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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 25, 2000 COMMISSION FILE NO. 0-29597
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------
PALM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3150688
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5470 GREAT AMERICA PARKWAY 95052
SANTA CLARA, CALIFORNIA -----
----------------------- (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 326-9000
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 NO X
----- -----
AS OF APRIL 3, 2000, 564,488,427 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.
THIS REPORT CONTAINS A TOTAL OF 36 PAGES OF WHICH THIS PAGE IS NUMBER 1.
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PALM, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Income Statements
THREE AND NINE MONTHS ENDED FEBRUARY 25, 2000 AND FEBRUARY 26, 1999 3
Condensed Consolidated Balance Sheets
FEBRUARY 25, 2000 AND MAY 28, 1999 4
Condensed Consolidated Statements of Cash Flows
NINE MONTHS ENDED FEBRUARY 25, 2000 AND FEBRUARY 26, 1999 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 32
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 33
ITEM 2. Changes in Securities and Use of Proceeds 34
ITEM 6. Exhibits and Reports on Form 8-K 34
Signatures 36
</TABLE>
Palm OS is a registered trademark and Palm, Palm VII and Palm.Net are
trademarks of Palm, Inc. or its subsidiaries.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALM, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
February 25, February 26, February 25, February 26,
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 272,292 $ 125,889 $ 707,352 $ 389,191
Cost of revenues 153,479 67,583 399,821 214,870
------------- ------------- ------------- -------------
Gross profit 118,813 58,306 307,531 174,321
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 57,591 28,725 160,277 86,587
Research and development 21,450 10,989 50,001 31,449
General and administrative 12,202 5,739 29,158 17,043
Purchased in-process
technology - 2,125 - 2,125
Separation costs 8,203 - 11,983 -
------------- ------------- ------------- -------------
Total operating expenses 99,446 47,578 251,419 137,204
------------- ------------- ------------- -------------
Operating income 19,367 10,728 56,112 37,117
Interest and other income
(expense), net 418 (15) 632 (115)
------------- ------------- ------------- -------------
Income before income taxes 19,785 10,713 56,744 37,002
Income tax provision 8,832 4,116 23,271 14,218
------------- --------------- ------------- -------------
Net income $ 10,953 $ 6,597 $ 33,473 $ 22,784
============= ============= ============= =============
Net income per share:
Basic and diluted $ 0.02 $ 0.01 $ 0.06 $ 0.04
Shares used in computing
per share amounts:
Basic and diluted 532,000 532,000 532,000 532,000
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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PALM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
February 25, May 28,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 40,005 $ 478
Accounts receivable, net 114,320 95,839
Inventories 29,774 12,186
Deferred income taxes 26,712 20,688
Prepaids and other 1,692 1,038
------------- ---------------
Total current assets 212,503 130,229
Property and equipment, net 10,553 8,136
Goodwill, intangibles and other assets 13,550 13,829
Deferred income taxes 1,938 53
------------- ---------------
Total assets $ 238,544 $ 152,247
============ ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 88,818 $ 35,577
Payable to 3Com Corporation 125,988 40,509
Other accrued liabilities 102,725 40,793
Current portion of long-term debt 162 668
------------- ---------------
Total current liabilities 317,693 117,547
Long-term debt 383 682
Commitments and contingencies - -
Stockholder's equity (deficiency):
Preferred stock, $.001 par value, 125,000 shares
authorized; none outstanding - -
Common stock, $.001 par value, 2,000,000 shares
authorized; outstanding: February 25, 2000,
532,000; May 28, 1999, 532,000 - -
3Com Corporation equity (deficiency) (79,377) 34,151
Accumulated other comprehensive income (loss) (155) (133)
-------------- ---------------
Total stockholder's equity (deficiency) (79,532) 34,018
-------------- ---------------
Total liabilities and stockholder's equity $ 238,544 $ 152,247
============== ===============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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PALM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
February 25, February 26,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 33,473 $ 22,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,644 2,368
Loss on disposal of property and equipment 897 1,658
Deferred income taxes (7,909) (6,474)
Purchased in-process technology - 2,125
Changes in assets and liabilities:
Accounts receivable (18,481) (31,698)
Inventories (17,588) (2,025)
Prepaids and other (2,908) (547)
Accounts payable 53,241 (1,255)
Payable to 3Com Corporation (64,521) 22,022
Other accrued liabilities 61,932 26,051
-------------- --------------
Net cash provided by operating activities 44,780 35,009
-------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (7,425) (3,804)
Business acquired in purchase transaction - (16,831)
-------------- --------------
Net cash used for investing activities (7,425) (20,635)
-------------- --------------
Cash flows from financing activities:
Net transfers (to) from 3Com 2,977 (13,761)
Repayments of debt (805) -
-------------- --------------
Net cash used for financing activities 2,172 (13,761)
-------------- --------------
Increase in cash and equivalents 39,527 613
Cash and equivalents, beginning of period 478 -
-------------- --------------
Cash and equivalents, end of period $ 40,005 $ 613
============== ==============
Noncash investing and financing activities
Dividend payable to 3Com $ 150,000 $ -
============== ==============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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PALM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The unaudited condensed consolidated financial statements have been
prepared by Palm, Inc. ("Palm," "us," "we," or "our"), pursuant to the
rules of the Securities and Exchange Commission ("SEC"). In the opinion
of management, these unaudited condensed consolidated financial
statements include all adjustments necessary for a fair presentation of
Palm's financial position as of February 25, 2000, results of
operations for the three and nine months ended February 25, 2000 and
February 26, 1999, and cash flows for the nine months ended February
25, 2000 and February 26, 1999.
Palm has a 52-53 week fiscal year ending on the Friday nearest to May
31. Accordingly, fiscal 2000 will end on June 2, 2000, resulting in a
53-week fiscal 2000, rather than 52 weeks as reported in fiscal 1999.
For fiscal year 2000, the first three quarters will contain 13 weeks,
and the fourth quarter will contain 14 weeks. The results of operations
for the three and nine months ended February 25, 2000 may not be
indicative of the results to be expected for the fiscal year ending
June 2, 2000. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and
related notes thereto included in Palm's Registration Statement on Form
S-1 filed with the SEC on December 13, 1999, as amended.
Through February 25, 2000, we were wholly-owned by 3Com Corporation
("3Com"). Our condensed consolidated financial statements reflect the
historical results of operations and cash flows of the handheld
computing business of 3Com during each respective period. The condensed
consolidated financial statements have been prepared using 3Com's
historical bases in the assets and liabilities and the historical
results of operations of Palm. The financial information included
herein may not reflect the consolidated financial statements, operating
results and cash flows of Palm in the future or what they would have
been had Palm been a separate stand-alone entity during the periods
presented.
The condensed consolidated financial statements include allocations of
certain 3Com expenses, including centralized legal, accounting,
treasury, real estate, information technology, distribution, customer
service, sales, marketing, engineering, and other 3Com corporate
services and infrastructure costs. The expense allocations have been
determined on the bases that 3Com and Palm considered to be reasonable
reflections of the utilization of services provided or the benefit
received by Palm. The allocation methods include relative revenues,
headcount or square footage. Management believes that the expenses
allocated to Palm are representative of the operating expenses it would
have incurred had Palm been operated on a stand-alone basis.
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The allocated amounts from 3Com included in our results of operations
were as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
February 25, February 26,
2000 1999
----------- -----------
<S> <C> <C>
Cost of revenues $ 10,443 $ 6,199
Sales and marketing 20,541 11,114
Research and development 6,125 2,164
General and administrative 14,550 9,466
Other (income) and expense, net (632) 115
</TABLE>
2. Separation from 3Com and Initial Public Offering
On September 13, 1999, 3Com announced its plan to create an independent
publicly-traded company, Palm, Inc., comprised of 3Com's handheld
computing business. Following the completion of Palm's initial public
offering in March 2000, 3Com owns approximately 94% of Palm's
outstanding common stock. 3Com has announced that it intends to
distribute its remaining shares of Palm common stock to 3Com
stockholders approximately four to six months following the initial
public offering ("the distribution date"), subject to receiving 3Com
board approval and a ruling from the Internal Revenue Service that the
distribution will be not be taxable.
3Com and Palm have entered into a Master Separation and Distribution
Agreement. In accordance with the separation agreement, 3Com
transferred to Palm the 3Com-owned assets and liabilities which related
to Palm prior to the date of separation from 3Com ("the separation
date"), except for most of Palm's accounts receivable and accounts
payable, which were retained by 3Com for administrative convenience.
Palm began incurring separation costs in the second quarter of fiscal
year 2000, which are costs associated with the process of becoming a
stand-alone, publicly-held company, including consulting and
professional fees.
Palm's legal separation from 3Com occurred on February 26, 2000, at
which time Palm began to operate independently from 3Com. Beginning in
the fourth quarter of fiscal year 2000, Palm's consolidated financial
statements will no longer include an allocated portion of 3Com's
corporate services and infrastructure costs. However, Palm will incur
amounts payable to 3Com under transitional service agreements, under
which 3Com will provide services such as information systems, real
estate and transaction processing in accounting, human resources, and
order processing.
Palm completed its initial public offering in March 2000, receiving net
proceeds of $942.3 million, after deducting underwriting commissions
and estimated offering expenses, from the sale of 26,450,000 shares of
common stock. Palm also received net proceeds of $225.0 million from
the sale of a total of 5,921,052 shares of common stock to America
Online, Motorola and Nokia in private placements. Using a portion of
the proceeds from the offering, Palm paid a dividend of $150.0 million
to 3Com in March 2000. This dividend was declared in January 2000 and
was payable to 3Com as the sole stockholder of record on February 25,
2000. The dividend
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payable is included in Palm's condensed consolidated balance sheet
under the caption "Payable to 3Com Corporation", along with other
amounts due from and payable to 3Com.
3. Comprehensive Income
The components of comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
February 25, February 26, February 25, February 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 10,953 $ 6,597 $ 33,473 $ 22,784
Other comprehensive income:
Change in accumulated
translation adjustments (191) (30) (22) (30)
----------- ------------ ----------- -----------
Total comprehensive incom $ 10,762 $ 6,567 $ 33,451 $ 22,754
============ ============ ============ ===========
</TABLE>
4. Net Income Per Share
For each period presented, basic and diluted net income per share are
calculated based on the 532,000,000 shares of Palm common stock owned
by 3Com. Pursuant to the requirements of SEC Staff Accounting Bulletin
Topic 1.B(3), pro forma net income per share for each period is
calculated based on the 532,000,000 shares of Palm owned by 3Com, plus
the 4,217,011 shares of common stock whose proceeds are assumed to be
used to pay the $150 million dividend to 3Com. Such pro forma net
income per share amounts are the same as the basic and diluted net
income per share amounts for each period.
In future periods, basic net income per share will be calculated based
on the weighted average shares of common stock outstanding during the
period, and diluted earnings per share will be calculated based on the
weighted average shares of common stock outstanding, plus the dilutive
effect of stock options, calculated using the treasury stock method. At
the time of Palm's initial public offering, Palm granted options to
purchase approximately 9.4 million shares of Palm common stock to its
employees and directors at the initial public offering price, and also
issued approximately 117,000 shares of restricted stock to certain key
employees. At the distribution date, options held by Palm employees to
purchase 3Com common stock will be converted into options to purchase
Palm common stock as described in Palm's Registration Statement on Form
S-1 filed on December 13, 1999, as amended.
5. Inventories
Inventories, net, consist of (in thousands):
<TABLE>
<CAPTION>
February 25, May 28,
2000 1999
---- ----
<S> <C> <C>
Finished goods $ 26,334 $ 5,900
Work-in-process 2,963 4,011
Purchased components 477 2,275
----------- -----------
Total Inventories $ 29,774 $ 12,186
=========== ===========
</TABLE>
8
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6. Litigation
Palm is a party to lawsuits in the normal course of its business.
Litigation in general, and intellectual property litigation in
particular, can be expensive and disruptive to normal business
operations. Moreover, the results of complex legal proceedings are
difficult to predict. Palm believes that it has defenses to the cases
set forth below and is vigorously contesting these matters. Palm is not
currently able to estimate the possible loss, or range of loss, if any,
from the cases listed below and an unfavorable resolution of these
lawsuits could adversely affect Palm's business, results of operations
or financial condition.
On April 28, 1997, Xerox Corporation filed suit against U.S. Robotics
Corporation and U.S. Robotics Access Corp. in the United States
District Court for the Western District of New York. The case is now
captioned: XEROX CORPORATION v. U.S. ROBOTICS CORPORATION, U.S.
ROBOTICS ACCESS CORP., PALM COMPUTING, INC. AND 3COM CORPORATION, Civil
Action No. 97-CV-6182T. The complaint alleges willful infringement of a
Xerox United States patent, relating to computerized interpretation of
handwriting. The complaint seeks unspecified damages and injunctive
relief. Xerox has asserted that Graffiti software and certain of our
products infringe the patent. On January 18, 2000, the court held a
status hearing during which it ordered that all of the parties' briefs
relating to motions for summary judgment would be filed with the court
by April 28, 2000. Palm anticipates that oral argument on these motions
will be heard thereafter. No trial date has been set.
On July 22, 1999, Palm filed a copyright infringement action against
Olivetti and CompanionLink in the United States District Court for
the Northern District of California and obtained a preliminary
injunction against further distribution, sale, import or export of
Olivetti Office USA's "Royal daVinci" handheld device and the
daVinci OS Software Development Kit, distributed by CompanionLink
Software, Inc. The injunction is to remain in effect pending the
outcome of the lawsuit. Palm also initiated a copyright infringement
action in Hong Kong on July 21, 1999, against EchoLink Design Ltd.,
the company responsible for developing the operating system software
contained in the daVinci products. The High Court of the Hong Kong
Special Administrative Region issued an order the same day
restraining EchoLink from further copying, distribution, sale,
import or export of Palm OS-Registered Trademark- operating system
source code or EchoLink's "NEXUS OS" source code, which Palm
maintains infringes its copyrights.
On December 13, 1999, WaveWare Communications, Inc. filed suit against
3Com, Palm and others in the Superior Court of California, San Mateo
County. The case is captioned WAVEWARE COMMUNICATIONS, INC. v. 3COM
CORPORATION, PALM COMPUTING, INC., AND MARK BERCOW, No. 411331. The
complaint alleges breach of contract, constructive fraud, fraud and
deceit, negligent misrepresentation, misappropriation of assets and
trade secrets, unfair competition, unjust enrichment and intentional
interference with economic advantage in connection with Palm and 3Com's
discussions with WaveWare concerning WaveWare's potential acquisition
by 3Com. The complaint seeks unspecified monetary damages and
injunctive relief. The case is in the early stages of discovery. No
trial date has been set.
On December 27, 1999, Telxon Corporation and Penright! Corporation
filed a complaint in the U.S. District Court for the Northern District
of Ohio, Eastern Division (Case No. 1:99CV3157) against 3Com and Palm
alleging copyright infringement, unfair competition and theft of trade
9
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secrets. The plaintiffs allege that the Palm OS operating system
contains graphical user interface software copied from the
plaintiffs' software. The complaint seeks unspecified compensatory
and treble damages and to enjoin, among other things, distribution
and sales of the Palm OS operating system. No trial date has been
set. No discovery has been exchanged.
On February 28, 2000, E-Pass Technologies, Inc. filed suit against 3Com
in the United States District Court for the Southern District of New
York (case no. 00CIV1523). The complaint alleges infringement and
induced infringement of United States patent 5,276,311 by Palm's
handheld devices in connection with a method and device for simplifying
the use of credit cards. The complaint seeks unspecified compensatory
and treble damages and, among other things, to permanently enjoin Palm
from infringing or inducing infringement of the patent as alleged. Palm
is in the preliminary stages of investigating the allegations contained
in the suit. No trial date has been set. No discovery has been
exchanged.
In connection with Palm's separation from 3Com, pursuant to the terms
of the Indemnification and Insurance Matters Agreement between Palm and
3Com, Palm will indemnify and hold 3Com harmless for any damages or
losses which may arise out of the Xerox, WaveWare, Telxon and Penright!
and E-Pass litigation.
7. Recent Accounting Pronouncements
In March 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-1 ("SOP 98-1"), "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." SOP
98-1 requires that entities capitalize certain costs related to
internal-use software if certain criteria are met. Palm adopted SOP
98-1 for its fiscal year ending June 2, 2000. The adoption of SOP 98-1
did not have a significant impact on Palm's financial results for the
nine months ended February 25, 2000.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133,
"Accounting for Derivative Investments and Hedging Activities." This
statement provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. In
July 1999, the FASB issued FAS 137, which defers the effective date of
FAS 133 for one year. Accordingly, Palm will now be required to adopt
FAS 133 during fiscal 2001. Palm does not expect the adoption of FAS
133 to have a significant effect on Palm's financial position or
results of operations.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report on Form 10-Q contains forward-looking statements, including
statements concerning expected revenues from Palm platform licensing and
Internet services, expected international revenue, continued strong growth in
unit shipments of Palm devices, investments for strategic initiatives, future
gross and operating margins, expansion into new customer segments and geographic
regions, offering new wireless Internet solutions, and the launch of an
aggressive marketing campaign. These statements are subject to certain risks and
uncertainties. Some of the factors that could cause future events or results to
materially differ from those projected in the forward-looking statements are
discussed in this report (see, in particular, "Business Environment and Risk
Factors").
OVERVIEW
We were founded in 1992 and introduced our first handheld device in 1996.
Immediately prior to our initial public offering in March 2000, we were a
wholly-owned subsidiary of 3Com. To date, our business has focused primarily on
developing and selling our Palm-branded handheld devices, and as of February 25,
2000, we had sold over 6 million Palm-TM- devices worldwide. In 1999, we
expanded our strategy of licensing our Palm platform and developed our wireless
Internet access service to support Internet-enabled handheld devices.
Substantially all of our revenues to date have been generated from sales of our
handheld devices and related peripherals and accessories. A small percentage of
our revenues has been derived from licensing our Palm platform or from
subscriptions to our wireless Internet access service. With our expanded focus
on Palm platform licensing and Internet services and solutions, we expect that
an increasing portion of our revenues in future periods will come from these
sources. International revenues represented 34% of total revenues for the nine
months ended February 25, 2000, and we expect that international revenues are
likely to increase as a percentage of total revenues as we expand into
international markets.
We believe that we will continue to experience strong growth in unit shipments
of our Palm devices, although the year over year growth rates may decline on a
percentage basis compared to recent levels. Factors which we believe may impact
gross margins include increased competition, introduction of new Palm handheld
devices, supply constraints for certain components, and expansion of our revenue
from licensing and Internet services and solutions. We anticipate that the net
impact of these factors is that gross margins may be lower over the next 12-18
months when compared to recent quarters.
In line with our strategy to expand our business, we expect to make significant
strategic investments over the next 12-18 months. We intend to expand into new
customer segments and new geographic regions, offer new wireless Internet
solutions, and launch an aggressive marketing campaign to strengthen brand
awareness and target new business areas. We also expect to incur some
duplication of costs over the next 12-18 months, as we build the infrastructure
for a stand-alone public company, while also paying 3Com to perform these
services under transition service agreements. In addition, for at least the next
several quarters, we expect to incur costs related to our separation from 3Com.
We anticipate that our operating margins may be lower over the next 12-18 months
as compared to recent quarters, and there may be several quarters in which we
report operating losses as we invest to expand our business, take advantage of
market opportunities and execute our strategic plan as an independent
stand-alone company.
11
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by the line items reflected in Palm's condensed
consolidated income statements:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
February 25, February 26, February 25, February 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 56.4 53.7 56.5 55.2
------ ------ ------ ------
Gross profit 43.6 46.3 43.5 44.8
Operating expenses:
Sales and marketing 21.1 22.8 22.7 22.2
Research and development 7.9 8.7 7.1 8.1
General and administrative 4.5 4.6 4.1 4.4
Purchased in-process
technology - 1.7 - 0.6
Separation costs 3.0 - 1.7 -
------ ------ ------ ------
Total operating expenses 36.5 37.8 35.6 35.3
------ ------ ------ ------
Operating income 7.1 8.5 7.9 9.5
Interest and other
income (expense) 0.2 - 0.1 -
------ ------ ------ ------
Income before income taxes 7.3 8.5 8.0 9.5
Income tax provision 3.3 3.3 3.3 3.6
------ ------ ------ ------
Net income 4.0% 5.2% 4.7% 5.9%
====== ====== ====== ======
Effective tax rate 44.6% 38.4% 41.0% 38.4%
Excluding purchased
in-process technology
and separation costs:
Total operating expenses 33.5% 36.1% 33.9% 34.7%
Operating income 10.1% 10.2% 9.6% 10.1%
</TABLE>
REVENUES
Revenues for the quarter ended February 25, 2000 were $272.3 million, an
increase of $146.4 million or 116% over revenues for the same quarter of the
previous year. This increase was due to higher unit shipments, offset by a
slight decline in the average selling price. Revenues increased in all
geographic areas, with Europe experiencing the highest growth rate.
International revenues for the third quarter of fiscal 2000 were 32% of revenues
compared with 27% of revenues in the same period of fiscal 1999.
Revenues for the nine months ended February 25, 2000 were $707.4 million, an
increase of $318.2 million or 82% over revenues for the same period of the
previous year. This increase was due primarily to higher unit shipments while
the average selling price remained relatively constant. Revenues increased in
all geographic areas, with revenues in Asia-Pacific and Europe growing at a
faster rate than in the United States. International revenues for the first nine
months of fiscal 2000 were 34% of revenues compared with 26% of revenues in the
same period of fiscal 1999.
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GROSS PROFIT
Gross profit was $118.8 million and $307.5 million for the third quarter and
first nine months of fiscal 2000, increasing by 104% and 76%, respectively, over
the corresponding periods in fiscal 1999. Gross profit as a percentage of
revenues was 43.6% and 43.5% for the third quarter and first nine months of
fiscal 2000, declining by 2.7 and 1.3 percentage points, respectively, compared
to the corresponding periods in fiscal 1999. These declines were primarily
attributable to costs related to providing wireless Internet access services,
which we introduced during the first quarter of fiscal 2000. For the third
quarter of fiscal 2000, gross profit as a percentage of revenue also declined
due to a change in our product mix as compared to the prior year quarter.
SALES AND MARKETING
Sales and marketing expenses were $57.6 million and $160.3 million for the third
quarter and first nine months of fiscal 2000, increasing by 100% and 85%,
respectively, as compared to the same periods in fiscal 1999. For the year to
date periods, sales and marketing expenses increased slightly as a percentage of
revenue. The increases in absolute dollars compared to the prior year periods
were due to increased spending on U.S. demand generation activities and media
advertising, headcount and related expenses, and expanded sales and marketing
activities in Europe.
RESEARCH AND DEVELOPMENT
Research and development expenses were $21.5 million and $50.0 million for the
third quarter and first nine months of fiscal 2000, increasing by 95% and 59%,
respectively, as compared to the same periods in fiscal 1999. For the year to
date periods, research and development expenses declined moderately as a
percentage of revenue, as certain fixed costs were spread over a higher revenue
base. The increases in absolute dollars compared to the prior year periods were
due to increased spending on headcount and related expenses, and development
costs in new product areas, including Bluetooth and other wireless
communications technology.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $12.2 million and $29.2 million for the
third quarter and first nine months of fiscal 2000, increasing by 113% and 71%,
respectively, as compared to the same periods in fiscal 1999. For the year to
date periods, general and administrative expenses remained relatively constant
as a percentage of revenue. The increases in absolute dollars compared to the
prior year periods were due primarily to increased spending for headcount and
related expenses to support the growth in revenues. For the third quarter of
fiscal 2000, the increase also related to building the infrastructure for a
stand-alone public company. General and administrative expenses also increased
due to higher allocated costs from 3Com due to Palm's revenue increasing as a
percentage of 3Com's total revenue.
PURCHASED IN-PROCESS TECHNOLOGY
Purchased in-process technology for the third quarter and nine months ended
February 26, 1999 relates to the acquisition of Smartcode Technologie SARL in
February 1999. Approximately $2.1 million of the purchase price represented
purchased in-process technology that had not yet reached technological
feasibility, had no alternative future use and was charged to operations in the
third quarter of fiscal 1999. The primary project related to the purchased
in-process technology was completed in the first quarter of
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fiscal 2000 and Palm began to derive revenue from the developed technology
beginning in the second quarter of fiscal 2000.
SEPARATION COSTS
Separation costs for the third quarter and nine months ended February 25, 2000
consist of costs associated with the process of becoming a stand-alone,
publicly-held company, including consulting and professional fees. Separation
costs were $8.2 million and $12.0 million for the third quarter and nine months
ended February 25, 2000, respectively. We expect to continue to incur separation
costs for at least the next several quarters.
INTEREST AND OTHER INCOME (EXPENSE)
Interest and other income (expense), on a net basis was $0.4 million and
$0.6 million for the third quarter and first nine months of fiscal 2000,
compared to a nominal expense for each period in fiscal 1999. We anticipate
that interest income will increase significantly in future periods, due to the
receipt of the net proceeds from the initial public offering and private
placements in March 2000.
INCOME TAX PROVISION
The effective tax rate for the first nine months of fiscal 2000 was 41.0%, up
from 38.4% for the first nine months of fiscal 1999. The increase in the
effective tax rate is primarily due to non-deductible separation costs and the
establishment of Palm's international legal structure, which in the initial year
is expected to create losses in certain foreign jurisdictions for which no
current tax benefit is obtained. We currently anticipate that our tax rate will
decline slightly in fiscal 2001, and will decline further in subsequent years.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at February 25, 2000 were $40.0 million, compared to
$0.5 million at May 28, 1999. The increase of $39.5 million for the nine months
ended February 25, 2000 was attributable to cash generated from operating
activities of $44.8 million and cash provided by financing activities of
$2.1 million, offset by cash used by investing activities of $7.4 million.
Cash provided by operating activities consisted of net income, adjusted for
non-cash charges and changes in working capital assets. The most significant
changes in working capital assets were increases in accounts payable and other
accrued liabilities, offset partially by a decrease in the payable to 3Com, and
by increases in accounts receivable and inventory. The decrease in the payable
to 3Com excludes the effect of the accrual of the $150 million dividend to 3Com,
which is classified as a non-cash investing and financing activity. Cash used by
investing activities of $7.4 million consisted entirely of capital expenditures.
Cash provided by financing activities of $2.1 million consisted of net transfers
from 3Com, offset by repayments of debt.
Based on current plans and business conditions, we believe that our existing
cash and cash equivalents, combined with the net proceeds of $1.17 billion
generated from the initial public offering and private placements, less the
payment of the dividend to 3Com of $150 million, will be sufficient to satisfy
our anticipated cash requirements for at least the next twelve months.
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BUSINESS ENVIRONMENT AND RISK FACTORS
RISKS RELATED TO OUR BUSINESS
IF WE FAIL TO DEVELOP AND INTRODUCE NEW PRODUCTS AND SERVICES RAPIDLY AND
SUCCESSFULLY, WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY AND OUR ABILITY TO
GENERATE REVENUES WILL SUFFER.
We operate in a highly competitive, quickly changing environment, and our future
success depends on our ability to develop and introduce new products and
services that our customers and end users choose to buy. If we are unsuccessful
at developing and introducing new products and services that are appealing to
end users, our business and operating results would be negatively impacted
because we would not be able to compete effectively and our ability to generate
revenues would suffer.
The development of new products and services can be very difficult and requires
high levels of innovation. The development process is also lengthy and costly.
If we fail to anticipate our end users' needs and technological trends
accurately or are otherwise unable to complete the development of products and
services quickly, we will be unable to introduce new products and services into
the market on a timely basis, if at all. For example, the Palm VII-TM- device
took more than two years to develop. In addition, because the Palm VII device
requires Internet services and applications to support it, we must also continue
to develop new services to maintain and broaden its user appeal.
Because the sales and marketing life cycle of our handheld devices is generally
12 to 18 months or less, we must:
continue to develop updates to our Palm platform, new handheld devices and
new Internet services, or our existing products and services will quickly
become obsolete;
manage the timing of new product introductions so that we minimize the
impact of customers delaying purchases of existing products in anticipation
of new product releases;
manage the timing of new product introductions to meet seasonal market
demands, including the holiday shopping season;
manage the levels of existing and older product and component inventories
to minimize inventory write-offs; and
adjust the prices of our existing products and services in order to
increase or maintain customer demand for these products and services.
IF WE DO NOT CORRECTLY ANTICIPATE DEMAND FOR OUR PRODUCTS, WE MAY NOT BE ABLE TO
SECURE SUFFICIENT QUANTITIES OR COST-EFFECTIVE PRODUCTION OF OUR HANDHELD
DEVICES OR WE COULD HAVE COSTLY EXCESS PRODUCTION OR INVENTORIES.
Historically, we have seen steady increases in demand for our products and have
generally been able to increase production to meet that demand. However, the
demand for our products depends on many factors and will be difficult to
forecast. As we introduce and support multiple handheld device products and as
competition in the market for our products intensifies, we expect that it will
become more difficult to forecast demand. Significant unanticipated fluctuations
in demand could cause the following problems in our operations:
If demand increases beyond what we forecast, we would have to rapidly
increase production at our third-party manufacturers. We would depend on
suppliers to provide additional volumes of
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components and those suppliers might not be able to increase production
rapidly enough to meet unexpected demand. There is the risk that even if
we are able to procure enough components, our third-party manufacturers
might not be able to produce enough of our devices to meet the market
demand for our products. The inability of either our manufacturers or
our suppliers to increase production rapidly enough could cause us to
fail to meet customer demand.
Rapid increases in production levels to meet unanticipated demand could
result in higher costs for manufacturing and supply of components and other
expenses. These higher costs could lower our profits. Further, if
production is increased rapidly, manufacturing yields could decline, which
may also lower our profits.
If forecasted demand does not develop, we could have excess production
resulting in higher inventories of finished products and components, which
would use cash and could lead to write-offs of some or all of the excess
inventories. Lower than forecasted demand could also result in excess
manufacturing capacity at our third party manufacturers and failure to meet
some minimum purchase commitments, each of which could result in lower
margins.
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND SEASONALITY, AND
IF WE FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS, OUR
SHARE PRICE MAY DECREASE SIGNIFICANTLY.
Our operating results are difficult to predict. Our future quarterly operating
results may fluctuate significantly and may not meet the expectations of
securities analysts or investors. If this occurs, the price of our stock would
likely decline. Factors that may cause fluctuations in our operating results
include the following:
Seasonality. Historically, our revenues have usually been weaker in the
first and third quarters of each fiscal year and have, from time to time,
been lower than the preceding quarter. This weakness is due to the fact
that our devices are highly consumer-oriented, and consumer buying is
traditionally lower in these quarters. As our licensing revenues grow, we
expect that they will contribute to the fluctuations in our quarterly
results because the products offered by our licensees are also primarily
consumer-oriented. In addition, we attempt to time our new product releases
to coincide with relatively higher consumer spending in the second and
fourth fiscal quarters, which contributes to these seasonal variations.
However, our revenues for the third fiscal quarter this year were greater
than revenues in the second fiscal quarter this year, due to stronger
demand for our products in the third fiscal quarter. This pattern may not
occur in the future.
Increases in Operating Expenses. As we expand our operations, we expect
that our operating expenses, particularly our sales, marketing and research
and development costs, will continue to increase. We also expect to make
significant expenditures to expand our Internet services through increased
marketing activities and investments in network expansion related to our
subscription-based Internet access service. These Internet services
expenditures as well as a significant portion of our sales, marketing and
research and development costs are fixed, at least in the short term. If
revenues decrease and we are unable to reduce those costs rapidly, our
operating results would be negatively affected. In addition, we will add
new fixed costs to continue building an independent business and
administration infrastructure following our recent separation from 3Com.
Over the next several quarters we expect expenses to grow more rapidly than
revenues, which will hurt our quarterly operating results.
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Product Mix. Our profit margins differ among the handheld device, Palm
platform licensing and Internet services parts of our business. In
addition, the product mix of our device sales affects profit margins in any
particular quarter. As our business evolves and the mix of revenues from
devices, licenses and services varies from quarter to quarter, our
operating results will likely fluctuate.
New Product Introductions. As we introduce new products and services, the
timing of these introductions will affect our quarterly operating results.
We may have difficulty predicting the timing of new product and service
introductions and the user acceptance of these new products and services.
If products and services are introduced earlier or later than anticipated,
or if user acceptance is unexpectedly high or low, our quarterly operating
results may fluctuate unexpectedly. In addition, we typically increase
sales and marketing expenses to support new product introductions.
Use of Purchase Orders with Customers. We rely on one-time purchase orders
rather than long-term contracts with our distributor customers. Because we
cannot predict with certainty incoming purchase orders, decreases in orders
or failure to fulfill orders may cause our operating results to fluctuate.
WE RELY ON THIRD-PARTY MANUFACTURERS TO PRODUCE OUR HANDHELD DEVICES, AND OUR
REPUTATION AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED BY OUR
INABILITY TO CONTROL THEIR OPERATIONS.
We outsource all of our manufacturing to Manufacturers' Services Limited and
Flextronics. We depend on these third-party manufacturers to produce sufficient
volume of our products in a timely fashion and at satisfactory quality levels.
If our third-party manufacturers fail to produce quality products on time and in
sufficient quantities, our reputation and results of operations would suffer. We
depend on Flextronics to manufacture some of our device products at its
facilities in Mexico, California and Malaysia, and the rest of our device
products are manufactured by Manufacturers' Services Limited at its Utah
facility. The cost, quality and availability of third-party manufacturing
operations are essential to the successful production and sale of our handheld
devices. Our reliance on third parties exposes us to the following risks outside
our control:
unexpected increases in manufacturing costs;
interruptions in shipments if one of our manufacturers is unable to
complete production;
inability to control quality of finished device products;
inability to control delivery schedules;
unpredictability of manufacturing yield;
potential lack of adequate capacity; and potential inability to secure
adequate volumes of components.
We began working with Manufacturers' Services Limited when it purchased 3Com's
Utah facility in November 1999. As a result, we have not had significant working
experience with Manufacturers'
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Service Limited. If we are unable to manage our relationship with
Manufacturers' Services Limited successfully, our ability to manufacture our
products would be harmed and our results of operations would suffer.
We do not have a manufacturing agreement with Flextronics, upon whom we rely to
manufacture a significant number of our device products. We presently order our
products on a purchase order basis from Flextronics. The absence of a
manufacturing agreement means that, with little or no notice, Flextronics could
refuse to continue to manufacture all or some of the units of our devices that
we require or change the terms under which it manufactures our device products.
If Flextronics were to stop manufacturing our devices, we may be unable to
replace the lost manufacturing capacity on a timely basis and our results of
operations could be harmed. In addition, if Flextronics were to change the terms
under which they manufacture for us, our manufacturing costs could increase and
our profitability could suffer.
WE DEPEND ON OUR SUPPLIERS, MANY OF WHICH ARE THE SOLE SOURCE FOR OUR
COMPONENTS, AND OUR PRODUCTION WOULD BE SERIOUSLY HARMED IF THESE SUPPLIERS ARE
NOT ABLE TO MEET OUR DEMAND AND ALTERNATIVE SOURCES ARE NOT AVAILABLE.
Our products contain components, including liquid crystal displays, touch
panels, memory chips and microprocessors, that are procured from a variety of
suppliers. The cost, quality and availability of components are essential to the
successful production and sale of our device products. Recently, we have
experienced shortages of certain key components, including flash memory chips
and liquid crystal displays. We believe that these supply limitations are due to
unexpectedly high demand from cellular telephone manufacturers. In addition, in
1999 we modified the design of our Palm VII device as a result of our inability
to obtain adequate supplies of the radio crystals and memory chips.
Some components, such as displays, power supply integrated circuits, digital
signal processors, microprocessors, crystals and several radio frequency and
discrete components, come from sole or single source suppliers. Alternative
sources are not currently available for these sole and single source components.
If suppliers are unable to meet our demand for sole source components and if we
are unable to obtain an alternative source or if the price for an alternative
source is prohibitive, our ability to maintain timely and cost-effective
production of our handheld computing device products would be seriously harmed.
In addition, because we rely on one-time purchase orders with our suppliers,
including our sole and single source suppliers, we cannot predict with certainty
our ability to procure components if the demand for our products exceeds our
forecast. If either the shortage in radio crystals, memory chips, liquid crystal
displays or any other key component persists or worsens, we will likely not be
able to deliver sufficient quantities of our products to satisfy demand. In
addition our costs to purchase these components would increase, which would
lower our profits.
WE DO NOT KNOW IF THE PALM PLATFORM LICENSING AND INTERNET SERVICES PARTS OF OUR
BUSINESS WILL BE ABLE TO GENERATE SIGNIFICANT REVENUE IN THE FUTURE, AND WE WILL
CONTINUE TO RELY ON OUR HANDHELD DEVICE PRODUCTS AS THE PRIMARY SOURCE OF OUR
REVENUE FOR THE FORESEEABLE FUTURE.
Our future growth and a significant portion of our future revenue depend on the
commercial success of our Palm handheld devices, which comprise the primary
product line that we currently offer. We expanded our Palm platform licensing
and Internet services parts of our business only recently, and these parts of
our business have generated a small percentage of our revenues. If revenues from
our device business do not grow, our other business activities will not be able
to compensate for this shortfall.
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A SIGNIFICANT PORTION OF OUR REVENUES CURRENTLY COMES FROM A SMALL NUMBER OF
DISTRIBUTORS, AND ANY DECREASE IN REVENUES FROM THESE DISTRIBUTORS COULD HARM
OUR RESULTS OF OPERATIONS.
A significant portion of our revenues comes from only a small number of
distributors. Ingram Micro and Tech Data represented approximately 30% and 10%,
respectively, of our revenues in the nine months ended February 25, 2000. We
expect that the majority of our revenues will continue to depend on sales of our
handheld devices to a small number of distributors. Any downturn in the business
of these customers could seriously harm our revenues and results of operations.
WE RELY ON DISTRIBUTORS, RETAILERS AND RESELLERS TO SELL OUR PRODUCTS, AND
DISRUPTIONS TO THESE CHANNELS WOULD ADVERSELY AFFECT OUR ABILITY TO GENERATE
REVENUES FROM THE SALE OF OUR HANDHELD DEVICES.
Because we sell a significant portion of our products to distributors, retailers
and traditional and Internet based resellers, we are subject to many risks,
including risks related to their inventory levels and support for our products.
Our distributors, retailers and resellers have traditionally maintained
significant levels of our products in their inventories. If distributors,
retailers and resellers attempt to reduce their levels of inventory or if they
do not maintain sufficient levels to meet customer demand, our sales could be
negatively impacted. If we reduce the prices of our products to these customers,
we may have to compensate them for the difference between the higher price they
paid to buy their inventory and the new lower prices. In addition, like other
manufacturers, we are exposed to the risk of product returns from distributors,
either through their exercise of contractual return rights or as a result of our
strategic interest in assisting distributors in balancing inventories.
