officer
			(Principal Financial and Accounting Officer and a duly authorized officer of the registrant)

47

EXHIBIT INDEX

Exhibit		Incorporated by Reference					Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
2.1	Master Separation and Distribution Agreement between the Registrant and Palm, Inc. effective as of December 13, 1999	10-Q	002-92053		2.1	4/4/00
2.2	Indemnification and Insurance Matters Agreement between the Registrant and Palm, Inc.	10-Q	002-92053		2.11	4/4/00
2.3	Agreement and Plan of Merger, dated December 13, 2004, by and among the Registrant, Topaz Acquisition Corporation and TippingPoint Technologies, Inc.	8-K	000-12867		2.1	12/16/04
2.4	Securities Purchase Agreement by and among 3Com Corporation, 3Com Technologies, Huawei Technologies Co., Ltd. and Shenzen Huawei Investment & Holding Co., Ltd., dated as of October 28, 2005	8-K/A	000-12867		2.1	3/30/06
2.5	Stock Purchase Agreement by and between Shenzhen Huawei Investment & Holding Co., Ltd. and 3Com Technologies, dated as of December 22, 2006	8-K	000-12867		10.1	12/27/06
2.6	Agreement and Plan of Merger by and among 3Com Corporation, Diamond II Holdings Inc. and Diamond II Acquisition Corp., dated September 28, 2007	8-K/A	000-12867		2.1	9/28/07
3.1	Corrected Certificate of Merger filed to correct an error in the Certificate of Merger	10-Q	002-92053		3.4	10/8/99
3.2	Registrant’s Bylaws, as amended on December 10, 2008	8-K	000-12867		3.1	12/16/08
3.3	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock	10-Q	000-12867		3.6	10/11/01
4.1	Third Amended and Restated Preferred Shares Rights Agreement, dated as of November 4, 2002 (“Rights Agreement”)	8-A/A	000-12867		4.1	11/27/02
4.2	Amendment No. 1 to Rights Agreement, dated as of September 28, 2007	8-K	000-12867		4.1	9/28/07
10.1	3Com Corporation 2003 Stock Plan, as amended and restated effective January 1, 2009*	8-K	000-12867		10.2	1/6/09
10.2	Form of Stock Option Agreement – 2003 Stock Plan*	8-K	000-12867		10.1	12/18/08
10.3	Form of Restricted Stock Unit Agreement – 2003 Stock Plan*	8-K	000-12867		10.2	12/18/08
10.4	Form of Restricted Stock Grant Agreement – 2003 Stock Plan*	8-K	000-12867		10.3	12/18/08
10.5	Form of Stock Appreciation Right Agreement – 2003 Stock Plan*	8-K	000-12867		10.4	12/18/08
10.6	3Com Corporation 2005 Deferred Compensation Plan, Amended & Restated effective as of January 1, 2009*						X
10.7	3Com Corporation Section 16 Officer Severance Plan, Amended & Restated						X

48

Exhibit		Incorporated by Reference					Filed
Number	Exhibit Description	Form	File No.	Exhibit		Filing Date	Herewith
	effective as of January 15, 2009*
10.8	First Amendment to Employment Agreement, effective as of January 1, 2009 – Robert Y. L. Mao*						X
10.9	First Amendment to Employment Agreement, effective as of January 1, 2009 – Ronald A. Sege*						X
10.10	Form of First Amendment to Severance Benefits Agreement — Executives*						X
10.11	Form of Second Amendment to Severance Benefits Agreement — Executives*						X
10.12	Form of First Amendment to Management Retention Agreement – Mr. Goldman*						X
10.13	Form of First Amendment to Management Retention Agreement – All Other Executives*						X
10.14	Form of Second Amendment to Management Retention Agreement – All Other Executives*						X
10.15	Hangzhou Manufacture Base Tenancy Agreement for No. 310 Liuhe Road, Binjiang District, Hangzhou, Zhejiang, China, effective January 1, 2009, by and between Huawei Technologies Co., Ltd., as landlord, and Hangzhou H3C Technologies Co., Ltd., as tenant	8-K	000-12867		10.1	1/6/09
31.1	Certification of Principal Executive Officer						X
31.2	Certification of Principal Financial Officer						X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002						X

* Indicates a management contract or compensatory plan

49

EX-10.6

Exhibit 10.6

3COM CORPORATION

2005 DEFERRED COMPENSATION PLAN

(Amended and Restated Effective as of January 1, 2009)

3COM CORPORATION
2005 DEFERRED COMPENSATION PLAN
(Amended and Restated Effective as of January 1, 2009)

Table of Contents

	Page
ARTICLE I INTRODUCTION		1
ARTICLE II DEFINITIONS		1
Section 2.1 “Administrator”		1
Section 2.2 “Beneficiary”		1
Section 2.3 “Board of Directors” or “Board”		1
Section 2.4 “Code”		1
Section 2.5 “Committee”		1
Section 2.6 “Company”		1
Section 2.7 “Company Contribution”		1
Section 2.8 “Deferral Account”		2
Section 2.9 “Disability”		2
Section 2.10 “Early Benefit Distribution”		2
Section 2.11 “Effective Date”		2
Section 2.12 “Executive”		2
Section 2.13 “Outside Director”		2
Section 2.14 “Plan”		2
Section 2.15 “Plan Year”		2
Section 2.16 “Salary”		2
Section 2.17 “Salary Deferral”		2
Section 2.18 “Salary Deferral Election”		2
Section 2.19 “Salary Deferral Election Form”		3
Section 2.20 “Separation from Service”		3
Section 2.21 “Trust”		3
Section 2.22 “Trust Agreement”		3
Section 2.23 “Trustee”		3
Section 2.24 “Unforeseeable Emergency”		3
Section 2.25 “Valuation Date”		3
ARTICLE III ELIGIBILITY AND PARTICIPATION		3
Section 3.1 Eligibility		3
Section 3.2 Participation		3
Section 3.3 Beneficiary Designations		4
Section 3.4 Cessation of Participation		4
ARTICLE IV DEFERRALS AND CONTRIBUTIONS		4
Section 4.1 Deferred Amounts		4
Section 4.2 Company Contributions		5

	Page
ARTICLE V INVESTMENT OF DEFERRALS		5
Section 5.1 Deferral Account		5
Section 5.2 Investment of Deferral Account		5
Section 5.3 Vesting		6
Section 5.4 Statement of Account		6
ARTICLE VI DISTRIBUTIONS		6
Section 6.1 Timing of Distribution		6
Section 6.2 Early Benefit Distribution		6
Section 6.3 Benefits Upon Separation from Service		7
Section 6.4 Benefits Upon Disability		8
Section 6.5 Benefits Upon Death		8
Section 6.6 Unforeseeable Emergencies		8
Section 6.7 Right of Offset		8
Section 6.8 Taxes		8
Section 6.9 Payment of Small Accounts		8
Section 6.10 Bona Fide Dispute		9
Section 6.11 Income Inclusion Under Code Section 409A		9
ARTICLE VII TRUST OBLIGATION TO PAY BENEFITS		9
Section 7.1 Deferrals Held in Trust		9
Section 7.2 Benefits Paid From Trust		9
Section 7.3 Trustee Investment Discretion		9
Section 7.4 No Secured Interest		9
ARTICLE VIII ADMINISTRATION AND CLAIMS PROCEDURES		9
Section 8.1 Administration of the Plan		9
Section 8.2 Powers and Duties		10
Section 8.3 Information		10
Section 8.4 Indemnification of Administrator		10
Section 8.5 Claims Procedure		10
ARTICLE IX MISCELLANEOUS		11
Section 9.1 Amendment		11
Section 9.2 Termination		11
Section 9.3 Rights of Executives		11
Section 9.4 Satisfaction of Claims; Unclaimed Benefits		12
Section 9.5 Nonalienation		12
Section 9.6 Not a Contract of Employment		12
Section 9.7 Costs of the Plan		12
Section 9.8 Legal Action		12
Section 9.9 Arbitration		12
Section 9.10 Governing Law		12
Section 9.11 Binding Upon Successors		13
- ii -

	Page
Section 9.12 Severability		13
Section 9.13 Entire Agreement		13
Section 9.14 Headings		13
- iii -

3COM CORPORATION
2005 DEFERRED COMPENSATION PLAN
Amended and Restated Effective as of January 1, 2009

ARTICLE I
INTRODUCTION

     3Com Corporation, a Delaware Corporation (the “Company”), established the 3Com Corporation Deferred Compensation Plan (the “Plan”), originally effective as of August 1, 1995 (the “1995 Plan”). The 1995 Plan was amended and restated, effective July 15, 2003. The Company froze the 1995 Plan (hereinafter the “Frozen Plan”), effective December 31, 2004.

     Effective January 1, 2005, the Company adopted the 2005 3Com Corporation Deferred Compensation Plan (the “Plan”) to (a) provide eligible Executives with supplemental retirement benefits in consideration of services rendered to the Company and as an inducement for their continued services in the future; and (b) comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). The Company operated the Plan in good faith compliance with Code Section 409A and guidance issued thereunder during the transition period from January 1, 2005 to December 31, 2008 and hereby amends and restates the Plan effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

ARTICLE II
DEFINITIONS

     Section 2.1 “Administrator” means the Company, or such other person or entity appointed to administer the Plan pursuant to Article VIII.

     Section 2.2 “Beneficiary” means the persons, trust or other entity designated by the Executive to receive benefits that may become payable hereunder upon his or her death pursuant to Section 6.5 of the Plan.

     Section 2.3 “Board of Directors” or “Board” means the Board of Directors of 3Com Corporation.

     Section 2.4 “Code” means the Internal Revenue Code of 1986, as amended.

     Section 2.5 “Committee” means the Compensation Committee of the Board, or such other committee appointed by the Board.

     Section 2.6 “Company” means 3Com Corporation, a Delaware corporation, and any present or future parent corporation or subsidiary corporation (as defined in Sections 424(e) and 424(f) of the Code) of 3Com Corporation which the Board determines should be included in the Plan.

     Section 2.7 “Company Contribution” means a contribution made on behalf of an Executive by the Company as specified in Section 4.2 of the Plan.

1

     Section 2.8 “Deferral Account” means the bookkeeping account established to record an Executive’s interest in the Plan attributable to Salary Deferrals and Company Contributions as provided in Article IV.

     Section 2.9 “Disability” means the Executive is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan of the Company that then covers the Executive.

     Section 2.10 “Early Benefit Distribution” means the date elected by an Executive in his or her initial Salary Deferral Election Form for the early distribution of his or her Salary Deferral, as provided in Section 6.2 of the Plan.

     Section 2.11 “Effective Date” means January 1, 2005.

     Section 2.12 “Executive” means any executive employee, including any Outside Director, who (a) is on the Company’s United States payroll; (b) is a member of a select group of management or highly compensated employees of the Company; (c) has been designated by the Administrator as eligible to participate in the Plan; and (d) has elected to participate in the Plan by executing a Salary Deferral Election Form or who receives a Company Contribution pursuant to Section 4.2 of the Plan.

     Section 2.13 “Outside Director” means a director who serves as a member of the Board and who is not otherwise employed by the Company.

     Section 2.14 “Plan” means the 2005 3Com Corporation Deferred Compensation Plan, effective as of January 1, 2005, as it may be amended from time to time.

     Section 2.15 “Plan Year” means the calendar year.

     Section 2.16 “Salary” means, for an Outside Director, such Executive’s annual retainer and meeting fees. For all other Executives, “Salary” shall mean base salary, commissions and the annual bonus, if any, paid to the Executive. Salary shall not include any equity compensation paid to an Executive.

     Section 2.17 “Salary Deferral” means the amount of Salary an Executive elects to defer pursuant to Article IV that, but for such election, would have otherwise been paid to the Executive.

     Section 2.18 “Salary Deferral Election” means the Executive’s election to defer an amount or percentage of his or her Salary pursuant to Article IV.

2

     Section 2.19 “Salary Deferral Election Form” means the form that an Executive must complete and return to the Administrator, in accordance with the rules and procedures as may be established by the Administrator, in order to elect to defer a portion of his or her Salary under the Plan.

     Section 2.20 “Separation from Service” means the Executive’s termination of employment with the Company for any reason or as otherwise provided by the Department of Treasury in regulations promulgated under Section 409A of the Code. Notwithstanding the foregoing, the change of status of an Outside Director to that of an employee of the Company shall not be considered a Separation from Service.

     Section 2.21 “Trust” means the legal entity created by the Trust Agreement.

     Section 2.22 “Trust Agreement” means the trust agreement entered into between the Company and the Trustee, as it may be amended from time to time.

     Section 2.23 “Trustee” means the original trustee named in the Trust Agreement for the Plan and any duly appointed successor thereto.

     Section 2.24 “Unforeseeable Emergency” means a severe financial hardship to the Executive resulting from an illness or accident of the Executive, the Executive’s spouse or a dependent (as defined in Section 152(a) of the Code), loss of the Executive’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Executive. Any distributions made on account of an Unforeseeable Emergency shall be made pursuant to Section 6.6.

