3Com Board Sets Record Date and Distribution
Date for Palm Stock Dividend; Also Announces
Expanded Stock Repurchase Program Of Up To
One Billion Dollars
Business Wire - May 08, 2000 18:48
SANTA CLARA, Calif.--(BUSINESS WIRE)--May 8, 2000--3Com Corporation (Nasdaq:COMS) and
Palm, Inc. (Nasdaq:PALM) today announced that 3Com's Board of Directors has declared a stock
dividend of all of 3Com's shares in Palm. The shares will be distributed to 3Com shareholders of
record as of 5:00 p.m. Eastern Daylight Time on July 27, 2000. The record date which establishes
the ratio of Palm shares to be distributed per 3Com share will be 5:00 p.m. Eastern Daylight Time
on July 11, 2000. 3Com currently owns 532 million shares, or approximately 94.3 percent, of the
outstanding common stock in Palm.
"Today's announcement follows through on our commitment to spin-off our handheld business and
increase shareholder value, as communicated last fall," said Eric Benhamou, 3Com Chairman and
CEO. "We're pleased to confirm the distribution of our Palm holdings will occur more quickly than
our previous estimates."
"The establishment of two fully independent and publicly traded companies, 3Com and Palm, will
maximize both companies' focus and ability to strengthen their leadership in their respective
markets," continued Benhamou.
On May 8, 2000, 3Com received a ruling from the Internal Revenue Service that the Palm
distribution will be tax-free to shareholders for U.S. federal income tax purposes. The number of
shares of Palm common stock that each holder of a share of 3Com common stock will receive will
be based on the actual number of shares of 3Com common stock outstanding on the record date.
Based on the approximately 351 million shares of 3Com common stock outstanding as of April 24,
2000, the distribution ratio would be approximately 1.5 shares of Palm for every share of 3Com.
There are approximately 14 million immediately exercisable options for 3Com common stock that
could be exercised between now and the record date. Therefore the final ratio will be based on the
actual number of shares outstanding as of the record date July 11. 3Com shareholders will receive
whole shares of Palm and cash payments for fractional shares. Cash received in lieu of fractional
shares will be taxable.
An information statement will be mailed to 3Com shareholders of record after July 11. The
information statement will include the final distribution ratio, as well as information on how to
calculate the share cost basis.
Expanded Stock Repurchase Program:
3Com also announced today that its Board of Directors has authorized expansion of the
company's stock repurchase program in the amount of up to one billion dollars. The company is
exploring various methods for the repurchase of shares including, but not limited to, accelerated
repurchase agreements with broker dealers and more traditional open market purchases. Such
purchases could be used to offset shares created as a result of employee's exercising stock
options and employee stock purchase plan requirements. This new program replaces previous
authorizations totaling 45 million shares between June 1998 and September 1999. During fiscal
2000 the company repurchased 20.5 million shares, bringing the total number of shares
repurchased since June 1998 to 35.3 million, which represents a total outlay of $919.3 million.
"We believe this expanded stock repurchase program is an important component in our multiple
efforts to increase shareholder value," continued Benhamou. "Our strong balance sheet which
includes over $3 billion in cash and short-term investments is the foundation for this repurchase
program, as well as for strategic investments and acquisitions."
The amount and timing of shares to be purchased will be based on several factors, including
method of repurchase selected, the price of the company's stock, the level of stock issuances
under the company's employee stock plans and market conditions. The Board has authorized a
two-year time limit on the repurchase authorizations, and except for re-issuances in connection
with employee stock programs, there are no specific plans for shares that might be purchased
Stock Option Adjustment in Connection with the Palm Distribution
As communicated in the Palm S-1 public registration statement filed with the Securities and
Exchange Commission, 3Com anticipates adjusting employee stock options in connection with
the Palm distribution. Such an adjustment in the quantity and exercise strike prices for
outstanding options will preserve the intrinsic value of the options as follows: 3Com will calculate
the relationship (the "Ratio") between the opening price of 3Com common stock on the first trading
day after distribution and the closing price of 3Com common stock on the last trading day before
distribution. The number of new 3Com options outstanding after the Palm distribution will be equal
to the quotient of the number of 3Com options outstanding immediately before distribution divided
by the Ratio. The new option strike prices for the underlying outstanding options will be equal to
the product of the option exercise strike prices before distribution multiplied by the Ratio. The
options will continue to have the same terms and conditions set forth in the 3Com Stock Plans
including vesting schedules.