Our distributors, retailers and resellers also sell products offered by our
competitors. If our competitors offer our distributors, retailers and resellers
more favorable terms, those distributors, retailers and resellers may
de-emphasize or decline to carry our products. In the future, we may not be able
to retain or attract a sufficient number of qualified distributors, retailers
and resellers. Further, distributors, retailers and resellers may not recommend,
or continue to recommend, our products. If we are unable to maintain successful
relationships with distributors, retailers and resellers or to expand our
distribution channels, our business will suffer.
We believe our distributors, retailers and traditional resellers are
experiencing heightened competition from Internet-based suppliers that
distribute directly to end-user customers. We also sell our products directly to
end-user customers from our Palm.com website. These actions could cause conflict
among our channels of distribution, which could seriously harm our revenues and
results of operations.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH EXISTING OR NEW COMPETITORS, OUR
RESULTING LOSS OF COMPETITIVE POSITION COULD RESULT IN PRICE REDUCTIONS, FEWER
CUSTOMER ORDERS, REDUCED MARGINS AND LOSS OF MARKET SHARE.
We compete in the handheld device, operating system software and Internet
services markets. The markets for these products and services are highly
competitive and we expect competition to increase in the future. Some of our
competitors or potential competitors have significantly greater financial,
technical and marketing resources than we do. These competitors may be able to
respond more rapidly than Palm to new or emerging technologies or changes in
customer requirements. They may also devote greater resources to the
development, promotion and sale of their products than we do.
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Our handheld computing device products compete with a variety of smart
handheld devices, including keyboard-based devices, sub-notebook computers,
smart phones and two-way pagers. Our principal competitors include Casio,
Compaq, Hewlett-Packard, Psion, Sharp and Palm platform licensees such as
TRG and Handspring.
Our Palm platform competes primarily with operating systems such as
Microsoft's Windows CE for palm-sized personal computers and Symbian's EPOC
for wireless devices. New product introductions based on both the Windows
CE and EPOC operating systems have recently been announced. Licensees of
our Palm platform are under no obligation to introduce new products based
on our operating system, and may elect to use an alternative operating
system, in which case we may not be able to increase our revenue from
licensing the Palm platform, or expand the proliferation of the Palm
economy.
Our Internet services compete with a variety of alternative technologies
and services, such as those based on different industry standards for
wireless Internet access, information appliances that provide Internet
connectivity and other traditional and developing methods. Potential
competitors to our wireless internet services include Research in Motion
Limited and Omnisky.
We expect our competitors to continue to improve the performance of their
current products and services and to introduce new products, services and
technologies. For example, Microsoft has announced that it is planning to
introduce a new version of its Windows CE operating system within the next
month. We believe that Microsoft plans to invest aggressively to assist its
licensees in marketing the Pocket PC line of handheld computers based on this
new version of the Windows CE operating system. Successful new product
introductions or enhancements by our competitors could reduce the sales and
market acceptance of our products and services, cause intense price competition
or make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We cannot be sure that we will have sufficient resources to
make these investments or that we will be able to make the technological
advances necessary to be competitive. Increased competition could result in
price reductions, fewer customer orders, reduced margins and loss of market
share. Our failure to compete successfully against current or future competitors
could seriously harm our business, financial condition and results of
operations.
IF WE FAIL TO EFFECTIVELY RESPOND TO COMPETITION FROM PRODUCTS INTRODUCED BY
LICENSEES OF OUR PALM PLATFORM OR IF OUR LICENSEES FAIL TO SELL PRODUCTS BASED
ON THE PALM PLATFORM, OUR RESULTS OF OPERATIONS MAY SUFFER AS THE REVENUES WE
RECEIVE FROM LICENSE FEES MAY NOT COMPENSATE FOR THE LOSS OF REVENUES FROM OUR
DEVICE PRODUCTS.
The success of our business depends on both the sale of handheld device
products and the licensing of our Palm platform. However, licensees of our
Palm platform offer products that compete directly or indirectly with our
handheld computing devices. For example, licensees such as Nokia, Sony or
QUALCOMM may use our Palm platform in devices such as mobile phones or other
similar products that can compete indirectly with our handheld devices. In
addition, while we expect to receive licensing revenue from Handspring and
TRG, our device products compete directly for users and distributors with
their devices. If revenues from our handheld devices suffer because of
competition from licensees of our Palm platform, our results of operations
would suffer and our ability to implement our business model would be
seriously challenged. In addition, our licensees may not be successful in
selling products based on the Palm platform, which could harm our business
and results of operations.
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OUR PALM PLATFORM AND HANDHELD DEVICES MAY CONTAIN ERRORS OR DEFECTS, WHICH
COULD RESULT IN THE REJECTION OF OUR PRODUCTS AND DAMAGE TO OUR REPUTATION, AS
WELL AS LOST REVENUES, DIVERTED DEVELOPMENT RESOURCES AND INCREASED SERVICE
COSTS AND WARRANTY CLAIMS.
Our Palm platform and our devices are complex and must meet stringent user
requirements. We must develop our software and hardware products quickly to keep
pace with the rapidly changing handheld device market. Products and services as
sophisticated as ours are likely to contain undetected errors or defects,
especially when first introduced or when new models or versions are released. We
have in the past experienced delays in releasing some models and versions of our
products until problems were corrected. Our products may not be free from errors
or defects after commercial shipments have begun, which could result in the
rejection of our products, damage to our reputation, lost revenues, diverted
development resources and increased customer service and support costs and
warranty claims. Any of these results could harm our business.
IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, WE MAY NOT BE ABLE TO SUCCESSFULLY
MANAGE OUR BUSINESS, WHICH COULD CAUSE US TO FAIL TO MEET OUR CUSTOMER DEMAND OR
TO ATTRACT NEW CUSTOMERS.
Our ability to successfully offer our products and implement our business plan
in a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations domestically and
internationally and have grown our shipments and headcount substantially. At
December 31, 1999, we had a total of approximately 652 employees. At February
25, 2000 we had a total of approximately 878 employees. In addition, we plan to
continue to hire a significant number of employees this year. This growth has
placed, and our anticipated growth in future operations will continue to place,
a significant strain on our management systems and resources and increase our
expenses.
We expect that we will need to continue to improve our financial and managerial
controls, reporting systems and procedures. While we are currently implementing
stand-alone versions of most of the transaction processing systems historically
used by 3Com, we may decide to purchase new systems in the future that more
closely match our business needs and incur significant additional expenses in
connection with those systems. In addition, we will need to continue to expand,
train and manage our work force worldwide.
Furthermore, we expect that we will be required to manage multiple relationships
with various customers and other third parties. In particular, we are
implementing a new administrative and managerial infrastructure due to our
separation from 3Com. Our future success depends on the implementation of this
infrastructure.
THE MARKET FOR THE DELIVERY OF INTERNET SERVICES THROUGH HANDHELD DEVICES IS
NEW AND RAPIDLY EVOLVING, AND OUR BUSINESS AND OUR ABILITY TO GENERATE
REVENUES FROM OUR HANDHELD DEVICES, PALM PLATFORM OR INTERNET SERVICES COULD
SUFFER IF THIS MARKET DOES NOT DEVELOP OR WE FAIL TO ADDRESS THIS MARKET
EFFECTIVELY.
The market for the delivery of Internet services through handheld devices is
new and rapidly evolving. In addition, our Internet services strategy has
been developed only recently, and we must continue to adapt it to compete in
the rapidly evolving Internet services market. We only recently introduced
our Palm.Net(TM) service, a subscription-based wireless access service that
enables Palm VII users to access
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web-clipped content on the Internet. Other competitors
have introduced or developed, or are in the process of introducing or
developing, products that facilitate the delivery of Internet services through
handheld devices. We cannot assure you that individuals currently using
competing products to access the Internet remotely, such as portable personal
computers and wireless telephones, will widely adopt handheld devices as a means
of accessing Internet services. Accordingly, it is extremely difficult to
predict which products will be successful in this market or the future size and
growth of this market. In addition, given the limited history and rapidly
evolving nature of this market, we cannot predict the price that wireless
subscribers will be willing to pay for these products and services. These risks
could affect our ability to support the Palm.Net service on a large scale and
price the service at a level that produces expected returns.
WE MAY NOT BE ABLE TO DELIVER INTERNET ACCESS IF OUR TELECOMMUNICATIONS CARRIER
RAISES ITS RATES, DISCONTINUES DOING BUSINESS WITH US OR DOES NOT DELIVER
ACCEPTABLE SERVICE.
The future success of our Internet services business substantially depends on
the capacity, affordability, reliability and security of our telecommunications
networks. Only a small number of telecommunications providers offer the network
services we require. We currently rely on BellSouth to provide all of our Palm
VII wireless network services pursuant to an agreement. Our agreement with
BellSouth permits each party to terminate the agreement on an annual basis. If
BellSouth failed to provide us with service at rates acceptable to us or at all,
we may not be able to provide Internet access to our users. In addition, our
Palm VII products are configured around the frequency standard used by
BellSouth. If we needed to switch to another telecommunications carrier, we
would have to redesign significant portions of our software and hardware to
permit transmission on a different frequency and service to users of existing
Palm VII products would be disrupted. If we were required to redesign these
elements, our Internet services part of our business could be adversely
affected. If BellSouth delivers unacceptable service, the quality of our
Internet services would suffer and we would likely lose users who are
dissatisfied with our service. In addition, BellSouth provides service only in
the continental United States.
WE MAY NOT BE ABLE TO SUCCESSFULLY EXPAND OUR WIRELESS INTERNET SERVICES INTO
INTERNATIONAL MARKETS.
We intend to expand our network services to support Internet services
internationally, but doing so will require us to enter into new relationships
with telecommunications providers abroad. We may not be able to enter into
relationships with international telecommunications providers which are on
favorable terms to us. In addition, because many international
telecommunications providers use different standards and transmit data on
different frequencies than BellSouth, we are likely to incur incremental
expenses related to the redesign of significant portions of our software and
hardware.
OUR REPUTATION AND ABILITY TO GENERATE REVENUES WILL BE HARMED IF DEMAND FOR OUR
INTERNET SERVICES EXCEEDS OUR TELECOMMUNICATIONS AND NETWORK CAPACITY.
We may from time to time experience increases in our Internet services usage
which exceed our available telecommunications capacity and the capacity of our
third-party network servers. As a result, users may be unable to register or log
on to our service, may experience a general slow-down in their Internet access
or may be disconnected from their sessions. Excessive user demand could also
result in system failures of our third-party network servers' networks.
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Inaccessibility, interruptions or other limitations on the ability to access our
service due to excessive user demand, or any failure of our third-party network
servers to handle user traffic, would have a material adverse effect on our
reputation and our revenues.
WE PLAN TO EXPAND OUR DIRECT E-COMMERCE OPERATION, AND OUR ABILITY TO GENERATE
REVENUES FROM OUR INTERNET SERVICES COULD BE HARMED IF THIS OPERATION IS NOT
SUCCESSFUL.
We may not be able to achieve any or all of the necessary components of a
successful e-commerce operation. We intend to expand our Palm.com and Palm.Net
websites. This expansion will require additional expenditures. These
expenditures are anticipated to exceed revenues from these services over the
next few years. We have little experience in implementing or operating a direct
e-commerce business, and if we are not successful in operating it or in
successfully managing our current sales channels alongside our direct e-commerce
channel, our business and financial condition could be materially harmed.
OUR INTERNET SERVICES BUSINESS PROSPECTS COULD SUFFER IF THE INTERNET DOES NOT
CONTINUE TO GROW AS A MEDIUM FOR INTERACTIVE CONTENT AND SERVICES.
Our future success depends in part on the continued growth and reliance by
consumers and businesses on the Internet, particularly in the market for
Internet services and networking of handheld computing devices. Use and growth
of the Internet will depend in significant part on continued rapid growth in the
number of households and commercial, educational and government institutions
with access to the Internet. The use and growth of the Internet will also depend
on the number and quality of products and services designed for use on the
Internet. Because use of the Internet as a source of information, products and
services is a relatively recent phenomenon, it is difficult to predict whether
the number of users drawn to the Internet will continue to increase and whether
the market for commercial use of the Internet will continue to develop and
expand. Internet use patterns may decline as the novelty of the medium recedes.
The rapid rise in the number of Internet users and the growth of electronic
commerce and applications for the Internet has placed increasing strains on the
Internet's communications and transmission infrastructure. This could lead to
significant deterioration in transmission speeds and the reliability of the
Internet as a commercial medium and could reduce the use of the Internet by
businesses and individuals. The Internet may not be able to support the demands
placed upon it by this continued growth. Any failure of the Internet to support
growth due to inadequate infrastructure or for any other reason would seriously
limit its development as a viable source of commercial and interactive content
and services. This could impair the development and acceptance of our Internet
services which could in turn harm our business prospects.
IF THE SECURITY OF OUR WEBSITES IS COMPROMISED, OUR REPUTATION COULD SUFFER
AND CUSTOMERS MAY NOT BE WILLING TO USE OUR INTERNET SERVICES, WHICH COULD
CAUSE OUR REVENUES TO DECLINE.
A significant barrier to widespread use of electronic commerce sites, such as
our Palm.com site, and network services sites, such as our Palm.Net site, is
concern for the security of confidential information transmitted over public
networks. Despite our efforts to protect the integrity of our Palm.com and
Palm.Net sites, a party may be able to circumvent our security measures and
could misappropriate proprietary information or cause interruptions in our
operations and damage our reputation. Any such
23
<PAGE>
action could negatively affect our customers' willingness to engage in online
commerce with us. We may be required to expend significant capital and other
resources to protect against these security breaches or to alleviate problems
caused by these breaches.
WE MAY NOT BE ABLE TO MAINTAIN AND EXPAND OUR BUSINESS IF WE ARE NOT ABLE TO
RETAIN, HIRE AND INTEGRATE SUFFICIENT QUALIFIED PERSONNEL.
Our future success depends partly on the continued contribution of our key
executive, technical, sales, marketing, supply chain and administrative
personnel. It also depends on our ability to expand, integrate and retain our
management team. Many members of our senior management have been with the
business only a short time. In addition, recruiting and retaining skilled
personnel, including software and hardware engineers, is highly competitive. If
we fail to retain, hire and integrate qualified employees and contractors, we
will not be able to maintain and expand our business.
THIRD PARTIES HAVE CLAIMED AND MAY CLAIM IN THE FUTURE WE ARE INFRINGING THEIR
INTELLECTUAL PROPERTY, AND WE COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING
EXPENSES OR BE PREVENTED FROM SELLING PRODUCTS IF THESE CLAIMS ARE SUCCESSFUL.
In the course of our business, we frequently 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 we must negotiate licenses or cross-licenses to incorporate or use the
proprietary technologies in our products. Third parties may claim that we or our
customers or Palm platform licensees are infringing their intellectual property
rights, and we may be found to infringe those intellectual property rights and
require a license to use those rights. We may be unaware of intellectual
property rights of others that may cover some of our technology, products and
services. Moreover, in connection with future intellectual property infringement
claims, we will not have the benefit of asserting counterclaims based on 3Com's
intellectual property portfolio, and we will not be able to offer licenses to
3Com's intellectual property rights in order to resolve claims.
Any litigation regarding patents or other intellectual property could be costly
and time-consuming, and divert our management and key personnel from our
business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require us to enter into costly
royalty or license agreements or indemnify our Palm platform licensees. However,
we may not be able to obtain royalty or license agreements on terms acceptable
to us, or at all. We also may be subject to significant damages or injunctions
against development and sale of our products.
We often rely on licenses of intellectual property for use in our business. We
cannot assure you that these licenses will be available in the future on
favorable terms or at all. In addition, our position with respect to the
negotiation of licenses may deteriorate as a result of our separation from 3Com.
For example, we are currently re-negotiating a Patent Cross License Agreement
between 3Com and IBM to name us as an additional licensee. The re-negotiation
will likely require us to pay additional royalties to IBM. If we do not
successfully re-negotiate this agreement, we may not be able to continue to
license certain IBM technology after our separation from 3Com on favorable
terms, or at all, which could have a material adverse effect on our business.
24
<PAGE>
IF THIRD PARTIES INFRINGE OUR INTELLECTUAL PROPERTY, WE MAY EXPEND SIGNIFICANT
RESOURCES ENFORCING OUR RIGHTS OR SUFFER COMPETITIVE INJURY.
Our success depends in large part on our proprietary technology. We rely on a
combination of patents, copyrights, trademarks and trade secrets,
confidentiality provisions and licensing arrangements to establish and protect
our proprietary rights. If we fail to protect or to enforce our intellectual
property rights successfully, our competitive position could suffer, which could
harm our operating results.
Our pending patent and trademark registration applications may not be allowed or
competitors may challenge the validity or scope of these patent applications or
trademark registrations. In addition, our patents may not provide us a
significant competitive advantage.
We may be required to spend significant resources to monitor and police our
intellectual property rights. We may not be able to detect infringement and may
lose competitive position in the market before we do so. In addition,
competitors may design around our technology or develop competing technologies.
Intellectual property rights may also be unavailable or limited in some foreign
countries, which could make it easier for competitors to capture market share.
In the past, there have been several thefts of computer equipment from us and
our employees. This computer equipment has contained proprietary information. We
have formulated a security plan to reduce the risk of any future thefts and have
cooperated with state and federal law enforcement officials in an investigation
of past incidents. We may not be successful in preventing future thefts, or in
preventing those responsible for past thefts from using our technology to
produce competing products. The unauthorized use of Palm technology by
competitors could have a material adverse effect on our ability to sell our
products in some markets.
OUR FUTURE RESULTS COULD BE HARMED BY ECONOMIC, POLITICAL, REGULATORY AND OTHER
RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS.
Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. We anticipate that revenue from
international operations will represent an increasing portion of our total
revenue. In addition, two of the facilities where our devices are manufactured
are located outside the United States. Accordingly, our future results could be
harmed by a variety of factors, including:
changes in foreign currency exchange rates;
changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
trade protection measures and import or export licensing requirements;
potentially negative consequences from changes in tax laws;
difficulty in managing widespread sales and manufacturing operations; and
less effective protection of intellectual property.
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<PAGE>
WE INTEND TO PURSUE STRATEGIC ACQUISITIONS AND WE MAY NOT BE ABLE TO
SUCCESSFULLY MANAGE OUR OPERATIONS IF WE FAIL TO SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES.
We often evaluate acquisition opportunities that could provide us with
additional product or services offerings or additional industry expertise. Any
future acquisition could result in difficulties assimilating acquired operations
and products, diversion of capital and management's attention away from other
business issues and opportunities and amortization of acquired intangible
assets. Integration of acquired companies may result in problems related to
integration of technology and inexperienced management teams. Our management has
had limited experience in assimilating acquired organizations and products into
our operations. We may not successfully integrate any operations, personnel or
products that we may acquire in the future. If we fail to successfully integrate
acquisitions, our business could be materially harmed.
OUR ABILITY TO PURSUE MERGERS AND ACQUISITIONS MAY BE LIMITED.
3Com has sought a ruling from the Internal Revenue Service that the distribution
of 3Com's shares of Palm common stock to 3Com's stockholders will be not be
taxable. Such ruling is expected to require 3Com and Palm, for up to two years
following the distribution date, not to engage in certain transactions that
would constitute a change of more than 50% of the equity interest in either
company. In addition, the ruling is expected to require that until the
distribution date, 3Com must maintain at least an 80% controlling interest in
Palm. Consequently, our ability to engage in mergers and acquisitions may be
limited by these requirements. If either 3Com or Palm fail to conform to
requirements set forth in the ruling, there would be material adverse
consequences, potentially including making the distribution taxable, and causing
the company which was responsible for such non-conformance to indemnify the
other company for any resulting damages.
RISKS RELATED TO OUR SEPARATION FROM 3COM
WE CURRENTLY USE 3COM'S OPERATIONAL AND ADMINISTRATIVE INFRASTRUCTURE, AND OUR
ABILITY TO SATISFY OUR CUSTOMERS AND OPERATE OUR BUSINESS WILL SUFFER IF WE DO
NOT DEVELOP OUR OWN INFRASTRUCTURE QUICKLY AND COST-EFFECTIVELY.
We currently use 3Com's systems to support our operations, including systems to
manage inventory, order processing, human resources, shipping, accounting,
payroll and internal computing operations. Many of these systems are proprietary
to 3Com and are very complex. These systems have been modified, and are in the
process of being further modified, to enable us to separately track items
related to our business. These modifications, however, may result in unexpected
system failures or the loss or corruption of data.
We are in the process of creating our own systems to replace 3Com's systems. We
may not be successful in implementing these systems and transitioning data from
3Com's systems to ours.
Any failure or significant downtime in 3Com's or our own information systems
could prevent us from taking customer orders, shipping products or billing
customers and could harm our business. In addition, 3Com's and our
information systems require the services of employees with extensive
knowledge of these information systems and the business environment in which
we operate. In order to successfully implement and operate our systems, we
must be able to attract and retain a significant
26
<PAGE>
number of highly skilled employees. If we fail to attract and retain the
highly skilled personnel required to implement, maintain, and operate our
information systems, our business could suffer.
In addition, we currently have office space in 3Com's Santa Clara campus. We
have entered into arrangements with 3Com to lease these facilities under a lease
that is terminable with six months notice beginning in July 2001 and expires in
July 2002. After this transition period, we will need to find alternative
facilities. If we fail to find replacement facilities in a timely fashion, our
business will be harmed.
OUR STOCK PRICE MAY DECLINE AND WE WILL NOT BE ABLE TO OPERATE OUR BUSINESS
WITHOUT 3COM'S CONTROL IF 3COM DOES NOT COMPLETE ITS DISTRIBUTION OF OUR COMMON
STOCK.
Approximately four to six months following our initial public offering, 3Com
intends to distribute its remaining shares of Palm common stock to 3Com
stockholders, subject to receiving 3Com board approval and a ruling from the
Internal Revenue Service that the distribution will not be taxable. This
distribution may not occur by that time or at all. We do not know yet what the
ruling from the Internal Revenue Service regarding the tax treatment of the
separation and the distribution will be. If 3Com does not receive a favorable
tax ruling, it is not likely to make the distribution in the expected time frame
or at all. In addition, until this distribution occurs, the risks discussed
below relating to 3Com's control of us and the potential business conflicts of
interest between 3Com and us will continue to be relevant to our stockholders.
If the distribution is delayed or not completed at all, the liquidity of our
shares in the market will be severely constrained unless and until 3Com elects
to sell some of its significant ownership. There are no limits on these sales
and the sale or potential sale by 3Com could adversely affect market prices. In
addition, because only approximately 5% of our outstanding common stock is
publicly traded, trades of a relatively small percentage of our outstanding
stock could have a disproportionate effect on our stock price. Also, if 3Com
does not distribute its shares, we will face significant difficulty hiring and
retaining key personnel, many of whom are attracted by the potential of
operating our business as a fully independent entity.
WE WILL BE CONTROLLED BY 3COM AS LONG AS IT OWNS A MAJORITY OF OUR COMMON STOCK,
AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF STOCKHOLDER
VOTING DURING SUCH TIME.
3Com owns approximately 94% of our outstanding common stock. As long as 3Com
owns a majority of our outstanding common stock, 3Com will be able to change the
composition of our board of directors without calling a special meeting, and
therefore, control any aspect of our business direction and policies.
Stockholders other than 3Com will not be able to affect the outcome of any
stockholder vote prior to the planned distribution of our stock to the 3Com
stockholders.
OUR HISTORICAL FINANCIAL INFORMATION MAY NOT BE REPRESENTATIVE OF OUR RESULTS AS
A SEPARATE COMPANY.
Our consolidated financial statements have been carved out from the
consolidated financial statements of 3Com using the historical results of
operations and historical bases of the assets and liabilities of the 3Com
handheld computing business that we comprise. Accordingly, the historical
financial information does not necessarily reflect what our financial
position, results of operations and cash flows would have been had we been a
separate, stand-alone entity during the periods presented. 3Com did not
account for us, and we were not operated, as a separate, stand-alone entity
for the periods presented.
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<PAGE>
Our costs and expenses include allocations from 3Com for centralized
corporate services and infrastructure costs, including:
legal;
accounting;
treasury;
real estate;
information technology;
distribution;
customer service;
sales;
marketing; and
engineering.
These allocations have been determined on bases that 3Com and Palm considered to
be reasonable reflections of the utilization of services provided to or the
benefit received by Palm. The historical financial information is not
necessarily indicative of what our results of operations, financial position and
cash flows will be in the future. We have not made adjustments to our historical
financial information to reflect many significant changes that will occur in our
cost structure, funding and operations as a result of our separation from 3Com,
including increased costs associated with reduced economies of scale, increased
marketing expenses related to building a company brand identity separate from
3Com and increased costs associated with being a publicly traded, stand-alone
company.
WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH 3COM WITH RESPECT TO
OUR PAST AND ONGOING RELATIONSHIPS AND, BECAUSE OF 3COM'S CONTROLLING OWNERSHIP,
WE MAY NOT RESOLVE THESE CONFLICTS ON THE MOST FAVORABLE TERMS TO US.
Conflicts of interest may arise between 3Com and us in a number of areas
relating to our past and ongoing relationships, including:
labor, tax, employee benefit, indemnification and other matters arising
from our separation from 3Com;
intellectual property matters;
employee retention and recruiting;
sales or distributions by 3Com of all or any portion of its ownership
interest in us;
the nature, quality and pricing of transitional services 3Com has agreed to
provide us; and
business opportunities that may be attractive to both 3Com and us.
Nothing restricts 3Com from competing with us.
We may not be able to resolve any potential conflicts, and even if we do, the
resolution may be less favorable than if we were dealing with an unaffiliated
party. The agreements we have entered into with
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<PAGE>
3Com may be amended upon agreement between the parties. While we are
controlled by 3Com, 3Com may be able to require us to agree to amendments to
these agreements that may be less favorable to us than the current terms of
the agreements.
OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST BECAUSE OF
THEIR OWNERSHIP OF 3COM COMMON STOCK.
Many of our directors and executive officers have a substantial amount of their
personal financial portfolios in 3Com common stock and options to purchase 3Com
common stock. Their options to purchase 3Com common stock may not convert into
options to purchase our common stock if the distribution does not occur.
Ownership of 3Com common stock by our directors and officers could create
potential or perceived conflicts of interest when directors and officers are
faced with decisions that could have different implications for 3Com and us.
IF THE TRANSITIONAL SERVICES BEING PROVIDED TO US BY 3COM ARE NOT SUFFICIENT TO
MEET OUR NEEDS, OR IF WE ARE NOT ABLE TO REPLACE THESE SERVICES AFTER OUR
AGREEMENTS WITH 3COM EXPIRE, WE WILL BE UNABLE TO MANAGE CRITICAL OPERATIONAL
FUNCTIONS OF OUR BUSINESS.
3Com is providing transitional services to us, including services related to:
information technology systems;
supply chain;
human resources administration;
product order administration;
customer service;
buildings and facilities;
treasury; and
legal, finance and accounting.
Although 3Com is contractually obligated to provide us with these services,
these services may not be provided at the same level as when we were part of
3Com, and we may not be able to obtain the same benefits. We will also lease
and sublease office space from 3Com. These transitional service and leasing
arrangements generally have a term of less than two years following the
separation. After the expiration of these various arrangements, we may not be
able to replace the transitional services or enter into appropriate leases in
a timely manner or on terms and conditions, including cost, as favorable as
those we will receive from 3Com.
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<PAGE>
These agreements were made in the context of a parent-subsidiary relationship
and were negotiated in the overall context of our separation from 3Com. The
prices charged to us under these agreements may be lower than the prices that we
may be required to pay third parties for similar services or the costs of
similar services if we undertake them ourselves.
RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK
SUBSTANTIAL SALES OF COMMON STOCK MAY OCCUR IN CONNECTION WITH THE DISTRIBUTION,
WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.
3Com intends to distribute the remaining shares of our common stock to 3Com
stockholders approximately four to six months after our initial public offering.
Substantially all of these shares will be eligible for immediate resale in the
public market. We are unable to predict whether significant amounts of common
stock will be sold in the open market in anticipation of, or following, this
distribution, or by 3Com if the distribution does not occur. We are also unable
to predict whether a sufficient number of buyers will be in the market at that
time. Any sales of substantial amounts of common stock in the public market, or
the perception that such sales might occur, whether as a result of this
distribution or otherwise, could harm the market price of our common stock.
OUR SECURITIES HAVE NOT BEEN PUBLICLY TRADED VERY LONG AND OUR STOCK PRICE MAY
BE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND VOLATILITY.
Our common stock has been publicly traded only since March 2, 2000. The market
price of our common stock has been subject to significant fluctuations since the
date of our initial public offering. These fluctuations could continue. Among
the factors that could affect our stock price are:
quarterly variations in our operating results;
changes in revenue or earnings estimates or publication of research reports
by analysts;
speculation in the press or investment community;
strategic actions by us or our competitors, such as acquisitions or
restructurings;
actions by institutional stockholders or by 3Com prior to its distribution
of our stock;
fluctuations in 3Com's stock price;
general market conditions; and
domestic and international economic factors unrelated to our performance.
The stock markets in general, and the markets for high technology stocks in
particular, have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock.
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PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT
ACQUISITION OF US, WHICH COULD DECREASE THE VALUE OF YOUR SHARES.
Our certificate of incorporation and bylaws and Delaware law contain provisions
that could make it harder for a third party to acquire us without the consent of
our board of directors, although these provisions have little significance while
we are controlled by 3Com. These provisions include a classified board of
directors and limitations on actions by our stockholders by written consent. In
addition, our board of directors has the right to issue preferred stock without
stockholder approval, which could be used to dilute the stock ownership of a
potential hostile acquirer. Delaware law also imposes some restrictions on
mergers and other business combinations between us and any holder of 15% or more
of our outstanding common stock. Although we believe these provisions provide
for an opportunity to receive a higher bid by requiring potential acquirers to
negotiate with our board of directors, these provisions apply even if the offer
may be considered beneficial by some stockholders.
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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
As of February 25, 2000, we had cash and cash equivalents of $40.0 million which
consisted of highly liquid money market instruments with maturities less than 90
days. Because of the short maturities of these instruments, a sudden change in
market interest rates would not have a material impact on the fair value of the
portfolio. We would not expect our operating results or cash flows to be
affected to any significant degree by the effect of a sudden change in market
interest rates on our portfolio. Subsequent to the end of the quarter, the net
proceeds from our initial public offering and private placements have been
invested in highly liquid money market funds and other high credit quality
short-term securities.
FOREIGN CURRENCY EXCHANGE RISK
Historically, our exposure to exchange rate risk has been managed on an
enterprise-wide basis as part of 3Com's risk management strategy. This
strategy has utilized foreign exchange forward and option contracts to hedge
certain balance sheet exposures and intercompany balances against future
movements in foreign exchange rates. Gains and losses on the forward and
option contracts are largely offset by gains and losses on the underlying
exposure and consequently a sudden or significant change in foreign exchange
rates would not have a material impact on future net income or cash flows. We
are currently evaluating our exchange rate risk management strategy. We do
not currently and do not intend in the future to utilize derivative financial
instruments for trading purposes.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 28, 1997, Xerox Corporation filed suit against U.S. Robotics
Corporation and U.S. Robotics Access Corp. in the United States District Court
for the Western District of New York. The case is now captioned: XEROX
CORPORATION v. U.S. ROBOTICS CORPORATION, U.S. ROBOTICS ACCESS CORP., PALM
COMPUTING, INC. AND 3COM CORPORATION, Civil Action No. 97-CV-6182T. The
complaint alleges willful infringement of a Xerox United States patent, relating
to computerized interpretation of handwriting. The complaint seeks unspecified
damages and injunctive relief. Xerox has asserted that Graffiti software and
certain of our products infringe the patent. On January 18, 2000, the court held
a status hearing during which it ordered that all of the parties' briefs
relating to motions for summary judgment would be filed with the court by April
28, 2000. We anticipate that oral argument on these motions will be heard
thereafter. No trial date has been set.
On July 22, 1999, we filed a copyright infringement action against Olivetti and
CompanionLink in the United States District Court for the Northern District of
California and obtained a preliminary injunction against further distribution,
sale, import or export of Olivetti Office USA's "Royal daVinci" handheld device
and the daVinci OS Software Development Kit, distributed by CompanionLink
Software, Inc. The injunction is to remain in effect pending the outcome of the
lawsuit. We also initiated a copyright infringement action in Hong Kong on July
21, 1999, against EchoLink Design Ltd., the company responsible for developing
the operating system software contained in the daVinci products. The High Court
of the Hong Kong Special Administrative Region issued an order the same day
restraining EchoLink from further copying, distribution, sale, import or export
of Palm OS operating system source code or EchoLink's "NEXUS OS" source code,
which we maintain infringes our copyrights.
On December 13, 1999, WaveWare Communications, Inc. filed suit against 3Com,
Palm and others in the Superior Court of California, San Mateo County. The case
is captioned WAVEWARE COMMUNICATIONS, INC. v. 3COM CORPORATION, PALM COMPUTING,
INC., AND MARK BERCOW, No. 411331. The complaint alleges breach of contract,
constructive fraud, fraud and deceit, negligent misrepresentation,
misappropriation of assets and trade secrets, unfair competition, unjust
enrichment and intentional interference with economic advantage in connection
with our and 3Com's discussions with WaveWare concerning WaveWare's potential
acquisition by 3Com. The complaint seeks unspecified monetary damages and
injunctive relief. The case is in the early stages of discovery. No trial date
has been set.
On December 27, 1999, Telxon Corporation and Penright! Corporation filed a
complaint in the U.S. District Court for the Northern District of Ohio, Eastern
Division (Case No. 1:99CV3157) against 3Com and Palm alleging copyright
infringement, unfair competition and theft of trade secrets. The plaintiffs
allege that the Palm OS operating system contains graphical user interface
software copied from the plaintiffs' software. The complaint seeks unspecified
compensatory and treble damages and to enjoin, among other things, distribution
and sales of the Palm OS operating system. No trial date has been set. No
discovery has been exchanged.
On February 28, 2000, E-Pass Technologies, Inc. filed suit against 3Com in the
United States District Court for the Southern District of New York (case no.
00CIV1523). The complaint alleges infringement and induced infringement of
United States patent 5,276,311 by our handheld devices in connection with a
method and device for simplifying the use of credit cards. The complaint seeks
unspecified compensatory and treble damages and, among other things, to
permanently enjoin us from infringing or
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<PAGE>
inducing infringement of the patent as alleged. We have not yet responded to
the complaint. No trial date has been set. No discovery has been exchanged.
In connection with our separation from 3Com, pursuant to the terms of the
Indemnification and Insurance Matters Agreement between us and 3Com, we will
indemnify and hold 3Com harmless for any damages or losses which may arise out
of the Xerox, WaveWare, Telxon and Penright! and E-Pass litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 7, 2000, simultaneously with the closing of our initial public
offering, we sold in private placements to America Online, Inc., Motorola, Inc.
and Nokia at $38.00 per share 2,105,263 shares, 1,710,526 shares and 2,105,263
shares, respectively, of our common stock. The aggregate proceeds from these
sales were $225 million. The transactions were exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1(1) Master Separation and Distribution Agreement between 3Com and
the registrant effective as of December 13, 1999, as amended.
2.2 General Assignment and Assumption Agreement between 3Com and
the registrant, as amended.
2.3 Master Technology Ownership and License Agreement between 3Com
and the registrant.
2.4 Master Patent Ownership and License Agreement between 3Com and
the registrant.
2.5 Master Trademark Ownership and License Agreement between 3Com
and the registrant.
2.6 Employee Matters Agreement between 3Com and the registrant.
2.7 Tax Sharing Agreement between 3Com and the registrant.
2.8 Master Transitional Services Agreement between 3Com and the
registrant.
2.9 Real Estate Matters Agreement between 3Com and the registrant.
2.10 Master Confidential Disclosure Agreement between 3Com and the
registrant.
2.11 Indemnification and Insurance Matters Agreement between 3Com
and the registrant.
2.12(1) Form of Non-U.S. Plan.
3.1(1) Amended and Restated Certificate of Incorporation.
3.2(1) Bylaws.
4.1(1) Reference is made to Exhibits 3.1 and 3.2 hereof.
4.2(1) Specimen Stock Certificate.
</TABLE>
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<PAGE>
(a) Exhibits. (continued)
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1(1)* 1999 Stock Plan.
10.2(1)* Form of 1999 Stock Plan Agreements.
10.3(1)* 1999 Employee Stock Purchase Plan.
10.4(1)* Form of 1999 Employee Stock Purchase Plan Agreements.
10.5(1)* 1999 Director Option Plan.
10.6(1)* Form of 1999 Director Option Plan Agreements.
10.7(1)* Management Retention Agreement dated as of December 1, 1999 by
and between Carl J. Yankowski and the registrant.
10.8(1)* Form of Indemnification Agreement entered into by the
registrant with each of its directors and executive officers.
10.9(1)** RAM Mobile Data USA Limited Partnership Value Added Reseller
Agreement between RAM Mobile Data USA Limited Partnership (now
BellSouth Wireless Data, L.P.) and the registrant.
10.10(1)** Supply Agreement between Manufacturers' Services Salt Lake
City Operations, Inc. and the registrant.
10.11(1) Common Stock Purchase Agreement between America Online and the
registrant.
10.12(1) Common Stock Purchase Agreement between Motorola and the
registrant.
10.13(1) Common Stock Purchase Agreement Between Nokia and the
registrant.
10.14(1) Form of Management Retention Agreement.
27.1 Financial Data Schedule.
</TABLE>
(1) - Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 333-92657) filed with the Commission on December 13, 1999,
as amended.
* - Denotes an executive or director compensation plan or arrangement.
** - Confidential treatment granted on portions of this exhibit.
(b) Reports on Form 8-K
None.
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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.
Palm, Inc.