     Section 2.25 “Valuation Date” means the first day of each calendar month, or such other valuation date or dates as the Administrator may from time to time establish.

ARTICLE III
ELIGIBILITY AND PARTICIPATION

     Section 3.1 Eligibility. An Executive may become a participant upon his or her designation as an Executive eligible for participation in the Plan by the Administrator. The Administrator shall notify those Executives of their eligibility to participate in the Plan each Plan Year. The Administrator shall have the sole discretion to determine eligibility pursuant to the Plan. An Executive’s eligibility to participate in the Plan for a Plan Year shall not guarantee his or her eligibility to participate in the Plan for any subsequent Plan Years.

     Section 3.2 Participation.

     (a) An eligible Executive may elect to participate in the Plan for any Plan Year by delivering to the Administrator a properly executed Salary Deferral Election Form at the time and in the form provided by the Administrator, pursuant to which the Executive shall elect to defer receipt of a specified portion of his or her Salary that would otherwise be payable to him or her for the Plan Year, as described in Article IV of the Plan. The Salary Deferral Election Form shall clearly specify the time and form of payment. Salary Deferral Elections shall be completed and filed during the enrollment period established by the Administrator, provided such

3

enrollment period is completed before the beginning of the Plan Year commencing January 1, 2005 and before the beginning of each Plan Year thereafter. Each properly completed and timely submitted Salary Deferral Election Form shall be irrevocable on the first day of the next following Plan Year to which the deferral election relates.

     (b) An Executive may also begin participating in the Plan without submitting a Salary Deferral Election Form upon the date on which a Company Contribution, if any, is made on his or her behalf pursuant to Section 4.2 of the Plan.

     Section 3.3 Beneficiary Designations. Each Executive shall designate a Beneficiary when completing the initial Salary Deferral Election Form. An Executive may designate a Beneficiary or Beneficiaries, including contingent Beneficiaries. An Executive may revoke any Beneficiary designation and/or designate a new Beneficiary at any time. The last Beneficiary designation on file shall control. If there is no Beneficiary designation in force when Plan benefits become payable upon the Executive’s death, payment shall be made to the Executive’s estate.

     Section 3.4 Cessation of Participation.

     (a) An Executive shall cease to be eligible for further Salary Deferrals effective as of the first day of next succeeding Plan Year upon notification by the Administrator that he or she is no longer eligible to participate in the Plan. Such Executive shall remain an inactive participant in the Plan until his or her Deferral Account has been paid in full in accordance with Article VI.

     (b) An Executive shall cease to be an active participant in the Plan effective as of the end of the Plan Year in which he or she experiences a Separation from Service or death. Upon a participant’s Disability or in the event a participant receives a distribution due to an Unforeseeable Emergency pursuant to Section 6.6, his or her Salary Deferral Election shall be cancelled for the remainder of the Plan Year. No discretionary Company Contributions shall be made to the Plan after an Executive’s Separation from Service, death or Disability. Upon discontinuance of all Salary Deferrals, an Executive shall remain an inactive participant in the Plan until his or her Deferral Account has been paid in full in accordance with Article VI.

ARTICLE IV
DEFERRALS AND CONTRIBUTIONS

     Section 4.1 Deferred Amounts.

     (a) An Executive may elect to defer receipt of a portion of his or her Salary for a Plan Year by delivering a properly executed Salary Deferral Election Form to the Administrator within the time specified in Section 3.2. The Salary Deferral Election Form shall designate the amount or percentage of Salary that is to be deferred, subject to the limitations in paragraph (b) below. A Salary Deferral Election shall apply only to Salary earned in the Plan Year following the Plan Year in which such Salary Deferral Election is made. Salary Deferral Elections shall be irrevocable once effective.

4

     (b) The Executive’s Salary eligible for deferral shall be reduced by the amounts, if any, that may be necessary to:

(i)	satisfy all applicable income and employment tax withholding and FICA contributions;
(ii)	pay all contributions elected by the Executive pursuant to the Company’s Employee Stock Purchase Plan and other fringe benefit programs; and
(iii)	satisfy all garnishments or other amounts required to be withheld by applicable law or court order.

     (c) Except as provided in Section 6.6 of the Plan, Salary Deferrals shall not be withdrawn by the Executive and shall be paid only in accordance with the terms of the Plan.

     Section 4.2 Company Contributions. The Company may, in its sole discretion, make a Company Contribution on behalf of an Executive to his or her Deferral Account. The Company shall provide the Executive with vesting and distribution conditions at the time the Company Contribution is made to the Executive’s Deferral Account, which vesting and distribution conditions shall comply with Section 409A of the Code and any regulations issued thereunder by the Department of Treasury. To the extent such Company Contributions are forfeited, corresponding debits shall be made to the Executive’s Deferral Account, including any earnings on such forfeited amounts. To the extent such Company Contributions vest, or otherwise become subject to employment taxes, a debit equal to the amount of any related employee-side employment taxes remitted by the Company shall be made to the Executive’s Deferral Account.

ARTICLE V
INVESTMENT OF DEFERRALS

     Section 5.1 Deferral Account. The Administrator shall establish a Deferral Account for each Executive, reflecting Salary Deferrals and Company Contributions made for the Executive’s benefit, together with any adjustments for income, gain or loss attributable thereto under Section 5.2, and any payments from the Deferral Account. The Administrator may establish such additional accounts or sub-accounts as it deems necessary or advisable.

     Section 5.2 Investment of Deferral Account.

     (a) An Executive’s Deferral Account shall be adjusted as of each Valuation Date to reflect the income, gain or loss that would accrue to the Deferral Account if assets in such Deferral Account were invested as described in this Section. Each Executive shall direct the investment of his or her Deferral Account among such investment funds as are from time to time made available by the Administrator. An Executive may change the investment allocation of future Salary Deferrals or Company Contributions, and may elect to transfer all or a portion of the balance of his or her Deferral Account invested in one investment fund to any other fund or funds then available under the Plan, by directing the Administrator in such form and at such time as the Administrator shall require.

5

     (b) The investment fund options available under the Plan shall be those designated by the Administrator from time to time in its sole discretion. The Administrator may promulgate uniform and nondiscriminatory rules and procedures governing investment elections under the Plan, including rules governing how credits or debits to a Deferral Account shall be allocated among investment funds in the absence of a valid election.

     Section 5.3 Vesting. Salary Deferrals shall be 100% vested at all times.

     Section 5.4 Statement of Account. A statement shall be sent to each Executive as to the balance of his or her Deferral Account at least once each Plan Year.

ARTICLE VI
DISTRIBUTIONS

     Section 6.1 Timing of Distribution. Distribution of an Executive’s Deferral Account shall commence within 90 days after the earlier to occur of the Executive’s (a) Early Benefit Distribution election date; (b) Separation from Service; (c) death; or (d) Disability. Notwithstanding any other provision of the Plan to the contrary, in no event shall the distribution of any Deferral Account be accelerated at a time earlier than which it would otherwise have been paid, whether by amendment of the Plan, exercise of the Administrator’s discretion or otherwise, except as permitted by the Treasury Regulations issued pursuant to Section 409A of the Code.

     Section 6.2 Early Benefit Distribution.

     (a) An Executive may elect to receive an Early Benefit Distribution with respect to each Salary Deferral Election. Such Early Benefit Distribution election shall be made on the Executive’s initial Salary Deferral Election Form. The Early Benefit Distribution election shall specify the date on which payment shall be made or commence, which date shall be no less than one year from the date such Early Benefit Distribution election is made. Except as otherwise provided in paragraph (c) below, the Early Benefit Distribution election shall be irrevocable.

     (b) An Early Benefit Distribution shall be paid as follows:

(i)

Unless an Executive otherwise elects in accordance with subparagraph (ii) below, an Executive’s Deferral Account shall be paid in a single lump sum upon an Early Benefit Distribution.

(ii)

In lieu of a lump sum form of payment, an Executive may elect to receive distribution of any Salary Deferral on account of an Early Benefit Distribution in the form of substantially equal annual installment payments. An Executive may select the number of years over which the aggregate amount of any Salary Deferral is to be paid, up to a maximum of five years. Such election shall be made in the form required by the Administrator and shall be filed with the Administrator with his or her initial Salary Deferral Election Form. An Executive may change his or her benefit payment election only as described in paragraph (c) below. If no valid installment payment election is in effect when the Early Benefit Distribution is to be made, then payment of the Executive’s Deferral

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Account shall be made in a lump sum, as provided in subparagraph (i) above.

     (c) An Executive may change the time or form of an Early Benefit Distribution only as follows:

(i)	An Executive may extend an existing Early Benefit Distribution election, provided the distribution shall be deferred to a date that is at least five years after the date the Early Benefit Distribution would otherwise have commenced.
(ii)	An Executive who has elected a lump sum Early Benefit Distribution may later change such election to installment payments, selecting a payment period from one to five years, provided the first installment payment shall be deferred to a date that is at least five years after the date the lump sum Early Benefit Distribution would otherwise have been made.
(iii)	An Executive who has an installment payment Early Benefit Distribution election in effect may change such election so as to delay the start of the installment period (or extend the installment period to a maximum of five years), provided the first installment payment shall be deferred to a date that is at least five years after the date the initial installment payment would otherwise have commenced.
(iv)	An Executive who has an installment payment Early Benefit Distribution election in effect may change such election to a lump sum, provided the lump sum payment shall be deferred to a date that is at least five years after the date the initial installment payment would have commenced.
(v)	Any such election changes shall be completed in accordance with Administrator rules, and shall not be effective unless made more than 12 months before the date the Early Benefit Distribution would otherwise be made or begin to be made. Notwithstanding the foregoing, election changes that have the effect of accelerating the time for payment shall be prohibited.

     (d) Notwithstanding the foregoing, an Executive’s Early Benefit Distribution election shall automatically terminate upon his or her Separation from Service, death or Disability, at which time the provisions of Sections 6.3, 6.4 and 6.5 of the Plan shall govern distribution of the Executive’s Deferral Account.

     Section 6.3 Benefits Upon Separation from Service. An Executive who has Separated from Service shall receive the balance in his or her Deferral Account in a lump sum distribution within 90 days following such Separation from Service. Notwithstanding the foregoing, distributions made to a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) upon Separation from Service (excluding death and Disability) shall not be made before the seventh month following the Executive’s Separation from Service.

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     Section 6.4 Benefits Upon Disability. An Executive who incurs a Disability shall receive the balance in his or her Deferral Account in a lump sum distribution within 90 days following such Disability. The Administrator shall have the sole discretionary authority to determine whether an Executive has incurred a Disability.

     Section 6.5 Benefits Upon Death. Upon the Executive’s death, the Company shall pay to the Executive’s Beneficiary a benefit equal to the remaining balance in his or her Deferral Account in a single lump sum payment. Payment shall be made within 90 days of the date of the Executive’s death.

     Section 6.6 Unforeseeable Emergencies. An Executive may request that all or a portion of his or her Deferral Account balance be distributed at any time by submitting a written request to the Administrator demonstrating that he or she has suffered an Unforeseeable Emergency, and that the distribution is necessary to alleviate the financial hardship created by the Unforeseeable Emergency. The Administrator shall have the sole discretionary authority to determine whether an Executive has suffered an Unforeseeable Emergency. Upon the finding that the Executive has suffered an Unforeseeable Emergency, the Administrator shall distribute to the Executive the portion of his or her Deferral Account in a lump sum within 90 days of such finding, plus taxes attributable thereto, provided that the Administrator has taken into account the extent to which the hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Executive’s assets, unless such liquidation itself would cause a severe financial hardship, or by the cessation of deferrals under the Plan. Distributions made pursuant to this Section shall be made as soon as administratively practicable after the Administrator has reviewed and approved the request. Notwithstanding the foregoing, distributions due to Unforeseeable Emergencies shall only be made in accordance with regulations promulgated by the Department of Treasury under Section 409A of the Code.

     Section 6.7 Right of Offset. To the extent permitted under Code Section 409A, the Company shall have the right to offset any amounts payable to an Executive under the Plan by any amount necessary to reimburse the Company for liabilities or obligations of the Executive to the Company, including for amounts misappropriated by the Executive.

     Section 6.8 Taxes. Income taxes and other taxes payable with respect to a Deferral Account shall be deducted from such Account. All federal, state or local taxes that the Administrator determines are required to be withheld from any payments made pursuant to this Article shall be withheld.

     Section 6.9 Payment of Small Accounts. The Administrator may, in its sole discretion which shall be evidenced in writing no later than the date of payment, elect to pay the value of the Executive’s Deferral Account in a single lump sum if the balance of such Account is not greater than the applicable dollar amount under Code Section 402(g)(1)(B), provided the payment represents the complete liquidation of the Executive’s interest in the Plan and all other account balance plans as determined pursuant to Treasury Regulation Section 1.409A-1(c)(2).