As of April 24, 2000 there were approximately 41 million employee options outstanding. Of this
amount, approximately 14 million options were immediately exercisable. The total number of 3Com
shares outstanding as of April 24, 2000 was approximately 351million.
Stock Option Conversion for Palm employees in Connection with the Palm Distribution
Similarly, 3Com stock options held by Palm employees will be assumed by Palm and converted
into Palm options. This process will occur as follows: The option conversion will be achieved by
calculating the relationship (the "Palm Ratio") between the opening price of Palm common stock
on the first trading day after distribution and the closing price of 3Com common stock on the last
trading day before distribution. The number of new Palm options outstanding after the Palm
distribution will be equal to the quotient of the number of 3Com options outstanding immediately
before distribution divided by the Palm Ratio. The new option strike prices for the underlying
outstanding options will be equal to the product of the 3Com option exercise strike prices before
distribution multiplied by the Palm Ratio. The options will continue to have the same terms and
conditions set forth in the 3Com Stock Plans including vesting schedules.
As of April 24, 2000, there were approximately 4.0 million 3Com stock options outstanding held by
Palm employees. Of this amount, approximately 1.4 million options were immediately exercisable.
For further information about the 3Com options held by Palm employees, please see the Employee
Matters Agreement entered into between Palm and 3Com on February 26, 2000 and included as
an exhibit in 3Com's fiscal quarter 10Q filed on April 4, 2000 or as an exhibit to Palm's fiscal third
quarter 10Q filed on April 10, 2000.
For additional information on the Palm distribution, please visit 3Com's investor relations' Web site,
at www.3com.com/investor, or call our toll-free investor information line at 877/463-6326 (U.S. only)
or 703/386-9710 (internationally). Investor information on Palm, Inc. can be obtained at
www.palm.com, or by calling 877/OWN-PALM (U.S. only). For questions regarding shareholder
certificates or address changes, please contact EquiServe investor relations department:
781/575-3120.
About 3Com Corporation
With more than 300 million customer connections worldwide, 3Com Corporation connects more
people and organizations to information and each other in more innovative, simple and reliable
ways than any other networking company. 3Com delivers web-enabled solutions to consumers,
small- to medium-sized business sites and network service providers. For more information, visit
3Com's web site @ www.3com.com/pressbox.
About Palm, Inc.
Palm, Inc. is the leading provider of handheld computing devices (IDC, Dec. 1999), including the
Palm III(TM), Palm V(TM) and Palm VII(TM) series of handheld computers. The Palm OS(R)
platform is the foundation for the company's market-leading handheld computers as well as
products from its strategic partners such as IBM, QUALCOMM, Franklin Covey, Handspring, TRG
and Symbol Technologies. Designed to support the increasingly mobile, wireless and
geographically dispersed nature of information management, the company's handheld solutions
allow people to carry their most critical information in their pockets. For more information, please
visit www.palm.com.
In connection with the Palm distribution, 3Com management plans to proactively communicate
with investors through active participation in investor conferences and analyst meetings and visits.
For more information, please contact 3Com investor relations at 408/326-5000, or visit Palm's Web
site: www.3com.com/investor.
PALM DISTRIBUTION FAQ
Q1) When will I need to own 3Com shares in order to receive Palm shares?
A1) If you own 3Com shares as of 5:00 p.m. Eastern Daylight Time on the record date, July 11,
2000, you are eligible to receive Palm shares in the Distribution. If you purchase 3Com shares in
the "Regular Way" market after July 11, 2000 but before the Distribution date, you will also receive
Palm shares in the Distribution. To learn more about buying or selling 3Com shares between the
record and distribution date, please see question 14 below.