(Registrant)
Dated: April 7, 2000 By: /s/ Judy Bruner
------------- -----------------
Judy Bruner
Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
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EXHIBIT 2.2
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
FEBRUARY 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CONTRIBUTION AND ASSUMPTION.................................................................................1
Section 1.1 Contribution of Assets and Assumption of Liabilities........................................1
Section 1.2 Palm Assets.................................................................................2
Section 1.3 Palm Liabilities............................................................................3
Section 1.4 The Non-US Plan.............................................................................5
Section 1.5 Methods of Transfer and Assumption..........................................................5
Section 1.6 Governmental Approvals and Consents.........................................................6
Section 1.7 Nonrecurring Costs and Expenses.............................................................7
Section 1.8 Novation of Assumed Palm Liabilities........................................................7
ARTICLE II LITIGATION.................................................................................................8
Section 2.1 Allocation..................................................................................8
Section 2.2 Cooperation.................................................................................8
ARTICLE III MISCELLANEOUS.............................................................................................9
Section 3.1 Entire Agreement............................................................................9
Section 3.2 Governing Law...............................................................................9
Section 3.3 Notices.....................................................................................9
Section 3.4 Parties in Interest.........................................................................9
Section 3.5 Counterparts...............................................................................10
Section 3.6 Assignment.................................................................................10
Section 3.7 Severability...............................................................................10
Section 3.8 Failure or Indulgence Not Waiver; Remedies Cumulative......................................10
Section 3.9 Amendment..................................................................................10
Section 3.10 Authority..................................................................................10
Section 3.11 Interpretation.............................................................................10
Section 3.12 Conflicting Agreements.....................................................................11
ARTICLE IV DEFINITIONS...............................................................................................11
Section 4.1 3Com Group.................................................................................11
Section 4.2 Action.....................................................................................11
Section 4.3 Affiliated Company.........................................................................11
Section 4.4 Ancillary Agreement........................................................................11
Section 4.5 Assets.....................................................................................11
Section 4.6 Contracts..................................................................................13
Section 4.7 Delayed Transfer Assets....................................................................13
Section 4.8 Distribution...............................................................................13
Section 4.9 Distribution Date..........................................................................13
Section 4.10 Governmental Approvals.....................................................................13
Section 4.11 Governmental Authority.....................................................................13
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Section 4.12 Indemnification and Insurance Matters Agreement............................................13
Section 4.13 Insurance Policies.........................................................................13
Section 4.14 Insured Palm Liabilities...................................................................13
Section 4.15 Intellectual Property......................................................................14
Section 4.16 IPO Registration Statement.................................................................14
Section 4.17 Liabilities................................................................................14
Section 4.18 Local Transfer Agreements..................................................................14
Section 4.19 Non-US Plan................................................................................14
Section 4.20 OFLs.......................................................................................14
Section 4.21 Palm Balance Sheet.........................................................................15
Section 4.22 Palm Business..............................................................................15
Section 4.23 Palm Contingent Gain.......................................................................15
Section 4.24 Palm Contingent Liability..................................................................16
Section 4.25 Palm Contracts.............................................................................16
Section 4.26 Palm Group.................................................................................17
Section 4.27 Palm Pro Forma Balance Sheet...............................................................17
Section 4.28 Person.....................................................................................17
Section 4.29 Retained Payables..........................................................................17
Section 4.30 Retained Receivables.......................................................................17
Section 4.31 Security Interest..........................................................................17
Section 4.32 Separation.................................................................................18
Section 4.33 Separation Agreement.......................................................................18
Section 4.34 Separation Date............................................................................18
Section 4.35 Subsidiary.................................................................................18
Section 4.36 Taxes......................................................................................18
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(c) Delayed Transfer Assets and Liabilities
Schedule 1.2(a)(viii) Specific Palm Assets to be Transferred
Schedule 1.2(b)(i) Excluded Assets
Schedule 1.3(a)(vi) Divested Businesses Which Contain Liabilities to be Transferred to Palm
Schedule 1.3(a)(vii) Specific Palm Liabilities
Schedule 1.3(b)(i) Excluded Liabilities
</TABLE>
<PAGE>
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
This General Assignment and Assumption Agreement (this "AGREEMENT")
is entered into on February 26, 2000 between 3Com Corporation, a Delaware
corporation ("3COM"), and Palm, Inc., a Delaware corporation ("PALM").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in ARTICLE IV hereof.
RECITALS
WHEREAS, 3Com hereby and by certain other instruments of even date
herewith transfers or will transfer to Palm effective as of the Separation Date,
certain assets of the Palm Business owned by 3Com in accordance with the Master
Separation and Distribution Agreement dated as of December 13, 1999 between the
3Com and Palm Computing, Inc., a California company (the "SEPARATION
AGREEMENT").
WHEREAS, it is further intended between the parties that Palm assume
certain of the liabilities related to the Palm Business currently owed by 3Com,
as provided in this Agreement, the Separation Agreement or the other agreements
and instruments provided for in the Separation Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
SECTION 1.1 CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES.
(a) TRANSFER OF ASSETS. Effective on the Separation Date, 3Com hereby
assigns, transfers, conveys and delivers (or will cause any applicable
Subsidiary to assign, transfer, convey and deliver) to Palm, or, pursuant to
SECTION 1.4, to any applicable Palm Subsidiary, and Palm hereby accepts from
3Com, or applicable 3Com Subsidiary, and agrees to cause its applicable Palm
Subsidiary to accept, all of 3Com's and its applicable Subsidiaries' respective
right, title and interest in Palm Assets, other than the Delayed Transfer
Assets; PROVIDED, HOWEVER, that any Palm Assets that are specifically assigned
or transferred pursuant to another Ancillary Agreement shall not be assigned or
transferred pursuant to this SECTION 1.1(a).
(b) ASSUMPTION OF LIABILITIES. Effective on the Separation Date, Palm
hereby assumes and agrees faithfully to perform and fulfill (or will cause any
applicable Subsidiary to assume, perform and fulfill), all the Palm Liabilities
owed by 3Com, other than the Delayed Transfer Liabilities, in accordance with
their respective terms. Thereafter, Palm shall be responsible (or will cause any
applicable Subsidiary to be responsible) for all Palm Liabilities held by 3Com,
regardless of when or where such Liabilities arose or arise, or whether the
facts on which they are based occurred prior to,
<PAGE>
on or after the date hereof, regardless of where or against whom such
Liabilities are asserted or determined (including any Palm Liabilities
arising out of claims made by 3Com's or Palm's respective directors,
officers, consultants, independent contractors, employees or agents against
any member of the 3Com Group or the Palm Group) or whether asserted or
determined prior to the date hereof, and regardless of whether arising from
or alleged to arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any member of the 3Com Group or the Palm Group or any of
their respective directors, officers, employees or agents.
(c) DELAYED TRANSFER ASSETS AND LIABILITIES. Each of the parties hereto
agrees that the Delayed Transfer Assets will be assigned, transferred, conveyed
and delivered, and the Delayed Transfer Liabilities will be assumed, in
accordance with the terms of the agreements that provide for such assignment,
transfer, conveyance and delivery, or such assumption, after the date of this
Agreement or as otherwise set forth on SCHEDULE 1.1(c). Following such
assignment, transfer, conveyance and delivery of any Delayed Transfer Asset, or
the assumption of any Delayed Transfer Liability, the applicable Delayed
Transfer Asset or Delayed Transfer Liability shall be treated for all purposes
of this Agreement and the other Ancillary Agreements as a Palm Asset or as a
Palm Liability, as the case may be.
(d) MISALLOCATED ASSETS. In the event that at any time or from time to
time (whether prior to, on or after the Separation Date), any party hereto (or
any member of such party's respective Group), shall receive or otherwise possess
any Asset that is allocated to any other Person pursuant to this Agreement or
any Ancillary Agreement, such party shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for any such other Person.
(e) PAYMENT. Palm shall make a payment in cash to 3Com to the extent
that the value of transferred Palm Assets exceed transferred Palm Liabilities.
Similarly, 3Com shall make payment in cash to Palm to the extent that the value
of transferred Palm Liabilities exceed transferred Palm Assets. Book value shall
be used in measuring the value of the transferred Palm Assets and Palm
Liabilities, as the parties agree that book value is the best evidence of fair
market value of the transferred Palm Assets and Palm Liabilities.
SECTION 1.2 PALM ASSETS.
(a) INCLUDED ASSETS. For purposes of this Agreement, "PALM ASSETS"
shall mean (without duplication) the following Assets, except as otherwise
provided for in any other Ancillary Agreement or other express agreement of the
parties:
(i) all Assets reflected in the Palm Balance Sheet, subject to
any dispositions of such Assets subsequent to the date of the Palm Balance
Sheet;
(ii) all Assets that have been written off, expensed or fully
depreciated that, had they not been written off, expensed or fully depreciated,
would have been reflected in the Palm
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Balance Sheet in accordance with the principles and accounting policies under
which the Palm Balance Sheet was prepared;
(iii) all Assets acquired by 3Com or its Subsidiaries after
the date of the Palm Balance Sheet that would be reflected in the consolidated
balance sheet of Palm as of the Separation Date if such consolidated balance
sheet was prepared using the same principles and accounting policies under which
the Palm Balance Sheet was prepared, including any business transaction
processing that may occur on 3Com systems on behalf of Palm during the period
between separation date to initialization of the processing systems required by
Palm;
(iv) all Assets that are used primarily by the Palm Business
at the Separation Date but are not reflected in the Palm Balance Sheet due to
mistake or omission; provided, however, that no Asset shall be a Palm Asset
requiring any transfer by 3Com unless Palm or its Subsidiaries have, on or
before the first anniversary of the Distribution Date, given 3Com or its
Subsidiaries notice that such Asset is a Palm Asset;
(v) all Palm Contingent Gains;
(vi) all Palm Contracts;
(vii) to the extent permitted by law and subject to the
Indemnification and Insurance Matters Agreement, all rights of any member of the
Palm Group under any of 3Com's Insurance Policies or other insurance policies
issued by Persons unaffiliated with 3Com; and
(viii) all Assets that are expressly contemplated by this
Agreement, the Separation Agreement or any other Ancillary Agreement (or
SCHEDULE 1.2(a)(viii) or any other Schedule hereto or thereto) as Assets to be
transferred to Palm or any other member of the Palm Group.
(b) EXCLUDED ASSETS. For the purposes of this Agreement, "EXCLUDED
ASSETS" shall mean:
(i) the Assets listed or described on SCHEDULE 1.2(b)(i);
(ii) the Retained Receivables; and
(iii) any Assets that are expressly contemplated by the
Separation Agreement, this Agreement or any other Ancillary Agreement (or the
Schedules hereto or thereto) as Assets to be retained by 3Com or any other
member of the 3Com Group.
SECTION 1.3 PALM LIABILITIES.
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<PAGE>
(a) INCLUDED LIABILITIES. For the purposes of this Agreement, "PALM
LIABILITIES" shall mean (without duplication) the following Liabilities, except
as otherwise provided for in any other Ancillary Agreement or other express
agreement of the parties:
(i) all Liabilities reflected in the Palm Balance Sheet,
subject to any discharge of such Liabilities subsequent to the date of the Palm
Balance Sheet;
(ii) all Liabilities of 3Com or its Subsidiaries that arise
after the date of the Palm Balance Sheet that would be reflected in the
consolidated balance sheet of Palm as of the Separation Date if such
consolidated balance sheet was prepared using the same principles and accounting
policies under which the Palm Balance Sheet was prepared;
(iii) all Liabilities that are related primarily to the Palm
Business at the Separation Date but are not reflected in the Palm Balance Sheet
due to mistake or unintentional omission; PROVIDED, HOWEVER, that no Liability
shall be considered as a Palm Liability unless 3Com or its Subsidiaries, on or
before the first anniversary of the Distribution Date, has given Palm or its
Subsidiaries notice that such Liability is a Palm Liability;
(iv) all Palm Contingent Liabilities;
(v) all Liabilities (other than Liabilities for Taxes),
whether arising before, on or after the Separation Date, primarily relating to,
arising out of or resulting from:
(1) the operation of the Palm Business, as conducted
at any time prior to, on or after the Separation Date (including any Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether or not such act or
failure to act is or was within such Person's authority));
(2) the operation of any business conducted by any
member of the Palm Group at any time after the Separation Date (including any
Liability relating to, arising out of or resulting from any act or failure to
act by any director, officer, employee, agent or representative (whether or not
such act or failure to act is or was within such Person's authority)); or
(3) any Palm Assets;
(vi) all Liabilities relating to, arising out of or resulting
from any of the terminated, divested or discontinued businesses and operations
listed or described on SCHEDULE 1.3(a)(vi); and
(vii) all Liabilities that are expressly contemplated by this
Agreement, SCHEDULE 1.3(a)(vii), the Separation Agreement or any other Ancillary
Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by
Palm or any member of the Palm Group, and all agreements, obligations and
Liabilities of any member of the Palm Group under this Agreement or any of the
Ancillary Agreements.
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<PAGE>
Notwithstanding the foregoing, any Liabilities of any Subsidiaries of 3Com
listed on SCHEDULE 2.1(b) of the Separation Agreement shall not be assumed
pursuant to SECTION 1.2(a), and the Palm Liabilities shall not include the
Excluded Liabilities referred to in SECTION 1.3(b) below.
(b) EXCLUDED LIABILITIES. For the purposes of this Agreement, "EXCLUDED
LIABILITIES" shall mean:
(i) all Liabilities listed or described in SCHEDULE 1.3(b)(i);
(ii) the Retained Payables;
(iii) all Insured Palm Liabilities;
(iv) all Liabilities that are expressly contemplated by this
Agreement, the Separation Agreement or any other Ancillary Agreement (or the
Schedules hereto or thereto) as Liabilities to be retained or assumed by 3Com or
any other member of the 3Com Group, and all agreements and obligations of any
member of the 3Com Group under the Separation Agreement, this Agreement or any
other Ancillary Agreement.
SECTION 1.4 THE NON-US PLAN. Each of 3Com and Palm shall take, and
shall cause each member of its respective Group to take, such action as
reasonably necessary to consummate the transactions contemplated by the
Non-US Plan (whether prior to, on or after the Separation Date).
Notwithstanding anything in this Agreement, the Separation Agreement or in
any other Ancillary Agreement to the contrary, no party to a Local Transfer
Agreement shall be entitled to receive or retain any Asset unless such party
shall have paid any consideration contemplated to be paid in connection
therewith pursuant to the Non-US Plan.
SECTION 1.5 METHODS OF TRANSFER AND ASSUMPTION.
(a) TERMS OF OTHER ANCILLARY AGREEMENTS GOVERN. The parties shall enter
into the other Ancillary Agreements, on or about the date of this Agreement. To
the extent that the transfer of any Palm Asset or the assumption of any Palm
Liability is expressly provided for by the terms of any other Ancillary
Agreement, the terms of such other Ancillary Agreement shall effect, and
determine the manner of, the transfer or assumption. It is the intent of the
parties that pursuant to SECTIONS 1.1, 1.2 AND 1.3, the transfer and assumption
of all other Palm Assets and Palm Liabilities, other than Delayed Transfer
Assets and Delayed Transfer Liabilities, shall be made effective as of the
Separation Date; PROVIDED, HOWEVER, that circumstances in various jurisdictions
outside the United States may require the transfer of certain Assets and the
assumption of certain Liabilities to occur in such other manner and at such
other time as the parties shall agree, as provided in SECTION 1.4 hereof.
(b) MISTAKEN ASSIGNMENTS AND ASSUMPTIONS. In addition to those
transfers and assumptions accurately identified and designated by the parties to
take place but which the parties are not able to effect prior to the Separation
Date, there may exist (i) Assets that the parties discover were, contrary
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<PAGE>
to the agreements between the parties, by mistake or omission, transferred to
Palm or (ii) Liabilities that the parties discover were, contrary to the
agreements between the parties, by mistake or omission, assumed by Palm. The
parties shall cooperate in good faith to effect the transfer or re-transfer
of such Assets, and/or the assumption or re-assumption of such Liabilities,
to or by the appropriate party and shall not use the determination that
remedial actions need to be taken to alter the original intent of the parties
hereto with respect to the Assets to be transferred to or Liabilities to be
assumed by Palm. Each party shall reimburse the other or make other financial
adjustments (e.g., without limitation, cash reserves) or other adjustments to
remedy any mistakes or omissions relating to any of the Assets transferred
hereby or any of the Liabilities assumed hereby.
(c) DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF
LIABILITIES. In furtherance of the assignment, transfer and conveyance of Palm
Assets and the assumption of Palm Liabilities set forth in SECTIONS 1.5(a) AND
(b) and certain other Ancillary Agreements, simultaneously with the execution
and delivery hereof or as promptly as practicable thereafter, (i) 3Com shall
execute and deliver, and shall cause its Subsidiaries in accordance with Local
Transfer Agreements to execute and deliver, such bills of sale, stock powers,
certificates of title, assignments of contracts and other instruments of
transfer, conveyance and assignment as and to the extent necessary to evidence
the transfer, conveyance and assignment of all of 3Com's and its Subsidiaries'
right, title and interest in and to the Palm Assets to Palm and (ii) Palm shall
execute and deliver to 3Com and its Subsidiaries such assumptions of contracts
and other instruments of assumption as and to the extent necessary to evidence
the valid and effective assumption of the Palm Liabilities by Palm.
SECTION 1.6 GOVERNMENTAL APPROVALS AND CONSENTS.
(a) TRANSFER IN VIOLATION OF LAWS. If and to the extent that the valid,
complete and perfected transfer assignment or novation to the Palm Group of any
Palm Assets and Palm Liabilities (or from the Palm Group of any Non-Palm Assets)
would be a violation of applicable laws or require any Consent or Governmental
Approval in connection with the Separation, the IPO or the Distribution, then,
unless 3Com shall otherwise determine, the transfer, assignment or novation to
or from the Palm Group, as the case may be, of such Palm Assets or Non-Palm
Assets, respectively, shall be automatically deemed deferred and any such
purported transfer, assignment or novation shall be null and void until such
time as all legal impediments are removed and/or such Consents or Governmental
Approvals have been obtained. Notwithstanding the foregoing, such Asset shall
still be considered a Palm Asset for purposes of determining whether any
Liability is a Palm Liability; PROVIDED, HOWEVER, that if such covenants or
Governmental Approvals have not been obtained within six months of the
Distribution Date, the parties will use their reasonable commercial efforts to
achieve an alternative solution in accordance with the parties' intentions.
(b) TRANSFERS NOT CONSUMMATED PRIOR TO SEPARATION DATE. If the
transfer, assignment or novation of any Assets intended to be transferred or
assigned hereunder, including pursuant to the Non-US Plan, is not consummated
prior to or on the Separation Date, whether as a result of the provisions of
SECTION 1.6(a) or for any other reason, then the Person retaining such Asset
shall
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<PAGE>
thereafter hold such Asset for the use and benefit, insofar as reasonably
possible, of the Person entitled thereto (at the expense of the Person
entitled thereto). In addition, the Person retaining such Asset shall take
such other actions as may be reasonably requested by the Person to whom such
Asset is to be transferred in order to place such Person, insofar as
reasonably possible, in the same position as if such Asset had been
transferred as contemplated hereby and so that all the benefits and burdens
relating to such Palm Assets (or such Non-Palm Assets, as the case may be),
including possession, use, risk of loss, potential for gain, and dominion,
control and command over such Assets, are to inure from and after the
Separation Date to the Palm Group (or the 3Com Group, as the case may be). If
and when the Consents and/or Governmental Approvals, the absence of which
caused the deferral of transfer of any Asset pursuant to SECTION 1.6(a), are
obtained, the transfer of the applicable Asset shall be effected in
accordance with the terms of this Agreement and/or such other applicable
Ancillary Agreement.
(c) EXPENSES. The Person retaining an Asset due to the deferral of the
transfer of such Asset shall not be obligated, in connection with the foregoing,
to expend any money unless the necessary funds are advanced by the Person
entitled to the Asset, other than reasonable out-of-pocket expenses, attorneys'
fees and recording or similar fees, all of which shall be promptly reimbursed by
the Person entitled to such Asset.
SECTION 1.7 NONRECURRING COSTS AND EXPENSES. Notwithstanding
anything herein to the contrary, any nonrecurring costs and expenses incurred
by the parties hereto to effect the transactions contemplated hereby which
are not allocated pursuant to the terms of the Separation Agreement, this
Agreement or any other Ancillary Agreement shall be the responsibility of the
party which incurs such costs and expenses.
SECTION 1.8 NOVATION OF ASSUMED PALM LIABILITIES.
(a) REASONABLE COMMERCIAL EFFORTS. Each of 3Com and Palm, at the
request of the other, shall use its reasonable commercial efforts to obtain,
or to cause to be obtained, any consent, substitution, approval or amendment
required to novate (including with respect to any federal government
contract) or assign all rights and obligations under agreements, leases,
licenses and other obligations or Liabilities (including Palm OFLs) of any
nature whatsoever that constitute Palm Liabilities or to obtain in writing
the unconditional release of all parties to such arrangements other than any
member of the Palm Group, so that, in any such case, Palm and its
Subsidiaries will be solely responsible for such Liabilities; PROVIDED,
HOWEVER, that neither 3Com, Palm nor their Subsidiaries shall be obligated to
pay any consideration therefor to any third party from whom such consents,
approvals, substitutions and amendments are requested.
(b) INABILITY TO OBTAIN NOVATION. If 3Com or Palm is unable to
obtain, or to cause to be obtained, any such required consent, approval,
release, substitution or amendment, the applicable member of the 3Com Group
shall continue to be bound by such agreements, leases, licenses and other
obligations and, unless not permitted by law or the terms thereof (except to
the extent expressly set forth in this Agreement, the Separation Agreement or
any other Ancillary Agreement), Palm shall, as agent or subcontractor for
3Com or such other Person, as the case may be, pay,
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<PAGE>
perform and discharge fully, or cause to be paid, transferred or discharged
all the obligations or other Liabilities of 3Com or such other Person, as the
case may be, thereunder from and after the date hereof. 3Com shall, without
further consideration, pay and remit, or cause to be paid or remitted, to
Palm or its appropriate Subsidiary promptly all money, rights and other
consideration received by it or any member of its respective Group in respect
of such performance (unless any such consideration is an Excluded Asset). If
and when any such consent, approval, release, substitution or amendment shall
be obtained or such agreement, lease, license or other rights or obligations
shall otherwise become assignable or able to be novated, 3Com shall
thereafter assign, or cause to be assigned, all its rights, obligations and
other Liabilities thereunder or any rights or obligations of any member of
its respective Group to Palm without payment of further consideration and
Palm shall, without the payment of any further consideration, assume such
rights and obligations.
ARTICLE II
LITIGATION
SECTION 2.1 ALLOCATION. Notwithstanding any contrary provisions in
the Indemnification and Insurance Matters Agreement, on the Separation Date,
the responsibilities for management of the litigation identified in a
litigation disclosure letter (the "LITIGATION DISCLOSURE LETTER"), which will
be delivered by 3Com to Palm on the Separation Date, shall be transferred in
their entirety from 3Com and its Subsidiaries to Palm and its Subsidiaries.
As of the Separation Date and thereafter, Palm shall manage the defense of
such litigation and shall cause its applicable Subsidiaries to do the same.
3Com and its Subsidiaries must first obtain the prior consent of Palm or its
applicable Subsidiary for any action taken subsequent to the Separation Date
in connection with the litigation identified in the Litigation Disclosure
Letter, which consent cannot be unreasonably withheld or delayed. All other
matters relating to such litigation, including but not limited to
indemnification for such claims, shall be governed by the provisions of the
Indemnification and Insurance Matters Agreement.
SECTION 2.2 COOPERATION. 3Com and Palm and their respective
Subsidiaries shall cooperate with each other in the defense of any litigation
covered under this ARTICLE II and afford to each other reasonable access upon
reasonable advance notice to witnesses and Information (other than
Information protected from disclosure by applicable privileges) that is
reasonably required to defend this litigation (as "INFORMATION" is defined
pursuant to SECTION 5.4 of the Separation Agreement). The foregoing agreement
to cooperate includes, but is not limited to, an obligation to provide access
to qualified assistance to provide information, witnesses and documents to
respond to discovery requests in specific lawsuits. In such cases,
cooperation shall be timely so that the party responding to discovery may
meet all court-imposed deadlines. The party requesting information shall
reimburse the party providing information consistent with the terms of
SECTION 5.4 of the Separation Agreement. The obligations set forth in this
paragraph are more clearly defined in SECTION 5.4 of the Separation Agreement.
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<PAGE>
ARTICLE III
MISCELLANEOUS
SECTION 3.1 ENTIRE AGREEMENT. This Agreement, the Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
referenced or attached hereto and thereto, constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
SECTION 3.2 GOVERNING LAW. This Agreement shall be construed in
accordance with and all Disputes hereunder shall be governed by the laws of
the State of California, excluding its conflict of law rules and the United
Nations Convention on Contracts for the International Sale of Goods. The
Superior Court of Santa Clara County and/or the United States District Court
for the Northern District of California shall have jurisdiction and venue
over all Disputes between the parties that are permitted to be brought in a
court of law pursuant to SECTION 5.9 of the Separation Agreement.
SECTION 3.3 NOTICES. Notices, offers, requests or other
communications required or permitted to be given by either party pursuant to
the terms of this Agreement shall be given in writing to the respective
parties to the following addresses:
if to 3Com:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
SECTION 3.4 PARTIES IN INTEREST. This Agreement, including the
Exhibits and Schedules hereto, and the other documents referred to herein,
shall be binding upon and inure solely to the benefit of each party hereto
and their legal representatives and successors, and nothing in this
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Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 3.5 COUNTERPARTS. This Agreement, including the Exhibits
and Schedules hereto, and the other documents referred to herein, may be
executed in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
SECTION 3.6 ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any
party hereto, without the other party's express written consent.
SECTION 3.7 SEVERABILITY. If any term or other provision of this
Agreement or the Exhibits or Schedules attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the fullest extent possible.
SECTION 3.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be
a waiver of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor shall any single or partial exercise of any such
right preclude other or further exercise thereof or of any other right. All
rights and remedies existing under this Agreement or the Schedules or
Exhibits attached hereto are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
SECTION 3.9 AMENDMENT. No change or amendment will be made to
this Agreement except by an instrument in writing signed on behalf of each of
the parties to such agreement.
SECTION 3.10 AUTHORITY. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and
authority to execute, deliver and perform this Agreement, (b) the execution,
delivery and performance of this Agreement by it have been duly authorized by
all necessary corporate or other action, (c) it has duly and validly executed
and delivered this Agreement, and (d) this Agreement is a legal, valid and
binding obligation, enforceable against it in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general equity
principles.
SECTION 3.11 INTERPRETATION. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table of contents to
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized term
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used in any Schedule or Exhibit but not otherwise defined therein, shall have
the meaning assigned to such term in this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
SECTION 3.12 CONFLICTING AGREEMENTS. In the event of conflict
between this Agreement and any other Ancillary Agreement or other agreement
executed in connection herewith, the provisions of such other agreement shall
prevail (other than (i) as otherwise provided herein and (ii) the Separation
Agreement).
ARTICLE IV
DEFINITIONS
SECTION 4.1 3COM GROUP. "3COM GROUP" means 3Com, each Subsidiary
and Affiliated Company of 3Com (other than any member of the Palm Group)
immediately after the Separation Date, after giving effect to the Non-US Plan
and each Person that becomes a Subsidiary or Affiliate Company of 3Com after
the Separation Date.
SECTION 4.2 ACTION. "ACTION" means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before
any federal, state, local, foreign or international governmental authority or
any arbitration or mediation tribunal.
SECTION 4.3 AFFILIATED COMPANY. "AFFILIATED COMPANY" of any Person
means a Person that controls, is controlled by, or is under common control
with such Person. As used herein, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such entity, whether through ownership of voting securities
or other interests, by contract or otherwise.
SECTION 4.4 ANCILLARY AGREEMENT. "ANCILLARY AGREEMENT" has the
meaning set forth in SECTION 2.1 of the Separation Agreement.
SECTION 4.5 ASSETS. "ASSETS" means assets, properties and rights
(including goodwill), wherever located (including in the possession of
vendors or other third parties or elsewhere), whether real, personal or
mixed, tangible, intangible or contingent, in each case whether or not
recorded or reflected or required to be recorded or reflected on the books
and records or financial statements of any Person, including the following:
(i) all accounting and other books, records and files
whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape
or any other form;
(ii) all apparatus, computers and other electronic data
processing equipment, , automobiles, trucks, aircraft, rolling stock,
vessels, motor vehicles and other transportation
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equipment, special and general tools, test devices, prototypes and models and
other tangible personal property, but excluding fixtures, machinery,
equipment, furniture and office equipment;
(iii) all inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and products;
(iv) all interests in real property of whatever nature,
including easements, whether as owner, mortgagee or holder of a Security
Interest, lessor, sublessor, lessee, sublessee or otherwise;
(v) all interests in any capital stock or other equity
interests of any Subsidiary or any other Person; all bonds, notes, debentures
or other securities issued by any Subsidiary or any other Person; all loans,
advances or other extensions of credit or capital contributions to any
Subsidiary or any other Person; and all other investments in securities of
any Person;
(vi) all license agreements, leases of personal property,
open purchase orders for raw materials, supplies, parts or services, unfilled
orders for the manufacture and sale of products and other contracts,
agreements or commitments;
(vii) all deposits, letters of credit and performance and
surety bonds;
(viii) all written technical information, data,
specifications, research and development information, engineering drawings,
operating and maintenance manuals, and materials and analyses prepared by
consultants and other third parties;
(ix) all Intellectual Property and licenses from third
Persons granting the right to use any Intellectual Property;
(x) all computer applications, programs and other
software, including operating software, network software, firmware,
middleware, design software, design tools, systems documentation and
instructions;
(xi) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer and
vendor data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings,
formulations and specifications, quality records and reports and other books,
records, studies, surveys, reports, plans and documents;
(xii) all prepaid expenses, trade accounts and other accounts
and notes receivables;
(xiii) all rights under contracts or agreements, all claims
or rights against any Person arising from the ownership of any Asset, all
rights in connection with any bids or offers and all claims, choses in action
or similar rights, whether accrued or contingent;
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(xiv) all rights under insurance policies and all rights in
the nature of insurance, indemnification or contribution;
(xv) all licenses (including radio and similar licenses),
permits, approvals and authorizations which have been issued by any
Governmental Authority;
(xvi) cash or cash equivalents, bank accounts, lock boxes
and other deposit arrangements; and
(xvii) interest rate, currency, commodity or other swap,
collar, cap or other hedging or similar agreements or arrangements.
SECTION 4.6 CONTRACTS. "CONTRACTS" means any contract, agreement,
lease, license, sales order, purchase order, instrument or other commitment
that is binding on any Person or any part of its property under applicable
law.
SECTION 4.7 DELAYED TRANSFER ASSETS. "DELAYED TRANSFER ASSETS"
means any Palm Assets that are expressly provided in this Agreement, the
Separation Agreement or any other Ancillary Agreement to be transferred after
the date of this Agreement.
SECTION 4.8 DISTRIBUTION. "DISTRIBUTION" means 3Com's pro rata
distribution to the holders of its common stock, $0.001 par value, following
the IPO as provided in the Separation Agreement, of all of the shares of Palm
common stock owned by 3Com.
SECTION 4.9 DISTRIBUTION DATE. "DISTRIBUTION DATE" has the meaning
set forth in Section 4.1 of the Separation Agreement.
SECTION 4.10 GOVERNMENTAL APPROVALS. "GOVERNMENTAL APPROVALS" means
any notices, reports or other filings to be made, or any consents,
registrations, approvals, permits or authorizations to be obtained from, any
Governmental Authority.
SECTION 4.11 GOVERNMENTAL AUTHORITY. "GOVERNMENTAL AUTHORITY" means
any federal, state, local, foreign or international court, government,
department, commission, board, bureau, agency, official or other regulatory,
administrative or governmental authority.
SECTION 4.12 INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT.
"Indemnification and Insurance Matters Agreement" means the Indemnification
and Insurance Matters Agreement attached as Exhibit J to the Separation
Agreement.
SECTION 4.13 INSURANCE POLICIES. "INSURANCE POLICIES" means
insurance policies pursuant to which a Person makes a true risk transfer to
an insurer.
SECTION 4.14 INSURED PALM LIABILITIES. "INSURED PALM LIABILITIES"
means any Palm Liability to the extent that (i) it is covered under the terms
of 3Com's Insurance Policies in effect
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prior to the Distribution Date and (ii) Palm is not a named insured under, or
otherwise entitled to the benefits of, such Insurance Policies.
SECTION 4.15 INTELLECTUAL PROPERTY. "INTELLECTUAL PROPERTY" means
all domestic and foreign patents and patent applications, together with any
continuations, continuations-in-part or divisional applications thereof, and
all patents issuing thereon (including reissues, renewals and re-examinations
of the foregoing); design patents, invention disclosures; mask works;
copyrights, and copyright applications and registrations; Web addresses,
trademarks, service marks, trade names, and trade dress, in each case
together with any applications and registrations therefor and all appurtenant
goodwill relating thereto; trade secrets, commercial and technical
information, know-how, proprietary or confidential information, including
engineering, production and other designs, notebooks, processes, drawings,
specifications, formulae, and technology; computer and electronic data
processing programs and software (object and source code), data bases and
documentation thereof; inventions (whether patented or not); utility models;
registered designs, certificates of invention and all other intellectual
property under the laws of any country throughout the world.
SECTION 4.16 IPO REGISTRATION STATEMENT. "IPO REGISTRATION
STATEMENT" means the registration statement on Form S-1 pursuant to the
Securities Act of 1933, as amended, to be filed with the Securities and
Exchange Commission registering the shares of common stock of Palm to be
issued in the initial public offering, together with all amendments thereto.
SECTION 4.17 LIABILITIES. "LIABILITIES" means all debts,
liabilities, guarantees, assurances, commitments and obligations, whether
fixed, contingent or absolute, asserted or unasserted, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, due or
to become due, whenever or however arising (including, without limitation,
whether arising out of any Contract or tort based on negligence or strict
liability) and whether or not the same would be required by generally
accepted principles and accounting policies to be reflected in financial
statements or disclosed in the notes thereto.
SECTION 4.18 LOCAL TRANSFER AGREEMENTS. "LOCAL TRANSFER AGREEMENTS"
means the agreements necessary to effect the Non-US Plan (as defined in the
Separation Agreement).
SECTION 4.19 NON-US PLAN. "NON-US PLAN" has the meaning set forth
in Section 5.8 of the Separation Agreement.
SECTION 4.20 OFLS. "OFLS" mean all liabilities, obligations,
contingencies, instruments and other Liabilities of any member of the 3Com
Group of a financial nature with third parties existing on the date hereof or
entered into or established between the date hereof and the Separation Date,
including any of the following:
(i) foreign exchange contracts;
(ii) letters of credit;
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(iii) guarantees of third party loans to customers;
(iv) surety bonds (excluding surety for workers' compensation
self-insurance);
(v) interest support agreements on third party loans to
customers;
(vi) performance bonds or guarantees issued by third parties;
(vii) swaps or other derivatives contracts; and
(viii) recourse arrangements on the sale of receivables or
notes.
SECTION 4.21 PALM BALANCE SHEET. "PALM BALANCE SHEET" means the
audited consolidated balance sheet (including the notes thereto) of the Palm
Business as of August 27, 1999, that is included in the IPO Registration
Statement.
SECTION 4.22 PALM BUSINESS. "PALM BUSINESS" means the business and
operations of the business of Palm as described in the IPO Registration
Statement and, except as otherwise expressly provided herein, any terminated,
divested or discontinued businesses or operations that at the time of
termination, divestiture or discontinuation primarily related to the Palm
Business as then conducted.
SECTION 4.23 PALM CONTINGENT GAIN. "PALM CONTINGENT GAIN" means any
claim or other right of a member of the 3Com Group or the Palm Group that
primarily relates to the Palm Business, whenever arising, against any Person
other than a member of the 3Com Group or the Palm Group, if and to the extent
that (i) such claim or right arises out of the events, acts or omissions
occurring as of the Separation Date (based on then existing law) and (ii) the
existence or scope of the obligation of such other Person as of the
Separation Date was not acknowledged, fixed or determined in any material
respect, due to a dispute or other uncertainty as of the Separation Date or
as a result of the failure of such claim or other right to have been
discovered or asserted as of the Separation Date. A claim or right meeting
the foregoing definition shall be considered a Palm Contingent Gain
regardless of whether there was any Action pending, threatened or
contemplated as of the Separation Date with respect thereto. In the case of
any claim or right a portion of which arises out of events, acts or omissions
occurring prior to the Separation Date and a portion of which arises out of
events, acts or omissions occurring on or after the Separation Date, only
that portion that arises out of events, acts or omissions occurring prior to
the Separation Date shall be considered a Palm Contingent Gain. For purposes
of the foregoing, a claim or right shall be deemed to have accrued as of the
Separation Date if all the elements of the claim necessary for its assertion
shall have occurred on or prior to the Separation Date, such that the claim
or right, were it asserted in an Action on or prior to the Separation Date,
would not be dismissed by a court on ripeness or similar grounds.
Notwithstanding the foregoing, none of (i) any Insurance Proceeds, (ii) any
Excluded Assets, (iii) any reversal of any litigation or other reserve, or
(iv) any matters relating to Taxes (which are governed by the Tax Sharing
Agreement) shall be deemed to be a Palm Contingent Gain.
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SECTION 4.24 PALM CONTINGENT LIABILITY. "PALM CONTINGENT LIABILITY"
means any Liability, other than Liabilities for Taxes (which are governed by
the Tax Sharing Agreement), of a member of the 3Com Group or the Palm Group
that primarily relates to the Palm Business, whenever arising, to any Person
other than a member of the 3Com Group or the Palm Group, if and to the extent
that (i) such Liability arises out of the events, acts or omissions occurring
as of the Separation Date and (ii) the existence or scope of the obligation
of a member of the 3Com Group or the Palm Group as of the Separation Date
with respect to such Liability was not acknowledged, fixed or determined in
any material respect, due to a dispute or other uncertainty as of the
Separation Date or as a result of the failure of such Liability to have been
discovered or asserted as of the Separation Date (it being understood that
the existence of a litigation or other reserve with respect to any Liability
shall not be sufficient for such Liability to be considered acknowledged,
fixed or determined). In the case of any Liability a portion of which arises
out of events, acts or omissions occurring prior to the Separation Date and a
portion of which arises out of events, acts or omissions occurring on or
after the Separation Date, only that portion that arises out of events, acts
or omissions occurring prior to the Separation Date shall be considered a
Palm Contingent Liability. For purposes of the foregoing, a Liability shall
be deemed to have arisen out of events, acts or omissions occurring prior to
the Separation Date if all the elements necessary for the assertion of a
claim with respect to such Liability shall have occurred on or prior to the
Separation Date, such that the claim, were it asserted in an Action on or
prior to the Separation Date, would not be dismissed by a court on ripeness
or similar grounds. For purposes of clarification of the foregoing, the
parties agree that no Liability relating to, arising out of or resulting from
any obligation of any Person to perform the executory portion of any contract
or agreement existing as of the Separation Date, or to satisfy any obligation
accrued under any Plan (as defined in the Employee Matters Agreement) as of
the Separation Date, shall deemed to be a Palm Contingent Liability. For
purposes of determining whether a claim relating to the Year 2000 problem is
a Palm Contingent Liability, claims relating to products shipped prior to the
Separation Date shall be deemed to have arisen prior to the Separation Date.
SECTION 4.25 PALM CONTRACTS. "PALM CONTRACTS" means the following
contracts and agreements to which 3Com is a party or by which it or any of
its Assets is bound, whether or not in writing, except for any such contract
or agreement that is contemplated to be retained by 3Com or any member of the
3Com Group pursuant to any provision of this Agreement or any other Ancillary
Agreement:
(i) any contract or agreement entered into in the name of,
or expressly on behalf of, any division or business unit of Palm;
(ii) any contract or agreement that relates primarily to the
Palm Business;
(iii) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement, the Separation Agreement or any of
the other Ancillary Agreements to be assigned to Palm;
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(iv) any guarantee, indemnity, representation, warranty or
other Liability of any member of the Palm Group or the 3Com Group in respect
of any other Palm Contract, any Palm Liability or the Palm Business
(including guarantees of financing incurred by customers or other third
parties in connection with purchases of products or services from the Palm
Business); and
(v) any Palm OFL.