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     Section 6.10 Bona Fide Dispute. The Company shall have the discretion to accelerate the time or schedule of payment under the Plan pursuant to Treasury Regulation Section 1.409A-3(j)(4)(xiv) where such payment occurs as part of an arm’s length settlement of a bona fide dispute between the Company and an Executive as to the Executive’s right to the deferred amount.

     Section 6.11 Income Inclusion Under Code Section 409A. The Administrator shall have the discretion to accelerate the time or schedule of payment under the Plan if the Plan fails to meet the requirements of Code Section 409A and regulations promulgated thereunder, provided that any such payment does not exceed the amount required to be included in income as a result of such failure.

ARTICLE VII
TRUST OBLIGATION TO PAY BENEFITS

     Section 7.1 Deferrals Held in Trust. An amount equal to the Executive’s Salary Deferrals shall be transferred to the Trustee within 30 days after the applicable pay period to be held pursuant to the terms of the Trust Agreement.

     Section 7.2 Benefits Paid From Trust. All benefits payable to the Executive hereunder shall be paid by the Trustee to the extent of the assets held in the Trust by the Trustee, and by the Company to the extent the assets in the Trust are insufficient to pay the Executive’s benefits as provided under the Plan.

     Section 7.3 Trustee Investment Discretion. The investment fund options under the Plan shall be for the sole purpose of determining the investment return that shall be credited to the Executive’s Deferral Account and neither the Trustee nor the Company shall have any obligation to invest the Executive’s Deferral Account in the investment fund options under the Plan.

     Section 7.4 No Secured Interest. Except as otherwise provided by the Trust Agreement, the assets of the Trust shall be subject to the claims of creditors of the Company and neither any Executive nor any Beneficiary shall have any legal or equitable interest in such assets or policies, or any other asset of the Company. The Executive shall be a general unsecured creditor of the Company with respect to the promises of the Company made herein, except as otherwise expressly provided by the Trust Agreement.

ARTICLE VIII
ADMINISTRATION AND CLAIMS PROCEDURES

     Section 8.1 Administration of the Plan. The Company is the Administrator of the Plan. The Company hereby delegates all administrative authority to act as Administrator under the Plan to the Company’s Benefits Manager. The Administrator shall oversee the administration of the Plan. The Administrator shall have complete control and authority to determine the rights and benefits of all claims, demands and actions arising out of the provisions of the Plan of any Executive, Beneficiary or other person having or claiming to have any interest under the Plan. Benefits under the Plan shall be paid only if the Administrator decides in its sole discretion that the Executive or Beneficiary is entitled to them. Notwithstanding any other

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provision of the Plan to the contrary, the Administrator shall have complete discretion to interpret the Plan and to decide all matters under the Plan. The Administrator shall have the sole discretionary authority to determine whether an Executive has incurred a Disability or suffered an Unforeseeable Emergency. Such interpretation and decision shall be final, conclusive and binding on all Executives and any person claiming under or through any Executive, in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Executive, Beneficiary, the Company or the Trustee.

     Section 8.2 Powers and Duties. The Administrator shall have such powers and duties, may adopt such rules and tables, may act in accordance with such procedures, may appoint such officers or agents, may delegate such powers and duties, may receive such reimbursements and compensation and shall follow such claims and appeal procedures with respect to the Plan as the Administrator may establish.

     Section 8.3 Information. To enable the Administrator to perform its functions, the Company shall supply full and timely information to the Administrator on all matters relating to the compensation of Executives, their employment, retirement, death, Disability, Separation from Service and such other pertinent facts as the Administrator may require.

     Section 8.4 Indemnification of Administrator. The Company agrees to indemnify and to defend to the fullest extent permitted by law any director, officer or employee who serves as Administrator (including any such individual who formerly served as Administrator) against all liabilities, damages, costs and expenses (including reasonable attorneys’ fees and amounts paid in settlement of any claims approved by the Company in writing in advance) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.

     Section 8.5 Claims Procedure. An Executive or Beneficiary (the “claimant”) shall have the right to file a claim, inquire if he or she has any right to benefits and the amounts thereof or appeal the denial of a claim. Benefits under the Plan shall be paid only if the Administrator or its designee decides, in its sole discretion, that the claimant is entitled to them.

     (a) Initial Claim. A claim shall be considered filed when a written communication is made by the claimant or his or her authorized representative to the Company’s Benefits Manager. The Benefits Manager shall, within 90 days of the receipt of the claim, either allow or deny the claim in writing. The claim denial shall include (i) the specific reason or reasons for the denial; (ii) specific references to pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Plan’s claim review procedure, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the claim upon review.

     (b) Appeal of Denied Claim. If a claim is wholly or partially denied, the claimant or his or her authorized representative may file an appeal requesting the Administrator to conduct a full and fair review. The claimant or his or her authorized representative shall file a written appeal with the Company’s Director, Benefits and Compensation no more than 60 days after receiving written notice of the denial of the initial claim. The claimant may review or receive

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copies, upon request and free of charge, of any documents, records or other information “relevant” (within the meaning of Department of Labor Regulation Section 2560.503-1(m)(8)) to the claimant’s claim. The claimant may also submit written comments, documents, records and other information relating to the claim. The Administrator hereby establishes an Appeals Committee, comprised of the Company’s General Counsel, Senior Vice President of Human Resources, and Director, Compensation and Benefits, and delegates all authority to the Appeals Committee to review and adjudicate all appeals of denied claims. The Appeals Committee shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim. The Appeals Committee’s decision on the appeal shall be given to the claimant in writing no later than 60 days following receipt of the appeal. However, if there are special circumstances involved, the decision shall be given no later than 120 days after receiving the appeal. If such an extension of time for review is required, written notice of the extension shall be furnished to the claimant before the initial 60 days expires and shall indicate the special circumstances requiring an extension of time and the date by which the Appeals Committee expects to render a final decision. The written decision on appeal shall be in a manner calculated to be understood by the claimant and shall include (i) the specific reason or reasons for the denial; (ii) specific references to pertinent Plan provisions on which the denial is based; (iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records or other information relevant to the claimant’s claim; and (iv) a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the claim upon review.

ARTICLE IX
MISCELLANEOUS

     Section 9.1 Amendment. The Committee may, at any time, modify or amend the Plan. Any such amendment shall be effected by resolution of the Committee. The Committee may not, however, reduce any benefit payment obligation to an Executive based on Salary Deferrals and earnings already credited to the Executive’s Deferral Account before the later of the date such modification or amendment is adopted or effective, without the Executive’s consent. No amendment that would otherwise affect the Trustee’s obligations shall be made without the Trustee’s consent.

     Section 9.2 Termination. The Committee reserves the right to terminate the Plan in its entirety at any time upon 15 days notice to the Executive. Executives’ Deferral Accounts shall continue to be held until distributed in accordance with Article VI. Notwithstanding the foregoing, the Committee reserves the discretion to accelerate distribution of Executives’ Deferral Accounts (including those Executives in pay status pursuant to an installment election) in accordance with Treasury Regulation Section 1.409A-3(j)(4)(ix). Any amount remaining in the Trust after all benefits have been paid shall revert to the Company.

     Section 9.3 Rights of Executives. The right of the Executive or Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company and neither the Executive nor any Beneficiary shall have any rights in or against any amount credited to the Executive’s Deferral Account or any other specific assets of the Company. The

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rights of an Executive hereunder are exercisable during the Executive’s lifetime only by the Executive or the Executive’s guardian or legal representative.

     Section 9.4 Satisfaction of Claims; Unclaimed Benefits. Any payment to any Executive or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims under the Plan against the Company, the Administrator, the Administrator’s designee(s) and the Trustee. If any Executive or Beneficiary is determined by the Administrator to be incompetent by reason of physical or mental disability (including minority) to give a valid receipt and release, the Administrator may cause the payment to such person to be made to another person for his or her benefit without responsibility on the part of the Administrator, the Company or the Trustee to follow the application of such funds. In the case of a benefit payable on behalf of an Executive, if the Administrator is unable to locate the Executive or Beneficiary to whom such benefit is payable, upon the Administrator’s determination thereof, such benefit shall be forfeited to the Company. Notwithstanding the foregoing, if subsequent to any such forfeiture the Executive or Beneficiary to whom such benefit is payable makes a valid claim for such benefit, such forfeited benefit shall be restored to the Plan by the Company.

     Section 9.5 Nonalienation. The right of an Executive or any other person to the payment of the Deferral Account under this Plan shall not be assigned, transferred, pledged or encumbered, except by will or the laws of descent and distribution.

     Section 9.6 Not a Contract of Employment. The adoption and maintenance of the Plan shall not be deemed to be a contract between the Company and any person or to be consideration for the employment or service of any person. Nothing contained in the Plan shall confer upon any person a right to be employed or to continue in the employ of Company, or to interfere, in any way, with such entity’s right to terminate, with or without cause, the employment of an Executive in the Plan at any time.

     Section 9.7 Costs of the Plan. Costs of establishing and administering the Plan shall be paid by the Company and its affiliates in such proportion as determined by the Administrator.

     Section 9.8 Legal Action. If the Company, the Executive, any Beneficiary or a successor in interest to any of the foregoing brings legal action to enforce any provisions of the Plan, the prevailing party in such legal action shall be reimbursed by the other party for the prevailing party’s costs of such legal action including, without limitation, reasonable attorneys’ fees, accountant fees and similar advisors and expert witnesses.

     Section 9.9 Arbitration. Any dispute or claim relating to or arising out of this Plan shall be submitted to and shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in Boston, Massachusetts. The venue of any such arbitration conducted by the American Arbitration Association hereunder shall be held in Boston, Massachusetts.

     Section 9.10 Governing Law. The Plan is to be construed, administered and governed in all respects under the laws of the State of Massachusetts.

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     Section 9.11 Binding Upon Successors. This Plan is binding upon the Company and Executives and their respective successors, assigns, heirs, executors, and Beneficiaries.

     Section 9.12 Severability. If any of the provisions of the Plan shall be held to be invalid, or shall be determined to be inconsistent with the purpose of the Plan, the remainder of the Plan shall not be affected thereby.

     Section 9.13 Entire Agreement. This Plan constitutes the entire understanding and agreement with respect to the provisions contained herein, and there are no agreements, understandings, restrictions, representations or warranties among any Executive or the Company other than those set forth herein.

     Section 9.14 Headings. Headings and subheadings in the Plan are inserted for convenience only and are not to be considered in the construction of the provisions hereof.

* * *

     IN WITNESS WHEREOF, 3Com Corporation has caused this Plan to be amended and restated by a duly authorized officer effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A.

3COM CORPORATION
 

By:  

Date:                                        

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EX-10.7

Exhibit 10.7

3Com Corporation
Section 16 Officer Severance Plan
Plan Document and Summary Plan Description

Amended and Restated Effective January 15, 2009

This Plan Document and Summary Plan Description (“Summary Plan Description”) is for all employees of 3Com Corporation (“3Com” or the “Company”) who are eligible under the terms of the 3Com Section 16 Officer Severance Plan (the “Section 16 Plan”). All rights to participate in and receive benefits from the Section 16 Plan are governed solely by the terms and conditions of this Summary Plan Description. This Summary Plan Description supercedes and replaces all prior plan documents and summary plan descriptions governing the Section 16 Plan. Severance benefits provided under the Section 16 Plan are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent permissible under Code Section 409A and regulations issued thereunder. To the extent severance benefits do not qualify for exemption from Code Section 409A, the Plan is intended to comply with Code Section 409A and guidance issued thereunder.

I. EFFECTIVE DATE

The Section 16 Plan is hereby amended and restated effective January 15, 2009 or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

II. ELIGIBILITY TO PARTICIPATE

Participation in the Section 16 Plan is restricted to employees of 3Com and its U.S. affiliates who are actively employed and are paid through the Company’s or its U.S. affiliate’s payroll, who have been designated by the Company, at its discretion and consistent with applicable law, as being subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended (“Officers”).

III. ELIGIBILITY TO RECEIVE BENEFITS

Officers who are employed by the Company are eligible to receive benefits upon the termination of their employment with 3Com under following circumstances: (a) an involuntary termination without Cause; or (b) a Voluntary Termination for Good Reason. The receipt of benefits under the Section 16 Plan will be conditioned upon the Officer’s execution of and compliance with an agreement (the “Release Agreement”) including, but not limited to, (i) a release of claims against the Company, its affiliates and representatives; (ii) a non-solicitation provision prohibiting the Officer’s solicitation of any Company employee, business opportunity, client, customer, account, distributor or vendor for a period of one (1) year following the Termination Date; and (iii) a non-competition provision prohibiting the Officer from directly or indirectly engaging in, participating in or having a material ownership interest in a business in competition with the Company. The form and language of the Release Agreement shall be determined by the Company in its sole discretion. If the Release Agreement has not been executed and/or the revocation period stated in the Release Agreement has not expired by the sixtieth (60^th) day following the Termination Date, severance benefits shall be forfeited. The Release Agreement shall be furnished to the Officer in sufficient time to enable the Officer to comply with the preceding sentence, taking into account the period of time that the Officer must be given to consider the terms of the Release Agreement under any applicable law.