Q2) How many shares of Palm will I receive in the distribution?
A2) The exact number of Palm shares that a 3Com shareholder of record will receive is dependent
on the number of 3Com shares outstanding on the record date, July 11, 2000, relative to the
approximately 532 million Palm shares to be distributed (distribution ratio). The final distribution
ratio will not be calculated and announced until several days following the record date.
To calculate the exact number of Palm shares to be distributed to each 3Com share, we will divide
the approximately 532 million Palm shares owned by 3Com by the outstanding 3Com shares on
the record date. Currently there are 351 million shares of 3Com outstanding. Using the current
outstanding shares, approximately 1.5 shares of Palm will be distributed for each share of 3Com.
Q3) What is the "record date" and why is it important?
A3) The record date is the date at which the ratio of Palm shares to 3Com shares is fixed. Any
3Com shares outstanding as of the record date are eligible to receive the Palm distribution. The
record date for the Palm distribution is July 11, 2000 at 5:00 p.m. EDT.
Q4) What and when is the distribution date? When will I actually receive my Palm shares?
A4) The "distribution date" is the date when a dividend of Palm shares is distributed to 3Com
shareholders. This date is set for July 27, 2000.
If you hold your 3Com shares through a stockbroker, bank or other nominee, that firm will credit
your Palm shares to your account. You should allow several days following July 27, 2000 for this to
occur.
If you hold your 3Com shares in a certificate, 3Com's transfer agent, EquiServe, will mail shares of
Palm to you on or about August 14, 2000. You should allow up to 14 days after this mailing date
for your Palm share certificates to arrive.
Q5) Will the current trading price of either 3Com or Palm affect the number of shares I receive?
A5) No, the current trading prices of the stocks will not affect the number of shares you receive or
the distribution ratio.
Q6) Will the number of 3Com shares I own increase or decrease after the distribution?
A6) The distribution will not change the number of 3Com shares you own. You will receive only
Palm shares in the distribution. If you have a 3Com certificate, you will not need to send in your
certificate. Please watch your mail for an Information Statement that will be sent on or about July
14.
If you are an employee of 3Com Corporation or Palm and own shares through 3Com's benefit
plans, please visit the 3Commmunity Web site or the Inside Palm Employee interim Web site.
Q7) How do I calculate the cost basis for tax purposes of the Palm shares I will receive following
the distribution?
A7)On approximately July 14, an Information Statement will be mailed to each 3Com shareholder
of record. Included in this packet will be information to assist you in determining the cost basis of
your shares.
Q8) What will happen to 3Com's share price and Palm's share price at the time of distribution?
A8) We can't predict at the share price for either stock at the time of distribution. We anticipate
that the market price of 3Com stock will adjust to reflect the distribution of the value of the Palm
shares out of 3Com. Factors such as market conditions, industry dynamics and the economy will
all factor into determining the market price of any stock, including 3Com and Palm.
Q9) Where can I get more information about Palm?
A9) Information about Palm, Inc. is available on Palm's Web site at www.Palm.com, or you can
call 877/OWN-PALM. In addition, information about Palm will be included in the Information Packet
to be mailed to shareholders of record on approximately July 14, 2000.
Q10) Who should I call with questions about my stock account or my share certificates?
A10) If you hold your 3Com shares in a brokerage or bank account, please contact your
representative at that bank or brokerage firm. If you hold share certificates issued by 3Com
Corporation in your name, please call EquiServe at 781/575-3120
Q11) Is the distribution tax-free?
A11) The U.S. Internal Revenue Services has ruled in a private letter that the distribution of Palm
will be free of U.S. federal income taxes. This means that for U.S. federal income tax purposes,
3Com shareholders will not recognize a gain or loss when they receive Palm shares. However,
depending upon your cost basis, a gain or loss for tax purposes may be recognized upon sale of
your Palm shares. Any cash received in lieu of fractional shares will be taxable upon receipt for
U.S. federal income tax purposes.
International shareholders should consult with a personal tax advisor to determine the taxable
effect of this distribution. Most jurisdictions outside the United States will tax the distribution.