SECTION 4.26 PALM GROUP. "PALM GROUP" means Palm, each Subsidiary
and Affiliated Company of Palm immediately after the Separation Date or that
is contemplated to be a Subsidiary or Affiliated Company of Palm pursuant to
the Non-US Plan and each Person that becomes a Subsidiary or Affiliate
Company of Palm after the Separation Date.
SECTION 4.27 PALM PRO FORMA BALANCE SHEET. "PALM PRO FORMA BALANCE
SHEET" means the unaudited pro forma condensed consolidated balance sheet
appearing in the IPO Registration Statement.
SECTION 4.28 PERSON. "PERSON" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.
SECTION 4.29 RETAINED PAYABLES. "RETAINED PAYABLES" means (i) all
accounts payable and other obligations of payment for goods or services
purchased, leased or otherwise received in the conduct of the Palm Business
that as of the Separation Date are payable to a third Person by 3Com or any
of 3Com's Subsidiaries, whether past due, due or to become due, including any
interest, sales or use taxes, finance charges, late or returned check charges
and other obligations of 3Com or any of 3Com's Subsidiaries with respect
thereto, and any obligations related to any of the foregoing and (ii) all
employee compensation Liabilities and other miscellaneous Liabilities for
which an adjustment is made in the Palm Pro Forma Balance Sheet.
SECTION 4.30 RETAINED RECEIVABLES. "RETAINED RECEIVABLES" means (i)
all accounts receivable and other rights to payment for goods or services
sold, leased or otherwise provided in the conduct of the Palm Business that
as of the Separation Date are payable by a third Person to 3Com or any of
3Com's Subsidiaries, whether past due, due or to become due, including any
interest, sales or use taxes, finance charges, late or returned check charges
and other obligations of the account debtor with respect thereto, and any
proceeds of any of the foregoing and (ii) all other miscellaneous Assets for
which an adjustment is made in the Palm Pro Forma Balance Sheet.
SECTION 4.31 SECURITY INTEREST. "SECURITY INTEREST" means any
mortgage, security interest, pledge, lien, charge, claim, option, right to
acquire, voting or other restriction, right-of-way, covenant, condition,
easement, encroachment, restriction on transfer, or other encumbrance of any
nature whatsoever.
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SECTION 4.32 SEPARATION. "SEPARATION" means the transfer and
contribution from 3Com to Palm, and Palm's receipt and assumption of,
directly or indirectly, substantially all of the Assets and Liabilities
currently associated with the Palm Business and the stock, investments or
similar interests currently held by 3Com in subsidiaries and other entities
that conduct such business.
SECTION 4.33 SEPARATION AGREEMENT. "SEPARATION AGREEMENT" means the
Master Separation and Distribution Agreement dated as of December 13, 1999,
of which this is an Exhibit thereto.
SECTION 4.34 SEPARATION DATE. "SEPARATION DATE" means the effective
date and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation, which shall be
12:01 a.m., Pacific Time, February 26, 2000, or such date as may be fixed by
the Board of Directors of 3Com.
SECTION 4.35 SUBSIDIARY. "SUBSIDIARY" of any Person means any
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interest having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries; provided, however that no
Person that is not directly or indirectly wholly owned by any other Person
shall be a Subsidiary of such other Person unless such other Person controls,
or has the right, power or ability to control, that Person.
SECTION 4.36 TAXES. "TAXES" has the meaning set forth in the Tax
Sharing Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this General
Assignment and Assumption Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.
3COM CORPORATION PALM, INC.
By:________________________________ By:________________________________
Name:______________________________ Name:______________________________
Title:_____________________________ Title:_____________________________
<PAGE>
SCHEDULE 1.1(c) DELAYED TRANSFER ASSETS AND LIABILITIES
None.
<PAGE>
SCHEDULE 1.2(a)(VIII) SPECIFIC PALM ASSETS TO BE TRANSFERRED
Inventories.
<PAGE>
SCHEDULE 1.2(b)(i) EXCLUDED ASSETS
None.
<PAGE>
SCHEDULE 1.3(a)(vi) DIVESTED BUSINESSES WHICH CONTAIN LIABILITIES TO BE
TRANSFERRED TO PALM
None.
<PAGE>
SCHEDULE 1.3(a)(vii) SPECIFIC PALM LIABILITIES
None.
<PAGE>
SCHEDULE 1.3(b)(i) EXCLUDED LIABILITIES
None.
<PAGE>
Exhibit 2.3
MASTER TECHNOLOGY OWNERSHIP AND
LICENSE AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
EFFECTIVE AS OF FEBRUARY 26, 2000
<PAGE>
MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS.................................................................................................1
1.1 ANCILLARY AGREEMENTS................................................................................1
1.2 COPYRIGHTS..........................................................................................1
1.3 DATABASE RIGHTS.....................................................................................1
1.4 DISTRIBUTION DATE...................................................................................2
1.5 GALAHAD PROJECT.....................................................................................2
1.6 GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT.........................................................2
1.7 INVENTION DISCLOSURE................................................................................2
1.8 IPO REGISTRATION STATEMENT..........................................................................2
1.9 JOINT TECHNOLOGY....................................................................................2
1.10 MASK WORK RIGHTS....................................................................................2
1.11 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT............................................................2
1.12 MASTER PATENT OWNERSHIP AND ASSIGNMENT AGREEMENT....................................................2
1.13 MASTER SEPARATION AND DISTRIBUTION AGREEMENT........................................................2
1.14 PALM BUSINESS.......................................................................................3
1.15 PALM COMPUTING PLATFORM.............................................................................3
1.16 PALM OS.............................................................................................3
1.17 PALM PRODUCTS DATABASE..............................................................................3
1.18 PALM TECHNOLOGY.....................................................................................3
1.19 PALM TECHNOLOGY DATABASE............................................................................3
1.20 PATENTS.............................................................................................3
1.21 PERSON..............................................................................................3
1.22 SELL................................................................................................3
1.23 SEPARATION DATE.....................................................................................3
1.24 SUBSIDIARY..........................................................................................4
1.25 TDC.................................................................................................4
1.26 TECHNOLOGY..........................................................................................4
1.27 THIRD PARTY.........................................................................................4
ARTICLE 2 OWNERSHIP...................................................................................................4
2.1 OWNERSHIP OF PALM TECHNOLOGY........................................................................4
2.2 JOINT TECHNOLOGY....................................................................................5
2.3 PRIOR GRANTS........................................................................................5
2.4 ASSIGNMENT DISCLAIMER...............................................................................6
ARTICLE 3 LICENSES AND RIGHTS.........................................................................................6
3.1 PALM COMPUTING PLATFORM.............................................................................6
3.2 GALAHAD PROJECT AND TDC.............................................................................6
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
3.3 RIGHTS TO JOINT TECHNOLOGY..........................................................................6
3.4 NO PATENT LICENSES..................................................................................7
3.5 THIRD PARTY TECHNOLOGY..............................................................................8
ARTICLE 4 CONFIDENTIALITY.............................................................................................8
ARTICLE 5 NO TERMINATION..............................................................................................8
ARTICLE 6 DISPUTE RESOLUTION..........................................................................................8
6.1 MEDIATION...........................................................................................8
6.2 ARBITRATION.........................................................................................9
6.3 COURT ACTION........................................................................................9
6.4 CONTINUITY OF SERVICE AND PERFORMANCE...............................................................9
ARTICLE 7 LIMITATION OF LIABILITY.....................................................................................9
ARTICLE 8 MISCELLANEOUS PROVISIONS...................................................................................10
8.1 DISCLAIMER.........................................................................................10
8.2 NO IMPLIED LICENSES................................................................................10
8.3 INFRINGEMENT SUITS.................................................................................10
8.4 NO OTHER OBLIGATIONS...............................................................................10
8.5 ENTIRE AGREEMENT...................................................................................11
8.6 GOVERNING LAW......................................................................................11
8.7 DESCRIPTIVE HEADINGS...............................................................................11
8.8 NOTICES............................................................................................11
8.9 NONASSIGNABILITY...................................................................................12
8.10 SEVERABILITY.......................................................................................12
8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE..............................................12
8.12 AMENDMENT..........................................................................................12
8.13 COUNTERPARTS.......................................................................................12
</TABLE>
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MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT
This Master Technology Ownership and License Agreement (the
"Agreement") is effective as of February 26, 2000 (the "Effective Date"),
between 3Com Corporation, a Delaware corporation ("3Com"), having an office at
5400 Bayfront Plaza, Santa Clara, California, 95052 and Palm, Inc., a Delaware
corporation ("Palm"), having an office at 5470 Great America Parkway, Santa
Clara, California, 95052.
WHEREAS, the Board of Directors of 3Com has determined that it is in
the best interest of 3Com and its stockholders to separate 3Com's existing
businesses into two independent businesses;
WHEREAS, as part of the foregoing, 3Com and Palm's predecessor, Palm
Computing, Inc., a California Corporation, have entered into a Master Separation
and Distribution Agreement (as defined below), which provides, among other
things, for the separation of certain Palm assets and Palm liabilities, the
initial public offering of Palm stock, the distribution of such stock and the
execution and delivery of certain other agreements in order to facilitate and
provide for the foregoing; and
WHEREAS, also as part of the foregoing, the parties desire to confirm
Palm's ownership or joint ownership of certain technology.
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and of good and valuable consideration, it is agreed by and between the parties
as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement the following capitalized terms are
defined in this Article 1 and shall have the meaning specified herein:
1.1 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the meaning
set forth in the Master Separation and Distribution Agreement.
1.2 COPYRIGHTS. "Copyrights" mean (i) any copyright in any original
works of authorship fixed in any tangible medium of expression as set forth in
17 U.S.C. Section 101 et. seq., whether registered or unregistered, including
any applications for registration thereof, (ii) any corresponding foreign
copyrights under the laws of any jurisdiction, in each case, whether registered
or unregistered, and any applications for registration thereof, and (iii) moral
rights under the laws of any jurisdiction.
1.3 DATABASE RIGHTS. "Database Rights" means any rights in databases
under the laws of the United States or any other jurisdiction, whether
registered or unregistered, and any applications for registration thereof.
<PAGE>
1.4 DISTRIBUTION DATE. "Distribution Date" shall have the meaning set
forth in the Master Separation and Distribution Agreement.
1.5 GALAHAD PROJECT. "Galahad Project" means the development effort
within 3Com's Wireless Connectivity Division (WCD) currently known internally as
the Galahad Project.
1.6 GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT. "General Assignment
and Assumption Agreement" means the General Assignment and Assumption Agreement
between the parties.
1.7 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of
an invention (i) written for the purpose of allowing legal and business people
to determine whether to file a Patent application with respect to such invention
and (ii) recorded with a control number in the owning party's records.
1.8 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means the
registration statement on Form S-1 pursuant to the Securities Act of 1933, as
amended, to be filed with the Securities and Exchange Commission registering the
shares of common stock of Palm to be issued in the initial public offering,
together with all amendments thereto.
1.9 JOINT TECHNOLOGY. "Joint Technology" means the manufacturing
Technology indicated to be jointly owned in the Palm Technology Database, and
Technology which has been jointly developed by the parties prior to the
Separation Date that is incorporated into Current Palm Products (as defined in
the Master Patent Ownership and Assignment Agreement); provided, however, that
Joint Technology shall not include any Technology developed under the Galahad
Project or work done by TDC, except as otherwise agreed by the parties in
writing.
1.10 MASK WORK RIGHTS. "Mask Work Rights" means (i) any rights in mask
works, as defined in 17 U.S.C. Section 901, whether registered or unregistered,
including applications for registration thereof, and (ii) any foreign rights in
semiconductor topologies under the laws of any jurisdiction, whether registered
or unregistered, including applications for registration thereof.
1.11 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT. "Master Confidential
Disclosure Agreement" means the Master Confidential Disclosure Agreement between
3Com and Palm.
1.12 MASTER PATENT OWNERSHIP AND ASSIGNMENT AGREEMENT. "Master Patent
Ownership and Assignment Agreement" means the Master Patent Ownership and
Assignment Agreement between 3Com and Palm.
1.13 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation
and Distribution Agreement" means the Master Separation and Distribution
Agreement between 3Com and Palm.
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1.14 PALM BUSINESS. "Palm Business" means the business and operations
of Palm as described in the IPO Registration Statement.
1.15 PALM COMPUTING PLATFORM. "Palm Computing Platform" means the Palm
OS and other related software and hardware technology and documentation
generally licensed by Palm to third party developers of handheld computing or
communication products.
1.16 PALM OS. "Palm OS" means the Palm operating system software files
and build tools.
1.17 PALM PRODUCTS DATABASE. "Palm Products Database" means the
mutually agreed Palm Products Database as of the Separation Date, as it may be
updated by the parties upon mutual agreement (signed by authorized officers) of
the parties to add Palm products as of the Separation Date.
1.18 PALM TECHNOLOGY. "Palm Technology" means (i) all Technology
developed solely by Palm or Subsidiaries of Palm or by its subcontractors for
Palm or its Subsidiaries, (ii) all Technology for which the direct costs were
solely paid for by Palm, (iii) the Palm Computing Platform, (iv) the
manufacturing technology that is indicated as to be owned by Palm in the Palm
Technology Database, and (v) all Technology developed or being developed solely
by the Palm Business as of the Separation Date. For the avoidance of doubt, the
parties agree that 3Com owns all right, title and interest in and to any
Technology that may have been jointly developed by the parties in the Galahad
Project and any projects with the TDC and any Technology either developed solely
by 3Com or for which the direct costs were solely paid for by 3Com.
1.19 PALM TECHNOLOGY DATABASE. "Palm Technology Database" means the
mutually agreed Palm Technology Database as of the Separation Date, as it may be
updated by the parties upon mutual agreement (signed by authorized officers) of
the parties to add Palm Technology as of the Separation Date.
1.20 PATENTS. "Patents" means patents, utility models, design patents,
design registrations, certificates of invention and other governmental grants
for the protection of inventions or industrial designs anywhere in the world and
all reissues, renewals, re-examinations and extensions of any of the foregoing.
1.21 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, and a governmental
entity or any department, agency or political subdivision thereof.
1.22 SELL. To "Sell" a product means to sell, transfer, lease or
otherwise dispose of a product. "Sale" and "Sold" have the corollary meanings
ascribed thereto.
1.23 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific Time,
February 26, 2000, or such other date as may be fixed by the Board of Directors
of 3Com.
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1.24 SUBSIDIARY. "Subsidiary" of any Person means a corporation or
other organization, whether incorporated or unincorporated, of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person. For purposes of this Agreement, Palm shall be deemed not
to be a subsidiary of 3Com.
1.25 TDC. "TDC" means the 3Com Technology Development Center.
1.26 TECHNOLOGY. "Technology" means technological models, algorithms,
manufacturing processes, design processes, behavioral models, logic diagrams,
schematics, test vectors, know-how, computer and electronic data processing and
other apparatus programs and software (object code and source code), databases
and documentation thereof, trade secrets, technical information, specifications,
drawings, records, documentation, works of authorship or other creative works,
websites, ideas, knowledge, data or the like. The term Technology includes
Copyrights, Database Rights, Mask Work Rights, trade secrets and any other
intellectual property right, but expressly does not include (i) any trademark,
trade name, trade dress or service mark, or applications for registration
thereof or (ii) any Patents or applications therefor, including any of the
foregoing that may be based on Invention Disclosures that are covered by the
Master Patent Ownership and License Agreement between the parties, but does
include trade secret rights in and to inventions disclosed in such Patent
applications and Invention Disclosures.
1.27 THIRD PARTY. "Third Party" means a Person other than 3Com and its
Subsidiaries and Palm and its Subsidiaries.
ARTICLE 2
OWNERSHIP
2.1 OWNERSHIP OF PALM TECHNOLOGY. The parties hereby confirm that
Palm owns all right, title and interest in and to the Palm Technology.
Subject to Sections 2.3 and 2.4 below, to the extent that 3Com has any
ownership rights in and to the Palm Technology, 3Com hereby grants, conveys
and assigns (and agrees to cause its appropriate Subsidiaries to grant,
convey and assign) to Palm, by execution hereof (or, where appropriate or
required, by execution of separate instruments of assignment), all its (and
their) right, title and interest in and to the Palm Technology, to be held
and enjoyed by Palm, its successors and assigns. 3Com further grants, conveys
and assigns (and agrees to cause its appropriate Subsidiaries to grant,
convey and assign) to Palm all its (and their) right, title and interest in
and to any and all causes of action and rights of recovery for past
infringement of Copyrights, Database Rights and Mask Work Rights in and to
the Palm Technology, and for past misappropriation of trade secrets in and to
the Palm Technology. 3Com further covenants that 3Com will, without demanding
any further consideration therefor, at the request and expense of Palm
(except for the value of the time of 3Com employees), do (and cause its
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Subsidiaries to do) all lawful and just acts that may be or become
necessary for evidencing, maintaining, recording and perfecting Palm's rights to
such Palm Technology consistent with 3Com's general business practice as of the
Separation Date, including but not limited to, execution and acknowledgement of
(and causing its Subsidiaries to execute and acknowledge) assignments and other
instruments in a form reasonably required by Palm for each Copyright, Mask Work
Right or Database Right jurisdiction.
2.2 JOINT TECHNOLOGY. The parties hereby confirm that 3Com and Palm
jointly own all right, title and interest in and to the Joint Technology.
(a) Subject to Sections 2.3 and 2.4 below, 3Com hereby
grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries
to grant, convey and assign) to Palm an undivided one-half interest in and to
the Joint Technology to be held and enjoyed by Palm, its successors and
assigns. 3Com further grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Palm an undivided
one-half interest in and to any and all causes of action and rights of
recovery for past infringement of Copyrights, Database Rights and Mask Work
Rights in and to the Joint Technology, and for past misappropriation of trade
secrets in and to the Joint Technology. 3Com further covenants that 3Com
will, without demanding any consideration therefor, at the request and
expense of Palm (except for the value of the time of 3Com employees), do (and
cause its Subsidiaries to do) all lawful and just acts including the
execution and acknowledgement of instruments, that may be or become necessary
for evidencing, maintaining and perfecting Palm's rights to such Joint
Technology consistent with 3Com's general business practice as of the
Separation Date, including but not limited to, execution and acknowledgement
of (and causing its Subsidiaries to execute and acknowledge) assignments and
other instruments in a form reasonably required by Palm for each Copyright,
Mask Work Right or Database Right jurisdiction.
(b) Subject to Sections 2.3 and 2.4 below, Palm hereby
grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries
to grant, convey and assign) to 3Com an undivided one-half interest in and to
the Joint Technology to be held and enjoyed by 3Com, its successors and
assigns. Palm further grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to 3Com an undivided
one-half interest in and to any and all causes of action and rights of
recovery for past infringement of Copyrights, Database Rights and Mask Work
Rights in and to the Joint Technology, and for past misappropriation of trade
secrets in and to the Joint Technology. Palm further covenants that Palm
will, without demanding any consideration therefor, at the request and
expense of 3Com (except for the value of the time of Palm employees), do (and
cause its Subsidiaries to do) all lawful and just acts including the
execution and acknowledgement of instruments, that may be or become necessary
for evidencing, maintaining and perfecting 3Com's rights to such Joint
Technology consistent with Palm's general business practice as of the
Separation Date, including but not limited to, execution and acknowledgement
of (and causing its Subsidiaries to execute and acknowledge) assignments and
other instruments in a form reasonably required by 3Com for each Copyright,
Mask Work Right or Database Right jurisdiction.
2.3 PRIOR GRANTS.
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(a) Palm acknowledges and agrees that the foregoing
assignment is subject to any and all licenses or other rights that may have
been granted by or to 3Com or its Subsidiaries with respect to the Palm
Technology prior to the Separation Date. 3Com shall respond to reasonable
inquiries from Palm regarding any such prior grants.
(b) 3Com acknowledges and agrees that the foregoing
assignment is subject to any and all licenses or other rights that may have
been granted by or to Palm or its Subsidiaries with respect to the 3Com
Technology prior to the Separation Date. Palm shall respond to reasonable
inquiries from 3Com regarding any such prior grants.
2.4 ASSIGNMENT DISCLAIMER. THE PARTIES ACKNOWLEDGE AND AGREE THAT
THE FOREGOING ASSIGNMENTS ARE MADE ON AN "AS IS," QUITCLAIM BASIS AND THAT
NEITHER PARTY NOR ANY SUBSIDIARY OF EITHER PARTY HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. FURTHER, THE
PARTIES ACKNOWLEDGE AND AGREE THAT NEITHER PARTY NOR ANY SUBSIDIARY OF EITHER
PARTY SHALL HAVE ANY OBLIGATION UNDER THIS AGREEMENT TO MAINTAIN OR SUPPORT
ANY OF THE TECHNOLOGY ASSIGNED UNDER THIS AGREEMENT OR TO PROVIDE ANY
UPGRADES OR ENHANCEMENTS THERETO TO THE OTHER PARTY.
ARTICLE 3
LICENSES AND RIGHTS
3.1 PALM COMPUTING PLATFORM. In recognition of the fact that 3Com
and Palm were affiliated entities prior to the Separation Date, Palm agrees
to grant a license (i) to 3Com with respect to the Palm Computing Platform on
favorable terms, and (ii) to 3Com (IAD) with respect to certain portions of
the Palm OS on favorable terms. The parties agree to negotiate such licensing
agreements reasonably and in good faith as promptly as they can reasonably
accomplish, but in no event later than the Distribution Date.
3.2 GALAHAD PROJECT AND TDC. The parties agree to negotiate reasonably
and in good faith joint development and licensing agreements with respect to
Technology developed in the Galahad Project and TDC (with respect to Palm
related projects) as promptly as they can reasonably accomplish, but in no event
later than the Distribution Date.
3.3 RIGHTS TO JOINT TECHNOLOGY.
(a) Each party has the right to (i) use and exploit the Joint
Technology, (ii) license the Joint Technology to Third Parties, and (iii)
transfer its ownership interest in any or all Joint Technology to any Third
Party, in each case (x) without restriction, (y) without the consent of the
other party, and (z) without the obligation to account to the other party for
profits derived therefrom.
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(b) Should either party (the "Registering Party") desire at
any time to register Copyrights, Database Rights or Mask Work Rights in and to
the Joint Technology in any jurisdiction, such party shall notify the other
party (the "Non-Registering Party") in writing of its intent and the reasons
therefor. The Non-Registering Party promptly shall communicate in writing any
objections it may have. In the absence of any written objections within thirty
(30) days after the date of its notice, the Registering Party shall be free to
proceed with the desired registration in the name of both 3Com and Palm. In the
event of any such objections by the Non-Registering Party, the parties shall
discuss and negotiate reasonably and in good faith to resolve the objections
based on each party's business objectives with respect to the relevant item of
Joint Technology. The parties shall share equally any actual and reasonable
out-of-pocket expenses (expressly excluding the value of the time of either
party's employees) incurred in connection with any such registration. The
Registering Party promptly shall provide the Non-Registering Party with copies
of each application and issued registration under this Section 3.3(b).
(c) Should either party become aware of any actual
infringement or misappropriation of Joint Technology, such party shall
promptly communicate the details to the other party and the parties will meet
and confer regarding any enforcement action with respect to such Joint
Technology. If the parties decide jointly to bring an action for infringement
or misappropriation of such Joint Technology, the parties shall equally share
all actual and reasonable expenses associated therewith (except for the value
of the time of each party's employees in connection with the action; each
party shall alone bear its employee expenses) and any resulting damages or
compensation, including any amounts paid in settlement. If the parties decide
not to jointly bring such an action, either party or any of its Subsidiaries
may, at its own expense (including, as the parties shall agree on a case by
case basis, compensation, if any, of the other party for the value of time of
the other party's employees as reasonably required in connection with the
action), enforce any Joint Technology against any Third Party infringer or
misappropriating Person without the consent of the other party, subject to
the following: (i) neither party shall have any obligation to be joined as a
party plaintiff in such action without its prior written consent, which may
be granted or withheld in its sole discretion, regardless of whether such
joinder is required in order to confer jurisdiction in the jurisdiction in
which the action is to be brought, (ii) if either party brings any such
action on its own, including cases in which the other party consents to be
named as party plaintiff, the party bringing the action agrees to defend,
indemnify and hold harmless the other party for all losses, costs,
liabilities and expenses arising out of or related to the bringing of such
action, and (iii) the party bringing such action may not take any action, or
make any admissions, that may affect the validity of any registration for
Copyrights, Database Rights or Mask Work Rights covering Joint Technology
without the prior written consent of the other party. If the enforcing party
or its Subsidiaries recovers any damages or compensation for any action the
enforcing party or the Subsidiaries of the enforcing party takes hereunder,
including any settlement, the enforcing party or the Subsidiaries of the
enforcing party shall retain one hundred percent (100%) of such damages. If
the parties cooperate in any such enforcement action, then any recovery of
damages or compensation shall be allocated pursuant to mutual agreement.
3.4 NO PATENT LICENSES. Nothing contained in this Agreement shall be
construed as conferring to either party by implication, estoppel or otherwise
any license or right under any
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Patent or applications therefor, whether or not the exercise of any right
herein granted necessarily employs an invention of any existing or later
issued Patent. The applicable licenses granted by 3Com to Palm with respect
to Patents are set forth in a separate Master Patent Ownership and License
Agreement.
3.5 THIRD PARTY TECHNOLOGY. The assignment of any applicable license
agreements with respect to Third Party Technology are set forth in the General
Assignment and Assumption Agreement.
ARTICLE 4
CONFIDENTIALITY
The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
ARTICLE 5
NO TERMINATION
Each party acknowledges and agrees that its remedy for breach by the
other party of any provision hereof shall be, subject to the requirements of
Article 6, to bring a claim to recover damages subject to the limits set forth
in this Agreement and to seek any other appropriate equitable relief, other than
termination of this Agreement. For the avoidance of doubt, the parties intend
that this Agreement continue in perpetuity.
ARTICLE 6
DISPUTE RESOLUTION
6.1 MEDIATION. If a dispute, controversy or claim ("Dispute") arises
between the parties relating to the interpretation or performance of this
Agreement appropriate senior executives (e.g. director or V.P. level) of each
party who shall have the authority to resolve the matter shall meet to attempt
in good faith to negotiate a resolution of the Dispute prior to pursuing other
available remedies. The initial meeting between the appropriate senior
executives shall be referred to herein as the "Dispute Resolution Commencement
Date." Discussions and correspondence relating to trying to resolve such Dispute
shall be treated as Confidential Information developed for the purpose of
settlement and shall be exempt from discovery or production and shall not be
admissible. If the senior executives are unable to resolve the Dispute within
thirty (30) days from the Dispute Resolution Commencement Date, and either party
wishes to pursue its rights relating to such Dispute, then the Dispute will be
mediated by a mutually acceptable mediator appointed pursuant to the mediation
rules of JAMS/Endispute within thirty (30) days after written notice by one
party to the other demanding non-binding mediation. Neither party may
unreasonably withhold consent to the selection of a mediator or the location of
the mediation. Both parties will share the
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costs of the mediation equally, except that each party shall bear its own
costs and expenses, including attorneys' fees, witness fees, travel expenses,
and preparation costs. The parties may also agree to replace mediation with
some other form of non-binding or binding alternate dispute resolution
("ADR").
6.2 ARBITRATION. Any Dispute which the parties cannot resolve through
mediation within ninety (90) days of the Dispute Resolution Commencement Date,
unless otherwise mutually agreed, shall be submitted to final and binding
arbitration under the then current Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), by three (3) arbitrators in Santa Clara County,
California. Such arbitrators shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the aforesaid
AAA rules. The arbitrators will be instructed to prepare and deliver a written,
reasoned opinion stating their decision within thirty (30) days of the
completion of the arbitration. The prevailing party in such arbitration shall be
entitled to expenses, including costs and reasonable attorneys' and other
professional fees, incurred in connection with the arbitration (but excluding
any costs and fees associated with prior negotiation or mediation). The decision
of the arbitrator shall be final and non-appealable and may be enforced in any
court of competent jurisdiction. The use of any ADR procedures will not be
construed under the doctrine of laches, waiver or estoppel to adversely affect
the rights of either party.
6.3 COURT ACTION. Any Dispute regarding the following is not required
to be negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality;
infringement, misappropriation, or misuse of any intellectual property right;
any other claim where interim relief from the court is sought to prevent serious
and irreparable injury to one of the parties or to others. However, the parties
to the Dispute shall make a good faith effort to negotiate and mediate such
Dispute, according to the above procedures, while such court action is pending.
6.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement during the course of dispute resolution
pursuant to the provisions of this Article 6 with respect to all matters not
subject to such dispute, controversy or claim.
ARTICLE 7
LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE
OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES;
PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT J OF THE MASTER SEPARATION AND
DISTRIBUTION AGREEMENT;
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PROVIDED FURTHER THAT THE EXCLUSION OF PUNITIVE DAMAGES
SHALL APPLY IN ANY EVENT.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL TECHNOLOGY
AND ANY OTHER INFORMATION OR MATERIALS PROVIDED HEREUNDER IS PROVIDED ON AN "AS
IS" BASIS, AND THAT NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES MAKES ANY
REPRESENTATIONS OR EXTENDS ANY WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR
STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE,
ENFORCEABILITY OR NON-INFRINGEMENT. Without limiting the generality of the
foregoing, neither party nor any of its Subsidiaries makes any warranty or
representation that any manufacture, use, importation, offer for sale or sale of
any product or service will be free from infringement of any Patent or other
intellectual property right of any Third Party.
8.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or otherwise, under
any intellectual property right, other than the rights expressly granted in this
Agreement with respect to the Palm Technology and the Joint Technology. Neither
party is required hereunder to furnish or disclose to the other any technical or
other information, except as specifically provided herein.
8.3 INFRINGEMENT SUITS. Neither party shall have any obligation
hereunder to institute any action or suit against Third Parties for infringement
of any Copyrights, Database Rights or Mask Work Rights or misappropriation of
any trade secret rights in or to any Technology licensed to the other party
hereunder, or to defend any action or suit brought by a Third Party which
challenges or concerns the validity of any of such rights or which claims that
any Technology assigned or licensed to the other party hereunder infringes any
Patent, Copyright, Database Right, Mask Work Right or other intellectual
property right of any Third Party or constitutes a misappropriated trade secret
of any Third Party. 3Com shall not have any right to institute any action or
suit against Third Parties for infringement of any of the Copyrights, Database
Rights or Mask Work Rights in or to the Palm Technology.
8.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES. Without limiting the generality of the foregoing, neither party,
nor any of its Subsidiaries, is obligated under this Agreement to provide any
technical assistance.
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8.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements and the Exhibits
and Schedules referenced or attached hereto and thereto constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the
subject matter hereof and thereof. This Agreement shall prevail in the event
of any conflicting terms or legends which may appear on any portion of the
Palm Technology or the Joint Technology. To the extent there is a conflict
between this Agreement and the Master Assignment and Assumption Agreement
between the parties, the terms of this Agreement shall govern. To the extent
that the parties enter into specific agreements regarding specific projects
such as the Galahad Project or the Palm Computing Platform license, such
agreements shall supersede this Agreement with respect to any common subject
matter.
8.6 GOVERNING LAW. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior Court
of Santa Clara County and/or the United States District Court for the Northern
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to Article 6 above.
8.7 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
8.8 NOTICES. Notices, offers, requests or other communications required
or permitted to be given by either party pursuant to the terms of this Agreement
shall be given in writing to the respective parties to the following addresses:
if to 3Com :
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
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or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance or renewal shall be sent by hand delivery, recognized
overnight courier or, within the United States, may also be sent via certified
mail, return receipt requested. All other notices may also be sent by fax,
confirmed by first class mail. All notices shall be deemed to have been given
and received on the earlier of actual delivery or three (3) days from the date
of postmark.
8.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in
whole or in part, whether by operation of law or otherwise, assign or transfer
this Agreement, without the other party's prior written consent, and any
attempted assignment, transfer or delegation without such prior written consent
shall be voidable at the sole option of such other party. Notwithstanding the
foregoing, each party (or its successive assignees or transferees hereunder)
may, without such consent, assign this Agreement to an entity that succeeds to
all or substantially all of the business or assets of such party as long as such
Person agrees to accept all of the terms set forth herein; provided, however,
that the rights and obligations set forth in Sections 3.1 and 3.2 may not be
assigned or transferred in any event (except in the case of a reincorporation of
such party in another state). Without limiting the foregoing, this Agreement
will be binding upon and inure to the benefit of the parties and their permitted
successors and assigns.
8.10 SEVERABILITY. If any term or other provision of this Agreement is
determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
8.12 AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
8.13 COUNTERPARTS. This Agreement, including the Ancillary
Agreements and the Exhibits and Schedules hereto and thereto and the other
documents referred to herein or therein, may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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WHEREFORE, the parties have signed this Master Technology Ownership
and License Agreement effective as of the date first set forth above.
3COM CORPORATION PALM, INC.
By: By:
------------------------- ----------------------------
Name: Name:
---------------------- --------------------------
Title: Title:
---------------------- -------------------------
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Exhibit 2.4
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
EFFECTIVE AS OF FEBRUARY 26, 2000
<PAGE>
MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS.................................................................................................1
1.1 ALLOCATED PATENT ASSETS DATABASE....................................................................1
1.2 ASSIGNED PATENTS....................................................................................2
1.3 BLUETOOTH...........................................................................................2
1.4 DISTRIBUTION DATE...................................................................................3
1.5 FIRST EFFECTIVE FILING DATE.........................................................................3
1.6 GALAHAD PATENTS.....................................................................................3
1.7 GALAHAD PROJECT.....................................................................................3
1.8 INVENTION DISCLOSURE................................................................................3
1.9 MASTER SEPARATION AND DISTRIBUTION AGREEMENT........................................................3
1.10 PALM PATENTS........................................................................................3
1.11 PALM PRODUCTS.......................................................................................3
1.12 PATENTS.............................................................................................3
1.13 PERSON..............................................................................................4
1.14 SEPARATION DATE.....................................................................................4
1.15 SUBSIDIARY..........................................................................................4
1.16 THIRD PARTY.........................................................................................4
1.17 THIRD PARTY PATENTS.................................................................................4
1.18 3COM PATENTS........................................................................................4
1.19 3COM PRODUCTS.......................................................................................4
ARTICLE 2 OWNERSHIP...................................................................................................5
2.1 OWNERSHIP OF PATENTS................................................................................5
2.2 PRIOR GRANTS........................................................................................6
2.3 ASSIGNMENT DISCLAIMER...............................................................................6
ARTICLE 3 LICENSES AND COVENANTS NOT TO SUE...........................................................................6
3.1 LICENSE GRANTS TO PALM WITH RESPECT TO GALAHAD PATENTS..............................................6
3.2 RESTRICTION ON 3COM LICENSING OF GALAHAD PATENTS....................................................6
3.3 RESTRICTION ON PALM'S "HAVE MADE" RIGHTS TO GALAHAD PATENTS.........................................6
3.4 COMBINATION EXCLUSION...............................................................................6
3.5 PALM'S SUBLICENSE RIGHTS WITH RESPECT TO GALAHAD PATENTS............................................7
3.6 DURATION............................................................................................7
3.7 ACQUISITION OF PALM OR TRANSFER OF A BUSINESS OR
SUBSIDIARY RELATED TO GALAHAD PATENTS...............................................................7
</TABLE>
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3.8 COPIES OF PATENT APPLICATIONS AND INVENTION DISCLOSURES.............................................9
3.9 THIRD PARTY PATENTS.................................................................................9
3.10 3COM COVENANT NOT TO SUE............................................................................9
3.11 PALM COVENANT NOT TO SUE...........................................................................10
ARTICLE 4 ADDITIONAL OBLIGATIONS.....................................................................................12
4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS.............................................12
4.2 ADDITIONAL OBLIGATIONS WITH REGARD TO GALAHAD PATENTS..............................................13
4.3 STANDARDS BODIES...................................................................................14
4.4 ASSIGNMENT OF PATENTS..............................................................................14
4.5 RECORDATION OF LICENSES............................................................................14
ARTICLE 5 CONFIDENTIALITY............................................................................................14
ARTICLE 6 TERMINATION................................................................................................15
6.1 VOLUNTARY TERMINATION..............................................................................15
6.2 SURVIVAL...........................................................................................15
6.3 NO OTHER TERMINATION...............................................................................15
ARTICLE 7 DISPUTE RESOLUTION.........................................................................................15
7.1 MEDIATION..........................................................................................15
7.2 ARBITRATION........................................................................................16
7.3 COURT ACTION.......................................................................................16
7.4 CONTINUITY OF SERVICE AND PERFORMANCE..............................................................16
ARTICLE 8 LIMITATION OF LIABILITY....................................................................................16
ARTICLE 9 MISCELLANEOUS PROVISIONS...................................................................................17
9.1 DISCLAIMER.........................................................................................17
9.2 NO IMPLIED LICENSES................................................................................17
9.3 INFRINGEMENT SUITS.................................................................................17
9.4 NO OTHER OBLIGATIONS...............................................................................17
9.5 ENTIRE AGREEMENT...................................................................................18
9.6 GOVERNING LAW......................................................................................18
9.7 DESCRIPTIVE HEADINGS...............................................................................18
9.8 NOTICES............................................................................................18
9.9 NONASSIGNABILITY...................................................................................19
9.10 SEVERABILITY.......................................................................................19
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE..............................................19
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9.12 AMENDMENT..........................................................................................19
9.13 COUNTERPARTS.......................................................................................19
</TABLE>
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MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT
This Master Patent Ownership and License Agreement (the "Agreement")
is effective as of February 26, 2000 (the "Effective Date"), between 3Com
Corporation, a Delaware corporation ("3Com"), having an office at 5400
Bayfront Plaza, Santa Clara, California, 95052 and Palm, Inc., a Delaware
corporation ("Palm"), having an office at 5470 Great America Parkway, Santa
Clara, California, 95052.
WHEREAS, the Board of Directors of 3Com has determined that it is in
the best interest of 3Com and its stockholders to separate 3Com's existing
businesses into two independent businesses;
WHEREAS, as part of the foregoing, 3Com and Palm's predecessor, Palm
Computing, Inc., a California Corporation, have entered into a Master
Separation and Distribution Agreement (as defined below), which provides,
among other things, for the separation of certain Palm assets and Palm
liabilities, the initial public offering of Palm stock, the distribution of
such stock and the execution and delivery of certain other agreements in
order to facilitate and provide for the foregoing;
WHEREAS, also as part of the foregoing, 3Com and Palm desire to
confirm Palm's ownership of all patents, patent applications and invention
disclosures invented by or for Palm and to record in Palm's name any such
patents and patent applications that are recorded in 3Com's name;
WHEREAS, Palm and 3Com desire to confirm 3Com's ownership of certain
jointly developed technology and Palm desires to receive and 3Com is willing
to grant to Palm certain licenses and rights under patents, patent
applications and invention disclosures covering such technology; and
WHEREAS, Palm and 3Com further desire to enter into reciprocal
covenants not to sue for patent infringement.