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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IV. BENEFITS

Provided that the Officer has executed a valid Release Agreement and the applicable revocation period has expired by the sixtieth (60^th) day following the Termination Date, an Officer who is eligible to receive benefits under the Section 16 Plan will be entitled to receive the following:

     A. Severance Amounts.

     1. One (1) year of the Officer’s annualized base salary as of the Termination Date, subject to all applicable taxes and withholdings, with payment commencing within sixty-five (65) days after the Officer’s Termination Date in substantially equal installments corresponding to the Company’s normal payroll practices and continuing for a period of twelve (12) months. Each payment shall be considered a separate payment and not part of a series of installments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i) and the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii). As a result, the following payments are exempt from the requirements of Code Section 409A:

     (i) payments that are made by the fifteenth (15^th) day of the third month of the calendar year following the year of the Officer’s Termination Date, and

     (ii) any additional payments that are made on or before the last day of the second (2^nd) calendar year following the year of the Officer’s Termination Date and that do not exceed the lesser of two (2) times: (A) the Officer’s annualized compensation based upon the annual rate of pay for services provided to the Company for the Officer’s taxable year that precedes the taxable year in which the Termination Date occurs (adjusted for any increase during that year that was expected to continue indefinitely if the Officer’s employment had not terminated); or (B) the limit under Code Section 401(a)(17) then in effect.

     Notwithstanding the preceding provisions, to the extent that the payments to be made during the first six (6) month period following the Officer’s Termination Date exceed the amounts exempt from Code Section 409A under this paragraph, such payments shall be paid in a single lump sum on the first (1^st) day following the six (6) month anniversary of the Officer’s Termination Date; and

     2. A pro-rated amount of the Officer’s earned incentive bonus for the bonus period in which the Termination Date occurs, to be calculated by multiplying the earned bonus amount (based on the Company’s actual attainment of applicable performance metrics) by a fraction, the numerator of which shall be the number of calendar days

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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between the beginning of the applicable bonus period to the Termination Date and the denominator of which shall be the number of calendar days within the applicable bonus period, to be paid within the first fiscal quarter following the end of the applicable bonus period but, in any event, by the later of (i) the date that is 2 ¹/2 months from the end of the Officer’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (ii) the date that is 2 ¹/2 months from the end of the Company’s tax year in which the amount is no longer subject to a substantial risk of forfeiture.

     B. Health, Dental & Vision Benefits. Continuation of coverage under the Company’s health, dental, and vision insurance plans (“Health Care Plans”) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) at the same level of coverage as was provided to and elected by the Officer as of the Termination Date. If the Officer timely and properly elects to continue coverage under the Company’s Health Care Plans in accordance with COBRA, the Company shall continue to pay the Company-paid portion of the premiums for the Officer’s elected coverage under the Health Care Plans until the earlier of: (i) one (1) year from the Termination Date, or (ii) the date upon which the Officer becomes eligible for coverage under another employer’s group health, dental, or vision insurance plan(s). Such benefit is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code), pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(B). The Officer will remain obligated to pay the unsubsidized portion of the applicable premium(s) in order to continue Company-sponsored coverage. The Company-paid portion of any premium(s) is subject to change at the Company’s discretion. To be eligible for continuation of coverage under the Health Care Plans, an Officer must be actively enrolled in the applicable Health Care Plan(s) as of the Termination Date. For purposes of Title X of COBRA, the date of the “qualifying event” for the Officer and his/her covered dependents shall be the Termination Date, and each month of Company-sponsored coverage continuation provided hereunder shall offset a month of coverage continuation otherwise due under COBRA. Upon the expiration of the one (1) year period, the Officer will be required to pay 102% of the premium to continue Company-sponsored coverage. Any continuation of Company-sponsored coverage shall be governed by COBRA and the terms and conditions of the applicable plan documents.

     C. Life Insurance. Conversion of the Officer’s basic term life insurance in effect immediately prior to the Termination Date to continue coverage until the earlier of (i) one (1) year from the Termination Date, or (ii) the date upon which the Officer becomes eligible for coverage under another employer’s life insurance plan.

     D. Equity Compensation.

          1. Six (6) months of accelerated vesting of outstanding stock options, restricted stock, stock appreciation rights, and restricted stock units issued to the Officer that are subject to time-based vesting. The accelerated vesting provided for herein will be effective as of the Termination Date, with transfer of shares, payment of cash, or removal of restrictions on shares, whichever applicable, occurring as soon as practicable, but in no event later than the sixtieth (60^th) day following the Officer’s Termination Date. Notwithstanding the foregoing, if the Employee is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) and the award is

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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subject to Code Section 409A, transfer of shares shall occur on the first market day following the six (6) month anniversary of the Employee’s termination of employment;

          2. Extension of the exercise period for vested stock options issued to the Officer to the earlier of: (i) one hundred and sixty-five (165) calendar days from the Termination Date; or (ii) the original term of the stock option grant.

All other compensation (including, without limitation, salary, bonuses and commissions) and employee benefits (including, without limitation, short-term and long-term disability insurance, Paid Time Off accrual, and vesting of equity compensation) will cease on the Officer’s Termination Date. Payments under the Section 16 Plan will not be subject to 401(k) or Employee Stock Purchase Plan deductions. Except as provided herein, all equity compensation grants are subject to the terms and conditions of the applicable plan document(s).

V. DEFINITIONS

     A. “Cause” shall mean (i) an act of theft, embezzlement or intentional dishonesty by the Officer in connection with his/her employment; (ii) the Officer being convicted of a felony, (iii) a willful act by the Officer which constitutes gross misconduct and which is injurious to the Company, or (iv) following delivery to the Officer of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief that the Officer has not substantially performed his/her duties, continued violation(s) of the Officer’s obligations to the Company which are demonstrably willful and deliberate on the Officer’s part.

     B. “Termination Date” shall mean the Officer’s last date of employment with 3Com Corporation or, if later, the date on which the Officer incurs a separation from service with 3Com Corporation as defined in Treasury Regulation Section 1.409A-1(h).

     C. “Voluntary Termination for Good Reason” shall mean the Officer’s voluntary resignation following the initial existence of one or more of the following conditions arising without the consent of the Officer:

     1. a material diminution in the Officer’s base compensation;

     2. a material diminution in the Officer’s authority, duties, or responsibilities;

     3. a material change in the geographic location at which the Officer must perform services; or

     4. any other action or inaction that constitutes a material breach by the Company of the agreement, if any, under which the Officer provides services.

     Notwithstanding the forgoing, no such condition described herein shall constitute a Voluntary Termination for Good Reason unless (i) the Officer has given written notice to the Company specifying the condition relied upon for such termination within ninety (90) days of the initial existence of the condition and

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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the Company has been given thirty (30) days to remedy the condition and has not done so within such thirty (30) days and (ii) the Officer’s Termination Date occurs within six (6) months of the initial existence of one or more of the conditions specified.

VI. FUNDING

Benefits provided pursuant to the Section 16 Plan shall be paid solely out of 3Com’s general assets. 3Com shall not be required to fund or otherwise provide for the payment of benefits provided hereunder in any other manner.

VII. CLAIMS AND REVIEW PROCEDURES

If an Officer believes that he/she is entitled to a benefit under the Section 16 Plan, or a benefit in an amount greater than he/she has received, the Officer may file a claim by writing to the Section 16 Plan Administrator. The Section 16 Plan Administrator is the named fiduciary that has the discretionary power and authority to act with respect to any appeal from a denial of a claim for benefits under the Section 16 Plan by performing a full and fair review of the denial, and such actions shall be final and binding on all persons. Benefits under the Section 16 Plan shall be payable only if the Section 16 Plan Administrator determines, in its sole discretion, that an eligible Officer is entitled to them. Any claim must be filed no later than forty-five (45) days after the Officer’s Termination Date.

     A. Initial Claim. The Section 16 Plan Administrator will notify the Officer in writing within ninety (90) days (or 180 days if special circumstances require an extension of time for processing the claim) of receipt of the claim as to whether the claim is granted or denied. Note that if an extension is necessary, the Section 16 Plan Administrator will provide the Officer with written notice of the extension (including the circumstances requiring extension and date by which a decision is expected to be rendered) before the initial ninety (90) day period expires. If the claim is denied, the Officer will be given (1) specific reasons for the denial, (2) specific reference to the Section 16 Plan provision(s) on which the denial is based, (3) a description of any information or material necessary to support the claim and an explanation of why such information or material is necessary, (4) an explanation of the Section 16 Plan’s claim appeal procedure (including a statement of the Officer’s right to bring a civil action under the Employee Retirement Income Security Act of 1974 (“ERISA”) following a denial of the claim upon appeal), and (5) a statement that the Officer is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records or other information relevant (as defined by Department of Labor regulation section 2560.503-1(m)) to the claim.

     B. Appeals. If the claim is denied, the Officer has sixty (60) days after notice of the denial to file a written appeal with the Section 16 Plan Administrator. During the review process, the Officer has the right to submit written comments, documents, records, and other information relating to the claim for benefits, which will be considered without regard to whether such items were considered in the initial benefit determination. Also, the Officer may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant (as defined by Department of Labor regulation section 2560.503-1(m)) to the claim for benefits.

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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     The Section 16 Plan Administrator will notify the Officer in writing within sixty (60) days (or 120 days if special circumstances require an extension of time for processing the appeal) of receipt of the appeal as to its decision on review, unless the Section 16 Plan Administrator determines that special circumstances exist requiring an extension of time. If the Section 16 Plan Administrator determines that an extension is necessary, the Section 16 Plan Administrator will provide the Officer with written notice (including the circumstances requiring the extension and date by which a decision is expected to be rendered) before the initial sixty (60) day period expires.

     If the Section 16 Plan Administrator denies the appeal, it will provide a written denial of the claim upon appeal. The written denial shall include the specific reason or reasons for the denial, specific references to the Section 16 Plan provisions on which the denial is based, a statement that the Officer is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records or other information relevant (as defined in Department of Labor regulation section 2560.503-1(m)) to the claim, and a statement of the Officer’s right to bring an action under Section 502(a) of ERISA.

     All determinations, interpretations, rules, and decisions of the Section 16 Plan Administrator or its delegate shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Section 16 Plan and shall be given deference in any judicial or other proceeding.

     C. Exhaustion of Claims Procedures. In no event shall an Officer or any other person be entitled to challenge a decision of the Section 16 Plan Administrator in court or in any other administrative proceeding unless and until the claim and appeal procedures described above have been fully complied with and exhausted.

VIII. ADMINISTRATION

The Section 16 Plan Administrator administers the Section 16 Plan. The Section 16 Plan Administrator is exclusively authorized to interpret the provisions of this Summary Plan Description. The Section 16 Plan Administrator’s interpretation and/or application of any term or provision of the Section 16 Plan shall be final and binding. The Section 16 Plan Administrator shall have full and unfettered authority and responsibility for administration of the Section 16 Plan, including the discretionary authority to determine eligibility for benefits and amounts of benefit entitlements and to interpret the terms of the Section 16 Plan.

IX. AMENDMENT AND TERMINATION

The Company reserves the right to amend or terminate the Section 16 Plan at any time, with or without notice. All material changes to the Section 16 Plan must be approved by the 3Com Corporation Board of Directors (the “Board”) or the Compensation Committee of the Board.

Information Required By ERISA:

Plan Name

3Com Section 16 Officer Severance Plan

Plan Sponsor

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

6

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

Plan Administrator

The Section 16 Plan Administrator shall be the Compensation Committee of the Board. Communications with the Section 16 Plan Administrator must be in writing and addressed to:

Senior Vice President, Human Resources
3Com Corporation
350 Campus Drive
Marlborough, MA 01752-3064

Type of Plan

The Section 16 Plan is a welfare plan providing for severance benefits.

Employer Identification Number

The 3Com Employer Identification Number is 94-2605794. When writing about the Section 16 Plan, an Officer should include this number.

Plan Number

For the purpose of identification, 3Com has assigned the Section 16 Plan the number 517. All communications concerning the Section 16 Plan should include this reference number.

Service of Legal Process

Service of legal process may be made on the Section 16 Plan Administrator at the address above.

X. ENTIRE PLAN; AMENDMENTS

This Summary Plan Description contains all the terms, conditions and benefits relating to the Section 16 Plan. No employee, officer, or director of the Company has the authority to alter, vary or modify the terms of the Section 16 Plan, other than by means of an authorized written amendment to the Section 16 Plan approved by the Section 16 Plan Administrator. No oral or written representations contrary to the terms of the Section 16 Plan and its written amendments shall be binding upon the Section 16 Plan, the Section 16 Plan Administrator or the Company.