Q12) Will I receive the Palm stock dividend for all 3Com shares that I own?
A12) If you purchase 3Com stock in the "Regular Way" market and the purchase settles prior to
the Distribution date, you will be eligible to receive a Palm dividend. This means that you must own
shares of 3Com Corporation in either a certificate form, as an account with EquiServe (our transfer
agent) or in your brokerage or bank account. If you own shares through 3Com's employee benefit
plans, please visit the 3Community employee Web site or the Palm Employee Web site.
Q13) If I hold a mutual fund that owns 3Com Corporation shares, will I receive Palm shares?
A13) If you hold a mutual fund that owns 3Com Corporation, you need to check with your mutual
fund advisor to see if you will be receiving a distribution of Palm shares.
If you own shares through 3Com's employee benefit plans, please visit the 3Community Web site
or the Palm Web site. Restricted shares held under one of 3Com's incentive stock plans will
receive a restricted dividend of Palm shares.
Q14) Why are there different stock symbols for 3Com?
A14) The difference in the stock symbols is due to the creation of two markets in 3Com stock: a
"regular way" and an "ex-distribution" market. Between July 7 and July 27, the regular way market
will trade 3Com stock under the ticker symbol COMS and will include an entitlement to receive the
dividend of Palm shares. The ex-distribution market will trade 3Com stock under the ticker symbol
COMS V and will not include an entitlement to receive shares of Palm. Since the COMS shares
effectively include the Palm shares, the price of these shares will be higher than the COMS V
shares.
People who own shares of 3Com common stock at the distribution date under the ticker COMS
will receive Palm shares shortly after the distribution. People who sell shares of 3Com common
stock under the ticker COMS prior to the distribution date will also sell their entitlement to receive
shares of Palm.
The ex-distribution market will end at market close on July 27, 2000. At that time, the COMS V
ticker and market for this stock will disappear and 3Com will only be traded under the ticker
symbol, COMS without the entitlement to receive Palm shares.
Q15) Why are there different stock symbols for Palm?
A15) The difference in the stock symbols is due to the creation of two markets in Palm stock: a
"regular way" and a "when-issued" market. Between July 9 and July 27, the regular way market will
trade Palm stock that is not currently held by 3Com under the ticker symbol PALM. The
when-issued market will trade Palm stock that a 3Com shareholder of record is due to receive on
the distribution date under the ticker symbol, PALM V and those that purchase these PALM V
shares will not receive shares until after the distribution occurs in July.
There should not be any material difference between PALM and PALM V stock prices.
The when-issued market will end at market close on July 27, 2000. At that time, Palm will only be
traded under the ticker symbol, PALM.
Q16) Why is the COMS V price different from the COMS price?
A16) The difference is because COMS traded between the record date and the distribution date will
include the attached value for Palm shares. The COMS V stock represents 3Com without the value
of the Palm shares, so its price is lower. If you sell stock in COMS between the record and the
distribution date, you will sell your right to receive Palm shares in the distribution.
After the July 27, 2000 distribution date, COMS will only trade under one symbol, COMS, which
will not include the value of Palm shares.
STOCK REPURCHASE FAQ
Q1) Why are you extending your stock repurchase program?
A1) We believe this expanded stock repurchase program is an important component in our multiple
efforts to increase shareholder value. In addition, the repurchased shares will, in part, be used to
fulfill employee stock programs.
Q2) How many shares will you repurchase and when will you do it?
A2) The amount and timing of shares to be purchased will be based on several factors, including
the price of the company's stock, the level of stock issuances under the company's employee
stock plans and market conditions. The Board has authorized a two-year time limit on this
authorization.
Q3) How many shares have you repurchased since the program began?
A3) During fiscal 2000 the company repurchased 20.5 million shares, bringing the total number of
shares repurchased since the program began in June 1998 to 35.3 million.
Q4) How many shares has the board authorized prior to this new program?
A4) This new program follows previous authorizations for 10 million shares in September 1999, 15
million shares in June 1999, 10 million shares in March 1999 and 10 million shares in June 1998.