NOW, THEREFORE, in consideration of the mutual promises of the
parties, and of good and valuable consideration, it is agreed by and between
the parties as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement the following capitalized terms
are defined in this Article 1 and shall have the meaning specified herein:
1.1 ALLOCATED PATENT ASSETS DATABASE. "Allocated Patent Assets
Database" means the mutually agreed Allocated Patent Assets Database as of
the Separation Date, as it may be updated by the parties upon mutual
agreement to add Patents, Patent applications and Invention Disclosures as of
the Separation Date.
<PAGE>
1.2 ASSIGNED PATENTS. "Assigned Patents" means only those
(a) Patents, Patent applications and Invention Disclosures
that are recorded in 3Com's name and are allocated to Palm in the Allocated
Patent Assets Database;
(b) Patent applications filed on the foregoing Invention
Disclosures described in Section 1.2(a);
(c) continuations, continuations-in-part, divisions and
substitutions of any of the foregoing Patent applications described in
Sections 1.2(a) and (b);
(d) Patents which may issue on any of the foregoing Patent
applications described in Sections 1.2(a)-(c);
(e) renewals, reissues, reexaminations and extensions of
the foregoing Patents described in Sections 1.2(a) and (d); and
(f) foreign Patent applications and Patents that are
counterparts of any of the foregoing Patent applications or Patents described
in Sections 1.2(a)-(e), including any Patent application or Patent to the
extent that it claims priority from any of the foregoing Patent applications
or Patents described in Sections 1.2(a)-(e); but
(g) excluding from any Patent or Patent application
described in Sections 1.2(c)-(f) any claim (i) directed to subject matter
that does not appear in any Patent application having a First Effective
Filing Date prior to the Separation Date and (ii) of which neither Palm nor
any person having a legal duty to assign his/her interest therein to Palm is
entitled to be named as an inventor.
1.3 BLUETOOTH. "Bluetooth" means the short range wireless standard
currently being promulgated by the Bluetooth Special Interest Group, of which
3Com is an adopter.
1.4 CURRENT PALM PRODUCTS. "Current Palm Products" means Palm
Products of the businesses in which Palm or any of its Subsidiaries is
engaged as of the Separation Date, including any Palm Products under
development as set forth in 3Com's High Level Product Plan for Fiscal Year
2000 or as otherwise agreed by the parties, as well as future versions of
such Palm Products, but only to the extent that they use the same designs
and/or technology as such Palm Products.
1.5 CURRENT 3COM PRODUCTS. "Current 3Com Products" means 3Com
Products of the businesses in which 3Com or any of its Subsidiaries is
engaged as of the Separation Date, including any 3Com Products under
development as set forth in 3Com's High Level Product Plan for Fiscal Year
2000 or as otherwise agreed by the parties, as well as future versions of
such 3Com Products, but only to the extent that they use the same designs
and/or technology as such 3Com Products.
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1.6 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth
in the Master Separation and Distribution Agreement.
1.7 FIRST EFFECTIVE FILING DATE. "First Effective Filing Date" means
the earliest effective filing date in the particular country for any Patent
or any application for any Patent. By way of example, it is understood that
the First Effective Filing Date for a United States Patent is the earlier of
(i) the actual filing date of the United States Patent application which
issued into such Patent, (ii) the priority date under 35 U.S.C. Section 119
for such Patent, or (iii) the priority date under 35 U.S.C. Section 120 for
such Patent.
1.8 GALAHAD PATENTS. "Galahad Patents" means any Patents, Patent
applications and Invention Disclosures arising from the Galahad Project which
have at least one inventor employed by Palm and at least one inventor
employed by 3Com.
1.9 GALAHAD PROJECT. "Galahad Project" means the development effort
within 3Com's Wireless Connectivity Division (WCD) currently known internally
as the Galahad Project.
1.10 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure
of an invention (i) written for the purpose of allowing legal and business
people to determine whether to file a Patent application with respect to such
invention and (ii) recorded with a control number in the owning party's
records) with a First Effective Filing Date before the Separation Date.
1.11 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master
Separation and Distribution Agreement" means the Master Separation and
Distribution Agreement between the parties.
1.12 PALM PATENTS. "Palm Patents" means:
(a) the Assigned Patents;
(b) every Patent to the extent entitled to a First
Effective Filing Date prior to the Separation Date provided that, at any time
after the First Effective Filing Date of any such Patent and prior to the
Separation Date, Palm (or any Subsidiary of Palm) has ownership or control of
any such Patent; and
(c) applications for the foregoing Patents described in
Section 1.12(b), including without limitation any continuations,
continuations-in-part, divisions and substitutions.
1.13 PALM PRODUCTS. "Palm Products" means any and all products and
services of the businesses in which Palm or any of its Subsidiaries is
engaged now or in the future, in all cases which products are designed or
created primarily by Palm (or by any sublicensed Subsidiary) and/or by a
subcontractor for Palm (or for any sublicensed Subsidiary).
1.14 PATENTS. "Patents" means patents, utility models, design
patents, design registrations, certificates of invention and other
governmental grants for the protection of inventions
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or industrial designs anywhere in the world and all reissues, renewals,
re-examinations and extensions of any of the foregoing.
1.15 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.
1.16 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific
Time, February 26, 2000, or such other date as may be fixed by the Board of
Directors of 3Com.
1.17 SUBSIDIARY. "Subsidiary" of any Person means a corporation or
other organization, whether incorporated or unincorporated, of which at least
a majority of the securities or interests having by the terms thereof
ordinary voting power to elect at least a majority of the board of directors
or others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
Person or by any one or more of its Subsidiaries, or by such Person and one
or more of its Subsidiaries; provided, however, that no Person that is not
directly or indirectly wholly-owned by any other Person shall be a Subsidiary
of such other Person unless such other Person controls, or has the right,
power or ability to control, that Person. For the purposes of this Agreement,
Palm shall be deemed not to be a Subsidiary of 3Com.
1.18 THIRD PARTY. "Third Party" means a Person other than 3Com and
its Subsidiaries and Palm and its Subsidiaries.
1.19 THIRD PARTY PATENTS. "Third Party Patents" means all Third
Party Patents licensed by 3Com or any Subsidiary of 3Com that, as of the
Effective Date, may be sublicensed to Palm (e.g., because Palm is a
Subsidiary of 3Com) under the terms of this Agreement without the requirement
to pay a royalty or other consideration to a Third Party (unless 3Com has the
right to grant such a sublicense to Palm on payment of a royalty and Palm
agrees to pay such royalty to such Third Party).
1.20 3COM PATENTS. "3Com Patents" means:
(a) every Patent to the extent entitled to a First
Effective Filing Date prior to the Separation Date provided that, at any time
after the First Effective Filing Date of any such Patent and prior to the
Separation Date, 3Com (or any Subsidiary of 3Com) has ownership or control of
any such Patent; and
(b) applications for the foregoing Patents described in
Section 1.18(a), including without limitation any continuations,
continuations-in-part, divisions and substitutions.
1.21 3COM PRODUCTS. "3Com Products" means any and all products and
services of the businesses in which 3Com or any of its Subsidiaries is
engaged now or in the future, in all cases which products are designed or
created primarily by 3Com (or by any sublicensed Subsidiary) and/or by a
subcontractor for 3Com (or for any sublicensed Subsidiary), as well as future
versions of such 3Com Products.
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ARTICLE 2
OWNERSHIP
2.1 OWNERSHIP OF PATENTS.
(a) PALM PATENTS. The parties agree that Palm hereby
retains ownership of all right, title and interest in and to all Palm Patents.
(b) ASSIGNED PATENTS. Subject to Sections 2.2 and 2.3
below, 3Com hereby grants, conveys and assigns (and agrees to cause its
appropriate Subsidiaries to grant, convey and assign) to Palm, by execution
hereof (or, where appropriate or required, by execution of separate
instruments of assignment), all its (and their) right, title and interest in
and to the Assigned Patents, to be held and enjoyed by Palm, its successors
and assigns. 3Com further grants, conveys and assigns (and agrees to cause
its appropriate Subsidiaries to grant, convey and assign) to Palm all its
(and their) right, title and interest in and to any and all causes of action
and rights of recovery for past infringement of the Assigned Patents and the
right to claim priority from the Assigned Patents. 3Com will, without
demanding any further consideration therefor, at the request and expense of
Palm (except for the value of the time of 3Com employees), do (and cause its
Subsidiaries to do) all lawful and just acts, that may be or become necessary
for prosecuting, sustaining, obtaining continuations of, or reissuing said
Assigned Patents and for evidencing, maintaining, recording and perfecting
Palm's rights to said Assigned Patents, consistent with 3Com's general
business practice as of the Separation Date, including but not limited to
execution and acknowledgement of (and causing its Subsidiaries to execute and
acknowledge) assignments and other instruments in a form reasonably required
by Palm for each Patent jurisdiction.
(c) GALAHAD PATENTS. Subject to Sections 2.2 and 2.3 below,
Palm hereby grants, conveys and assigns (and agrees to cause its appropriate
Subsidiaries to grant, convey and assign) to 3Com, by execution hereof (or,
where appropriate or required, by execution of separate instruments of
assignment), all its (and their) right, title and interest in and to the
Galahad Patents, to be held and enjoyed by 3Com, its successors and assigns.
Palm further grants, conveys and assigns (and agrees to cause its appropriate
Subsidiaries to grant, convey and assign) to 3Com all its (and their) right,
title and interest in and to any and all causes of action and rights of
recovery for past infringement of the Galahad Patents and the right to claim
priority from the Galahad Patents. Palm will, without demanding any further
consideration therefor, at the request and expense of 3Com (except for the
value of the time of Palm employees), do (and cause its Subsidiaries to do)
all lawful and just acts, that may be or become necessary for prosecuting,
sustaining, obtaining continuations of, or reissuing said Galahad Patents and
for evidencing, maintaining, recording and perfecting 3Com's rights to said
Galahad Patents, consistent with Palm's general business practice as of the
Separation Date, including but not limited to execution and acknowledgement
of (and causing its Subsidiaries to execute and acknowledge) assignments and
other instruments in a form reasonably required by 3Com for each Patent
jurisdiction.
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2.2 PRIOR GRANTS. Palm acknowledges and agrees that the foregoing
assignments are subject to any and all licenses or other rights that may have
been granted by 3Com or its Subsidiaries with respect to the Assigned Patents
prior to the Separation Date. 3Com shall respond to reasonable inquiries from
Palm regarding any such prior grants.
2.3 ASSIGNMENT DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT
THE FOREGOING ASSIGNMENTS ARE MADE ON AN "AS-IS," QUITCLAIM BASIS AND THAT
NEITHER PARTY NOR ANY SUBSIDIARY OF SUCH PARTY HAS MADE OR WILL MAKE ANY
WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, ENFORCEABILITY, NON-INFRINGEMENT, OR VALIDITY OF
PATENT CLAIMS (ISSUED OR PENDING).
ARTICLE 3
LICENSES AND COVENANTS NOT TO SUE
3.1 LICENSE GRANTS TO PALM WITH RESPECT TO GALAHAD PATENTS. 3Com
grants (and agrees to cause its appropriate Subsidiaries to grant) to Palm,
under the Galahad Patents, an irrevocable, nonexclusive, worldwide,
fully-paid, royalty-free and non-transferable (except as set forth in Section
9.9) license to make (including the right to practice methods, processes and
procedures), have made (except as restricted in Section 3.3 below), use,
lease, sell, offer for sale and import Palm Products.
3.2 RESTRICTION ON 3COM LICENSING OF GALAHAD PATENTS. 3Com agrees
that it will not license any of the Galahad Patents to any Third Party for
use in lightweight handheld mobile computing devices or operating systems for
such devices; provided, however, that 3Com retains the right to license the
Galahad Patents to Third Parties for such use for defensive purposes (i.e.,
to resolve a claim of patent infringement brought against 3Com by a Third
Party).
3.3 RESTRICTION ON PALM'S "HAVE MADE" RIGHTS TO GALAHAD PATENTS. The
license granted in Section 3.1 to have Palm Products made by a Third Party
shall (i) only apply when the portion of the "have made" Palm Product covered
by the Galahad Patents has been designed or created by Palm and/or one of
Palm's subcontractors (not such Third Party) who is not a direct competitor
of 3Com in the field of the Palm Product being designed or created and (ii)
shall not apply to (A) any methods used, or (B) any Palm Products or portions
thereof that have been manufactured or marketed, by a Third Party prior to
Palm furnishing the designs or creations to such Third Party.
3.4 COMBINATION EXCLUSION. Except as expressly provided herein, no
license or immunity is granted under this Agreement by 3Com, either directly
or by implication, estoppel or otherwise to any third parties acquiring Palm
Products from Palm for the combination of such Palm Products with other items
or for the use of such combination. Notwithstanding the previous sentence,
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3Com grants to the direct and indirect customers of Palm, an immunity from
suit under the Galahad Patents for the combination of any such Palm Products
with other Palm Products and their use in such combination where the Palm
Products have no other substantial noninfringing use aside from the
combination with other Palm Products sold or otherwise transferred by Palm
directly or indirectly to such customer.
3.5 PALM'S SUBLICENSE RIGHTS WITH RESPECT TO GALAHAD PATENTS.
(a) Palm may grant sublicenses to its Subsidiaries under
the license grant set forth in Section 3.1 within the scope of Palm's license
hereunder (with no right to grant further sublicenses other than, in the case
of a sublicensed Subsidiary, to another Subsidiary of Palm and as described
in Section 3.5(c) below).
(b) Any sublicense under Section 3.5(a) may be made
effective retroactively, but not prior to the sublicensee's becoming a
Subsidiary of Palm.
(c) Any Palm Product for which a software license is
granted by Palm (or any sublicensed Subsidiary) to its distributors,
resellers, OEM customers, VAR customers, VAD customers, systems integrators
and other channels of distribution and to its end user customers (including,
but not limited to, the Palm operating system) shall be considered to be
covered under the license grant set forth in Section 3.1 within the scope of
Palm's license hereunder, but only to the extent that the Palm Product
incorporates the technology covered by the claims of the Galahad Patents.
(d) Palm shall have no rights to grant sublicenses to the
Galahad Patents, except as expressly provided in Section 3.5 (a), (b) and (c)
above.
3.6 DURATION.
(a) All licenses granted herein with respect to each Patent
shall expire upon the expiration of the term of such Patent.
(b) All sublicenses granted pursuant to this Agreement to a
particular Subsidiary of Palm shall terminate the date that the Subsidiary
ceases to be a Subsidiary of Palm.
3.7 ACQUISITION OF PALM OR TRANSFER OF A BUSINESS OR SUBSIDIARY
RELATED TO GALAHAD PATENTS.
(a) If Palm, after the Separation Date, transfers all or
substantially all of its business or assets, or all or substantially all of
the business or assets to which the Galahad Patents relate, then regardless
of whether such transfer is part of (i) an asset sale to any Third Party, or
(ii) a sale of shares or securities in Palm or a Subsidiary to a Third Party
(in each case, any such Third Party shall be referred to herein as a
"Transferee"), then upon written request by Palm and the Transferee to 3Com
within sixty (60) days following the transfer, 3Com shall grant a
royalty-free
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license to the Transferee with respect to the Galahad Patents under the same
terms of the license granted to Palm under this Agreement subject to the
following:
(i) the effective date of such license shall
be the effective date of transfer; and
(ii) the products and services of the
Transferee that are subject to such license shall be limited to the specific
Palm Products in the transferred business that are (A) commercially released
as of the date of transfer or which, prior to the transfer, (B) were planned
for release within three (3) months from the date of transfer and actually
are commercially released within three (3) months from the date of transfer
and (C) for new versions of such specific Palm Products covered by clauses
(A) and (B) above that have merely minor differences from such Palm Products
with no additional features; and
(iii) the Galahad Patents that are subject to
such license shall be limited to the Galahad Patents that are entitled to a
First Effective Filing Date before the date of such transfer; and
(iv) the Transferee shall have no right to
grant sublicenses (except as set forth in Section 3.5(c) above); and
(v) this Section 3.7 shall be excluded from
such license in any event and therefore 3Com shall have no obligation to
grant a license to a subsequent transferee;
(b) provided, that 3Com shall have no obligation to grant
such license unless the Transferee grants to 3Com a royalty-free license
under a comparable license grant as the license granted to Palm under this
Agreement, subject to the following:
(i) the effective date of such license shall
be the effective date of the transfer; and
(ii) the products and services of 3Com that
are subject to such license shall be all the 3Com Products; and
(iii) the Patents of the Transferee that are
subject to such license shall be the Patents owned or controlled by the
Transferee claiming inventions in the wireless field that are entitled to a
First Effective Filing Date on or before the date of such transfer and
applications for such patents (including without limitation any
continuations, continuations-in-part, divisions and substitutions); and
(c) provided, further, that in the event that 3Com and the
Transferee are engaged in litigation, arbitration or other formal dispute
resolution proceedings covering Patent infringement (pending in any court,
tribunal, or administrative agency or before any appointed or agreed upon
arbitrator in any jurisdiction worldwide), then 3Com shall have no obligation
to grant such license to the Transferee under this Section 3.7.
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3.8 COPIES OF PATENT APPLICATIONS AND INVENTION DISCLOSURES. 3Com
agrees, at its own expense from time to time upon Palm's request, to provide
to Palm copies of (i) the Assigned Patents and (ii) the Galahad Patents.
3.9 THIRD PARTY PATENTS. 3Com confirms that it has granted, and
hereby grants (and agrees to cause its appropriate Subsidiaries to grant) to
Palm, under the Third Party Patents, a nonexclusive, worldwide sublicense to
make (including the right to practice methods, processes and procedures),
have made, use, lease, sell, offer for sale and import any products and
services subject to any and all terms and conditions set forth in the
applicable agreement between 3Com and the Third Party Patent owner, but only
to the extent and for the period of time 3Com has the legal right to grant
such a sublicense. 3Com shall respond to reasonable inquires from Palm
regarding any Third Party Patents.
3.10 3COM COVENANT NOT TO SUE.
(a) 3Com irrevocably grants, on behalf of itself and its
Subsidiaries, at no charge, an immunity from suit to Palm and its
Subsidiaries, and its or their direct or indirect customers and Third Party
manufacturers (subject to the restrictions set forth in the next sentence)
for infringement of any 3Com Patent by any Current Palm Product. The
foregoing covenant with respect to Third Party manufacturers (i) shall apply
only when the portion of the "have made" Current Palm Product covered by the
3Com Patents has been designed or created by Palm and/or one of Palm's
subcontractors (not the Third Party manufacturer) who is not a direct
competitor of 3Com in the field of the Current Palm Product being designed or
created and (ii) shall not apply to (A) any methods used, or (B) any products
or portions thereof that have been manufactured or marketed, by any Third
Party prior to Palm furnishing the designs or creations to such Third Party.
No immunity is granted under the foregoing covenant by 3Com, either directly
or by implication, estoppel or otherwise to any Third Parties acquiring
Current Palm Products from Palm for the combination of such Current Palm
Products with other items or for the use of such combination; provided,
however, that the foregoing covenant shall apply to the direct and indirect
customers of Palm for the combination of any such acquired Current Palm
Products with other Palm Products and their use in such combination where the
acquired Current Palm Products have no other substantial noninfringing use
aside from the combination with other Palm Products sold or otherwise
transferred by Palm directly or indirectly to such customer.
(b) The foregoing covenant shall continue with respect to
each 3Com Patent for the term of such 3Com Patent.
(c) If Palm, after the Separation Date, transfers all or
substantially all of its business or assets, or transfers a Subsidiary or
business unit, then regardless of whether such transfer is part of (i) an
asset sale to any Third Party, or (ii) a sale of shares or securities in Palm
or a Subsidiary to a Third Party (in each case, any such Third Party shall be
referred to herein as a "Transferee"), then upon written request by Palm and
the Transferee to 3Com within sixty (60) days following the transfer, 3Com
shall grant an immunity from suit to the Transferee under the same terms as
the covenant set forth in Section 3.10 (a) and (b) above subject to the
following:
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(i) the effective date of such covenant shall
be the effective date of transfer; and
(ii) the products and services of the
Transferee that are subject to such covenant shall be limited to the specific
Current Palm Products in the transferred business that are (A) commercially
released as of the date of transfer or which, prior to the transfer, (B) were
planned for release within three (3) months from the date of transfer and
actually are commercially released within three (3) months from the date of
transfer and (C) for new versions of such specific Current Palm Products
covered by Clauses (i) or (ii) above that have merely minor differences from
such Current Palm Products with no additional features; and
(iii) the 3Com Patents that are subject to
such covenant shall be limited to the 3Com Patents that are entitled to a
First Effective Filing Date before the date of such transfer and, in the
event that the transfer is a transfer of a Subsidiary or business unit and
not all or substantially all of Palm's business or assets, then the 3Com
Patents that are subject to such covenant shall be limited to the 3Com
Patents in the field of use of the transferred Subsidiary or business ; and
(iv) this Section 3.10(c) shall be excluded
from such covenant in any event and therefore 3Com shall have no obligation
to grant a covenant not to sue to any subsequent transferee;
(v) provided, however, that 3Com shall have
no obligation to grant such covenant unless the Transferee grants to 3Com and
its customers and suppliers a covenant not to sue at no charge on the
following terms:
(1) the effective date of such
covenant shall be the effective date of the transfer; and
(2) the products and services of
3Com that are subject to such covenant shall be the 3Com Products; and
(3) the Patents of the
Transferee that are subject to such covenant shall be all the Patents owned
or controlled by the Transferee that are entitled to a First Effective Filing
Date before the date of such transfer and applications for such Patents
(including without limitation any continuations, continuations-in-part,
divisions and substitutions); and
(vi) provided, further, that in the event
that 3Com and any such Transferee are engaged in litigation, arbitration or
other formal dispute resolution proceedings covering Patent infringement
(pending in any court, tribunal, or administrative agency or before any
appointed or agreed upon arbitrator in any jurisdiction worldwide), then 3Com
shall have no obligation to grant such covenant under this Section 3.10(c).
3.11 PALM COVENANT NOT TO SUE
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(a) Palm irrevocably grants, on behalf of itself and its
Subsidiaries, at no charge, an immunity from suit to 3Com and its
Subsidiaries, and its or their direct or indirect customers and manufacturers
(subject to the restrictions set forth in the next sentence) for infringement
of any Palm Patent by any Current 3Com Product. The foregoing covenant with
respect to Third Party manufacturers (i) shall apply only when the portion of
the "have made" Current 3Com Product covered by the Palm Patents has been
designed or created by 3Com and/or one of 3Com's subcontractors (not the
Third Party manufacturer) who is not a direct competitor of Palm in the field
of the Current 3Com Product being designed or created and (ii) shall not
apply to (A) any methods used, or (B) any products or portions thereof that
have been manufactured or marketed by any Third Party prior to 3Com
furnishing the designs or creations to such Third Party. No immunity is
granted under the foregoing covenant by Palm, either directly or by
implication, estoppel or otherwise to any Third Parties acquiring Current
3Com Products from 3Com for the combination of such Current 3Com Products
with other items or for the use of such combination; provided, however, that
the foregoing covenant shall apply to the direct and indirect customers of
3Com for the combination of any such acquired Current 3Com Products with
other 3Com Products and their use in such combination where the acquired
Current 3Com Products have no other substantial noninfringing use aside from
the combination with other 3Com Products sold or otherwise transferred by
3Com directly or indirectly to such customer.
(b) The foregoing covenant shall continue with respect to
each Palm Patent, for the term of such Palm Patent.
(c) If 3Com, after the Separation Date, transfers all or
substantially all of its business or assets, or transfers a Subsidiary or
business unit, then regardless of whether such transfer is part of (i) an
asset sale to any Third Party, or (ii) a sale of shares or securities in 3Com
or a Subsidiary to a Third Party (in each case, any such Third Party shall be
referred to herein as a "Transferee"), then upon written request by 3Com and
the Transferee to Palm within sixty(60) days following the transfer, Palm
shall grant an immunity from suit to the Transferee under the same terms as
the covenant set forth in Section 3.11(a) and (b) above subject to the
following:
(i) the effective date of such covenant shall
be the effective date of transfer; and
(ii) the products and services of the
Transferee that are subject to such covenant shall be limited to the specific
Current 3Com Products in the transferred business that are (A) commercially
released as of the date of transfer or which, prior to the transfer, (B) were
planned for release within three (3) months from the date of transfer and
actually are commercially released within three (3) months from the date of
transfer and (C) for new versions of such specific Current 3Com Products
covered by clauses (i) or (ii) above, that have merely minor differences from
such Current 3Com Products with no additional features; and
(iii) the Palm Patents that are subject to
such covenant shall be limited to the Palm Patents that are entitled to a
First Effective Filing Date before the date of such transfer and, in the
event that the transfer is a transfer of a Subsidiary or business unit and
not all or substantially
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all of 3Com's business or assets, then the Palm Patents that are subject to
such covenant shall be limited to the Palm Patents in the field of use of the
transferred Subsidiary or business; and
(iv) this Section 3.11(c) shall be excluded
from such covenant in any event and therefore, Palm shall have no obligation
to grant a covenant not to sue to any subsequent transferee;
(v) provided, however, that Palm shall have
no such obligation to grant such covenant unless the Transferee grants to
Palm and its customers and suppliers a covenant not to sue at no charge on
the following terms:
(1) the effective date of such
covenant shall be the effective date of the transfer; and
(2) the products and services of
Palm that are subject to such covenant shall be the Palm Products; and
(3) the Patents of the
Transferee that are subject to such covenant shall be all the Patents owned
or controlled by the Transferee that are entitled to a First Effective Filing
Date before the date of such transfer and applications for such Patents
including without limitation any continuations, continuations-in-part,
divisions and substitutions; and
(vi) provided, further, that in the event
that Palm and any such Transferee are engaged in litigation, arbitration or
other formal dispute resolution proceedings covering Patent infringement
(pending in any court, tribunal, or administrative agency or before any
appointed or agreed upon arbitrator in any jurisdiction worldwide), then Palm
shall have no obligation to grant such covenant under this Section 3.11(c).
ARTICLE 4
ADDITIONAL OBLIGATIONS
4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS.
(a) The parties will cooperate to effect a smooth transfer
of the responsibility for prosecution, maintenance and enforcement of the
Assigned Patents from 3Com to Palm. Until such transfer has been effected,
3Com agrees to continue the prosecution and maintenance of, and ongoing
litigation (if any) with respect to, the Assigned Patents (including payment
of maintenance fees), and to maintain its files and records relating to the
Assigned Patents using the same standard of care and diligence that it uses
with respect to 3Com's Patents. Palm will reimburse 3Com for all actual and
reasonable expenses (excluding the value of the time of 3Com employees) to
continue to prosecute and maintain the Assigned Patents after the Separation
Date until the transfer of
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responsibility for the Assigned Patents has been completed and to continue
any such ongoing litigation. The parties shall agree on a case by case basis
on compensation, if any, of 3Com for the value of time of 3Com's employees as
reasonably required in connection with any such litigation. 3Com will provide
Palm with the originals or copies of its files relating to the Assigned
Patents upon such transfer or at such earlier time as the parties may agree.
(b) 3Com shall provide continuing reasonable support to
Palm with respect to the Assigned Patents, including by way of example the
following:
(i) executing all documents prepared by Palm
necessary for prosecution, maintenance, and litigation of the Assigned
Patents,
(ii) making available to Palm or its counsel,
inventors and other persons employed by 3Com for interviews and/or testimony
to assist in good faith in further prosecution, maintenance or litigation of
the Assigned Patents, including the signing of documents related thereto,
(iii) forwarding copies of all correspondence
sent and received concerning the Assigned Patents within a reasonable period
of time after receipt by 3Com, and
(iv) making all relevant documents in the
possession or control of 3Com and corresponding to the Assigned Patents, or
any licenses thereunder, available to Palm or its counsel.
Any actual and reasonable out-of-pocket expenses associated with any such
assistance shall be borne by Palm, expressly excluding the value of the time
of such 3Com employees; provided, however, that in the case of assistance
with litigation, the parties shall agree on a case by case basis on
compensation, if any, of 3Com for the value of the time of 3Com's employees
as reasonably required in connection with such litigation.
4.2 ADDITIONAL OBLIGATIONS WITH REGARD TO GALAHAD PATENTS. Palm
shall provide continuing reasonable support to 3Com with respect to the
Galahad Patents, including by way of example the following:
(a) executing all documents prepared by 3Com necessary for
prosecution, maintenance, and litigation of the Galahad Patents,
(b) making available to 3Com or its counsel, inventors and
other persons employed by Palm for interviews and/or testimony to assist in
good faith in further prosecution, maintenance or litigation of the Galahad
Patents, including the signing of documents related thereto,
(c) forwarding copies of all correspondence sent and
received concerning the Galahad Patents within a reasonable period of time
after receipt by Palm, and
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(d) making all relevant documents in the possession or control
of Palm and corresponding to the Galahad Patents, or any licenses thereunder,
available to 3Com or its counsel.
Any actual and reasonable out-of-pocket expenses associated with such
assistance shall be borne by 3Com, expressly excluding the value of the time of
such Palm personnel; provided, however, that in the case of assistance with
litigation, the parties shall agree on a case by case basis on compensation, if
any, of Palm for the value of the time of Palm's employees as reasonably
required in connection with such litigation.
4.3 STANDARDS BODIES. For a period of five (5) years from the
Separation Date, the parties agree to cooperate reasonably and in good faith
with each other with respect to the licensing of each party's Patents in the
context of Bluetooth related standards bodies, to the extent consistent with
each party's own business objectives.
4.4 ASSIGNMENT OF PATENTS. 3Com shall not assign or grant any
rights under any of the Galahad Patents unless such assignment or grant is
made subject to the licenses granted in this Agreement.
4.5 RECORDATION OF LICENSES.
(a) For any country, now or in the future, that requires the
express consent of all inventors or their assignees to the grant of licenses or
rights under Patents issued in such countries for joint inventions:
(i) each party shall give such consent, or
shall obtain such consent from its employees, its Subsidiaries or employees
of any of its Subsidiaries, as required to make full and effective any such
licenses and rights respecting any joint invention granted to a grantee
hereunder by such party; and
(ii) each party shall take steps that are
reasonable under the circumstances to obtain from Third Parties whatever
other consents are necessary to make full and effective such licenses and
rights respecting any joint invention purported to be granted by it
hereunder. If, in spite of such reasonable steps, such party is unable to
obtain the requisite consents from such Third Parties, the resulting
inability of such party to make full and effective its purported grant of
such licenses and rights shall not be considered to be a breach of this
Agreement.
(b) Each party agrees, without demanding any further
consideration, to execute (and to cause its Subsidiaries to execute) all
documents reasonably requested by the other party to effect recordation of the
license relationship between the parties created by this Agreement.
ARTICLE 5
CONFIDENTIALITY
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The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
ARTICLE 6
TERMINATION
6.1 VOLUNTARY TERMINATION. By written notice to 3Com, Palm may
voluntarily terminate all or a specified portion of the licenses and rights
granted to it hereunder by 3Com. Such notice shall specify the effective date
of such termination and shall clearly specify any affected Patent, Patent
application, Invention Disclosure, product or service.
6.2 SURVIVAL. Any voluntary termination of licenses and rights of
Palm under Section 6.1 shall not affect Palm's licenses and rights with
respect to any licensed product made or service furnished prior to such
termination, and shall not affect the licenses and rights granted to 3Com
hereunder.
6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that
its remedy for breach by the other party of the licenses granted to it
hereunder or of any other provision hereof, shall be, subject to the
requirements of Article 7, to bring a claim to recover damages subject to the
limits set forth in this Agreement and to seek any other appropriate
equitable relief, other than termination of the licenses or covenants not to
sue granted by it in this Agreement.
ARTICLE 7
DISPUTE RESOLUTION
7.1 MEDIATION. If a dispute, controversy or claim ("Dispute")
arises between the parties relating to the interpretation or performance of
this Agreement, or the grounds for the termination hereof, appropriate senior
executives (e.g. director or V.P. level) of each party who shall have the
authority to resolve the matter shall meet to attempt in good faith to
negotiate a resolution of the Dispute prior to pursuing other available
remedies. The initial meeting between the appropriate senior executives shall
be referred to herein as the "Dispute Resolution Commencement Date."
Discussions and correspondence relating to trying to resolve such Dispute
shall be treated as confidential information developed for the purpose of
settlement and shall be exempt from discovery or production and shall not be
admissible. If the senior executives are unable to resolve the Dispute within
thirty (30) days from the Dispute Resolution Commencement Date, and either
party wishes to pursue its rights relating to such Dispute, then the Dispute
will be mediated by a mutually acceptable mediator appointed pursuant to the
mediation rules of JAMS/Endispute within thirty (30) days after written
notice by one party to the other demanding non-binding mediation. Neither
party may unreasonably withhold consent to the selection of a mediator or the
location of the mediation. Both parties will share the costs of the mediation
equally, except that each party shall bear its own costs
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and expenses, including attorney's fees, witness fees, travel expenses, and
preparation costs. The parties may also agree to replace mediation with some
other form of non-binding or binding ADR.
7.2 ARBITRATION. Any Dispute which the parties cannot resolve
through mediation within ninety (90) days of the Dispute Resolution
Commencement Date, unless otherwise mutually agreed, shall be submitted to
final and binding arbitration under the then current Commercial Arbitration
Rules of the American Arbitration Association ("AAA"), by three (3)
arbitrators in Santa Clara County, California. Such arbitrators shall be
selected by the mutual agreement of the parties or, failing such agreement,
shall be selected according to the aforesaid AAA rules. The arbitrators will
be instructed to prepare and deliver a written, reasoned opinion stating
their decision within thirty (30) days of the completion of the arbitration.
The prevailing party in such arbitration shall be entitled to expenses,
including costs and reasonable attorneys' and other professional fees,
incurred in connection with the arbitration (but excluding any costs and fees
associated with prior negotiation or mediation). The decision of the
arbitrator shall be final and non-appealable and may be enforced in any court
of competent jurisdiction. The use of any ADR procedures will not be
construed under the doctrine of laches, waiver or estoppel to adversely
affect the rights of either party.
7.3 COURT ACTION. Any Dispute regarding the following is not
required to be negotiated, mediated or arbitrated prior to seeking relief
from a court of competent jurisdiction: breach of any obligation of
confidentiality; infringement, misappropriation, or misuse of any
intellectual property right; any other claim where interim relief from the
court is sought to prevent serious and irreparable injury to one of the
parties or to others. However, the parties to the Dispute shall make a good
faith effort to negotiate and mediate such Dispute, according to the above
procedures, while such court action is pending.
7.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed
in writing, the parties will continue to provide service and honor all other
commitments under this Agreement during the course of dispute resolution
pursuant to the provisions of this Article 7 with respect to all matters not
subject to such dispute, controversy or claim.
ARTICLE 8
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE
OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES;
PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT DAMAGES FOR
INFRINGEMENT AVAILABLE TO EITHER PARTY UNDER APPLICABLE LAW IN THE EVENT OF
BREACH BY THE OTHER PARTY OF SECTIONS 3.1, 3.2, 3.3 OR 3.5(a) OR FOR
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS NOT LICENSED OR COVENANTED
HEREIN AND
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SHALL NOT LIMIT EACH PARTY'S OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT J OF
THE MASTER SEPARATION AND DISTRIBUTION AGREEMENT; PROVIDED FURTHER THAT THE
EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY IN ANY EVENT.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL PATENTS
AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER ARE
LICENSED OR PROVIDED ON AN "AS IS" BASIS AND THAT NEITHER PARTY NOR ANY OF
ITS SUBSIDIARIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES
WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without
limiting the generality of the foregoing, neither party nor any of its
Subsidiaries makes any warranty or representation as to the validity and/or
scope of any Patent licensed by it to the other party hereunder or any
warranty or representation that any manufacture, use, importation, offer for
sale or sale of any product or service will be free from infringement of any
Patent or other intellectual property right of any Third Party.
9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall
be construed as conferring any rights by implication, estoppel or otherwise,
under any intellectual property right, other than the rights expressly
granted in this Agreement with respect to the Galahad Patents and Assigned
Patents. Neither party is required hereunder to furnish or disclose to the
other any technical or other information except as specifically provided
herein.
9.3 INFRINGEMENT SUITS. Neither party shall have any obligation
hereunder to institute any action or suit against Third Parties for
infringement of any Patent or to defend any action or suit brought by a Third
Party which challenges or concerns the validity of any Patent. Unless the
parties otherwise agree in writing, neither party shall have any right to
institute any action or suit against Third Parties for infringement of any
Patent owned by the other party.
9.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY
RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES
AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN
AGREEMENT BETWEEN THE PARTIES. Without limiting the generality of the
foregoing, neither party, nor any of its Subsidiaries is obligated to (i)
file any Patent application, or to secure any Patent or Patent rights, (ii)
to maintain any Patent in force, or (iii) provide any technical assistance,
except for the obligations expressly assumed in this Agreement.
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9.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements (as defined in the
Master Separation and Distribution Agreement) and the Exhibits and Schedules
referenced or attached hereto and thereto constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
shall supersede all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof and
thereof. To the extent there is a conflict between this Agreement and the
Master Assignment and Assumption Agreement between the parties, the terms of
this Agreement shall govern.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior
Court of Santa Clara County and/or the United States District Court for the
Northern District of California shall have jurisdiction and venue over all
Disputes between the parties that are permitted to be brought in a court of
law pursuant to Article 7 above.
9.7 DESCRIPTIVE HEADINGS. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Any capitalized term used in any
Exhibit or Schedule but not otherwise defined therein, shall have the meaning
assigned to such term in this Agreement. When a reference is made in this
Agreement to an Article or a Section, Exhibit or Schedule, such reference
shall be to an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.
9.8 NOTICES. Notices, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of
this Agreement shall be given in writing to the respective parties to the
following addresses:
if to 3Com:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed
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by first class mail. All notices shall be deemed to have been given and
received on the earlier of actual delivery or three (3) days from the date of
postmark.
9.9 NONASSIGNABILITY. Neither party may, directly or indirectly, in
whole or in part, whether by operation of law or otherwise, assign or
transfer this Agreement, without the other party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other party.
Notwithstanding the foregoing, each party (or its successive assignees or
transferees hereunder) may, without such consent, assign or transfer this
Agreement, to a Person that succeeds to all or substantially all of its
business or assets of such party as long as such Person agrees to accept all
of the terms set forth herein; provided, however, that the licenses and
covenants not to sue set forth in Article 3 may not be assigned or
transferred in any event (except in the case of a reincorporation of such
party in another state); and provided, further, that the prohibition on
assignment or transfer of the licenses and covenants not to sue set forth in
Article 3 shall not limit 3Com's or Palm's obligations in Sections 3.7,
3.10(c) and 3.11(c) to grant licenses and/or covenants not to sue to a
Transferee. Without limiting the foregoing, this Agreement will be binding
upon and inure to the benefit of the parties and their permitted successors
and assigns.