XI. NO CONTRACT OF EMPLOYMENT

Nothing herein is intended to or shall be considered a contract of employment or for any period of employment or a guarantee of future employment with the Company.

XII. NO ASSIGNMENT OF RIGHTS

No eligible Officer shall have the right to assign, delegate or otherwise transfer, either in full or in part, any of his/her rights or obligations under the Section 16 Plan and any such assignment, delegation or other such transfer shall be void.

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

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XIII. APPLICABLE LAW; VENUE

Except where preempted by ERISA, the Section 16 Plan shall be construed in accordance with, and all disputes hereunder shall be governed by, the laws of the Commonwealth of Massachusetts without regard to its conflict of laws rules. All legal actions arising under or relating to the Section 16 Plan shall be subject to the jurisdiction and venue of the United States District Court for the District of Massachusetts sitting in Boston, Massachusetts.

XIV. ERISA RIGHTS

If you are an eligible Officer who is a participant in the Section 16 Plan, you are entitled to certain rights and protections under ERISA.

Receive Information About Your Plan and Benefits. ERISA provides that you are entitled to:

(1)	Examine, without charge, at the office of the Section 16 Plan Administrator or its delegate all Section 16 Plan documents, including copies of any documents filed by the Section 16 Plan with the U.S. Department of Labor, such as Section 16 Plan descriptions.
(2)	Obtain copies of all Section 16 Plan documents and other Section 16 Plan information upon written request to the Section 16 Plan Administrator. The Section 16 Plan Administrator may impose a reasonable charge for the copies.
(3)	Receive a copy of the Section 16 Plan’s financial report, if any. The Section 16 Plan Administrator may be required by law to furnish each participant with a copy of the summary annual report.

Prudent Actions By Fiduciaries. In addition to creating rights for the Section 16 Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the Section 16 Plan. The people who operate the Section 16 Plan, called “fiduciaries” of the Section 16 Plan, have a duty to do so prudently and in the interest of you and other Section 16 Plan participants and beneficiaries.

No one may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA.

Enforce Your Rights. If your claim for any Section 16 Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Section 16 Plan and do not receive them within thirty (30) days, you may file suit in a federal court. In such case, the court may require the Section 16 Plan Administrator to provide the materials and pay you up to $110 a day until you receive the

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

8

materials, unless the materials were not sent because of reasons beyond the control of the Section 16 Plan Administrator.

If you have a claim for a benefit that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that Section 16 Plan fiduciaries misuse the Section 16 Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

Assistance With Your Questions. If you have questions about the statements made in this summary or your rights under ERISA, you should contact the Section 16 Plan Administrator or the nearest Area Office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory, or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue, Washington, D.C. 20210.

3Com Corporation Section 16 Officer Severance Plan Last updated 1/15/09

9

EX-10.8

Exhibit 10.8

3COM CORPORATION

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This AMENDMENT is made and entered into pursuant to the EMPLOYMENT AGREEMENT of April 29, 2008 (the “Agreement”) by and between 3Com Corporation (the “Company”) and Robert Y.L. Mao (“Executive”).

     WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects, effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

     1. A new sentence is added at the end of Section 3(b) to read as follows:

     “Annual cash incentives shall be paid in a lump sum as soon as practicable following the determination that specified goals have been met. In no event shall payment be made later than March 15^th of the year following the year in which the incentive was earned or, if later, the 15^th day of the third month following the end of the Company’s taxable year following the year in which the incentive was earned.”

     2. Paragraph (a) of Section 8 is revised in its entirety to read as follows:

     “(a) Termination Without Cause or Resignation for Good Reason other than in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or if Executive resigns for Good Reason, and such termination is not in Connection with a Change of Control, then, subject to Section 8(d), Executive will receive:

     (i) the aggregate of twelve (12) months of Executive’s Base Salary plus the Target Annual Incentive for the year in which the termination occurs (less applicable tax withholdings), with payment to occur as follows:

     On the first day following the six (6) month anniversary of Executive’s termination of employment (as determined pursuant to Treasury Regulation Section 1.409A-1(h)), Executive shall receive a lump sum equal to the aggregate amount Executive would have received through such date had payments commenced upon termination of employment in bi-weekly installments in accordance with the Company’s normall payroll policies. Thereafter, the amount remaining shall be paid in bi-weekly installments in accordance with the Company’s normal payroll policies.

     (ii) with respect to Executive’s then outstanding, unvested equity awards, other than performance-based awards, twelve (12) months accelerated vesting, with payment to occur as follows:

     (a) Awards Exempt from Code Section 409A:

(1) Stock Options: stock options may be exercised pursuant to paragraph (iii), with underlying shares to be delivered to Executive as soon as administratively practicable following Executive’s exercise of such options.

(2) Restricted stock: all restrictions placed upon the shares of stock shall lapse upon Executive’s termination of employment.

(3) Restricted stock units: shares underlying those restricted stock units that are exempt from Code Section 409A shall be transferred to Executive as soon as administratively practicable, but in no event later than the sixtieth (60th) day following Executive’s termination of employment.

     (b) Restricted Stock Units Subject to Code Section 409A: Shares underlying those restricted stock units that are subject to Code Section 409A shall be transferred to Executive on the first market day following the six (6) month anniversary of Executive’s termination of employment.

     (iii) extension of the exercise period for all Executive’s outstanding stock options to the earlier of 165 calendar days from the date of termination or the expiration date of the stock options;

     (iv) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (x) eighteen (18) months, payable when such premiums are due (provided Executive validly elects to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (‘COBRA’) or (y) the date upon which Executive and Executive’s eligible dependents become covered under similar plans; and

     (v) life insurance as set forth in Section 4(c).

     In addition, subject to Sections 8(d), (x) if such termination or resignation is after April 29, 2009, then Executive’s then outstanding equity from the Stock Option Grant and the Restricted Stock Grant hereunder shall be accelerated, with the Restricted Stock Grant payable in full on the first day following the six (6) month anniversary of Executive’s termination, and (y) if such termination is after

2

December 31, 2009, then Executive’s then outstanding equity from the Stock Option Grant and the Restricted Stock Grant hereunder as well as Executive’s outstanding equity from any grants made in calendar year 2009 shall be accelerated. Payment of such equity awards shall be made in full (a) as soon as practicable following Executive’s termination if an award is exempt from Code Section 409A, or (b) on the first day following the six (6) month anniversary of Executive’s termination if an award is subject to Code Section 409A.”

     3. Paragraph (b) of Section 8 is revised in its entirety to read as follows:

     “(b) Termination Without Cause or Resignation for Good Reason in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and such termination is in Connection with a Change of Control, then, subject to Section 8(d), Executive will receive:

     (i) twenty-four (24) months of Executive’s Base Salary, less applicable tax withholdings, with payment to occur as follows:

     On the first day following the six (6) month anniversary of Executive’s termination of employment (as determined pursuant to Treasury Regulation Section 1.409A-1(h)), Executive shall receive a lump sum equal to the aggregate amount Executive would have received through such date had payments commenced upon termination of employment in bi-weekly installments in accordance with the Company’s normall payroll policies. Thereafter, the amount remaining shall be paid in bi-weekly installments in accordance with the Company’s normal payroll policies.

     (ii) two (2) payments each equal to 100% of Executive’s Target Annual Incentive for the year in which the termination occurs, less applicable tax withholdings, payable in the Company’s first and third (or vice-versa depending upon Executive’s termination date) fiscal quarter in accordance with the Company’s normal annual incentive payment schedule following Executive’s termination of employment, provided that to the extent that any such payment would occur within six (6) months following Executive’s termination, such payment shall be delayed until the first day following the six (6) month anniversary of Executive’s termination;

     (iii) full vesting with respect to Executive’s then outstanding unvested equity awards (other than performance-based awards), with payment to occur as follows:

     (a) Awards Exempt from Code Section 409A:

3

(1) Stock Options: stock options may be exercised pursuant to paragraph (iv), with underlying shares to be delivered to Executive as soon as administratively practicable following Executive’s exercise of such options.

(2) Restricted stock: all restrictions placed upon the shares of stock shall lapse upon Executive’s termination of employment.

(3) Restricted stock units: shares underlying those restricted stock units that are exempt from Code Section 409A shall be transferred to Executive as soon as administratively practicable, but in no event later than the sixtieth (60th) day following Executive’s termination of employment.

     (b) Restricted Stock Units Subject to Code Section 409A: Shares underlying those restricted stock units that are subject to Code Section 409A shall be transferred to Executive on the first market day following the six (6) month anniversary of Executive’s termination of employment.

     (iv) extension of the exercise period for all Executive’s outstanding stock options to the earlier of 165 calendar days from the date of termination or the expiration date of the stock options;

     (v) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (x) eighteen (18) months, payable when such premiums are due (provided Executive validly elects to continue coverage under COBRA or (y) the date upon which Executive and Executive’s eligible dependents become covered under similar plans; and

     (vi) life insurance as set forth in Section 4(c).”

     4. Revise Section 8(d) in its entirety to read as follows:

     “(d) Separation Agreement and Release of Claims. The receipt of any severance other other benefits pursuant to this Section 8 will be subject to Executive signing and not revoking a separation agreement and release of claims appended hereto as Exhibit B. For this purpose, Executive commits to signing and returning the separation agreement and release of claims to the Company no later than forty-five (45) days after the date of termination of Executive’s employment. Failure to return the separation agreement and release of claims by the forty-fifth (45^th) day, or revoking the release of claims within the seven (7) day revocation period, will result in a forfeiture of severance pay.”

4

     5. Add a new sentence at the end of Section 9 to read as follows:

     “In no event shall payment be made later than the end of the year following the year in which Executive remits the related taxes.”

     6. Revise the first sentence of Section 25(a) to read as follows:

     “Notwithstanding anything to the contrary in this Agreement, if Executive is a ‘specified employee’ within the meaning of Section 409A of the Code and the final regulations and any guidance promulgated thereunder (‘Section 409A’) (and as applied according to procedures of the Company) at the time of Executive’s termination of employment (other than due to death), then the severance benefits payable to Executive under this Agreement, if any, and any other severance payments or separation benefits payments that may be considered deferred compensation under Section 409A (together, the ‘Deferred Compensation Separation Benefits’) otherwise due to Executive on or within the six (6) month period following Executive’s termination of employment will accrue during such six (6) month period and will become payable in a lump sum payment (less applicable withholding taxes) on the date six (6) months and one (1) day following the date of Executive’s termination of employment.”

* * *

(signature page follows)

5

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

COMPANY:

3COM CORPORATION

By:	/s/ Neal D. Goldman Neal D. Goldman	Date:      12/23/08
EXECUTIVE:
/s/ Robert Y. L. Mao Robert Y.L. Mao		Date:      12/16/08

6

EX-10.9

Exhibit 10.9

3COM CORPORATION

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This AMENDMENT is made and entered into pursuant to the EMPLOYMENT AGREEMENT of April 29, 2008 (the “Agreement”) by and between 3Com Corporation (the “Company”) and Ronald A. Sege (“Executive”).

     WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects, effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

     1. A new sentence is added at the end of Section 3(b) to read as follows:

     “Annual cash incentives shall be paid in a lump sum as soon as practicable following the determination that specified goals have been met. In no event shall payment be made later than March 15^th of the year following the year in which the incentive was earned or, if later, the 15^th day of the third month following the end of the Company’s taxable year following the year in which the incentive was earned.”

     2. Paragraph (a) of Section 8 is revised in its entirety to read as follows:

     “(a) Termination Without Cause or Resignation for Good Reason other than in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or if Executive resigns for Good Reason, and such termination is not in Connection with a Change of Control, then, subject to Section 8(d), Executive will receive:

     (i) the aggregate of twelve (12) months of Executive’s Base Salary plus the Target Annual Incentive for the year in which the termination occurs (less applicable tax withholdings), with payment to occur as follows:

     On the first day following the six (6) month anniversary of Executive’s termination of employment (as determined pursuant to Treasury Regulation Section 1.409A-1(h)), Executive shall receive a lump sum equal to the aggregate amount Executive would have received through such date had payments commenced upon termination of employment in bi-weekly installments in accordance with the Company’s normal payroll policies. Thereafter, the amount remaining shall be paid in bi-weekly installments in accordance with the Company’s normal payroll policies.

     (ii) with respect to Executive’s then outstanding, unvested equity awards, other than performance-based awards, twelve (12) months accelerated vesting, with payment to occur as follows:

     (a) Awards Exempt from Code Section 409A:

(1) Stock Options: stock options may be exercised pursuant to paragraph [iii], with underlying shares to be delivered to Executive as soon as administratively practicable following Executive’s exercise of such options.

(2) Restricted stock: all restrictions placed upon the shares of stock shall lapse upon Executive’s termination of employment.

(3) Restricted stock units: shares underlying those restricted stock units that are exempt from Code Section 409A shall be transferred to Executive as soon as administratively practicable, but in no event later than the sixtieth (60th) day following Executive’s termination of employment.