Q5) Prior to this authorization, how many shares were available for purchase?
A5) 45 million shares have been authorized for repurchase and 35.3 million shares have been
repurchased to date.
Q6) Why are you allocating so much cash to repurchasing shares? Don't you have better uses of
cash like acquiring companies or technology?
A6) Our strong balance sheet, which includes over $3 billion in cash and short-term investments, is
the foundation for this repurchase program, as well as for strategic investments and acquisitions.
Q7) Does the authorization to repurchase stock have any implications for future
acquisitions/mergers or investments?
A7) With over $3 billion in cash and short term investments, we believe we have sufficient cash to
fund the types and amounts of investments and acquisitions in executing our strategy in the
foreseeable future.
OPTION ADJUSTMENT AND CONVERSION FAQ
Q1) Why are 3Com stock options being adjusted?
A1) Options held by 3Com employees are being adjusted to maintain the intrinsic value of the
options outstanding immediately before and immediately after the Palm distribution. The
adjustment will affect both the quantities and strike prices of options that each employee holds.
Q2) What's the difference between an adjustment and a conversion?
A2) 3Com stock options held by 3Com employees will be adjusted at distribution in terms of
re-setting the number of options and the strike prices in order to maintain the intrinsic value. 3Com
stock options held by Palm employees will be converted into Palm stock options, again in such a
way as to maintain the intrinsic value immediately before and immediately after distribution.
Q3) Will all 3Com stock options be adjusted?
A3) Yes, all 3Com stock options held by 3Com employees as the distribution date will be
adjusted.
Q4) If I'm a former 3Com employee with stock options, how will I be impacted?
A4) Employees have 90 days after their date of termination to exercise any vested options.
Terminated employees with vested options as of July 7, 2000 and whose 90 days expire before the
distribution date of July 27, 2000 are strongly encouraged to exercise their options by July 7 in
order to maximize the value. Any options exercised between July 8 and July 27 will not include the
entitlement to the Palm dividend and will not have the option prices and quantities reset. If the 90
day period expires after the distribution date, the option strike prices and quantities will be reset as
described above immediately after the distribution. The terminated employee can then exercise
any vested options at the new strike prices up until the 90th day after his or her termination date.
Q5) How will the 3Com stock option adjustment be determined?
A5) As communicated in the Palm S-1 public registration statement filed with the Securities and
Exchange Commission, 3Com will adjust stock options in connection with the Palm distribution.
3Com anticipates making an adjustment in the quantity and exercise strike prices for all
outstanding options in order to preserve their intrinsic value as follows: 3Com will calculate the
relationship (the "Ratio") between the opening price of 3Com common stock on the first trading day
after distribution and the closing price of 3Com common stock on the last trading day before
distribution. The number of new 3Com options outstanding after the Palm distribution will be equal
to the quotient of the number of 3Com options outstanding immediately before distribution divided
by the Ratio. The new option strike prices for the underlying outstanding options will be equal to
the product of the option exercise strike prices before distribution multiplied by the Ratio. The
options will continue to have the same terms and conditions set forth in the 3Com Stock Plans
including vesting schedules.
Q6) How will the 3Com stock option conversion for Palm employees be determined?
A6) 3Com stock options held by Palm employees will be converted into Palm options as follows:
The option conversion will be achieved by calculating the relationship (the "Palm Ratio") between
the opening price of Palm common stock on the first trading day after distribution and the closing
price of 3Com common stock on the last trading day before distribution. The number of new Palm
options outstanding after the Palm distribution will be equal to the quotient of the number of 3Com
options outstanding immediately before distribution divided by the Palm Ratio. The new option
strike prices for the underlying outstanding options will be equal to the product of the 3Com option
exercise strike prices before distribution multiplied by the Palm Ratio. The options will continue to
have the same terms and conditions set forth in the (the 3Com Stock Plans) including vesting
schedules.
CONTACT: 3Com
Pamela Sklar, 408/326-8726 (Public Relations)
pamela_sklar@3com.com
Shirley Stacy, 408/326-6301 (Investor Relations)
shirley_stacy@3com.com |