9.10 SEVERABILITY. If any term or other provision of this Agreement
is determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
9.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of either party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
9.12 AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
9.13 COUNTERPARTS. This Agreement, including the Ancillary
Agreement and the Exhibits and Schedules hereto and thereto and the other
documents referred to herein or therein, may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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WHEREFORE, the parties have signed this Master Patent Ownership and
License Agreement effective as of the date first set forth above.
3COM CORPORATION PALM, INC.
By: By:
----------------------------- -----------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
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Exhibit 2.5
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
BETWEEN
3COM CORPORATION
AND PALM, INC.
Effective as of February 26, 2000
<PAGE>
MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS.................................................................................................1
1.1 AUTHORIZED DEALERS..................................................................................1
1.2 COLLATERAL MATERIALS................................................................................1
1.3 CORPORATE IDENTITY MATERIALS........................................................................1
1.4 DISTRIBUTION DATE...................................................................................2
1.5 LICENSED MARKS......................................................................................2
1.6 MAINTENANCE CONTRACTS...............................................................................2
1.7 MARK................................................................................................2
1.8 MASTER SEPARATION AND DISTRIBUTION AGREEMENT........................................................2
1.9 PALM BUSINESS.......................................................................................2
1.10 PALM BUSINESS MARKS.................................................................................2
1.11 PALM BUSINESS MARKS DATABASE........................................................................2
1.12 PALM BUSINESS PRODUCTS..............................................................................2
1.13 PERSON..............................................................................................2
1.14 QUALITY STANDARDS...................................................................................3
1.15 SELL................................................................................................3
1.16 SEPARATION DATE.....................................................................................3
1.17 SUBSIDIARY..........................................................................................3
1.18 THIRD PARTY.........................................................................................3
1.19 TRADEMARK USAGE GUIDELINES..........................................................................3
ARTICLE 2 OWNERSHIP...................................................................................................3
2.1 OWNERSHIP OF PALM BUSINESS MARKS....................................................................3
2.2 PRIOR GRANTS........................................................................................4
2.3 ASSIGNMENT DISCLAIMER...............................................................................4
ARTICLE 3 LICENSES....................................................................................................4
3.1 LICENSE GRANT.......................................................................................4
3.2 LICENSE RESTRICTIONS................................................................................4
3.3 LICENSEE UNDERTAKINGS...............................................................................5
3.4 NON-TRADEMARK USE...................................................................................5
3.5 RESERVATION OF RIGHTS...............................................................................5
3.6 THIRD PARTY LICENSES................................................................................6
ARTICLE 4 PERMITTED SUBLICENSES.......................................................................................6
4.1 SUBLICENSES.........................................................................................6
4.2 AUTHORIZED DEALERS'USE OF MARKS.....................................................................6
4.3 ENFORCEMENT OF AGREEMENTS...........................................................................6
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
ARTICLE 5 TRADEMARK USAGE GUIDELINES..................................................................................7
5.1 TRADEMARK USAGE GUIDELINES..........................................................................7
5.2 TRADEMARK REVIEWS...................................................................................7
ARTICLE 6 TRADEMARK USAGE GUIDELINE ENFORCEMENT.......................................................................7
6.1 INITIAL CURE PERIOD.................................................................................7
6.2 SECOND CURE PERIOD..................................................................................7
6.3 FINAL CURE PERIOD...................................................................................8
ARTICLE 7 QUALITY STANDARDS...........................................................................................8
7.1 GENERAL.............................................................................................8
7.2 QUALITY STANDARDS...................................................................................8
7.3 QUALITY CONTROL REVIEWS.............................................................................8
7.4 PRODUCT DISCONTINUATION.............................................................................8
ARTICLE 8 QUALITY STANDARD ENFORCEMENT................................................................................9
8.1 INITIAL CURE PERIOD.................................................................................9
8.2 SECOND CURE PERIOD..................................................................................9
8.3 FINAL CURE PERIOD...................................................................................9
ARTICLE 9 PROTECTION OF LICENSED MARKS................................................................................9
9.1 OWNERSHIP AND RIGHTS................................................................................9
9.2 PROTECTION OF MARKS.................................................................................9
9.3 SIMILAR MARKS......................................................................................10
9.4 INFRINGEMENT PROCEEDINGS...........................................................................10
ARTICLE 10 TERMINATION...............................................................................................11
10.1 TERM...............................................................................................11
10.2 VOLUNTARY TERMINATION..............................................................................11
10.3 SURVIVAL...........................................................................................11
10.4 OTHER TERMINATION..................................................................................11
ARTICLE 11 DISPUTE RESOLUTION........................................................................................11
11.1 MEDIATION..........................................................................................11
11.2 ARBITRATION........................................................................................11
11.3 COURT ACTION.......................................................................................12
11.4 CONTINUITY OF SERVICE AND PERFORMANCE..............................................................12
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<S> <C>
ARTICLE 12 LIMITATION OF LIABILITY...................................................................................12
ARTICLE 13 MISCELLANEOUS PROVISIONS..................................................................................13
13.1 DISCLAIMER.........................................................................................13
13.2 NO IMPLIED LICENSES................................................................................13
13.3 INFRINGEMENT SUITS.................................................................................13
13.4 NO OTHER OBLIGATIONS...............................................................................13
13.5 ENTIRE AGREEMENT...................................................................................13
13.6 GOVERNING LAW......................................................................................14
13.7 DESCRIPTIVE HEADINGS...............................................................................14
13.8 NOTICES............................................................................................14
13.9 NONASSIGNABILITY...................................................................................15
13.10 SEVERABILITY.......................................................................................15
13.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE..............................................15
13.12 AMENDMENT..........................................................................................15
13.13 COUNTERPARTS.......................................................................................15
</TABLE>
EXHIBIT A: LICENSED MARKS
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MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
This Master Trademark Ownership and License Agreement (the "Agreement")
is effective as of February 26, 2000 (the "Effective Date"), between 3Com
Corporation, a Delaware corporation ("3Com"), having an office at 5400 Bayfront
Plaza, Santa Clara, California, 95052 and Palm, Inc., a Delaware corporation
("Palm"), having an office at 5470 Great America Parkway, Santa Clara,
California, 95052.
WHEREAS, the Board of Directors of 3Com has determined that it is in
the best interest of 3Com and its stockholders to separate 3Com's existing
businesses into two independent businesses;
WHEREAS, as part of the foregoing, 3Com and Palm's predecessor, Palm
Computing, Inc., a California Corporation, have entered into a Master Separation
and Distribution Agreement (as defined below) which provides, among other
things, for the separation of certain Palm assets and Palm liabilities, the
initial public offering of Palm stock, the distribution of such stock and the
execution and delivery of certain other agreements in order to facilitate and
provide for the foregoing;
WHEREAS, the parties desire that 3Com assign and transfer to Palm the
Palm Business Marks (as defined below); and
WHEREAS, the parties further desire that 3Com license the Licensed
Marks (as defined below) to Palm after the separation of the Palm businesses.
NOW, THEREFORE, in consideration of the mutual promises of the parties,
and of good and valuable consideration, it is agreed by and between the parties
as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following capitalized terms are
defined in this Article 1 and shall have the meaning specified herein:
1.1 AUTHORIZED DEALERS. "Authorized Dealers" means any distributor,
dealer, OEM customer, VAR customer, VAD customer, systems integrator or other
agent that on or after the Separation Date is authorized to market,
advertise, sell, lease, rent, service or otherwise offer Palm Business
Products. Palm will provide 3Com a list of the then current Authorized
Dealers within a reasonable period after 3Com's request.
1.2 COLLATERAL MATERIALS. "Collateral Materials" means all
packaging, tags, labels, advertising, promotions, display fixtures,
instructions, warranties and other materials of any and all types associated
with the Palm Business Products that are marked with at least one of the
Licensed Marks.
1.3 CORPORATE IDENTITY MATERIALS. "Corporate Identity Materials"
means materials that are not products or product-related and that Palm may
now or hereafter use to
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communicate its identity, including, by way of example and without
limitation, business cards, letterhead, stationery, paper stock and other
supplies, and signage on real property and buildings.
1.4 DISTRIBUTION DATE. "Distribution Date" has the meaning set
forth in the Master Separation and Distribution Agreement.
1.5 LICENSED MARKS. "Licensed Marks" means the Marks set forth on
Exhibit A hereto.
1.6 MAINTENANCE CONTRACTS. "Maintenance Contracts" means agreements
pursuant to which Palm, its Subsidiaries or its or their Authorized Dealers
or their designees provide repair and maintenance services (whether
preventive, diagnostic, remedial, warranty or non-warranty) in connection
with Palm Business Products, including without limitation agreements entered
into by 3Com prior to the Separation Date and assigned to Palm pursuant to
the Master Separation and Distribution Agreement or the Ancillary Agreements
(as such term is defined in the Master Separation and Distribution Agreement).
1.7 MARK. "Mark" means any trademark, service mark, trade name,
domain name, and the like, or other word, name, symbol or device, or any
combination thereof, used or intended to be used by a Person to identify and
distinguish the products or services of that Person from the products or
services of others and to indicate the source of such goods or services,
including without limitation all registrations and applications therefor
throughout the world and all common law and other rights therein throughout
the world.
1.8 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master
Separation and Distribution Agreement" means the Master Separation and
Distribution Agreement between the parties.
1.9 PALM BUSINESS. "Palm Business" means the business and
operations of Palm.
1.10 PALM BUSINESS MARKS. "Palm Business Marks" means the mutually
agreed Marks listed in the Palm Business Marks Database.
1.11 PALM BUSINESS MARKS DATABASE. "Palm Business Marks Database"
means the mutually agreed Palm Business Marks Database as of the Separation
Date, as it may be updated by the parties upon mutual agreement to add
additional Marks as of the Separation Date.
1.12 PALM BUSINESS PRODUCTS means any and all products of the Palm
Business commercially released prior to the Separation Date.
1.13 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, and a
governmental entity or any department, agency or political subdivision
thereof.
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1.14 QUALITY STANDARDS. "Quality Standards" means standards of
quality applicable to the Palm Business Products, as in use immediately prior
to the Separation Date, unless otherwise communicated in writing by 3Com from
time to time.
1.15 SELL. To "Sell" a product means to sell, transfer, lease or
otherwise dispose of a product. "Sale" and "Sold" have the corollary meanings
ascribed thereto.
1.16 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific
Time, February 26, 2000, or such other date as may be fixed by the Board of
Directors of 3Com.
1.17 SUBSIDIARY. "Subsidiary" of any Person means a corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or
by any one or more of its Subsidiaries, or by such Person and one or more of
its Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such
other Person unless such other Person controls, or has the right, power or
ability to control, that Person. For purposes of this Agreement, Palm shall
be deemed not to be a subsidiary of 3Com.
1.18 THIRD PARTY. "Third Party" means a Person other than 3Com and
its Subsidiaries and Palm and its Subsidiaries.
1.19 TRADEMARK USAGE GUIDELINES. "Trademark Usage Guidelines" means
the guidelines for proper usage of the Licensed Marks, as in use immediately
prior to the Separation Date, as such guidelines may be revised and updated
in writing by 3Com from time to time.
ARTICLE 2
OWNERSHIP
2.1 OWNERSHIP OF PALM BUSINESS MARKS. The parties agree that Palm
hereby retains ownership of all right, title and interest in and to the Palm
Business Marks. Subject to Sections 2.2 and 2.3 below, to the extent that any
Palm Business Marks are registered in 3Com's name anywhere in the world, or
to the extent that 3Com otherwise has any ownership rights in and to the Palm
Business Marks or any goodwill therein, 3Com hereby grants, conveys and
assigns (and agrees to cause its appropriate Subsidiaries to grant, convey
and assign) to Palm, by execution hereof (or, where appropriate or required,
by execution of separate instruments of assignment), all its (and their)
right, title and interest in and to the Palm Business Marks, including all
goodwill of the Palm Business appurtenant thereto, to be held and enjoyed by
Palm, its successors and assigns. 3Com further grants, conveys and assigns
(and agrees to cause its appropriate Subsidiaries to grant, convey and
assign) to Palm all its (and their) right, title and interest in and to any
and all causes of action and rights of recovery for past infringement of the
Palm Business Marks. 3Com will, without demanding any further consideration
therefor, at the request and expense of Palm (except for the
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value of the time of 3Com employees), do (and to cause its Subsidiaries to
do) all lawful and just acts that may be or become necessary for evidencing,
maintaining, recording and perfecting Palm's rights to such Palm Business
Marks consistent with 3Com's general business practice as of the Separation
Date, including but not limited to execution and acknowledgement of (and
causing its Subsidiaries to execute and acknowledge) assignments and other
instruments in a form reasonably required by Palm or the relevant
governmental or other authorities for each Mark in all jurisdictions in which
3Com owns rights thereto.
2.2 PRIOR GRANTS. Palm acknowledges and agrees that the foregoing
assignment is subject to any and all licenses or other rights that may have
been granted by 3Com or its Subsidiaries with respect to the Palm Business
Marks prior to the Separation Date. 3Com shall respond to reasonable
inquiries from Palm regarding any such prior grants.
2.3 ASSIGNMENT DISCLAIMER. PALM ACKNOWLEDGES AND AGREES THAT THE
FOREGOING ASSIGNMENTS ARE MADE ON AN "AS-IS," QUITCLAIM BASIS AND THAT
NEITHER 3COM NOR ANY SUBSIDIARY OF 3COM HAS MADE OR WILL MAKE ANY WARRANTY
WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR NON-INFRINGEMENT.
ARTICLE 3
LICENSES
3.1 LICENSE GRANT. 3Com grants (and agrees to cause its appropriate
Subsidiaries to grant) to Palm a personal, irrevocable, nonexclusive,
worldwide, fully-paid and non-transferable (except as set forth in Section
13.9) license to use the Licensed Marks on the Palm Business Products and in
connection with the Sale and offer for Sale of Palm Business Products (or, in
the case of Palm Business Products in the form of software, in connection
with licensing of Palm Business Products) and to use the Licensed Marks in
the advertisement and promotion of such Palm Business Products.
3.2 LICENSE RESTRICTIONS.
(a) Palm may not make any use whatsoever, in whole or in part,
of the Licensed Marks, or any other Mark owned by 3Com, in connection with
Palm's corporate, doing business as, or fictitious name, or on Corporate
Identity Materials without the prior written consent of 3Com, except as
expressly set forth in this Section 3.2(a) or in Section 3.4 below.
Notwithstanding the foregoing, Palm may use any business cards, letterhead,
stationery, paper stock and other supplies, and the like throughout their useful
life in connection with the conduct of the Palm Business, to the extent that, as
of the Separation Date, they are in use, in inventory or on order.
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(b) Palm may not use any Licensed Mark in direct association
with another Mark such that the two Marks appear to be a single Mark or in any
other composite manner with any Marks of Palm or any Third Party (other than the
Palm Business Marks as permitted herein).
(c) In all respects, Palm's usage of the Licensed Marks
pursuant to the license granted hereunder shall be in a manner consistent with
the high standards, reputation and prestige represented by the Licensed Marks,
and any usage by Palm that is inconsistent with the foregoing shall be deemed to
be outside the scope of the license granted hereunder. As a condition to the
license granted hereunder, Palm shall at all times present, position and promote
the Palm Business Products marked with one or more of the Licensed Marks in a
manner consistent with the high standards and prestige represented by the
Licensed Marks.
3.3 LICENSEE UNDERTAKINGS. As a condition to the licenses granted
hereunder, Palm undertakes to 3Com that:
(a) Palm shall not use the Licensed Marks (or any other Mark
of 3Com) in any manner which is deceptive or misleading, which ridicules or is
derogatory to the Licensed Marks, or which compromises or reflects unfavorably
upon the goodwill, good name, reputation or image of 3Com or the Licensed Marks,
or which might jeopardize or limit 3Com's proprietary interest therein.
(b) Palm shall not use the Licensed Marks in connection with
any products or services other than the Palm Business Products.
(c) Palm shall not (i) misrepresent to any Person the scope of
its authority under this Agreement, (ii) incur or authorize any expenses or
liabilities chargeable to 3Com, or (iii) take any actions that would impose upon
3Com any obligation or liability to a Third Party other than obligations under
this Agreement, or other obligations which 3Com expressly approves in writing
for Palm to incur on its behalf.
(d) All press releases and corporate advertising and
promotions that embody the Licensed Marks and messages conveyed thereby shall be
consistent with the high standards and prestige represented by the Licensed
Marks.
3.4 NON-TRADEMARK USE. Each party may make appropriate and truthful
references to the other party and the other party's products and technology.
3.5 RESERVATION OF RIGHTS. Except as otherwise expressly provided
in this Agreement, 3Com shall retain all rights in and to the Licensed Marks,
including without limitation:
(a) All rights of ownership in and to the Licensed Marks;
(b) The right to use (including the right of 3Com's
Subsidiaries to use) the Licensed Marks, either alone or in combination with
other Marks, in connection with the marketing,
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offer or provision of any product or service, including any product or
service which competes with Palm Business products; and
(c) The right to license Third Parties to use the Licensed
Marks.
3.6 THIRD PARTY LICENSES. 3Com agrees that it and its Subsidiaries
will not license or transfer the Licensed Marks to Third Parties (other than
to and among Subsidiaries or Joint Ventures (as defined below) of 3Com) for
use in connection with products or services which compete with Palm Business
Products that are listed on a mutually agreed Palm corporate price list as of
the Distribution Date until two (2) years after the Separation Date. Such
restriction shall be binding on any successors and assigns of the Licensed
Marks. As used in this Section 3.6, "Joint Venture" means a corporation or
other organization whether incorporated or unincorporated of which at least
fifth percent (50%) of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by 3Com.
ARTICLE 4
PERMITTED SUBLICENSES
4.1 SUBLICENSES
(a) SUBLICENSES TO SUBSIDIARIES. Subject to the terms and
conditions of this Agreement, including all applicable Quality Standards and
Trademark Usage Guidelines and other restrictions in this Agreement, Palm may
grant sublicenses to its Subsidiaries to use the Licensed Marks in accordance
with the license grant in Section 3.1 above; provided, that (i) Palm enters into
a written sublicense agreement with each such Subsidiary sublicensee, and (ii)
such agreement does not include the right to grant further sublicenses other
than, in the case of a sublicensed Subsidiary of Palm, to another Subsidiary of
Palm. Palm shall provide copies of such written sublicense agreements to 3Com
upon request. If Palm grants any sublicense rights pursuant to this Section
4.1(a) and any such sublicensed Subsidiary ceases to be a Subsidiary, then the
sublicense granted to such Subsidiary pursuant to this Section 4.1(a) shall
terminate 180 days from the date of such cessation.
4.2 AUTHORIZED DEALERS' USE OF MARKS. Subject to the terms and
conditions of this Agreement, including all applicable Quality Standards and
Trademark Usage Guidelines and other restrictions in this Agreement, Palm
(and those Subsidiaries sublicensed to use the Licensed Marks pursuant to
Section 4.1) may allow Authorized Dealers to, and may allow such Authorized
Dealers to allow other Authorized Dealers to, use the Licensed Marks in the
advertisement and promotion of Palm Business Products Sold by such Authorized
Dealers.
4.3 ENFORCEMENT OF AGREEMENTS. Palm shall take all appropriate
measures at Palm's expense promptly and diligently to enforce the terms of
any sublicense agreement or other
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agreement with any Subsidiary or Authorized Dealer, or of any existing
agreement with any Authorized Dealer, and shall restrain any such Subsidiary
or Authorized Dealer from violating such terms, including without limitation
(i) monitoring the Subsidiaries' and Authorized Dealers' compliance with the
relevant Trademark Usage Guidelines and Quality Standards and causing any
noncomplying Subsidiary or Authorized Dealer promptly to remedy any failure,
(ii) terminating such agreement and/or (iii) commencing legal action, in each
case, using a standard of care consistent with 3Com's practices as of the
Separation Date. In the event that 3Com determines that Palm has failed
promptly and diligently to enforce the terms of any such agreement using such
standard of care, 3Com reserves the right to enforce such terms, and Palm
shall reimburse 3Com for its fully allocated direct costs and expenses
incurred in enforcing such agreement, plus all out-of-pocket costs and
expenses, plus five percent (5%).
ARTICLE 5
TRADEMARK USAGE GUIDELINES
5.1 TRADEMARK USAGE GUIDELINES. Palm and its Subsidiaries and
Authorized Dealers shall use the Licensed Marks only in a manner that is
consistent with the Trademark Usage Guidelines.
5.2 TRADEMARK REVIEWS. At 3Com's request, Palm agrees to furnish or
make available for inspection to 3Com samples of all Palm Business Products
and Collateral Materials of Palm, its Subsidiaries and Authorized Dealers
that are marked with one or more of the Licensed Marks (to the extent that
Palm has the right to obtain such samples). If Palm is notified or determines
that it or any of its Subsidiaries or Authorized Dealers is not complying
with any Trademark Usage Guidelines, it shall notify 3Com and the provisions
of Article 6 and Section 4.3 shall apply to such noncompliance.
ARTICLE 6
TRADEMARK USAGE GUIDELINE ENFORCEMENT
6.1 INITIAL CURE PERIOD. If 3Com becomes aware that Palm or any
Subsidiary or Authorized Dealer is not complying with any Trademark Usage
Guidelines, 3Com shall notify Palm in writing, setting forth in reasonable
detail a written description of the noncompliance and any requested action
for curing such noncompliance. Palm shall then have sixty (60) days with
regard to noncompliance by Authorized Dealers and thirty (30) days with
regard to noncompliance by Palm or any Subsidiary after receipt of such
notice ("Guideline Initial Cure Period") to correct such noncompliance or
submit to 3Com a written plan to correct such noncompliance which written
plan is reasonably acceptable to 3Com.
6.2 SECOND CURE PERIOD. If noncompliance with the Trademark Usage
Guidelines continues beyond the Guideline Initial Cure Period, Palm and 3Com
shall each promptly appoint a representative to negotiate in good faith
actions that may be necessary to correct such
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noncompliance. The parties shall have thirty (30) days following the
expiration of the Guideline Initial Cure Period to agree on corrective
actions, and Palm shall have thirty (30) days from the date of an agreement
of corrective actions to implement such corrective actions and cure or cause
the cure of such noncompliance ("Second Guideline Cure Period").
6.3 FINAL CURE PERIOD. If the noncompliance with the Trademark
Usage Guidelines remains uncured after the expiration of the Second Guideline
Cure Period, then at 3Com's election, Palm, or the noncomplying Subsidiary or
Authorized Dealer, whichever is applicable, promptly shall cease using the
noncomplying Collateral Materials until 3Com determines that Palm, or the
noncomplying Subsidiary or Authorized Dealer, whichever is applicable, has
demonstrated its ability and commitment to comply with the Trademark Usage
Guidelines. Nothing in this Article 6 shall be deemed to limit Palm's
obligations under Section 4.3 above or to preclude 3Com from exercising any
rights or remedies under Section 4.3 above.
ARTICLE 7
QUALITY STANDARDS
7.1 GENERAL. Palm acknowledges that the Palm Business Products
permitted by this Agreement to be marked with one or more of the Licensed
Marks must continue to be of sufficiently high quality as to provide
protection of the Licensed Marks and the goodwill they symbolize, and Palm
further acknowledges that the maintenance of the high quality standards
associated with such products is of the essence of this Agreement.
7.2 QUALITY STANDARDS. Palm and its Authorized Dealers and
Subsidiaries shall use the Licensed Marks only on and in connection with Palm
Business Products that meet or exceed in all respects the Quality Standards.
7.3 QUALITY CONTROL REVIEWS. At 3Com's request, Palm agrees to
furnish or make available to 3Com for inspection sample Palm Business
Products marked with one or more of the Licensed Marks. 3Com may also
independently conduct customer satisfaction surveys to determine if Palm and
its Subsidiaries and Authorized Dealers are meeting the Quality Standards.
Palm shall cooperate with 3Com fully in the distribution of such surveys. In
the event of a challenge by 3Com, 3Com shall, at the request of Palm, provide
Palm with copies of customer surveys used by 3Com to determine if Palm is
meeting the Quality Standards. If Palm is notified or determines that it or
any of its Subsidiaries or Authorized Dealers is not complying with any
Quality Standards, it shall notify 3Com and the provisions of Article 8 and
Section 4.3 shall apply to such noncompliance.
7.4 PRODUCT DISCONTINUATION. If, at any time during or after the
term of this Agreement, Palm discontinues the sale of a Palm Business Product
that has been marked with one or more of the Licensed Marks, Palm shall
substantially comply with the discontinuation procedure used by 3Com for such
or similar products immediately prior to Separation Date.
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ARTICLE 8
QUALITY STANDARD ENFORCEMENT
8.1 INITIAL CURE PERIOD. If 3Com becomes aware that Palm or any
Subsidiary or Authorized Dealer sublicensee is not complying with any Quality
Standards, 3Com shall notify Palm in writing, setting forth in reasonable
detail a written description of the noncompliance and any requested action
for curing such noncompliance. Palm shall then have thirty (30) days after
receipt of such notice ("Initial Cure Period") to correct such noncompliance
or submit to 3Com a written plan to correct such noncompliance which written
plan is reasonably acceptable to 3Com.
8.2 SECOND CURE PERIOD. If noncompliance with the Quality Standards
continues beyond the Initial Cure Period, Palm and 3Com shall each promptly
appoint a representative to negotiate in good faith actions that may be
necessary to correct such noncompliance. The parties shall have thirty (30)
days following the expiration of the Initial Cure Period to agree on
corrective actions, and Palm shall have thirty (30) days from the date of an
agreement of corrective actions to implement such corrective actions and cure
or cause the cure of such noncompliance ("Second Cure Period").
8.3 FINAL CURE PERIOD. If the noncompliance with the Quality
Standards remains uncured after the expiration of the Second Cure Period,
then at 3Com's election, Palm, or the noncomplying Subsidiary or Authorized
Dealer, whichever is applicable, promptly shall cease offering the
noncomplying Palm Business Products under the Licensed Marks until 3Com
determines that Palm, or the noncomplying Subsidiary or Authorized Dealer,
whichever is applicable, has demonstrated its ability and commitment to
comply with the Quality Standards. Nothing in this Article 8 shall be deemed
to limit Palm's obligations under Section 4.3 above or to preclude 3Com from
exercising any rights or remedies under Section 4.3 above.
ARTICLE 9
PROTECTION OF LICENSED MARKS
9.1 OWNERSHIP AND RIGHTS. To the extent not contrary to applicable
law, Palm agrees not to challenge the ownership or validity of the Licensed
Marks. Palm shall not disparage, dilute or adversely affect the validity of
the Licensed Marks. Palm's use of the Licensed Marks shall inure exclusively
to the benefit of 3Com, and Palm shall not acquire or assert any rights
therein. Palm recognizes the value of the goodwill associated with the
Licensed Marks, and that the Licensed Marks may have acquired secondary
meaning in the minds of the public.
9.2 PROTECTION OF MARKS. Palm shall assist 3Com, at 3Com's request
and expense, in the procurement and maintenance of 3Com's intellectual
property rights in the Licensed Marks. Palm will not grant or attempt to
grant a security interest in the Licensed Marks, or to record any such
security interest in the United States Patent and Trademark Office or
elsewhere, against any trademark application or registration belonging to
3Com. Palm agrees to, and to cause its Subsidiaries to, execute all documents
reasonably requested by 3Com to effect further registration
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of, maintenance and renewal of the Licensed Marks, recordation of the license
relationship between 3Com and Palm, and recordation of Palm as a registered
user. 3Com makes no warranty or representation that trademark registrations
have been or will be applied for, secured or maintained in the Licensed Marks
throughout, or anywhere within, the world. Palm shall cause to appear on all
Palm Business Products, and all Collateral Materials, such legends, markings
and notices as may be required by applicable law or reasonably requested by
3Com.
9.3 SIMILAR MARKS. Palm agrees not to use or register in any
country any Mark that infringes 3Com's rights in the Licensed Marks, or any
element thereof. If any application for registration is, or has been, filed
in any country by Palm which relates to any Mark that infringes 3Com's rights
in the Licensed Marks, Palm shall immediately abandon any such application or
registration or assign it to 3Com. To the extent not contrary to applicable
law, Palm shall not challenge 3Com's ownership of or the validity of the
Licensed Marks or any application for registration thereof throughout the
world. Palm shall not use or register in any country any copyright, domain
name, telephone number or any other intellectual property right, whether
recognized currently or in the future, or other designation which would
affect the ownership or rights of 3Com in and to the Licensed Marks, or
otherwise to take any action which would adversely affect any of such
ownership rights, or assist anyone else in doing so. Palm shall cause its
Subsidiaries and Authorized Dealers to comply with the provisions of this
Section 9.3.
9.4 INFRINGEMENT PROCEEDINGS. In the event that the Palm General
Counsel learns of any infringement or threatened infringement of the Licensed
Marks, or any unfair competition, passing-off or dilution with respect to the
Licensed Marks, Palm shall notify 3Com or its authorized representative
giving particulars thereof, and Palm shall provide necessary information and
assistance to 3Com or its authorized representatives at 3Com's expense in the
event that 3Com decides that proceedings should be commenced. Notwithstanding
the foregoing, Palm is not obligated to monitor or police use of the Licensed
Marks by Third Parties other than as specifically set forth in Section 4.3.
3Com shall have exclusive control of any litigation, opposition, cancellation
or related legal proceedings, relating to the use of the licensed trademarks
by third parties. The decision whether to bring, maintain or settle any such
proceedings shall be at the exclusive option and expense of 3Com, and all
recoveries shall belong exclusively to 3Com. Palm shall not and shall have no
right to initiate any such litigation, opposition, cancellation or related
legal proceedings in its own name, but, at 3Com's request, agrees to be
joined as a party in any action taken by 3Com to enforce its rights in the
Licensed Marks. 3Com shall incur no liability to Palm or any other Person
under any legal theory by reason of 3Com's failure or refusal to prosecute or
by 3Com's refusal to permit Palm to prosecute, any alleged infringement by
Third Parties, nor by reason of any settlement to which 3Com may agree.
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ARTICLE 10
TERMINATION
10.1 TERM. This Agreement shall remain in effect for a period of
two (2) years from the Effective Date unless earlier terminated as provided
below.
10.2 VOLUNTARY TERMINATION. By written notice to 3Com, Palm may
voluntarily terminate all or a specified portion of the licenses and rights
granted to it hereunder by 3Com. Such notice shall specify the effective date
of such termination and shall clearly specify any affected Licensed Marks,
Palm Business Products or services.
10.3 SURVIVAL. Any termination of licenses and rights of Palm
under Section 10.2 shall not affect Palm's licenses and rights with respect
to any Palm Business Products made or sold prior to such termination.
10.4 OTHER TERMINATION. 3Com acknowledges and agrees that its
rights to terminate the licenses granted to Palm hereunder are solely as set
forth in Section 4.3 and Articles 6 and 8.
ARTICLE 11
DISPUTE RESOLUTION
11.1 MEDIATION. If a dispute, controversy or claim ("Dispute")
arises between the parties relating to the interpretation or performance of
this Agreement or the Ancillary Agreements, or the grounds for the
termination hereof, appropriate senior executives (e. g. director or V.P.
level) of each party who shall have the authority to resolve the matter shall
meet to attempt in good faith to negotiate a resolution of the Dispute prior
to pursuing other available remedies. The initial meeting between the
appropriate senior executives shall be referred to herein as the "Dispute
Resolution Commencement Date." Discussions and correspondence relating to
trying to resolve such Dispute shall be treated as confidential information
developed for the purpose of settlement and shall be exempt from discovery or
production and shall not be admissible. If the senior executives are unable
to resolve the Dispute within thirty (30) days from the Dispute Resolution
Commencement Date, and either party wishes to pursue its rights relating to
such Dispute, then the Dispute will be mediated by a mutually acceptable
mediator appointed pursuant to the mediation rules of JAMS/Endispute within
thirty (30) days after written notice by one party to the other demanding
non-binding mediation. Neither party may unreasonably withhold consent to the
selection of a mediator or the location of the mediation. Both parties will
share the costs of the mediation equally, except that each party shall bear
its own costs and expenses, including attorney's fees, witness fees, travel
expenses, and preparation costs. The parties may also agree to replace
mediation with some other form of non-binding or binding ADR.
11.2 ARBITRATION. Any Dispute which the parties cannot resolve
through mediation within ninety (90) days of the Dispute Resolution
Commencement Date, unless otherwise mutually
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agreed, shall be submitted to final and binding arbitration under the then
current Commercial Arbitration Rules of the American Arbitration Association
("AAA"), by three (3) arbitrators in Santa Clara County, California. Such
arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA
rules. The arbitrators will be instructed to prepare and deliver a written,
reasoned opinion stating their decision within thirty (30) days of the
completion of the arbitration. The prevailing party in such arbitration shall
be entitled to expenses, including costs and reasonable attorneys' and other
professional fees, incurred in connection with the arbitration (but excluding
any costs and fees associated with prior negotiation or mediation). The
decision of the arbitrator shall be final and non-appealable and may be
enforced in any court of competent jurisdiction. The use of any ADR
procedures will not be construed under the doctrine of laches, waiver or
estoppel to adversely affect the rights of either party.
11.3 COURT ACTION. Any Dispute regarding the following is not
required to be negotiated, mediated or arbitrated prior to seeking relief
from a court of competent jurisdiction: breach of any obligation of
confidentiality; infringement, misappropriation, or misuse of any
intellectual property right; any other claim where interim relief from the
court is sought to prevent serious and irreparable injury to one of the
parties or to others. However, the parties to the Dispute shall make a good
faith effort to negotiate and mediate such Dispute, according to the above
procedures, while such court action is pending.
11.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed
in writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the
course of dispute resolution pursuant to the provisions of this Article 11
with respect to all matters not subject to such dispute, controversy or claim.
ARTICLE 12
LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE
OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS OR ANY OTHER DAMAGES, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY
OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS
SHALL NOT LIMIT EACH PARTY'S OBLIGATIONS EXPRESSLY ASSUMED IN EXHIBIT J OF THE
MASTER SEPARATION AND DISTRIBUTION AGREEMENT; PROVIDED FURTHER THAT THE
EXCLUSION OF PUNITIVE DAMAGES SHALL APPLY IN ANY EVENT.
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<PAGE>
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL
LICENSED MARKS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED
HEREUNDER ARE LICENSED OR PROVIDED ON AN "AS IS" BASIS AND THAT NEITHER PARTY
NOR ANY OF ITS SUBSIDIARIES MAKE ANY REPRESENTATIONS OR EXTENDS ANY
WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY
OR NON-INFRINGEMENT. Without limiting the generality of the foregoing,
neither 3Com nor any of its Subsidiaries makes any warranty or representation
as to the validity of any Mark licensed by it to Palm or any warranty or
representation that any use of any Mark with respect to any product or
service will be free from infringement of any rights of any Third Party.
13.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall
be construed as conferring any rights by implication, estoppel or otherwise,
under any intellectual property right, other than the rights expressly
granted in this Agreement with respect to the Licensed Marks. Neither party
is required hereunder to furnish or disclose to the other any information
(including copies of registrations of the Marks), except as specifically
provided herein.
13.3 INFRINGEMENT SUITS. Except as set forth in Section 4.3, (i)
neither party shall have any obligation hereunder to institute any action or
suit against Third Parties for infringement of any of the Licensed Marks or
to defend any action or suit brought by a Third Party which challenges or
concerns the validity of any of the Licensed Marks and (ii) Palm shall not
have any right to institute any action or suit against Third Parties for
infringement of any of the Licensed Marks.
13.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY
RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES
AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN
AGREEMENT BETWEEN THE PARTIES. Without limiting the generality of the
foregoing, neither party, nor any of its Subsidiaries, is obligated to (i)
file any application for registration of any Mark, or to secure any rights in
any Marks, (ii) to maintain any Mark registration, or (iii) provide any
assistance, except for the obligations expressly assumed in this Agreement.
13.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements (as defined in the
Master Separation and Distribution Agreement) and the Exhibits and Schedules
referenced or attached hereto and thereto constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
shall supersede all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof and
thereof. To the extent there is a conflict
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<PAGE>
between this Agreement and the General Assignment and Assumption Agreement
between the parties, the terms of this Agreement shall govern.
13.6 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior
Court of Santa Clara County and/or the United States District Court for the
Northern District of California shall have jurisdiction and venue over all
Disputes between the parties that are permitted to be brought in a court of
law pursuant to Article 11 above.
13.7 DESCRIPTIVE HEADINGS. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table of contents to
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized term
used in any Exhibit or Schedule but not otherwise defined therein, shall have
the meaning assigned to such term in this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
13.8 NOTICES. Notices, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of
this Agreement shall be given in writing to the respective parties to the
following addresses:
if to 3Com :
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
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<PAGE>
13.9 NONASSIGNABILITY. Neither party may, directly or indirectly,
in whole or in part, whether by operation of law or otherwise, assign or
transfer this Agreement, without the other party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other party.
Notwithstanding the foregoing, each party (or its permitted successive
assignees or transferees hereunder) may assign or transfer this Agreement as
a whole without consent to a Person that succeeds to all or substantially all
of the business or assets of such party as long as such Person agrees to
accept all the terms and conditions set forth herein. Without limiting the
foregoing, this Agreement will be binding upon and inure to the benefit of
the parties and their permitted successors and assigns.
13.10 SEVERABILITY. If any term or other provision of this Agreement
is determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
13.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of either party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
13.12 AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
13.13 COUNTERPARTS. This Agreement, including the Ancillary
Agreements and the Exhibits and Schedules hereto and thereto and the other
documents referred to herein or therein, may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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<PAGE>
WHEREFORE, the parties have signed this Trademark Ownership and License
Agreement effective as of the date first set forth above.
3COM CORPORATION PALM, INC.