     (b) Restricted Stock Units Subject to Code Section 409A: Shares underlying those restricted stock units that are subject to Code Section 409A shall be transferred to Executive on the first market day following the six (6) month anniversary of Executive’s termination of employment.

     (iii) extension of the exercise period for all Executive’s outstanding stock options to the earlier of 165 calendar days from the date of termination or the expiration date of the stock options;

     (iv) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (x) eighteen (18) months, payable when such premiums are due (provided Executive validly elects to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (‘COBRA’) or (y) the date upon which Executive and Executive’s eligible dependents become covered under similar plans; and

     (v) life insurance as set forth in Section 4(c).”

     3. Paragraph (b) of Section 8 is revised in its entirety to read as follows:

     “(b) Termination Without Cause or Resignation for Good Reason in Connection with a Change of Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, and such

2

termination is in Connection with a Change of Control, then, subject to Section 8(d), Executive will receive:

     (i) twenty-four (24) months of Executive’s Base Salary, less applicable tax withholdings, with payment to occur as follows:

     On the first day following the six (6) month anniversary of Executive’s termination of employment (as determined pursuant to Treasury Regulation Section 1.409A-1(h)), Executive shall receive a lump sum equal to the aggregate amount Executive would have received through such date had payments commenced upon termination of employment in bi-weekly installments in accordance with the Company’s normal payroll policies. Thereafter, the amount remaining shall be paid in bi-weekly installments in accordance with the Company’s normal payroll policies.

     (ii) two (2) payments each equal to 100% of Executive’s Target Annual Incentive for the year in which the termination occurs, less applicable tax withholdings, payable in the Company’s first and third (or vice-versa depending upon Executive’s termination date) fiscal quarter in accordance with the Company’s normal annual incentive payment schedule following Executive’s termination of employment, provided that to the extent that any such payment would occur within six (6) months following Executive’s termination, such payment shall be delayed until the first day following the six (6) month anniversary of Executive’s termination;

     (iii) full vesting with respect to Executive’s then outstanding unvested equity awards (other than performance-based awards), with payment to occur as follows:

     (a) Awards Exempt from Code Section 409A:

(1) Stock Options: stock options may be exercised pursuant to paragraph [iv], with underlying shares to be delivered to Executive as soon as administratively practicable following Executive’s exercise of such options.

(2) Restricted stock: all restrictions placed upon the shares of stock shall lapse upon Executive’s termination of employment.

(3) Restricted stock units: shares underlying those restricted stock units that are exempt from Code Section 409A shall be transferred to Executive as soon as administratively practicable, but in no event later than the

3

sixtieth (60th) day following Executive’s termination of employment.

     (b) Restricted Stock Units Subject to Code Section 409A: Shares underlying those restricted stock units that are subject to Code Section 409A shall be transferred to Executive on the first market day following the six (6) month anniversary of Executive’s termination of employment.

     (iv) extension of the exercise period for all Executive’s outstanding stock options to the earlier of 165 calendar days from the date of termination or the expiration date of the stock options;

     (v) reimbursement for premiums paid for continued health benefits for Executive (and any eligible dependents) under the Company’s health plans until the earlier of (x) eighteen (18) months, payable when such premiums are due (provided Executive validly elects to continue coverage under COBRA or (y) the date upon which Executive and Executive’s eligible dependents become covered under similar plans; and

     (vi) life insurance as set forth in Section 4(c).”

     4. Revise Section 8(d) in its entirety to read as follows:

     “(d) Separation Agreement and Release of Claims. The receipt of any severance other benefits pursuant to this Section 8 will be subject to Executive signing and not revoking a separation agreement and release of claims appended hereto as Exhibit B. For this purpose, Executive commits to signing and returning the separation agreement and release of claims to the Company no later than forty-five (45) days after the date of termination of Executive’s employment. Failure to return the separation agreement and release of claims by the forty-fifth (45^th) day, or revoking the release of claims within the seven (7) day revocation period, will result in a forfeiture of severance pay.”

     5. Add a new sentence at the end of Section 9 to read as follows:

     “In no event shall payment be made later than the end of the year following the year in which Executive remits the related taxes.”

     6. Revise the first sentence of Section 24(a) to read as follows:

     “Notwithstanding anything to the contrary in this Agreement, if Executive is a ‘specified employee’ within the meaning of Section 409A of the Code and the final regulations and any guidance promulgated thereunder (‘Section 409A’) (and as applied according to procedures of the Company) at the time of Executive’s termination of employment (other than due to death), then the severance benefits payable to Executive under this Agreement, if any, and any other severance payments or separation benefits payments that may be considered deferred

4

compensation under Section 409A (together, the ‘Deferred Compensation Separation Benefits’) otherwise due to Executive on or within the six (6) month period following Executive’s termination of employment will accrue during such six (6) month period and will become payable in a lump sum payment (less applicable withholding taxes) on the date six (6) months and one (1) day following the date of Executive’s termination of employment.”

* * *

(signature page follows)

5

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

COMPANY:

3COM CORPORATION

By:	/s/ Neal D. Goldman Neal D. Goldman	Date:     12/23/08
EXECUTIVE:
/s/ Ronald A. Sege Ronald A. Sege		Date:     12/22/08

6

EX-10.10

Exhibit 10.10

3COM CORPORATION

FORM OF FIRST AMENDMENT TO SEVERANCE BENEFITS AGREEMENT

     This AMENDMENT is made and entered into pursuant to the SEVERANCE BENEFITS AGREEMENT of [                    ] (the “Agreement”) by and between 3Com Corporation (the “Company”) and [                    ] (“Executive”).

     WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects, effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

     1. The first “WHEREAS” clause is revised in its entirety to read as follows:

“WHEREAS, the Executive is currently employed by the Company as its [     ] and is eligible to receive severance benefits pursuant to the Company’s Section 16 Officer Severance Plan (as amended, the “Plan”); and”

     2. Section 2 is revised in its entirety to read as follows:

“2. Term of Agreement. This Agreement shall be effective as of the Effective Date and shall terminate on the Termination Date. “Termination Date” shall mean the Executive’s last date of employment with 3Com Corporation or, if later, the date on which the Executive incurs a separation from service with 3Com Corporation as defined in Treasury Regulation Section 1.409A-1(h).”

     3. A new sentence is added to the end of Section 3 of the Agreement to read as follows:

“If the Release Agreement has not been executed and/or the revocation period stated in the Release Agreement has not expired by the sixtieth (60^th) day following the Termination Date, severance benefits shall be forfeited. The Release Agreement shall be furnished to the Executive in sufficient time to enable the Executive to comply with the preceding sentence, taking into account the period of time that the Executive must be given to consider the terms of the Release Agreement under any applicable law.”

     4. The introductory sentence of Section 4 of the Agreement is revised in its entirety to read as follows:

“Severance Benefits. Provided that the Executive has executed a valid Release Agreement and the applicable revocation period has expired by the sixtieth (60^th) day following the Termination Date, Executive will be entitled to receive the following:”

     5. Paragraph A of Section 4 is revised in its entirety to read as follows:

“A. Severance Amounts.

     i. One (1) year of the Executive’s annualized base salary as of the Termination Date, subject to all applicable taxes and withholdings, with payment commencing within sixty-five (65) days after the Executive’s Termination Date in substantially equal installments corresponding to the Company’s normal payroll practices and continuing for a period of twelve (12) months, provided that the Executive continues to comply with all terms and conditions of the Release Agreement during the twelve (12) month period. Each payment shall be considered a separate payment and not part of a series of installments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i) and the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii). As a result, the following payments are exempt from the requirements of Code Section 409A:

     (a) payments that are made by the fifteenth (15^th) day of the third month of the calendar year following the year of the Executive’s Termination Date, and

     (b) any additional payments that are made on or before the last day of the second (2^nd) calendar year following the year of the Executive’s Termination Date and that do not exceed the lesser of two (2) times: (A) the Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the Executive’s taxable year that precedes the taxable year in which the Termination Date occurs (adjusted for any increase during that year that was expected to continue indefinitely if the Executive’s employment had not terminated); or (B) the limit under Code Section 401(a)(17) then in effect.

     Notwithstanding the preceding provisions, to the extent that the payments to be made during the first six (6) month period following the Executive’s Termination Date exceed the amounts exempt from Code Section 409A under this paragraph, such payments shall be paid in a single lump sum on the first (1^st) day following the six (6) month anniversary of the Executive’s Termination Date.

     ii. A pro-rated amount of the Executive’s earned incentive bonus for the bonus period in which the Termination Date occurs, to be calculated by multiplying the earned bonus amount (based on the Company’s actual attainment of applicable performance metrics) by a fraction, the numerator of which shall be the number of calendar days between the beginning of the applicable bonus period to the Termination Date and the denominator of which shall be the number of calendar days within the applicable bonus period, to be paid within sixty-five (65) days of the Termination Date (the payment of which is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code) pursuant to the short-term deferral rules of Treasury Regulation 1.409A-1(b)(4)).

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     6. A new sentence is added immediately following the second sentence of Paragraph B of Section 4 of the Plan to read as follows:

“Such benefit is intended to be exempt from Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(B).”

     7. Subparagraph D-i of Section 4 is revised in its entirety to read as follows:

“i. With respect to Executive’s then outstanding, unvested equity awards, other than performance-based awards, six (6) months accelerated vesting, with transfer of shares, payment of cash, or removal of restrictions on shares, whichever applicable, occurring as soon as practicable, but in no event later than the sixtieth (60^th) day following the Termination Date. Notwithstanding the foregoing, if the Executive is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) and the award is subject to Code Section 409A, transfer of shares shall occur on the first market day following the six (6) month anniversary of the Executive’s termination of employment.”

     8. Section 5 is revised in its entirety to read as follows:

“(a) Payment of Severance Benefits. Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A and as applied according to procedures of the Company at the time of Executive’s termination of employment (other than due to death), then the severance benefits payable to Executive under this Agreement, if any, and any other severance payments or separation benefits payments that may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) otherwise due to Executive on or within the six (6) month period following Executive’s termination of employment will accrue during such six (6) month period and will become payable in a lump sum payment (less applicable withholding taxes) on the date six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequent payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his or her termination of employment but prior to the six (6) month anniversary of his or her date of termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum (less applicable withholding taxes) to Executive’s estate as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment of severance benefits to Executive under this Agreement that is made by March 15 of the calendar year following Executive’s termination of employment and is intended to not constitute a “deferral of compensation” by virtue of the “short term deferral” rule of Treasury Regulations Section 1.409A-1(b)(4) shall constitute a “separate payment” for purposes of application of that rule.

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(b) Amendments to this Agreement with Respect to Section 409A. The severance payments and other benefits provided under this Agreement are intended to not constitute a “deferral of compensation” under Section 409A, to the extent possible, or, to the extent not so possible, to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code so that none of the severance payments and benefits to be provided hereunder will be subject to the income inclusion, additional tax or interest provisions of Section 409A(a)(1), and any ambiguities herein will be interpreted in accordance with that intent. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or interest or income recognition prior to actual payment to Executive under Section 409A(a)(1).”

* * *

(signature page follows)

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     IN WITNESS WHEREOF, each of the parties has executed this First Amendment to the Agreement, in the case of the Company by a duly authorized Executive’s, as of the day and year written below.

	COMPANY:
	3COM CORPORATION
By:		Date:
	EXECUTIVE:
		Date:

5

EX-10.11

Exhibit 10.11

3COM CORPORATION

FORM OF SECOND AMENDMENT TO SEVERANCE BENEFITS
AGREEMENT

     This AMENDMENT is made and entered into pursuant to the SEVERANCE BENEFITS AGREEMENT by and between 3Com Corporation (the “Company”) and [                                        ] (“Executive”) effective as of [                    ] and the First Amendment thereto of [                    ] (“First Amendment” and collectively the “Agreement”). Unless otherwise indicated, capitalized terms herein shall have the definitions applied to said terms in the First Amendment.

     WHEREAS, the Company desires to further amend the Agreement to address a drafting error in the First Amendment concerning the payment of the pro-rated bonus to which the Executive may be eligible under the terms of the Agreement.

     NOW, THEREFORE, it is hereby agreed that the Agreement is further amended in the following respects, effective as of the date hereof:

     1. Subparagraph A(ii) of Section 4 is revised in its entirety to read as follows:

     “ii. A pro-rated amount of the Executive’s earned incentive bonus for the bonus period in which the Termination Date occurs, to be calculated by multiplying the earned bonus amount (based on the Company’s actual attainment of applicable performance metrics) by a fraction, the numerator of which shall be the number of calendar days between the beginning of the applicable bonus period to the Termination Date and the denominator of which shall be the number of calendar days within the applicable bonus period, to be paid within the first fiscal quarter following the end of the applicable bonus period but, in any event, by the later of (i) the date that is 2 ¹/2 months from the end of the Executive’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (ii) the date that is 2 ¹/2 months from the end of the Company’s tax year in which the amount is no longer subject to a substantial risk of forfeiture.”

* * *

(signature page follows)

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

	COMPANY:
	3COM CORPORATION
By:		Date:
	EXECUTIVE:
		Date:

2

EX-10.12

Exhibit 10.12

3COM CORPORATION

FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION
AGREEMENT

     This AMENDMENT is made and entered into pursuant to the MANAGEMENT RETENTION AGREEMENT of [                    ] (the “Agreement”) by and between 3Com Corporation (the “Company”) and [          ] (“Employee”).

     WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects, effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

     1. Paragraph (a) of Section 3 is revised in its entirety to read as follows:

“(a) Involuntary Termination other than for Cause, death or Disability or Voluntary Termination for Good Reason Within Three (3) Months Prior to or Within Twelve (12) Months Following a Change of Control. If, within three (3) months prior to or within twelve (12) months following a Change of Control, the Employee’s employment is terminated (i) involuntarily by the Company other than for Cause, death or Disability or (ii) by the Employee pursuant to a Voluntary Termination for Good Reason, then, subject to the Employee’s executing a mutual release, as provided in the following paragraph, the Company shall provide the Employee with the benefits described below upon such termination. “Termination Date” shall mean herein the Employee’s last date of employment with 3Com Corporation or, if later, the date on which the Employee incurs a separation from service with 3Com Corporation as defined in Treasury Regulation Section 1.409A-1(h).

The receipt of any severance or other benefits pursuant to this Section 3 will be subject to the Employee signing and returning to the Company a separation agreement and release of claims in substantially the form attached hereto as Exhibit A (as updated at the Company’s discretion or to reflect applicable local, state and federal law) (“Release Agreement”), by no later than forty-five (45) days after the date of termination of Employee’s employment. Failure to return the Release Agreement by the forty-fifth (45^th) day, or revoking the release of claims within the seven (7) day revocation period, will result in a forfeiture of severance pay. The Release Agreement shall be furnished to the Employee in sufficient time to enable the Employee to comply with the preceding sentence, taking into account the period of time that the Employee must be given to consider the terms of the Release Agreement under any applicable law.

(i) Lump-Sum Payment. A lump-sum cash payment in an amount equal to one hundred percent (100%) of the Employee’s Annual Compensation, subject to all applicable taxes and withholdings, to be paid within sixty-

five (65) days of the Termination Date (the payment of which is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code) pursuant to the short-term deferral rules of Treasury Regulation 1.409A-1(b)(4));

(ii) Continued Employee Benefits. Company-paid health, dental, vision, long-term disability, and life insurance coverage at the same level of coverage and coverage tier as was provided to the Employee and/or the Employee’s dependents immediately prior to the termination of his/her employment and at the same ratio of Company premium payment to Employee premium payment as was in effect immediately prior to the Change of Control (the “Company-Paid Coverage”). Company-Paid Coverage shall continue until the earlier of (i) two (2) years from the date of termination, or (ii) the date upon which the Employee and/or his/her dependents become covered under another employer’s group health, dental, vision, long-term disability, or life insurance plans that provide the Employee and/or his dependents with comparable benefits and levels of coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985 (“COBRA”), the date of the “qualifying event” for the Employee and/or his/her dependents shall be the date upon which the Company-Paid Coverage commences, and each month of Company-Paid Coverage provided hereunder shall offset a month of continuation coverage otherwise due under COBRA. To the extent that the period during which the continued provision of medical and dental benefits falls within the applicable COBRA continuation period, such continued provision of medical and dental benefits is exempt from Code Section 409A under Treasury Regulation Section 1.409A-1(b)(9)(v)(B). To the extent that the period during which the continued provision of medical and dental benefits extends beyond the applicable COBRA continuation period, the following shall apply: (a) the premiums for continued medical and dental coverage shall be paid on a monthly basis; (b) any amounts paid to or on behalf of the Employee as reimbursement for medical and/or dental expenses shall be paid on or before the last day of the year following the year in which such expense was incurred; (c) any amounts paid to or on behalf of the Employee as reimbursement for medical and/or dental expenses during one year will not affect the Employee’s eligibility for amounts paid to or on behalf of the Employee as reimbursement for medical and/or dental expenses during any other year; and (d) the right to continued coverage beyond the applicable COBRA continuation period is not subject to liquidation or exchange for another benefit. This paragraph shall be administered and interpreted consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv);

(iii) Pro-Rated Bonus Payment. A lump-sum cash payment equal to one hundred percent (100%) of the Employee’s Target Bonus as in effect for the fiscal year in which the Change of Control occurs, pro-rated by multiplying such Target Bonus amount by a fraction, the numerator of

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which shall be the number of calendar days prior to occurrence of the Change of Control during such fiscal year, and the denominator of which shall be three-hundred and sixty-five (365), subject to all applicable taxes and withholdings, to be paid within sixty-five (65) days of the Termination Date (the payment of which is intended to be exempt from Section 409A of the Code pursuant to the short-term deferral rules of Treasury Regulation 1.409A-1(b)(4));

(iv) Equity Compensation Accelerated Vesting. One hundred percent (100%) of the unvested portion of any stock option, restricted stock or other Company equity compensation held by the Employee shall automatically be accelerated in full so as to become completely vested; provided, however, that if this occurs due to a qualifying termination of employment occurring within three (3) months prior to a Change of Control, such acceleration shall become effective upon the date of the Change of Control, with transfer of shares, payment of cash, or removal of restrictions on shares, whichever applicable, occurring as soon as practicable, but in no event later than the sixtieth (60^th) day following the Employee’s termination of employment or Change of Control, whichever is later. Notwithstanding the foregoing, if the Employee is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) and the award is subject to Code Section 409A, transfer of shares shall occur on the first market day following the six (6) month anniversary of the Employee’s termination of employment; and

(v) Extension of Stock Option and Stock Appreciation Right Post-Termination Exercisability. The post-termination exercise period of any outstanding Company stock options and stock appreciation rights held by the Employee shall be extended to the lesser of (A) one (1) year from the Employee’s termination date, or (B) the original term of the award.”

     2. Add a new sentence at the end of Section 4(b) to read as follows:

“In no event shall payment be made later than the end of the year following the year in which Employee remits the related taxes.”

     3. Paragraph (d) of Section 5 is revised in its entirety to read as follows:

“(d) Change of Control. “Change of Control” means the occurrence of any of the following events:

(i) Any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; or

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(ii) The consummation of the sale or change in ownership of a substantial portion of the Company’s assets (i.e., the total gross fair market value of the Company’s assets acquired during the twelve (12) month period ending on the date of the most recent acquisition equals more than fifty percent (50%) of the total gross fair market value of all of the Company’s assets (without regard to associated liabilities) immediately before such acquisition or acquisitions) other than a transfer of assets to a related person as described in Treasury Regulation Section 1.409A-3(i)(5)(vii)(B); or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

(iv) A change in the composition of the Board occurring within a twelve (12) month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date upon which this Agreement was entered into, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii), or (iii) above, or in connection with an actual or threatened proxy contest relating to the election of directors to the Company.”

     4. Paragraph (g) of Section 5 is revised in its entirety to read as follows:

(g) Voluntary Termination for Good Reason. “Voluntary Termination for Good Reason” shall mean the Employee’s voluntary resignation following the initial existence of one or more of the following conditions arising without the consent of the Employee:

1. a material diminution in the Employee’s base compensation;

2. a material diminution in the Employee’s authority, duties, or responsibilities;

3. a material change in the geographic location at which the Employee must perform services; or

4. any other action or inaction that constitutes a material breach by the Company of the agreement, if any, under which the Employee provides services.

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Notwithstanding the forgoing, no such condition described herein shall constitute a Voluntary Termination for Good Reason unless (i) the Employee has given written notice to the Company specifying the condition relied upon for such termination within ninety (90) days of the initial existence of the condition and the Company has been given thirty (30) days to remedy the condition and has not done so within such thirty (30) days and (ii) the Employee’s Termination Date occurs within six (6) months of the initial existence of one or more of the conditions specified.”

     5. Paragraph (b) of Section 8 is revised in its entirety to read as follows:

(b) Notice of Termination. Not less than thirty days prior to a termination for Cause, the Company must provide to the Employee notice of termination, indicating the specific termination provision in this Agreement relied upon. Said notice shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the final date of employment.

     6. A new Section 9 is added and the remaining sections are renumbered accordingly:

(a) Payment of Severance Benefits. Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” within the meaning of Section 409A and as applied according to procedures of the Company at the time of Employee’s termination of employment (other than due to death), then the severance benefits payable to Employee under this Agreement, if any, and any other severance payments or separation benefits payments that may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) otherwise due to Employee on or within the six (6) month period following Employee’s termination of employment will accrue during such six (6) month period and will become payable in a lump sum payment (less applicable withholding taxes) on the date six (6) months and one (1) day following the date of Employee’s termination of employment. All subsequent payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Employee dies following his or her termination of employment but prior to the six (6) month anniversary of his or her date of termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum (less applicable withholding taxes) to Employee’s estate as soon as administratively practicable after the date of Employee’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment of severance benefits to Employee under this Agreement that is made by March 15 of the calendar year following Employee’s termination of employment and is intended to not constitute a “deferral of compensation” by virtue of the “short term deferral” rule of Treasury Regulations Section 1.409A-1(b)(4) shall constitute a “separate payment” for purposes of application of that rule.

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(b) Amendments to this Agreement with Respect to Section 409A. The severance payments and other benefits provided under this Agreement are intended to not constitute a “deferral of compensation” under Section 409A, to the extent possible, or, to the extent not so possible, to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code so that none of the severance payments and benefits to be provided hereunder will be subject to the income inclusion, additional tax or interest provisions of Section 409A(a)(1), and any ambiguities herein will be interpreted in accordance with that intent. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or interest or income recognition prior to actual payment to Employee under Section 409A(a)(1).”

* * *
(signature page follows)

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     IN WITNESS WHEREOF, each of the parties has executed this First Amendment to the Agreement, in the case of the Company by a duly authorized Employee’s, as of the day and year written below.

	COMPANY:
	3COM CORPORATION
		Date:
By:
	EMPLOYEE:
		Date:

7

EX-10.13

Exhibit 10.13

3COM CORPORATION

FORM OF FIRST AMENDMENT TO MANAGEMENT RETENTION
AGREEMENT

     This AMENDMENT is made and entered into pursuant to the MANAGEMENT RETENTION AGREEMENT of [                              ] (the “Agreement”) by and between 3Com Corporation (the “Company”) and [                    ] (“Executive”).

     WHEREAS, the Company desires to amend the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

     NOW, THEREFORE, it is hereby agreed that the Agreement is amended in the following respects, effective as of January 1, 2009, or such earlier date as required to comply with Code Section 409A and guidance issued thereunder.

1. Paragraph (a) of Section 3 is replaced with the following:

“3. Change of Control Severance Benefits.

     (a) Involuntary Termination other than for Cause, death or Disability or Voluntary Termination for Good Reason Within Three (3) Months Prior to or Within Twelve (12) Months Following a Change of Control. The Executive shall be entitled to receive the severance benefits provided below if, within three (3) months prior to or within twelve (12) months following a Change of Control (as defined herein), the Executive’s employment is terminated (i) involuntarily by the Company other than for Cause, death or Disability (as such capitalized terms are defined herein) or (ii) by the Executive pursuant to a Voluntary Termination for Good Reason (as defined herein). The Executive’s receipt of the severance benefits provided below shall be conditioned upon the Executive’s execution of and compliance with an agreement (the “Release Agreement”) which shall include, without limitation, (i) a release of claims against the Company, its affiliates and representatives; (ii) a non-solicitation provision prohibiting the Executive’s solicitation of any Company employee, business opportunity, client, customer, account, distributor or vendor for a period of one (1) year following the Executive’s Termination Date; and (iii) a non-competition provision prohibiting the Executive from directly or indirectly engaging in, participating in, or having a material ownership interest in, a business in competition with the Company for a period of one (1) year following the Executive’s Termination Date; and (iv) a non-disparagement provision. The form and language of the Release Agreement shall be determined by the Company in its sole discretion.

     If the Release Agreement has not been executed and/or the revocation period stated in the Release Agreement has not expired by the sixtieth (60^th) day following the Termination Date, severance benefits shall be forfeited. The Release Agreement shall be furnished to the Executive in sufficient time to enable the Executive to comply with the preceding sentence, taking into account the period of time that the Executive must be given to consider the terms of the

Release Agreement under any applicable law. Provided that the Executive has executed a valid Release Agreement and the applicable revocation period has expired by the sixtieth (60^th) day following the Termination Date, Executive will be entitled to receive the following:

     (i) Severance Payments. One hundred percent (100%) of the Executive’s Annual Compensation, subject to all applicable taxes and withholdings, with payment commencing within sixty-five (65) days after the Executive’s Termination Date in substantially equal installments corresponding to the Company’s normal payroll practices and continuing for a period of twelve (12) months, provided that the Executive continues to comply with all terms and conditions of the Release Agreement during the twelve (12) month period. Each payment shall be considered a separate payment and not part of a series of installments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i) and the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii). As a result, the following payments are exempt from the requirements of Code Section 409A:

     (a) payments that are made by the fifteenth (15^th) day of the third month of the calendar year following the year of the Executive’s Termination Date, and

     (b) any additional payments that are made on or before the last day of the second (2^nd) calendar year following the year of the Executive’s Termination Date and that do not exceed the lesser of two (2) times: (A) the Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the Executive’s taxable year that precedes the taxable year in which the Termination Date occurs (adjusted for any increase during that year that was expected to continue indefinitely if the Executive’s employment had not terminated); or (B) the limit under Code Section 401(a)(17) then in effect.