By: By:
-------------------------- --------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
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<PAGE>
EXHIBIT A
TO MASTER TRADEMARK OWNERSHIP AND LICENSE AGREEMENT
LICENSED MARKS
3Com
3Com Logo
<PAGE>
EMPLOYEE MATTERS AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
EFFECTIVE AS OF
FEBRUARY 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS.................................................................................................1
1.1 3Com................................................................................................1
1.2 3Com Employee.......................................................................................1
1.3 3Com Group..........................................................................................2
1.4 3Com Stock Value....................................................................................2
1.5 3Com Terminated Employee............................................................................2
1.6 401(k) Plan.........................................................................................2
1.7 AD&D Plan...........................................................................................2
1.8 Affiliate...........................................................................................2
1.9 Agreement...........................................................................................2
1.10 Ancillary Agreements................................................................................2
1.11 ASO Contracts.......................................................................................2
1.12 Assets..............................................................................................2
1.13 Benefits Committee..................................................................................2
1.14 Bonus Plan..........................................................................................2
1.15 Business Travel Accident Insurance..................................................................3
1.16 COBRA...............................................................................................3
1.17 Code................................................................................................3
1.18 Deferred Compensation Plan..........................................................................3
1.19 Disability Plan.....................................................................................3
1.20 Distribution........................................................................................3
1.21 Distribution Date...................................................................................3
1.22 DOL.................................................................................................3
1.23 Educational Assistance Program......................................................................3
1.24 Employee Assistance Program.........................................................................4
1.25 ERISA...............................................................................................4
1.26 Executive Bonus Plan................................................................................4
1.27 FMLA................................................................................................4
1.28 Food Programs.......................................................................................4
1.29 Foreign Plan........................................................................................4
1.30 Fringe Benefit Plans................................................................................4
1.31 FSA/Dependent Reimbursement Plan....................................................................4
1.32 FSA/Medical Reimbursement Plan......................................................................4
1.33 General Assignment and Assumption Agreement.........................................................4
1.34 Group Insurance Policies............................................................................5
1.35 Group Life Plan.....................................................................................5
1.36 HCFA................................................................................................5
1.37 Health and Welfare Plans............................................................................5
1.38 Health Plans........................................................................................5
1.39 HMO.................................................................................................5
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TABLE OF CONTENTS
(Continued)
1.40 HMO Agreements......................................................................................5
1.41 IPO.................................................................................................5
1.42 IPO Closing Date....................................................................................5
1.43 IPO Registration Statement..........................................................................5
1.44 IRS.................................................................................................5
1.45 Leave of Absence Plans..............................................................................5
1.46 Liabilities.........................................................................................6
1.47 Long-Term Care Plan.................................................................................6
1.48 Long-Term Disability Plan...........................................................................6
1.49 Master Transitional Services Agreement..............................................................6
1.50 Material Feature....................................................................................6
1.51 Nasdaq..............................................................................................6
1.52 Non-U.S. Plan.......................................................................................6
1.53 Option..............................................................................................7
1.54 Outsourcing.........................................................................................7
1.55 Palm................................................................................................7
1.56 Palm Business.......................................................................................7
1.57 Palm Claims.........................................................................................7
1.58 Palm Employee.......................................................................................7
1.59 Palm Group..........................................................................................7
1.60 Palm Stock Value....................................................................................7
1.61 Palm Terminated Employee............................................................................7
1.62 Palm Transferred Employee...........................................................................8
1.63 Participating Company...............................................................................8
1.64 Person..............................................................................................8
1.65 Plan................................................................................................8
1.66 Post-Distribution Period............................................................................8
1.67 Premium Plan........................................................................................8
1.68 PTO.................................................................................................9
1.69 QDRO................................................................................................9
1.70 QMCSO...............................................................................................9
1.71 Rabbi Trust.........................................................................................9
1.72 Ratio...............................................................................................9
1.73 Record Date.........................................................................................9
1.74 Restricted Stock....................................................................................9
1.75 Revenue.............................................................................................9
1.76 Sabbatical Plan.....................................................................................9
1.77 SEC.................................................................................................9
1.78 Section 125 Plan...................................................................................10
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TABLE OF CONTENTS
(Continued)
1.79 Separation.........................................................................................10
1.80 Separation Agreement...............................................................................10
1.81 Separation Date....................................................................................10
1.82 Severance Plan.....................................................................................10
1.83 Short-Term Disability Plan.........................................................................10
1.84 SOS Plan...........................................................................................10
1.85 Stock Plan.........................................................................................10
1.86 Stock Purchase Plan................................................................................10
1.87 Subsidiary.........................................................................................11
1.88 Tax Sharing Agreement..............................................................................11
1.89 Unemployment Insurance Program.....................................................................11
1.90 WellCom Program....................................................................................11
1.91 Workers'Compensation Plan..........................................................................11
ARTICLE II GENERAL PRINCIPLES........................................................................................12
2.1 Assumption of Palm Liabilities.....................................................................12
2.2 Establishment of Palm Plans........................................................................12
2.3 Palm Under No Obligation to Maintain Plans.........................................................13
2.4 Palm's Participation in 3Com Plans.................................................................13
2.5 Terms of Participation by Palm Transferred Employees in Palm Plans.................................14
2.6 Benefits Committee and Dispute Resolution..........................................................15
2.7 Foreign Plans......................................................................................15
ARTICLE III DEFINED CONTRIBUTION PLAN................................................................................16
3.1 401(k) Plan........................................................................................16
ARTICLE IV NON-QUALIFIED PLAN........................................................................................17
4.1 Deferred Compensation Plan.........................................................................17
ARTICLE V HEALTH AND WELFARE PLANS...................................................................................18
5.1 Health Plans as of the Distribution Date...........................................................18
5.2 Health Plans from the Separation Date through the Distribution Date................................19
5.3 Group Life Plan....................................................................................19
5.4 AD&D Plan..........................................................................................20
5.5 Severance Plan.....................................................................................20
5.6 Sabbatical Plan....................................................................................20
5.7 Disability Plans...................................................................................21
5.8 Business Travel Accident Insurance.................................................................21
5.9 Long-Term Care Plan................................................................................22
5.10 Section 125 Plan...................................................................................22
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TABLE OF CONTENTS
(Continued)
5.11 COBRA..............................................................................................22
5.12 Leave of Absence Plans and FMLA....................................................................23
5.13 Workers'Compensation Plan..........................................................................23
5.14 Administrative Services............................................................................24
ARTICLE VI EQUITY AND OTHER COMPENSATION.............................................................................25
6.1 Bonus Plan.........................................................................................25
6.2 Executive Bonus Plan...............................................................................25
6.3 3Com Options.......................................................................................26
6.4 3Com Restricted Stock..............................................................................26
6.5 Stock Purchase Plan................................................................................27
6.6 Administrative Services............................................................................27
ARTICLE VII FRINGE AND OTHER BENEFITS................................................................................28
7.1 Employee Assistance Program........................................................................28
7.2 Educational Assistance Program.....................................................................28
7.3 Credit Union.......................................................................................28
7.4 Cafeteria and Related Subsidies....................................................................28
7.5 Employee Product Discounts and Company Store.......................................................29
7.6 WellCom............................................................................................29
7.7 SOS Plan...........................................................................................29
7.8 Other Benefits.....................................................................................29
7.9 Administrative Services............................................................................30
ARTICLE VIII ADMINISTRATIVE PROVISIONS...............................................................................31
8.1 Master Transitional Services Agreement.............................................................31
8.2 Payment of Liabilities, Plan Expenses and Related Matters..........................................31
8.3 Transitional Staffing Services.....................................................................32
8.4 Sharing of Participant Information.................................................................32
8.5 Reporting and Disclosure Communications to Participants............................................32
8.6 Audits Regarding Vendor Contracts..................................................................32
8.7 Employee Identification Numbers....................................................................33
8.8 Beneficiary Designations...........................................................................33
8.9 Requests for IRS and DOL Opinions..................................................................33
8.10 Fiduciary Matters..................................................................................33
8.11 Consent of Third Parties...........................................................................33
8.12 3Com Intranet......................................................................................33
8.13 Tax Cooperation....................................................................................33
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TABLE OF CONTENTS
(Continued)
ARTICLE IX EMPLOYMENT-RELATED MATTERS................................................................................34
9.1 Terms of Palm Employment...........................................................................34
9.2 HR Data Support Systems............................................................................34
9.3 Non-Solicitation of Employees......................................................................34
9.4 Employment of Employees with U.S.Work Visas........................................................34
9.5 Confidentiality and Proprietary Information........................................................35
9.6 PTO................................................................................................35
9.7 Personnel Records..................................................................................35
9.8 Medical Records....................................................................................35
9.9 Unemployment Insurance Program.....................................................................35
9.10 Non-Termination of Employment; No Third-Party Beneficiaries........................................36
9.11 Employment Litigation..............................................................................36
ARTICLE X GENERAL PROVISIONS.........................................................................................37
10.1 Effect if Separation, IPO and/or Distribution Does Not Occur.......................................37
10.2 Relationship of Parties............................................................................37
10.3 Affiliates.........................................................................................37
10.4 Incorporation of Separation Agreement Provisions...................................................37
10.5 Governing Law......................................................................................37
10.6 Assignment.........................................................................................37
10.7 Severability.......................................................................................38
10.8 Interpretation.....................................................................................38
10.9 Amendment..........................................................................................38
10.10 Termination........................................................................................38
10.11 Conflict...........................................................................................38
10.12 Counterparts.......................................................................................38
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SCHEDULES PAGE
<S> <C> <C>
SCHEDULE 2.7 FOREIGN PLANS...........................................i
SCHEDULE 5.1(a) PALM HEALTH AND WELFARE PLANS...........................ii
SCHEDULE 5.1(c)(i) THIRD PARTY ASO.........................................iii
SCHEDULE 5.1(c)(ii) GROUP INSURANCE POLICIES................................iv
SCHEDULE 5.1(c)(iii) HMO AGREEMENT...........................................v
SCHEDULE 5.2(a) 3COM HEALTH AND WELFARE PLANS...........................vi
SCHEDULE 6.3 OPTIONS HELD BY CERTAIN NON-U.S PALM....................vii
TRANSFERRED EMPLOYEES
SCHEDULE 6.4 3COM RESTRICTED STOCK HELD BY NON-U.S PALM..............viii
TRANSFERRED EMPLOYEES
SCHEDULE 7.8 OTHER FRINGE BENEFITS..................................ix
</TABLE>
vii
<PAGE>
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT is entered into on February 26,
2000, between 3Com Corporation, a Delaware corporation, and Palm, Inc., a
Delaware corporation. Capitalized terms used herein (other than the formal
names of 3Com Plans (as defined below) and related trusts of 3Com) and not
otherwise defined, shall have the respective meanings assigned to them in
Article I hereof.
WHEREAS, the Board of Directors of 3Com has determined that it is in
the best interests of 3Com and its shareholders to separate 3Com's existing
businesses into two (2) independent businesses, 3Com and the Palm Business;
and
WHEREAS, in furtherance of the foregoing, 3Com and Palm have agreed
to enter into this Agreement to allocate between them Assets, Liabilities and
responsibilities with respect to certain employee compensation, benefit
plans, programs and arrangements, and certain employment matters;
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
meanings indicated below, unless a different meaning is plainly required by
the context. The singular shall include the plural, unless the context
indicates otherwise. Headings of sections are used for convenience of
reference only, and in case of conflict, the text of this Agreement, rather
than such headings, shall control:
1.1 3COM. "3Com" means 3Com Corporation, a Delaware corporation.
In all such instances in which 3Com is referenced in this Agreement, it shall
also be deemed to include a reference to each member of the 3Com Group,
unless it specifically provides otherwise; 3Com shall be solely responsible
to Palm for ensuring that each member of the 3Com Group complies with the
applicable terms of this Agreement.
1.2 3COM EMPLOYEE. "3Com Employee" means an individual who, on the
Distribution Date, is: (a) either actively employed by, or on leave of
absence from, the 3Com Group; (b) a 3Com Terminated Employee; or (c) an
employee or group of employees designated as 3Com Employees by 3Com and Palm,
by mutual agreement.
<PAGE>
1.3 3COM GROUP. "3Com Group" means 3Com and each Subsidiary and
Affiliate of 3Com (or any predecessor organization thereof).
1.4 3COM STOCK VALUE. "3Com Stock Value" means the closing
per-share price of 3Com common stock as listed on the Nasdaq on the last
trading day before the Distribution.
1.5 3COM TERMINATED EMPLOYEE. "3Com Terminated Employee" means any
individual who is a former employee of the 3Com Group and who, on the
Distribution Date, is not a Palm Transferred Employee.
1.6 401(k) PLAN. "401(k) Plan," when immediately preceded by
"3Com," means the 3Com Corporation 401(k) Plan, a defined contribution plan.
When immediately preceded by "Palm," "401(k) Plan" means the defined
contribution plan to be established by Palm pursuant to Section 2.2 and
Article III.
1.7 AD&D PLAN. "AD&D Plan," when immediately preceded by "3Com,"
means the 3Com Accidental Death and Dismemberment ("AD&D") Plan. When
immediately preceded by "Palm," "AD&D Plan" means the accidental death and
dismemberment plan to be established by Palm pursuant to Sections 2.2 and 5.4.
1.8 AFFILIATE. "Affiliate" means, with respect to any specified
Person, means any entity that Controls, is Controlled by, or is under common
Control with such Person. For this purpose, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through ownership of voting
securities or other interests, by control, or otherwise.
1.9 AGREEMENT. "Agreement" means this Employee Matters Agreement,
including all the Schedules hereto, and all amendments made hereto from time
to time.
1.10 ANCILLARY AGREEMENTS. "Ancillary Agreements" means all of the
underlying agreements, documents and instruments referred to, contemplated
by, or made a part of the Separation Agreement.
1.11 ASO CONTRACTS. "ASO Contracts" is defined in Subsection
5.1(c)(i) and Schedule 5.1(c)(i).
1.12 ASSETS. "Assets" is defined in Section 4.4 of the General
Assignment and Assumption Agreement.
1.13 BENEFITS COMMITTEE. "Benefits Committee" means the benefits
committee established, implemented and operated pursuant to Section 2.6.
1.14 BONUS PLAN. "Bonus Plan," when immediately preceded by "3Com,"
means the 3Com 3Bonus Plan; provided, however, with respect to Palm Employees
in the 3Com 3Bonus Plan,
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<PAGE>
that "Bonus Plan" means the bonus plan as established and implemented with
respect to the Palm Employees. When immediately preceded by "Palm," "Bonus
Plan" means the bonus plan to be established by Palm pursuant to Sections 2.2
and 6.1.
1.15 BUSINESS TRAVEL ACCIDENT INSURANCE. "Business Travel Accident
Insurance," when immediately preceded by "3Com," means the policy or policies
covering 3Com Business Travel Accident Insurance in the U.S. and to the
extent applicable, outside the U.S. When immediately preceded by "Palm,"
"Business Travel Accident Insurance" means the policy or policies covering
the business travel accident insurance to be established by Palm pursuant to
Sections 2.2 and 5.8.
1.16 COBRA. "COBRA" means the continuation coverage requirements
for "group health plans" under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as codified in
Code Section 4980B and ERISA Sections 601 through 608.
1.17 CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.18 DEFERRED COMPENSATION PLAN. "Deferred Compensation Plan," when
immediately preceded by "3Com," means the 3Com Deferred Compensation Plan.
When immediately preceded by "Palm," "Deferred Compensation Plan" means the
deferred compensation plan to be established by Palm pursuant to Section 2.2
and Article IV.
1.19 DISABILITY PLAN. "Disability Plan," when immediately preceded
by "3Com," means the 3Com Disability Plan which consists of the 3Com
Short-Term Disability Plan and the 3Com Long-Term Disability Plan. When
immediately preceded by "Palm," "Disability Plan" means the Palm Short-Term
Disability Plan and the Palm Long-Term Disability Plan, to be established by
Palm pursuant to Sections 2.2 and 5.7.
1.20 DISTRIBUTION. "Distribution" means 3Com's pro rata
distribution to the holders of its common stock, $0.001 par value, several
months following the IPO, of all the shares of Palm common stock owned by
3Com.
1.21 DISTRIBUTION DATE. "Distribution Date" means the date that the
Distribution is effective.
1.22 DOL. "DOL" means the United States Department of Labor.
1.23 EDUCATIONAL ASSISTANCE PROGRAM. "Educational Assistance
Program," when immediately preceded by "3Com," means the 3Com Educational
Assistance Program. When immediately preceded by "Palm," "Educational
Assistance Program" means the educational assistance program to be
established by Palm pursuant to Sections 2.2 and 7.2.
3
<PAGE>
1.24 EMPLOYEE ASSISTANCE PROGRAM. "Employee Assistance Program,"
when immediately preceded by "3Com," means the 3Com Employee Assistance
Program. When immediately preceded by "Palm," "Employee Assistance Program"
means the employee assistance program to be established by Palm pursuant to
Sections 2.2 and 7.1.
1.25 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.
1.26 EXECUTIVE BONUS PLAN. "Executive Bonus Plan," when immediately
preceded by "3Com," means the 3Com Executive Bonus Program. When immediately
preceded by "Palm," "Executive Bonus Plan" means the executive bonus plan to
be established by Palm pursuant to Sections 2.2 and 6.2.
1.27 FMLA. "FMLA" means the Family and Medical Leave Act of 1993,
as amended from time to time.
1.28 FOOD PROGRAMS. "Food Programs" is defined in Section 7.4.
1.29 FOREIGN PLAN. "Foreign Plan," when immediately preceded by
"3Com," means a Plan maintained by the 3Com Group for the benefit of its
employees outside the U.S. When immediately preceded by "Palm," "Foreign
Plan" means a Plan to be established by Palm for the benefit of its employees
outside the U.S.
1.30 FRINGE BENEFIT PLANS. "Fringe Benefit Plans," when immediately
preceded by "3Com," means the 3Com employee assistance program, educational
assistance program and other fringe benefit plans, programs and arrangements,
sponsored and maintained by 3Com (as set forth in Article VII and Schedule
7.8). When immediately preceded by "Palm," "Fringe Benefit Plans" means the
fringe benefit plans, programs and arrangements to be established by Palm
pursuant to Section 2.2 and Article VII.
1.31 FSA/DEPENDENT REIMBURSEMENT PLAN. "FSA/Dependent Reimbursement
Plan," when immediately preceded by "3Com," means the 3Com FSA/Dependent
Reimbursement Plan. When immediately preceded by "Palm," "FSA/Dependent
Reimbursement Plan" means the dependent care assistance reimbursement plan to
be established by Palm pursuant to Sections 2.2 and 5.10.
1.32 FSA/MEDICAL REIMBURSEMENT PLAN. "FSA/Medical Reimbursement
Plan," when immediately preceded by "3Com," means the 3Com FSA/Medical
Reimbursement Plan. When immediately preceded by "Palm," "FSA/Medical
Reimbursement Plan" means the medical expense reimbursement plan to be
established by Palm pursuant to Sections 2.2 and 5.10.
1.33 GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT. "General
Assignment and Assumption Agreement" means the Ancillary Agreement which is
Exhibit C to the Separation Agreement.
4
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1.34 GROUP INSURANCE POLICIES. "Group Insurance Policies" is
defined in Subsection 5.1(c)(ii) and Schedule 5.1(c)(ii).
1.35 GROUP LIFE PLAN. "Group Life Plan," when immediately preceded
by "3Com," means the 3Com Group Life Plan. When immediately preceded by
"Palm," "Group Life Plan" means the group life plan to be established by Palm
pursuant to Sections 2.2 and 5.3.
1.36 HCFA. "HCFA" means the United States Health Care Financing
Administration.
1.37 HEALTH AND WELFARE PLANS. "Health and Welfare Plans," when
immediately preceded by "3Com," means the 3Com Health Plans, the 3Com Section
125 Plan, and the health and welfare plans listed on Schedule 5.2(a)
established and maintained by 3Com for the benefit of eligible employees of
the 3Com Group, and such other welfare plans or programs as may apply to such
employees as of the Distribution Date. When immediately preceded by "Palm,"
"Health and Welfare Plans" means the Palm Health Plans, the Palm Section 125
Plan, and the health and welfare plans to be established by Palm pursuant to
Section 2.2, Article V, and Schedule 5.1(a).
1.38 HEALTH PLANS. "Health Plans," when immediately preceded by
"3Com," means the medical, HMO, vision, and dental plans and any similar or
successor Plans. When immediately preceded by "Palm," "Health Plans" means
the medical, HMO, vision and dental plans to be established by Palm pursuant
to Section 2.2 and Article V.
1.39 HMO. "HMO" means a health maintenance organization that
provides benefits under the 3Com Health Plans or the Palm Health Plans.
1.40 HMO AGREEMENTS. "HMO Agreements" is defined in Subsection
5.1(c)(iii) and Schedule 5.1(c)(iii).
1.41 IPO. "IPO" means the initial public offering of Palm common
stock pursuant to a registration statement on Form S-1 pursuant to the
Securities Act of 1933, as amended.
1.42 IPO CLOSING DATE. "IPO Closing Date" means the closing of the
IPO, which is currently scheduled to occur prior to June 2, 2001.
1.43 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means
the registration statement on Form S-1 pursuant to the Securities Act of 1933
as amended, to be filed with the SEC, registering the shares of common stock
of Palm to be issued in the IPO, together with all amendments thereto.
1.44 IRS. "IRS" means the United States Internal Revenue Service.
1.45 LEAVE OF ABSENCE PLANS. "Leave of Absence Plans," when
immediately preceded by "3Com," means the personal, medical/disability,
military, and FMLA leave offered from time to time under the personnel
policies and practices of 3Com. When immediately preceded by "Palm,"
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"Leave of Absence Plans" means the leave of absence programs to be
established by Palm pursuant to Sections 2.2 and 5.12.
1.46 LIABILITIES. "Liabilities" means all debts, liabilities,
guarantees, assurances, commitments, and obligations, whether fixed,
contingent or absolute, asserted or unasserted, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, due or
to become due, whenever or however arising (including, without limitation,
whether arising out of any Contract or tort based on negligence or strict
liability) and whether or not the same would be required by generally
accepted accounting principles to be reflected in financial statements or
disclosed in the notes thereto. For this purpose, "Contract" means any
contract, agreement, lease, license, sales order, purchase order, instrument
or other commitment that is binding on any Person or any part of its property
under applicable law.
1.47 LONG-TERM CARE PLAN. "Long-Term Care Plan," when immediately
preceded by "3Com," means the 3Com Long-Term Care Plan. When immediately
preceded by "Palm," "Long-Term Care Plan" means the long-term care plan, if
any, that may be established by Palm pursuant to Sections 2.2 and 5.9.
1.48 LONG-TERM DISABILITY PLAN. "Long-Term Disability Plan," when
immediately preceded by "3Com," means the 3Com Long-Term Disability Plan.
When immediately preceded by "Palm," Long-Term Disability Plan" means the
long-term disability plan to be established by Palm pursuant to Section 2.2
and Subsection 5.7(b).
1.49 MASTER TRANSITIONAL SERVICES AGREEMENT. "Master Transitional
Services Agreement" means the Ancillary Agreement which is Exhibit G to the
Separation Agreement.
1.50 MATERIAL FEATURE. "Material Feature" means any feature of a
Plan that could reasonably be expected to be of material importance, in the
aggregate, to the sponsoring employer or the participants (or their
dependents or beneficiaries) of that Plan, which could include, depending on
the type and purpose of the particular Plan, the class or classes of
employees eligible to participate in such Plan, the nature, type, form,
source, and level of benefits provided under such Plan, the amount or level
of contributions, if any, required to be made by participants (or their
dependents or beneficiaries) to such Plan, and the costs and expenses
incurred by the sponsoring employer or Participating Companies for
implementing and/or maintaining such Plan.
1.51 NASDAQ. "Nasdaq" means the Nasdaq National Market.
1.52 NON-U.S. PLAN. "Non-U.S. Plan" means the local transfer
agreements, assignments, assumptions, novations and other documents executed
by the foreign subsidiaries of 3Com and Palm as shall be necessary to carry
out the plan of reorganization described in Exhibit K to the Separation
Agreement to effect the purposes of the Separation Agreement with respect to
3Com and Palm's respective operations outside the U.S.
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1.53 OPTION. "Option," when immediately preceded by "3Com," means
an option to purchase 3Com common stock pursuant to a Stock Plan. When
immediately preceded by "Palm," "Option" means an option to purchase Palm
common stock pursuant to a Stock Plan.
1.54 OUTSOURCING. "Outsourcing" is defined in Section 5.13(c).
1.55 PALM. "Palm" means Palm, Inc., a Delaware corporation. In all
such instances in which Palm is referred to in this Agreement, it shall also
be deemed to include a reference to each member of the Palm Group, unless it
specifically provides otherwise; Palm shall be solely responsible to 3Com for
ensuring that each member of the Palm Group complies with the applicable
terms of this Agreement.
1.56 PALM BUSINESS. "Palm Business" means the hand-held computing
business and related businesses and operations as described in the IPO
Registration Statement.
1.57 PALM CLAIMS. "Palm Claims" is defined in Subsection 5.13(a).
1.58 PALM EMPLOYEE. "Palm Employee" means any individual who is:
(a) either actively employed by, or on leave of absence from, the Palm Group
on the Separation Date; (b) either actively employed by, or on leave of
absence from, the 3Com Group as either part of a work group or organization,
or common support function that, at any time after the Separation Date and
before the Distribution Date, moves to the employ of the Palm Group from the
employ of the 3Com Group; (c) a Palm Terminated Employee; (d) employed by the
Palm Group; (e) any other employee or group of employees designated as Palm
Employees (as of the specified date) by 3Com and Palm by mutual agreement; or
(f) an alternate payee under a QDRO, alternate recipient under a QMCSO,
beneficiary, covered dependent, or qualified beneficiary (as such term is
defined under COBRA), in each case, of an employee or former employee,
described in Subsections 1.58(a) through (e) with respect to that employee's
or former employee's benefit under the applicable Plan(s) (unless specified
otherwise in this Agreement, such an alternate payee, alternate recipient,
beneficiary, covered dependent, or qualified beneficiary shall not otherwise
be considered a Palm Employee with respect to any benefits he or she accrues
or has accrued under any applicable Plan(s), unless he or she is a Palm
Employee by virtue of Subsections 1.58(a) through (e)).
1.59 PALM GROUP. "Palm Group" means Palm and each Subsidiary and
Affiliate of Palm immediately after the Separation Date, or that is
contemplated to be a Subsidiary or Affiliate of Palm pursuant to the Non-U.S.
Plan and each Person that becomes a Subsidiary or Affiliate of Palm after the
Separation Date.
1.60 PALM STOCK VALUE. "Palm Stock Value" means the opening
per-share price of Palm common stock as listed on Nasdaq, as applicable, on
the first trading day after the Distribution.
1.61 PALM TERMINATED EMPLOYEE. "Palm Terminated Employee" means any
individual who is: (a) a former employee of the 3Com Group who was terminated
from the Palm Business on or before the Separation Date; or (b) a former
employee of the Palm Group. Notwithstanding the
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foregoing, "Palm Terminated Employee" shall not, unless otherwise expressly
provided to the contrary in this Agreement, include: (a) an individual who is
a 3Com Employee at the Distribution Date; or (b) an individual who is
otherwise a Palm Terminated Employee, but who is subsequently employed by the
3Com Group prior to the Distribution Date.
1.62 PALM TRANSFERRED EMPLOYEE. "Palm Transferred Employee" means
any individual who, as of the Distribution Date, is: (a) either actively
employed by, or on a leave of absence from, the Palm Group; (b) a Palm
Terminated Employee; (c) an employee or group of employees designated by 3Com
and Palm, by mutual agreement, as Palm Transferred Employees; or (d) an
alternate payee under a QDRO, alternate recipient under a QMCSO, beneficiary,
covered dependent, or qualified beneficiary (as such term is defined under
COBRA), in each case, of an employee or former employee, described in
Subsections 1.62(a) through (c) with respect to that employee's or former
employee's benefit under the applicable Plan(s) (unless specified otherwise
in this Agreement, such an alternate payee, alternate recipient, beneficiary,
covered dependent, or qualified beneficiary shall not otherwise be considered
a Palm Transferred Employee with respect to any benefits he or she accrues or
accrued under any applicable Plan(s), unless he or she is a Palm Transferred
Employee by virtue of Subsections 1.62(a) through (c)). An employee may be a
Palm Transferred Employee pursuant to this Section regardless of whether such
employee is, as of the Distribution Date, alive, actively employed, on a
temporary leave of absence from active employment, on layoff, terminated from
employment, retired or on any other type of employment or post-employment
status relative to a 3Com Plan, and regardless of whether, as of the
Distribution Date, such employee is then receiving any coverage under or
benefits from a 3Com Plan.
1.63 PARTICIPATING COMPANY. "Participating Company" means: (a)
3Com; (b) any Person (other than an individual) that 3Com has approved for
participation in, has accepted participation in, and which is participating
in, a Plan sponsored by 3Com; and (c) any Person (other than an individual)
which, by the terms of such Plan, participates in such Plan or any employees
of which, by the terms of such Plan, participate in or are covered by such
Plan.
1.64 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, and a
governmental entity or any department, agency or political subdivision
thereof.
1.65 PLAN. "Plan" means any plan, policy, program, payroll
practice, arrangement, contract, trust, insurance policy, or any agreement or
funding vehicle providing compensation or benefits to employees, former
employees, directors or consultants of 3Com or Palm.
1.66 POST-DISTRIBUTION PERIOD. "Post-Distribution Period" means,
for each designated Plan, the period beginning as of the Distribution Date
and ending on the date that no member of the Palm Group is using 3Com benefit
delivery and administrative services with respect to that Plan.
1.67 PREMIUM PLAN. "Premium Plan," when immediately preceded by
"3Com," means the 3Com Medical/Dental Pre-Tax Premium Plan, the vehicle by
which employees participating in the 3Com Health and Welfare Plans can
contribute their portion of the premium payments with pre-tax
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dollars. When immediately preceded by "Palm," "Premium Plan" means the
medical/dental pre-tax premium plan to be established by Palm pursuant to
Sections 2.2 and 5.10.
1.68 PTO. "PTO," when immediately preceded by "3Com," means the
3Com Personal Time Off Policy. When immediately preceded by "Palm," "PTO"
means the Palm personal time off policy to be established by Palm pursuant to
Sections 2.2 and 9.6.
1.69 QDRO. "QDRO" means a domestic relations order which qualifies
under Code Section 414(p) and ERISA Section 206(d) and which creates or
recognizes an alternate payee's right to, or assigns to an alternate payee,
all or a portion of the benefits payable to a participant under the 3Com
401(k) Plan.
1.70 QMCSO. "QMCSO" means a medical child support order which
qualifies under ERISA Section 609(a) and which creates or recognizes the
existence of an alternate recipient's right to, or assigns to an alternate
recipient the right to, receive benefits for which a participant or
beneficiary is eligible under any of the Health Plans.
1.71 RABBI TRUST. "Rabbi Trust," when immediately preceded by
"3Com," means the grantor trust established for purposes of holding assets
under the 3Com Deferred Compensation Plan. When immediately preceded by
"Palm," "Rabbi Trust" means the grantor trust to be established by Palm
pursuant to Section 4.1(a).
1.72 RATIO. "Ratio" means the ratio determined by dividing the Palm
Stock Value by the 3Com Stock Value.
1.73 RECORD DATE. "Record Date" means the close of business on the
date to be determined by the Board of Directors of 3Com as the record date
for determining the stockholders of 3Com entitled to receive shares of common
stock of Palm in the Distribution.
1.74 RESTRICTED STOCK. "Restricted Stock," when immediately
preceded by "3Com," means shares of 3Com common stock that are subject to
transfer restrictions or to employment and/or performance vesting conditions,
pursuant to a 3Com Stock Plan. When immediately preceded by "Palm,"
"Restricted Stock" means shares of Palm common stock that are subject to
transfer restrictions or to employment and/or performance vesting conditions,
pursuant to a Palm Stock Plan.
1.75 REVENUE. "Revenue" means net revenue as determined in
accordance with generally accepted accounting principles.
1.76 SABBATICAL PLAN. "Sabbatical Plan," when immediately preceded
by "3Com," means the 3Com Sabbatical Plan. When immediately preceded by
"Palm," "Sabbatical Plan" means the sabbatical plan, if any, to be
established by Palm pursuant to Sections 2.2 and 5.6.
1.77 SEC. "SEC" means the United States Securities and Exchange
Commission.
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1.78 SECTION 125 PLAN. "Section 125 Plan," when immediately
preceded by "3Com," means the 3Com Premium Plan, the 3Com FSA/Dependent
Reimbursement Plan, and the 3Com FSA/Medical Reimbursement Plan. When
immediately preceded by "Palm," "Section 125 Plan" means the Palm Premium
Plan, the Palm FSA/Dependent Reimbursement Plan, and the Palm FSA/Medical
Reimbursement Plan to be established by Palm pursuant to Sections 2.2 and
5.10.
1.79 SEPARATION. "Separation" means the contribution and transfer
from 3Com to Palm, and Palm's receipt and assumption of, directly or
indirectly, substantially all of the Assets and Liabilities currently
associated with the Palm Business and the stock, investments or similar
interests currently held by 3Com in subsidiaries and other entities that
conduct such business.
1.80 SEPARATION AGREEMENT. "Separation Agreement" means the Master
Separation and Distribution Agreement, dated as of December 13, 1999, of
which this is Exhibit E thereto.
1.81 SEPARATION DATE. "Separation Date" means the effective date
and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation which shall, with
respect to non-Foreign Plans and U.S. employees, be 12:01 a.m., Pacific Time,
February 26, 2000, and/or such other date(s) as may be fixed by the Board of
Directors of 3Com.
1.82 SEVERANCE PLAN. "Severance Plan," when immediately preceded by
"3Com," means the 3Com Severance Plan. When immediately preceded by "Palm,"
"Severance Plan" means the severance program, if any, to be established by
Palm pursuant to Sections 2.2 and 5.5.
1.83 SHORT-TERM DISABILITY PLAN. "Short-Term Disability Plan," when
immediately preceded by "3Com," means the 3Com Short-Term Disability Plan.
When immediately preceded by "Palm," "Short-Term Disability Plan" means the
short-term disability plan to be established by Palm pursuant to Section 2.2
and Subsection 5.7(a).
1.84 SOS PLAN. "SOS Plan," when immediately preceded by "3Com,"
means the 3Com Share Our Success ("SOS") Plan. When immediately preceded by
"Palm," "SOS" means the matching gift program for charitable contributions,
if any, to be established by Palm pursuant to Sections 2.2 and 7.7.
1.85 STOCK PLAN. "Stock Plan," when immediately preceded by "3Com,"
means any plan, program, or arrangement, other than the Stock Purchase Plan,
pursuant to which employees and other service providers hold Options, 3Com
Restricted Stock, or other 3Com equity incentives. When immediately preceded
by "Palm," "Stock Plan" means plans, programs, or arrangements that are
substantially similar to the 3Com Stock Plans, to be established by Palm
pursuant to Section 2.2 and Article VI.
1.86 STOCK PURCHASE PLAN. "Stock Purchase Plan," when immediately
preceded by "3Com," means the 3Com Employee Stock Purchase Plan. When
immediately preceded by "Palm,"
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"Stock Purchase Plan" means the employee stock purchase plan to be
established by Palm pursuant to Sections 2.2 and 6.5.
1.87 SUBSIDIARY. "Subsidiary" of any person means a corporation or
other organization, whether incorporated or unincorporated, of which at least
a majority of the securities or interest having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization, is directly or indirectly owned or controlled by such Person or
by any one or more of its Subsidiaries, or by such Person and one or more of
its Subsidiaries; provided, however that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such
other Person unless such other Person controls, or has the right, power or
ability to control that Person. Unless the context otherwise requires,
reference to 3Com and its Subsidiaries shall not include the subsidiaries of
3Com that will be transferred to Palm after giving effect to the Separation,
including the actions taken pursuant to the Non-U.S. Plans.
1.88 TAX SHARING AGREEMENT. "Tax Sharing Agreement" means the
Ancillary Agreement, which is Exhibit F to the Separation Agreement.
1.89 UNEMPLOYMENT INSURANCE PROGRAM. "Unemployment Insurance
Program," when immediately preceded by "3Com," means the group unemployment
insurance policies purchased by 3Com from time to time. When immediately
preceded by "Palm," "Unemployment Insurance Program" means any group
unemployment insurance program to be established by Palm pursuant to Section
9.10.
1.90 WELLCOM PROGRAM. "WellCom Program" is defined in Section 7.6.
1.91 WORKERS' COMPENSATION PLAN. "Workers' Compensation Plan" when
immediately preceded by "3Com" means the 3Com Workers' Compensation Plan,
consisting of the various arrangements established by a member of the 3Com
Group to comply with the workers' compensation requirements of the states in
which the 3Com Group conducts business. When immediately preceded by "Palm,"
"Workers' Compensation Plan" means the workers' compensation program to be
established by Palm pursuant to Section 5.13.
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ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF PALM LIABILITIES. Except as specified otherwise
in this Agreement or as mutually agreed upon by Palm and 3Com from time to
time, effective as of Separation Date, Palm hereby assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms,
all of the following: (a) all Liabilities of, or relating to, Palm Employees
or Palm Transferred Employees, in each case relating to, arising out of, or
resulting from future, present or former employment with the Palm Business
(including Liabilities relating to, arising out of, or resulting from 3Com
Plans and Palm Plans); (b) all Liabilities relating to, arising out of, or
resulting from any other actual or alleged employment relationship with the
Palm Group; and (c) all other Liabilities relating to, arising out of, or
resulting from obligations, liabilities and responsibilities expressly
assumed or retained by the Palm Group, or a Palm Plan pursuant to this
Agreement. Except as specified otherwise in this Agreement or as otherwise
mutually agreed upon by 3Com and Palm from time to time, 3Com shall transfer
to Palm amounts equal to trust assets, insurance reserves, and other related
assets as consistent with the applicable Plan transition that relates to,
arises out of, or results from Palm's pro rata interest in each 3Com Plan.
2.2 ESTABLISHMENT OF PALM PLANS.
(a) HEALTH AND WELFARE PLANS. Except as specified otherwise
in this Agreement, effective as of the Distribution Date (or such other
date(s) as 3Com and Palm may mutually agree), Palm shall adopt the Palm
Health and Welfare Plans. Except as otherwise specified in this Agreement, to
the extent administratively and financially practicable, each of the
foregoing Palm Plans as in effect as of the Distribution Date (or such other
date(s) as 3Com and Palm may mutually agree), shall be comparable in the
aggregate in all Material Features to the corresponding 3Com Plan as in
effect as of such agreed upon date.
(b) 401(K) AND FRINGE BENEFIT PLANS. Except as specified
otherwise in this Agreement, effective as of the Distribution Date (or such
other date(s) as 3Com and Palm may mutually agree), Palm shall adopt the Palm
401(k) Plan and the Palm Fringe Benefit Plans. Except as otherwise specified
in this Agreement, to the extent administratively and financially
practicable, each of the foregoing Palm Plans as in effect as of the
Distribution Date (or such other date(s) as 3Com and Palm may mutually
agree), shall be comparable in the aggregate in all Material Features to the
corresponding 3Com Plan as in effect as of such agreed upon date; provided,
however, that the Palm 401(k) Plan shall allow for a discretionary matching
contribution, as determined by the Palm Board of Directors (in contrast to
the 3Com 401(k) Plan that currently provides for a specific matching
contribution per payroll period).
(c) EQUITY AND OTHER COMPENSATION. Except as specified
otherwise in this Agreement, effective on or before the IPO (or such other
date(s) as 3Com and Palm may mutually
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agree), Palm shall adopt the Palm Stock Plans. Except as specified otherwise
in this Agreement, effective as of the Distribution Date (or such other
date(s) as 3Com and Palm may mutually agree), Palm shall adopt the Palm
Executive Bonus Plan and the Palm Bonus Plan. Effective on or before the IPO
(or such other date as 3Com and Palm may mutually agree), Palm shall adopt
the Palm Stock Purchase Plan. Each of the foregoing Palm Plans as in effect
as of the IPO (or such other date(s) as 3Com and Palm may mutually agree),
shall be comparable in the aggregate in all Material Features to the
corresponding 3Com Plan as in effect on the IPO.