     Notwithstanding the preceding provisions, to the extent that the payments to be made during the first six (6) month period following the Executive’s Termination Date exceed the amounts exempt from Code Section 409A under this paragraph, such payments shall be paid in a single lump sum on the first (1^st) day following the six (6) month anniversary of the Executive’s Termination Date; and

     (ii) Pro-Rated Bonus Payment. A pro-rated amount of the Executive’s earned incentive bonus for the bonus period in which the Termination Date occurs, to be calculated by multiplying the earned bonus amount (based on the Company’s actual attainment of applicable performance metrics) by a fraction,

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the numerator of which shall be the number of calendar days from the beginning of the applicable bonus period to the Termination Date and the denominator of which shall be the number of calendar days within the applicable bonus period; provided, however, that if a qualifying termination of employment occurs and the Termination Date is within three (3) months prior to a Change of Control, the numerator shall be the number of calendar days from the beginning of the applicable bonus period to the effective date of the Change of Control. The pro-rated bonus referenced herein shall be paid within sixty-five (65) days of the Termination Date (the payment of which is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code) pursuant to the short-term deferral rules of Treasury Regulation 1.409A-1(b)(4)).

          (iii) Health, Dental & Vision Benefits. Continuation of coverage under the Company’s health, dental, and vision insurance plans (“Health Care Plans”) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) at the same level of coverage as was provided to and elected by the Executive as of the Termination Date. If the Executive timely and properly elects to continue coverage under the Company’s Health Care Plans in accordance with COBRA, the Company shall continue to pay the Company-paid portion of the premiums for the Executive’s elected coverage under the Health Care Plans until the earlier of: (i) two (2) years from the Termination Date, or (ii) the date upon which the Executive becomes eligible for coverage under another employer’s group health, dental, or vision insurance plan(s). The Executive will remain obligated to pay the unsubsidized portion of the applicable premium(s) in order to continue Company-sponsored coverage. The Company-paid portion of any premium(s) is subject to change at the Company’s discretion; provided, however, that the Company-paid portion of the Executive’s premium shall not be changed to be proportionately less than the Company-paid portion of the then-current employees. To be eligible for continuation of coverage under the Health Care Plans, an employee must be actively enrolled in the applicable Health Care Plan(s) as of the Termination Date. For purposes of Title X of COBRA, the date of the “qualifying event” for the Executive and his/her covered dependents shall be the Termination Date, and each month of Company-sponsored coverage continuation provided hereunder shall offset a month of coverage continuation otherwise due under COBRA. Upon the expiration of the two (2) year period, the Executive will be required to pay 102% of the premium to continue Company-sponsored coverage. Any continuation of Company-sponsored coverage shall be governed by COBRA and the terms and conditions of the applicable plan documents. To the extent that the period during which the continued provision of medical and dental benefits falls within the applicable COBRA continuation period, such continued provision of medical and dental benefits is exempt from Code Section 409A under Treasury Regulation Section 1.409A-1(b)(9)(v)(B). To the extent that the period during which the continued provision of medical and dental benefits extends beyond the applicable COBRA continuation period, the following shall apply: (a) the premiums for continued medical and dental coverage shall be paid on a monthly basis; (b) any amounts paid to or on behalf of the Executive as reimbursement for medical and/or dental expenses shall be paid

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on or before the last day of the year following the year in which such expense was incurred; (c) any amounts paid to or on behalf of the Executive as reimbursement for medical and/or dental expenses during one year will not affect the Executive’s eligibility for amounts paid to or on behalf of the Executive as reimbursement for medical and/or dental expenses during any other year; and (d) the right to continued coverage beyond the applicable COBRA continuation period is not subject to liquidation or exchange for another benefit. This paragraph shall be administered and interpreted consistent with Treasury Regulation Section 1.409A-3(i)(1)(iv).

          (iv) Life Insurance. Conversion of the Executive’s basic term life insurance in effect immediately prior to the Termination Date to continue coverage until the earlier of (i) two (2) years from the Termination Date, or (ii) the date upon which the Executive becomes eligible for coverage under another employer’s life insurance plan.

          (v) Equity Compensation Accelerated Vesting. One hundred percent (100%) of the unvested portion of any stock option, restricted stock or other Company equity compensation issued by the Company to the Executive shall automatically be accelerated in full so as to become completely vested; provided, however, that if a qualifying termination occurs and the Termination Date is within three (3) months prior to a Change of Control, such acceleration shall become effective upon the effective date of the Change of Control, with transfer of shares, payment of cash, or removal of restrictions on shares, whichever applicable, occurring as soon as practicable, but in no event later than the sixtieth (60^th) day following the Executive’s Termination Date or Change of Control, whichever is later. Notwithstanding the foregoing, if the Executive is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i) and as applied according to procedures of the Company) and the award is subject to Code Section 409A, transfer of shares shall occur on the first market day following the six (6) month anniversary of the Executive’s termination of employment; and

          (vi) Extension of Stock Option and Stock Appreciation Right Post-Termination Exercisability. The post-termination exercise period of any outstanding Company stock options and stock appreciation rights held by the Executive shall be extended to the lesser of (A) one hundred and sixty-five (165) calendar days from the Executive’s Termination Date, or (B) the original term of the award.”

2.	Add a new sentence at the end of Section 4(b) to read as follows:
	“In no event shall payment be made later than the end of the year following the year in which Executive remits the related taxes.”

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3. Section 5 is revised in its entirety to read as follows:

     “5. Internal Revenue Code Section 409A. Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A and as applied according to procedures of the Company at the time of Executive’s termination of employment (other than due to death), then the severance benefits payable to Executive under this Agreement, if any, and any other severance payments or separation benefits payments that may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) otherwise due to Executive on or within the six (6) month period following Executive’s termination of employment will accrue during such six (6) month period and will become payable in a lump sum payment (less applicable withholding taxes) on the date six (6) months and one (1) day following the date of Executive’s termination of employment. All subsequent payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his or her termination of employment but prior to the six (6) month anniversary of his or her date of termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum (less applicable withholding taxes) to Executive’s estate as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment of severance benefits to Executive under this Agreement that is made by March 15 of the calendar year following Executive’s termination of employment and is intended to not constitute a “deferral of compensation” by virtue of the “short term deferral” rule of Treasury Regulations Section 1.409A-1(b)(4) shall constitute a “separate payment” for purposes of application of that rule.

(b) Amendments to this Agreement with Respect to Section 409A. The severance payments and other benefits provided under this Agreement are intended to not constitute a “deferral of compensation” under Section 409A, to the extent possible, or, to the extent not so possible, to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code so that none of the severance payments and benefits to be provided hereunder will be subject to the income inclusion, additional tax or interest provisions of Section 409A(a)(1), and any ambiguities herein will be interpreted in accordance with that intent. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or interest or income recognition prior to actual payment to Executive under Section 409A(a)(1).”

4. Paragraph (c) of Section 6 is revised in its entirety to read as follows:

5

“(c) Change of Control. “Change of Control” means the occurrence of any of the following events:

     (i) Any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; or

     (ii) The consummation of the sale or change in ownership of a substantial portion of the Company’s assets (i.e., the total gross fair market value of the Company’s assets acquired during the twelve (12) month period ending on the date of the most recent acquisition equals more than fifty percent (50%) of the total gross fair market value of all of the Company’s assets (without regard to associated liabilities) immediately before such acquisition or acquisitions) other than a transfer of assets to a related person as described in Treasury Regulation Section 1.409A-3(i)(5)(vii)(B); or

     (iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

     (iv) A change in the composition of the Board occurring within a twelve (12) month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date upon which this Agreement was entered into, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii), or (iii) above, or in connection with an actual or threatened proxy contest relating to the election of directors to the Company.”

5. Paragraph (g) of Section 6 is revised in its entirety to read as follows:

“(g) Termination Date. “Termination Date” shall mean the Executive’s last date of employment with 3Com Corporation or, if later, the date on which the Executive incurs a separation from service with 3Com Corporation as defined in Treasury Regulation Section 1.409A-1(h).”

6. Paragraph (h) of Section 6 is revised in its entirety to read as follows:

“(h) Voluntary Termination for Good Reason. “Voluntary Termination for Good Reason” shall mean the Executive’s voluntary resignation following the initial existence of one or more of the following conditions arising without the consent of the Executive:

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     1. a material diminution in the Executive’s base compensation;

     2. a material diminution in the Executive’s authority, duties, or responsibilities;

     3. a material change in the geographic location at which the Executive must perform services; or

     4. any other action or inaction that constitutes a material breach by the Company of the agreement, if any, under which the Executive provides services.

Notwithstanding the forgoing, no such condition described herein shall constitute a Voluntary Termination for Good Reason unless (i) the Executive has given written notice to the Company specifying the condition relied upon for such termination within ninety (90) days of the initial existence of the condition and the Company has been given thirty (30) days to remedy the condition and has not done so within such thirty (30) days and (ii) the Executive’s Termination Date occurs within six (6) months of the initial existence of one or more of the conditions specified.”

7. Paragraph (b) of Section 8 is revised in its entirety to read as follows:

“(b) Notice of Termination. Not less than thirty days prior to a termination for Cause, the Company must provide to the Executive notice of termination, indicating the specific termination provision in this Agreement relied upon. Said notice shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the final date of employment.”

* * *

(signature page follows)

7

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

         COMPANY:

         3COM CORPORATION

By:		Date:
	EMPLOYEE:
		Date:

8

EX-10.14

Exhibit 10.14

3COM CORPORATION

FORM OF SECOND AMENDMENT TO MANAGEMENT RETENTION
AGREEMENT

     This AMENDMENT is made and entered into pursuant to the MANAGEMENT RETENTION AGREEMENT of [               ] and the First Amendment thereto of [               ] (“First Amendment” and collectively the “Agreement”) by and between 3Com Corporation (the “Company”) and [               ] (“Executive”). Unless otherwise indicated, capitalized terms herein shall have the definitions applied to said terms in the First Amendment.

     WHEREAS, the Company desires to further amend the Agreement to address a drafting error in the First Amendment concerning the payment of the pro-rated bonus to which the Executive may be eligible under the terms of the Agreement.

     NOW, THEREFORE, it is hereby agreed that the Agreement is further amended in the following respects, effective as of the date hereof:

1. Subparagraph (a)(ii) of Section 3 is replaced with the following:

     “(ii) Pro-Rated Bonus Payment. A pro-rated amount of the Executive’s earned incentive bonus for the bonus period in which the Termination Date occurs, to be calculated by multiplying the earned bonus amount (based on the Company’s actual attainment of applicable performance metrics) by a fraction, the numerator of which shall be the number of calendar days from the beginning of the applicable bonus period to the Termination Date and the denominator of which shall be the number of calendar days within the applicable bonus period; provided, however, that if a qualifying termination of employment occurs and the Termination Date is within three (3) months prior to a Change of Control, the numerator shall be the number of calendar days from the beginning of the applicable bonus period to the effective date of the Change of Control. The pro-rated bonus referenced herein shall be paid within the first fiscal quarter following the end of the applicable bonus period but, in any event, by the later of (i) the date that is 2 ¹/2 months from the end of the Executive’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (ii) the date that is 2 ¹/2 months from the end of the Company’s tax year in which the amount is no longer subject to a substantial risk of forfeiture.”

* * *
(signature page follows)

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

         COMPANY:

         3COM CORPORATION

By:		Date:
	EMPLOYEE:
		Date:

2

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Robert Y. L. Mao, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of 3Com Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 8, 2009

/s/      Robert Y. L. Mao  

Robert Y. L. Mao 

Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Jay Zager, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of 3Com Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 8, 2009

/s/       Jay Zager  

Jay Zager 

Executive Vice President and Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Y. L. Mao, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of 3Com Corporation on Form 10-Q for the fiscal quarter ended February 27, 2009 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of 3Com Corporation.

Date:	April 8, 2009	By: Name:	/s/     Robert Y. L. Mao Robert Y. L. Mao
		Title:	Chief Executive Officer

I, Jay Zager, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of 3Com Corporation on Form 10-Q for the fiscal quarter ended February 27, 2009 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of 3Com Corporation.

Date:	April 8, 2009	By:	/s/      Jay Zager
		Name:	Jay Zager
		Title: Executive Vice President and Chief Financial Officer