(d) OTHER PLANS. Except as otherwise specified in this
Agreement, effective as of the Separation Date (or such other date(s) as 3Com
and Palm may mutually agree), Palm shall adopt certain Palm Plans that are
specifically tied to its payroll practices, including, without limitation, a
Short-Term Disability Plan, a PTO Plan and a Deferred Compensation Plan. Palm
shall also adopt a Section 125 Plan, effective as of January 1, 2000.
2.3 PALM UNDER NO OBLIGATION TO MAINTAIN PLANS. Except as specified
otherwise in this Agreement, nothing in this Agreement shall preclude Palm,
at any time after the Distribution Date, from amending, merging, modifying,
terminating, eliminating, reducing, or otherwise altering in any respect any
Palm Plan, any benefit under any Palm Plan or any trust, insurance policy or
funding vehicle related to any Palm Plans, or any employment or other service
arrangement with Palm Employees or vendors (to the extent permitted by law).
2.4 PALM'S PARTICIPATION IN 3COM PLANS.
(a) PARTICIPATION IN 3COM PLANS. Except as specified
otherwise in this Agreement or as 3Com and Palm may mutually agree, Palm
shall, until the Distribution Date, continue to be a Participating Company in
the 3Com Plans to the extent that Palm has not established a corresponding
Plan. Effective as of any date on or after the Separation Date and before the
Distribution Date (or such other date(s) as 3Com or Palm may mutually agree),
any member of the Palm Group not described in the preceding sentence may, at
its request and with the consent of 3Com and Palm, become a Participating
Company in any or all of the 3Com Plans, to the extent that Palm has not yet
established a corresponding Plan.
(b) 3COM'S GENERAL OBLIGATIONS AS PLAN SPONSOR. To the
extent that Palm is a Participating Company in any 3Com Plan, 3Com shall
continue to administer, or cause to be administered, in accordance with its
terms and applicable law, such 3Com Plan, and shall have the sole and
absolute discretion and authority to interpret the 3Com Plan, as set forth
therein. 3Com shall not amend any Material Feature of any 3Com Plan in which
Palm is a Participating Company, except to the extent: (i) such amendment
would not materially affect any coverage or benefits of Palm Employees or
Palm Transferred Employees under such Plan; (ii) Palm shall consent to such
amendment and such consent shall not be unreasonably withheld; or (iii) such
amendment is necessary or appropriate to comply with applicable law.
(c) PALM'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY.
Palm shall perform, with respect to its participation in the 3Com Plans, the
duties of a Participating Company as set forth
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in each such Plan or any procedures adopted pursuant thereto, including
(without limitation): (i) assistance in the administration of claims, to the
extent requested by the claims administrator of the applicable 3Com Plan;
(ii) full cooperation with 3Com Plan auditors, benefit personnel and benefit
vendors; (iii) preservation of the confidentiality of all financial
arrangements 3Com has or may have with any vendors, claims administrators,
trustees, service providers or any other entity or individual with whom 3Com
has entered into an agreement relating to the 3Com Plans; and (iv)
preservation of the confidentiality of participant information (including,
without limitation, health information in relation to FMLA leaves) to the
extent not specified otherwise in this Agreement.
(d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except as
otherwise may be mutually agreed upon by 3Com and Palm, effective as of the
Distribution Date or such other date as Palm establishes a corresponding Plan
(as specified in Section 2.2 or otherwise in this Agreement), Palm shall
automatically cease to be a Participating Company in the corresponding 3Com
Plan.
2.5 TERMS OF PARTICIPATION BY PALM TRANSFERRED EMPLOYEES IN PALM
PLANS.
(a) NON-DUPLICATION OF BENEFITS. Except as specified
otherwise in this Agreement, as of the Distribution Date, or other later date
that applies to the particular Palm Plan established thereafter, the Palm
Plans shall be, with respect to Palm Transferred Employees, in all respects
the successors in interest to, and shall not provide benefits that duplicate
benefits provided by, the corresponding 3Com Plans. 3Com and Palm shall agree
on methods and procedures, including amending the respective Plan documents,
to prevent Palm Employees from receiving duplicate benefits from the 3Com
Plans and the Palm Plans.
(b) SERVICE CREDIT. Except as specified otherwise in this
Agreement, with respect to Palm Transferred Employees, each Palm Plan shall
provide that all service, all compensation and all other benefit-affecting
determinations that, as of the Distribution Date, were recognized under the
corresponding 3Com Plan shall, as of the Distribution Date, receive full
recognition and credit and be taken into account under such Palm Plan to the
same extent as if such items occurred under such Palm Plan, except to the
extent that duplication of benefits would result. Notwithstanding the
foregoing, 3Com and Palm shall recognize service with either 3Com or Palm
that was recognized as of the Distribution Date, except to the extent
provided in Subsection 2.5(a) above. The service crediting provisions shall
be subject to any respectively applicable "service bridging," "break in
service," "employment date," or "eligibility date" rules under the Palm Plans
and the 3Com Plans.
(c) ASSUMPTION OF LIABILITIES. Except as specified
otherwise in this Agreement (including, without limitation, the exception
applicable to self-insured Health Plans), the provisions of this Agreement
for the transfer of Assets relating to 3Com Plans to Palm and/or the
appropriate Palm Plans are based upon the understanding of the parties that
Palm and/or the appropriate Palm Plan will assume all Liabilities of the
corresponding 3Com Plan to or relating to Palm Transferred Employees, as
provided for herein. If any such Liabilities are not effectively assumed by
Palm and/or the appropriate Palm Plan, then the amount of transferred Assets
shall be recomputed accordingly, taking into account the retention of such
Liabilities by such 3Com Plan, and Assets
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shall be transferred from Palm and/or the appropriate Palm Plan to 3Com
and/or the appropriate 3Com Plan so as to place Palm and/or the appropriate
Palm Plan in the position it would have been in had the initial Asset
transfer been made in accordance with such recomputed amount of assets.
2.6 BENEFITS COMMITTEE AND DISPUTE RESOLUTION. From the date of
this Agreement through the later of the Distribution Date or the end of the
Post-Distribution Period, as applicable, the management of the Plans shall be
conducted under the supervision of the Benefits Committee. The Benefits
Committee shall consist of an equal number of representatives from 3Com and
Palm as appointed by the 3Com Senior Vice President, Human Resources, and the
Palm Vice President, Human Resources, and shall provide strategic oversight
and direction of the cohesive administration of the Plans. Issues that cannot
be resolved by the Benefits Committee shall be decided, at the request of
either party, by the Palm Vice President, Human Resources (or his or her
authorized delegate) and the 3Com Senior Vice President, Human Resources (or
his or her authorized delegate). After the exhaustion of the process, as
specified herein, any outstanding issue shall be resolved in accordance with
Section 5.9 of the Separation Agreement, entitled "Dispute Resolution."
2.7 FOREIGN PLANS. Palm and 3Com each intend that the matters,
issues or Liabilities relating to, arising out of, or resulting from Foreign
Plans and non-U.S.-related employment matters be handled in a manner that is
in compliance with the requirements of applicable local law and, to the
extent permitted by applicable local law, in a manner consistent with
comparable U.S. matters, issues or Liabilities as reflected in this
Agreement. Without in any way limiting the general principle set forth in the
preceding sentence, Schedule 2.7 sets forth the specific manner in which
certain existing 3Com Foreign Plans in non-U.S. jurisdictions shall be
handled, effective as of the Separation Date (or such other date(s) as 3Com
and Palm may mutually agree) consistent with the provisions of this Section
2.7 or as permitted under applicable local law.
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ARTICLE III
DEFINED CONTRIBUTION PLAN
3.1 401(k) PLAN.
(a) 401(k) PLAN TRUST. Effective as of the Distribution Date
(or such other date as 3Com and Palm may mutually agree), Palm shall establish,
or cause to be established, a separate trust, which is intended to be
tax-qualified under Code Section 401(a), to be exempt from taxation under Code
Section 501(a)(1), and to form the Palm 401(k) Plan.
(b) 401(k) PLAN: ASSUMPTION OF LIABILITIES AND TRANSFER OF
ASSETS. Effective as of the Distribution Date (or such other date as 3Com and
Palm may mutually agree): (i) the Palm 401(k) Plan shall assume and be solely
responsible for all Liabilities relating to, arising out of, or resulting from
Palm Transferred Employees under the 3Com 401(k) Plan; and (ii) 3Com shall cause
the accounts of the Palm Transferred Employees under the 3Com 401(k) Plan that
are held by its related trust to be transferred to the Palm 401(k) Plan and its
related trust, and Palm shall cause such transferred accounts to be accepted by
such Plan and its related trust. Effective as of the Distribution Date (or such
other date as 3Com and Palm may mutually agree), Palm shall use its commercially
reasonable best efforts to enter into agreements satisfactory to Palm to
accomplish such assumption and transfer, the maintenance of the necessary
participant records, the appointment of an initial trustee under the Palm 401(k)
Plan, and the engagement of an initial recordkeeper under the Palm 401(k) Plan.
Palm and 3Com each agree to use their commercially reasonable best efforts to
accomplish this 401(k) Plan and related trust spin-off.
(c) 401(k) PLAN: STOCK CONSIDERATIONS. As a result of the
spin-off of the 3Com 401(k) Plan and to the extent that immediately prior to
such time, the 3Com 401(k) Plan continues to consist of 3Com employer
securities, then the resulting 3Com 401(k) Plan and Palm 401(k) Plan shall both
consist in part of 3Com and Palm employer securities. Palm and 3Com shall assume
sole responsibility for ensuring that their respective company stock funds, and
underlying employer securities held in each such fund, are maintained in
compliance with all requirements of the SEC.
(d) NO DISTRIBUTION TO PALM TRANSFERRED EMPLOYEES. The 3Com
401(k) Plan and the Palm 401(k) Plan shall provide that no distribution of
account balances shall be made to any Palm Transferred Employee on account of
the Palm Group ceasing to be an Affiliate of the 3Com Group as of the
Distribution Date.
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ARTICLE IV
NON-QUALIFIED PLAN
4.1 DEFERRED COMPENSATION PLAN.
(a) ESTABLISHMENT OF PALM RABBI TRUST. Effective on or before
the Separation Date (or such other date as 3Com and Palm may mutually agree),
Palm shall establish the Palm Deferred Compensation Plan and the Palm Rabbi
Trust.
(b) ALLOCATION AND ASSUMPTION OF LIABILITIES. As of the date
that Palm establishes the Palm Deferred Compensation Plan, 3Com shall determine
the amount of Liabilities under the 3Com Deferred Compensation Plan,
attributable to Palm Employees. As soon as administratively practicable
thereafter, 3Com shall pay to Palm or to the trustee of the Palm Rabbi Trust, as
Palm specifies, an amount of 3Com's Assets equal to such Liabilities. Coincident
with the receipt of such transfer of Assets, Palm shall assume all
responsibilities and obligations relating to, arising out of, or resulting from
such Liabilities.
(c) PARTICIPATION IN DEFERRED COMPENSATION PLANS. Effective as
of the Separation Date (or such other date as 3Com and Palm may mutually agree),
eligible Palm Employees may commence participation in the Palm Deferred
Compensation Plan. Palm Employees who are currently participating in the 3Com
Deferred Compensation Plan shall continue their participation in that Plan
(according to its terms) to the Separation Date (or such other date as 3Com and
Palm may mutually agree).
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ARTICLE V
HEALTH AND WELFARE PLANS
5.1 HEALTH PLANS AS OF THE DISTRIBUTION DATE.
(a) PALM HEALTH PLANS. As of the Distribution Date (or such
other date(s) as 3Com and Palm may mutually agree), Palm shall have established
the Palm Health Plans listed on Schedule 5.1(a) and, correspondingly, Palm shall
cease to be a Participating Company in the 3Com Health Plans. Palm shall be
solely responsible for the administration of the Palm Health Plans, including
the payment of all employer-related costs in establishing and maintaining the
Palm Health Plans, and for the collection and remittance of employee premiums,
subject to Section 8.2.
(b) PENDING TREATMENTS. Notwithstanding Subsection 5.1(a)
above, all treatments which have been pre-certified for or are being provided
to a Palm Transferred Employee as of the Distribution Date shall be provided
without interruption under the appropriate 3Com Health Plan (to the extent
such continued treatment is not provided under a Palm Health Plan) until such
treatment is concluded, discontinued, or, if earlier, through December 31,
2000, pursuant to applicable Health Plan rules and limitations, but Palm
shall continue to be responsible for all Liabilities relating to, arising out
of, or resulting from such on-going treatments as of the Distribution Date.
(c) VENDOR ARRANGEMENTS. 3Com shall use its commercially
reasonable best efforts for and on behalf of Palm to procure, effective as of
the Distribution Date (or such other date(s) as 3Com and Palm may mutually
agree): (i) third party ASO Contracts which are comparable in the aggregate in
all Material Features to the ASO Contracts entered into by 3Com, as set forth in
Schedule 5.1(c)(i) (the "ASO Contracts); (ii) Group Insurance Policies, which
are comparable in the aggregate in all Material Features to the Group Insurance
Policies entered into by 3Com, as set forth in Schedule 5.1(c)(ii) (the "Group
Insurance Policies"); and (iii) an HMO Agreement which is comparable in the
aggregate in all Material Features to the HMO Agreement entered into by 3Com, as
set forth in Schedule 5.1(c)(iii) (the "HMO Agreement"). In each case, Palm
shall, as of the Distribution Date (or such other date as 3Com and Palm may
mutually agree), establish, adopt and/or implement such contracts, agreements or
arrangements. Palm may, at such future date after the Distribution Date, elect
to discontinue such contracts, agreements or arrangements in accordance with
Section 2.3.
(d) CONTINUANCE OF ELECTIONS, CO-PAYMENTS AND MAXIMUM
BENEFITS.
(i) As of the Distribution Date and for the
remainder of the plan year in which the Distribution Date occurs (or such other
period as 3Com and Palm may mutually agree), Palm shall make its commercially
reasonable best efforts to cause the Palm Health Plans to recognize and maintain
all coverage and contribution elections made by Palm Employees and Palm
Transferred Employees under the 3Com Health Plans and apply such elections under
the Palm
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Health Plans for the remainder of the period or periods for which such
elections are by their terms applicable. The transfer or other movement of
employment between 3Com to Palm at any time upon or before the Distribution Date
shall neither constitute nor be treated as a "status change" or termination of
employment under the 3Com Health Plans or the Palm Health Plans.
(ii) On and after the Distribution Date, Palm
shall cause the Palm Health Plans to recognize and give credit for (A) all
amounts applied to deductibles, out-of-pocket maximums, co-payments and other
applicable benefit coverage limits with respect to which such expenses have been
incurred by Palm Transferred Employees under the 3Com Health Plans for the
remainder of the calendar year in which the Distribution Date occurs, and (B)
all benefits paid to Palm Transferred Employees under the 3Com Health Plans for
purposes of determining when such persons have reached their lifetime maximum
benefits under the Palm Health Plans.
(e) HCFA. As of the Separation Date (or such other date as
3Com and Palm may mutually agree), Palm shall assume all Liabilities relating
to, arising out of, or resulting from claims, if any, under the HCFA data match
reports that relate to Palm Transferred Employees
5.2 HEALTH PLANS FROM THE SEPARATION DATE THROUGH THE DISTRIBUTION
DATE. Except as otherwise agreed by 3Com and Palm, for the period beginning
with the Separation Date and ending on the Distribution Date (or such other
period as 3Com and Palm may mutually agree), Palm shall be a Participating
Company in the 3Com Health Plans listed on Schedule 5.2(a). 3Com shall
administer claims incurred under the 3Com Health Plans by Palm Employees
before the Distribution Date but only to the extent that Palm has not, before
the Distribution Date, established and assumed administrative responsibility
for a corresponding Health Plan. Any determination made or settlements
entered into by 3Com with respect to such claims shall be final and binding.
3Com shall retain financial and administrative ("run-out") Liability and all
related obligations and responsibilities for all claims incurred by Palm
Transferred Employees before the Distribution Date (or such other date(s) as
3Com and Palm may mutually agree), including any claims that were
administered by 3Com as of, on, or after the Distribution Date (or such other
date(s) as 3Com and Palm may mutually agree). Except as set forth in the
preceding sentence, Palm shall reimburse 3Com for any and all direct and
indirect costs and expenses associated with its participation in the 3Com
Health Plans, subject to Section 8.2.
5.3 GROUP LIFE PLAN.
(a) PALM'S PARTICIPATION IN 3COM GROUP LIFE PLAN. Palm shall,
until the Distribution Date (or such other date as 3Com and Palm may mutually
agree), continue to be a Participating Company in the 3Com Group Life Plan. Palm
shall cease to be a Participating Company in the 3Com Group Life Plan coincident
with Palm's establishment of the Palm Group Life Plan (or, if none, Palm's
written notice to 3Com of its withdrawal as a Participating Company in the 3Com
Group Life Plan). Palm shall reimburse 3Com for any and all direct and indirect
costs and expenses associated with its participation in the 3Com Group Life
Plan, subject to Section 8.2.
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(b) PALM'S ESTABLISHMENT OF PALM GROUP LIFE PLAN. 3Com shall
make its commercially reasonable best efforts to procure an arrangement on
behalf of Palm for a Group Life Plan which shall be comparable in the aggregate
in all Material Features to the 3Com Group Life Plan as are financially,
administratively and legally practicable. If 3Com procures such an arrangement,
Palm will not unreasonably withhold its consent to adopt such an arrangement to
constitute the Palm Group Life Plan. Palm will reimburse 3Com for its direct and
indirect costs and expenses associated with its procurement, preparation, and
implementation of the Palm Group Life Plan, subject to Section 8.2.
5.4 AD&D PLAN.
(a) PALM'S PARTICIPATION IN 3COM AD&D PLAN. Palm shall, until
the Distribution Date (or such other date as 3Com and Palm may mutually agree),
continue to be a Participating Company in the 3Com AD&D Plan. Palm shall cease
to be a Participating Company in the 3Com AD&D Plan coincident with Palm's
establishment of the Palm AD&D Plan (or, if none, Palm's written notice to 3Com
of its withdrawal as a Participating Company in the 3Com AD&D Plan). Palm shall
reimburse 3Com for any and all direct and indirect costs and expenses associated
with its participation in the 3Com AD&D Plan, subject to Section 8.2.
(b) PALM'S ESTABLISHMENT OF PALM AD&D PLAN. 3Com shall make
its commercially reasonable best efforts to procure an arrangement on behalf of
Palm for an AD&D Plan which shall be comparable in the aggregate in all Material
Features to the 3Com AD&D Plan as are financially, administratively and legally
practicable to Palm. If 3Com procures such an arrangement, Palm shall not
unreasonably withhold its consent to adopt such an arrangement to constitute the
Palm AD&D Plan. Palm will reimburse 3Com for its direct and indirect costs and
expenses associated with its procurement, preparation and implementation of the
Palm AD&D Plan, subject to Section 8.2.
5.5 SEVERANCE PLAN. Palm shall, until the Distribution Date (or
such other date as 3Com and Palm may mutually agree), continue to be a
Participating Company in the 3Com Severance Plan. Palm shall cease to be a
Participating Company in the 3Com Severance Plan coincident with Palm's
establishment of the Palm Severance Plan (or if none, Palm's written notice
to 3Com of its withdrawal as a Participating Company in the 3Com Severance
Plan). If Palm so elects, 3Com will assist Palm in establishing the Palm
Severance Plan. Palm will reimburse 3Com for any and all direct and indirect
costs and expenses related to its participation in the 3Com Severance Plan
and 3Com's preparation and implementation of the Palm Severance Plan, subject
to Section 8.2.
5.6 SABBATICAL PLAN.
(a) PALM'S PARTICIPATION IN 3COM SABBATICAL PLAN. Palm shall,
until the Distribution Date (or such other date as 3Com and Palm may mutually
agree), continue to be a Participating Company in the 3Com Sabbatical Plan. Palm
shall remit to 3Com or the trust fund for the 3Com Sabbatical Plan, as specified
by 3Com, sufficient funds to assume its funding Liability under the 3Com
Sabbatical Plan relating to, arising out of, or resulting from Palm's
participation in
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the 3Com Sabbatical Plan. Palm will also reimburse 3Com for any and all
direct and indirect costs and expenses associated with its participation in
the 3Com Sabbatical Plan, subject to Section 8.2. Palm shall cease to be a
Participating Company in the 3Com Sabbatical Plan coincident with Palm's
establishment of the Palm Sabbatical Plan.
(b) ALLOCATION AND ASSUMPTION OF LIABILITIES. 3Com shall
determine the amount of Assets under the 3Com Sabbatical Plan and related trust
as of the Distribution Date (or such other date that Palm establishes the Palm
Sabbatical Plan) attributable to Palm. As soon as administratively practicable
thereafter, 3Com shall pay to Palm or to the trustee of the Palm Sabbatical
Plan, as Palm specifies, an amount equal to Palm's Assets under the 3Com
Sabbatical Plan, if any.
(c) PALM SABBATICAL PLAN. Effective as of the Distribution
Date (or such other date as 3Com and Palm may mutually agree), Palm shall
establish the Palm Sabbatical Plan which is comparable in the aggregate in all
Material Features to the 3Com Sabbatical Plan. If Palm so elects, 3Com will
assist Palm in preparing and implementing the Palm Sabbatical Plan and Palm will
reimburse 3Com for its costs and expenses associated with the preparation and
implementation of the Palm Sabbatical Plan, subject to Section 8.2.
5.7 DISABILITY PLANS.
(a) SHORT-TERM DISABILITY PLAN. Effective on or before the
Separation Date (or such other date as 3Com and Palm may mutually agree), Palm
shall implement or cause to be implemented, payroll procedures for purposes of
sponsoring and administering the Palm Short-Term Disability Plan outside of
California. Palm has adopted a state voluntary Disability Plan for Palm
Employees and Palm Transferred Employees who are employed in California. 3Com
will administer Palm's Short-Term Disability Plan through the Distribution Date
(or such other date as 3Com and Palm may mutually agree). Palm shall reimburse
3Com for its costs and expenses associated with such administration, subject to
Section 8.2.
(b) LONG-TERM DISABILITY PLAN. Palm shall, until the
Distribution Date (or such other date as Palm and 3Com may mutually agree),
continue to be a Participating Company in the 3Com Long-Term Disability Plan.
3Com shall use its commercially reasonable best efforts for and on behalf of
Palm to procure, effective as of the Distribution Date (or such other date as
3Com and Palm may mutually agree), a Palm Long-Term Disability Plan. Palm will
reimburse 3Com for any and all direct and indirect costs and expenses associated
with its participation in the 3Com Long-Term Disability Plan and 3Com's
assistance in procuring, preparing, and implementing the Palm Long-Term
Disability Plan, subject to Section 8.2.
5.8 BUSINESS TRAVEL ACCIDENT INSURANCE. Through the Distribution
Date (or such other date as 3Com and Palm may mutually agree), Palm shall
remain a Participating Company in the 3Com Business Travel Accident Insurance
policy. 3Com shall be responsible for administering or causing to be
administered the 3Com Business Travel Accident Insurance policy with respect
to Palm Employees. Palm shall reimburse 3Com for any and all direct and
indirect expenses and costs
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associated with its participation in the 3Com Business Travel Accident Insurance
policy, subject to Section 8.2. 3Com shall use its commercially reasonable best
efforts for and on behalf of Palm to procure a Business Travel Accident
Insurance policy which shall be comparable in the aggregate in all Material
Features to the 3Com Business Travel Accident Insurance policy, effective as of
the Distribution Date (or such other date as 3Com and Palm may mutually agree).
If 3Com procures such an agreement, Palm shall not unreasonably withhold its
consent to adopt such an agreement to constitute the Palm Business Travel
Accident Insurance policy. Effective as of the Distribution Date, Palm shall be
solely responsible for maintaining its own Business Travel Accident Insurance
policy.
5.9 LONG-TERM CARE PLAN. Through the Distribution Date (or such
other date as 3Com and Palm may mutually agree), Palm shall remain a
Participating Company in the 3Com Long-Term Care Plan. 3Com shall be
responsible for administering or causing to be administered the 3Com
Long-Term Care Plan. Palm shall reimburse 3Com for any and all direct and
indirect costs and expenses associated with its participation in the 3Com
Long-Term Care Plan, subject to Section 8.2. The Palm Employees and Palm
Transferred Employees participating in the 3Com Long-Term Care Plan shall
have the rights to take their existing benefits with them under such 3Com
Long-Term Care Plan (a "portable benefit") at the time their rights to
participation would otherwise terminate.
5.10 SECTION 125 PLAN. Through December 31, 1999 (or such other
date as 3Com and Palm may mutually agree), Palm and designated members of the
Palm Group shall remain Participating Companies in the 3Com Section 125 Plan.
The existing elections for Palm Employees participating in the 3Com Section
125 Plan and for newly-eligible Palm Employees who elect to participate in
the 3Com Section 125 Plan shall remain in effect through December 31, 1999
(or such other date as 3Com and Palm may mutually agree). Effective on
January 1, 2000 (or such other date immediately following the date that
Palm's participation in the 3Com Section 125 Plan terminates), Palm shall
establish, or caused to be established, the Palm Section 125 Plan and Palm
shall be solely responsible for the Palm Section 125 Plan. 3Com will
administer, or cause to be administered, the 3Com Section 125 Plan for Palm
Employees and the Palm Section 125 Plan through such date as 3Com and Palm
may mutually agree. Palm shall reimburse 3Com for any and all direct and
indirect expenses and costs attributable to Palm Employees, subject to
Section 8.2.
5.11 COBRA. 3Com shall be responsible through the Distribution Date
(or such other date as 3Com and Palm may mutually agree), for compliance with
the health care continuation coverage requirements of COBRA and the 3Com
Health and Welfare Plans with respect to Palm Employees and qualified
beneficiaries (as such term is defined under COBRA). Palm shall be
responsible for providing 3Com with all necessary employee change notices and
related information for covered dependents, spouses, qualified beneficiaries
(as such term is defined under COBRA), and alternate recipients pursuant to
QMCSO, in accordance with applicable 3Com COBRA policies and procedures. As
soon as administratively practicable after the Distribution Date (or such
other date as 3Com and Palm may mutually agree), 3Com shall provide Palm
(through hard copy, electronic format, or such other mechanism as is
appropriate under the circumstances), with a list of all qualified
beneficiaries (as such term is defined under COBRA) that relate to the Palm
Group and
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the relevant information pertaining to their coverage elections and remaining
COBRA time periods. Effective as of the Distribution Date (or such other date
as 3Com and Palm may mutually agree), Palm shall be solely responsible for
compliance with the health care continuation coverage requirements of COBRA
and the Palm Health and Welfare Plans for Palm Transferred Employees and
their qualified beneficiaries (as such term is defined under COBRA);
provided, however, Palm may elect to retain 3Com's services in such manner
and for such period as 3Com and Palm may mutually agree to assist it with
COBRA administration and Palm will reimburse 3Com for its costs and expenses
associated with such administration, subject to Section 8.2.
5.12 LEAVE OF ABSENCE PLANS AND FMLA.
(a) ALLOCATION OF RESPONSIBILITIES AFTER SEPARATION DATE.
Effective as of the Separation Date (or such other date as 3Com and Palm may
mutually agree): (i) Palm shall adopt Leave of Absence Plans which shall be
comparable in the aggregate in all Material Features to the 3Com Leave of
Absence Plans as in effect on the Separation Date (or such other date as 3Com
and Palm may mutually agree); (ii) Palm shall honor all terms and conditions of
leaves of absence which have been granted to any Palm Employee under a 3Com
Leave of Absence Plan or FMLA before the Separation Date by 3Com, including such
leaves that are to commence after the Separation Date (or such other date as
3Com and Palm may mutually agree); and (iii) Palm shall recognize all periods of
service of Palm Employees and Palm Transferred Employees with the 3Com Group, as
applicable, to the extent such service is recognized by the 3Com Group for the
purpose of eligibility for leave entitlement under the 3Com Leave of Absence
Plans and FMLA; provided, however, that no duplication of benefits shall, to the
extent permitted by law, be required by the foregoing.
(b) ADMINISTRATION. Through the Distribution Date (or such
other such period as 3Com and Palm may mutually agree), 3Com will administer, or
cause to be administered, the Palm Leave of Absence Plans in such manner as 3Com
and Palm may mutually agree. Palm will reimburse 3Com for its costs and expenses
associated with such administration, subject to Section 8.2.
(c) DISCLOSURE. Before the Distribution Date (or such other
date as 3Com and Palm may mutually agree), 3Com shall provide to Palm copies of
all records pertaining to the 3Com Leave of Absence Plans and FMLA with respect
to all Palm Employees and Palm Transferred Employees to the extent such records
have not been previously provided.
5.13 WORKERS' COMPENSATION PLAN.
(a) ASSUMPTION OF 3COM AND PALM WORKERS' COMPENSATION PLAN
LIABILITIES BY PALM. Effective as of the Separation Date, Palm shall assume and
be solely responsible for all Liabilities relating to, arising out of, or
resulting from their claims by Palm Employees and Palm Transferred Employees
employment with the Palm Business ("Palm Claims") whether incurred before or
after the Separation Date.
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(b) PARTICIPATION IN THE 3COM WORKERS' COMPENSATION PLAN. Palm
shall, until the Distribution Date (or such earlier date as Palm and 3Com may
mutually agree), continue to be a Participating Company in the 3Com Workers'
Compensation Plan. 3Com shall continue to administer, or cause to be
administered, the 3Com Workers' Compensation Plan in accordance with its
terms and applicable law. Palm shall fully cooperate with 3Com and its
insurance company in the administration and reporting of Palm Claims under
the 3Com Workers' Compensation Plan. Any determination made, or settlement
entered into, by or on behalf of 3Com or its insurance company with respect
to Palm claims under the 3Com Workers' Compensation Plan shall be final and
binding. Palm shall reimburse 3Com and its insurance company for any and all
direct and indirect costs related to the Palm claims or Palm's participation
in the 3Com Workers' Compensation Plan, including, but not limited to loss
costs, claims administration fees, legal expenses, premium audits, and
retrospective premium adjustments, subject to Section 8.2. 3Com shall
transfer to and reimburse Palm any assets related to the Palm claims or
Palm's participation in the 3Com Workers' Compensation Plan, including, but
not limited to, loss reserves, premium audits, and retrospective premium
adjustments.
(c) OUTSOURCING OF PALM WORKERS' COMPENSATION PLAN CLAIMS.
Palm shall have the right to transfer the administration of Palm Claims
incurred under the 3Com Workers' Compensation Plan to a third party
administrator, vendor, or insurance company ("Outsourcing"). Palm shall
promptly notify 3Com of its intent to transfer such claims, including the
material terms and conditions of the transfer before the effective date
thereof. 3Com, upon the request of Palm, shall use its commercially
reasonable best efforts to procure such Outsourcing on behalf of Palm, assist
Palm in the transition to Outsourcing, and provide Palm with any information
that is in the possession of 3Com and is reasonably available and necessary
to obtain such Outsourcing.
(d) ESTABLISHMENT OF THE PALM WORKERS' COMPENSATION PLAN. As
of the Distribution Date, Palm shall be responsible for complying with the
workers' compensation requirements of the states in which the Palm Group
conducts business and for obtaining and maintaining insurance programs for
its risk of loss. Such insurance arrangements shall be separate and apart
from the 3Com Workers' Compensation Plan. Notwithstanding the foregoing,
3Com, upon the request of Palm, shall use its commercially reasonable best
efforts to procure workers' compensation insurance policies on behalf of
Palm, assist Palm in the transition to its own separate insurance program,
and provide Palm with any information that is in the possession of 3Com and
is reasonably available and necessary to either obtain insurance coverages
for Palm or to assist Palm in preventing unintended self-insurance, in
whatever form.
5.14 ADMINISTRATIVE SERVICES. To the extent not provided otherwise
in this Article, 3Com shall provide certain administrative services to Palm
in conjunction with both the 3Com and Palm Health and Welfare Plans in such
manner and for such period as 3Com and Palm may mutually agree. Palm shall
reimburse 3Com for any and all direct and indirect costs and expenses related
thereto, subject to Section 8.2.
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ARTICLE VI
EQUITY AND OTHER COMPENSATION
6.1 BONUS PLAN. Employees of the Palm Business (including, for
this purpose, any employees of 3Com who are designated as employees of the
Palm Business for purposes of the Separation) shall cease their participation
in the 3Com Bonus Plan in the quarter ending prior to the Distribution Date
(or such other date as 3Com and Palm may mutually agree). Any bonus pool, or
portion thereof, that has been finally determined or accrued for under the
3Com Bonus Plan for the benefit of, or that is allocable to, employees of the
Palm Business (including for this purpose, any employees of 3Com who are
designated as employees of the Palm Business for purposes of the Separation)
shall be paid to such Employees pursuant to the terms and conditions of the
3Com Bonus Plan, except that such payment shall be made on the Distribution
Date (or such other date as 3Com and Palm may mutually agree). Effective as
of the last day of the quarter ending prior to the Distribution Date (or such
other date as 3Com and Palm may mutually agree), Palm shall establish the
Palm Bonus Plan for Palm Employees and Palm Transferred Employees for Palm
fiscal period(s) beginning on and after such date (or such other date as 3Com
and Palm may mutually agree), to be administered by the Compensation
Committee of the Palm Board of Directors.
6.2 EXECUTIVE BONUS PLAN. Employees of the Palm Business
(including, for this purpose, any employees of 3Com who are designated as
employees of the Palm Business for purposes of the Separation) shall cease
their participation in the 3Com Executive Bonus Plan in the quarter ending
prior to the Distribution Date (or such other date as 3Com and Palm may
mutually agree). Any bonus pool, or portion thereof, that has been finally
determined or accrued for under the 3Com Executive Bonus Plan for the benefit
of, or that is allocable to, employees of the Palm Business (including for
this purpose, any employees of 3Com who are designated as employees of the
Palm Business for purposes of the Separation) shall be paid to such Employees
pursuant to the terms and conditions of the 3Com Bonus Plan, except that such
payment shall be made on the Distribution Date (or such other date as 3Com
and Palm may mutually agree). The 3Com Board of Directors may, in its
absolute discretion following the IPO, adjust the performance and other
factors applicable to any employee of the Palm Business (including, for this
purpose, any employees of 3Com who are designated as employees of the Palm
Business for purposes of the Separation) under the 3Com Executive Bonus Plan
to reflect any changes in such employee's position, duties and
responsibilities following the IPO in such equitable fashion as it shall
determine. Effective as of the Distribution Date (or such other date as 3Com
and Palm may mutually agree), Palm shall establish the Palm Executive Bonus
Plan for Palm Employees and Palm Transferred Employees for Palm fiscal
period(s) beginning on and after the Distribution Date (or such other date as
3Com and Palm may mutually agree), to be administered by the Compensation
Committee of the Palm Board of Directors.
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6.3 3COM OPTIONS.
(a) OPTION ASSUMPTION BY PALM. At the Distribution Date (or
such other date as 3Com and Palm may mutually agree), each outstanding 3Com
Option held by Palm Transferred Employees, whether vested or unvested, shall
be, in connection with the Distribution, assumed by Palm. Each 3Com Option so
assumed by Palm shall continue to have, and be subject to, the same terms and
conditions set forth in the 3Com Stock Plans and as provided in the
respective option agreements governing such 3Com Option as of the
Distribution Date (or such other date as 3Com and Palm may mutually agree),
except that (i) such 3Com Option shall be exercisable for that number of
whole shares of Palm common stock equal to the quotient of the number of
shares of 3Com common stock that were issuable upon exercise of such 3Com
Option as of the Distribution Date divided by the Ratio, rounded down to the
nearest whole number of shares of Palm common stock, and (ii) the per share
exercise price for the shares of Palm common stock issuable upon exercise of
such assumed 3Com Option shall be equal to the product determined by
multiplying the exercise price per share of 3Com common stock at which such
3Com Option was exercisable as of the Distribution Date by the Ratio, rounded
up to the nearest whole cent.
(b) ASSUMPTION CRITERIA. The intention of 3Com and Palm is
that the assumption of 3Com Options by Palm pursuant to Subsection 6.3(a)
meet the following criteria: (i) the aggregate intrinsic value of the assumed
3Com Options immediately after the assumption is not greater than such value
immediately before the assumption; (ii) with respect to each such assumed
3Com Option, the ratio of the exercise price per share to the Palm Stock
Value of the assumed 3Com Options immediately after the assumption is not
less than the ratio of the exercise price per share to the 3Com Stock Value
immediately before the assumption; and (iii) the vesting and option term of
the assumed 3Com Options shall not be changed.
(c) CERTAIN NON-U.S. OPTIONEES. Except as may otherwise be
agreed upon by 3Com and Palm and/or as set forth in Schedule 6.3, this
Section 6.3 shall govern the treatment of 3Com Options held by non-U.S. Palm
Transferred Employees.
6.4 3COM RESTRICTED STOCK.
(a) FORFEITURE. Except as otherwise specified herein and
subject to the terms of the applicable 3Com Stock Plans, on the Distribution
Date, 3Com Restricted Stock (including any Palm common stock issued with
respect to such 3Com Restricted Stock in connection with the Distribution)
held by Palm Transferred Employees shall be forfeited in accordance with the
terms of the applicable 3Com Stock Plans.
(b) SUBSTITUTION. Each Palm Employee who holds 3Com Restricted
Stock shall receive Palm Restricted Stock at the Distribution Date (or such
other date as 3Com and Palm may mutually agree), as more fully set forth in
this Subsection 6.4(b). The value of a Palm Employee's
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resulting Palm Restricted Stock award shall be substantially equivalent to
the value of his or her forfeited 3Com Restricted Stock award (such value to
be reasonably determined by Palm immediately before the Record Date, the
Distribution Date (or such other date as 3Com and Palm may mutually agree)).
The resulting Palm Restricted Stock shall vest under circumstances
substantially identical to the vesting conditions applicable to the
corresponding 3Com Restricted Stock.
(c) CERTAIN NON-U.S. RESTRICTED STOCK HOLDERS. Except as may
otherwise be agreed upon by 3Com and Palm and/or as set forth in Schedule
6.4, this Section 6.4 shall govern the treatment of 3Com Restricted Stock
held by non-U.S. Palm Transferred Employees.
6.5 STOCK PURCHASE PLAN. Through the Distribution Date, employees
of the Palm Business (including for this purpose any employee of 3Com who is
designated as an employee of the Palm Business for purposes of the
Separation) shall continue to be eligible for participation in the 3Com Stock
Purchase Plan. Effective on or before the IPO (or such other date as 3Com and
Palm may mutually agree), Palm shall sponsor a Stock Purchase Plan for the
benefit of Palm Employees and Palm Transferred Employees which shall be
comparable in the aggregate in all Material Features to the corresponding
3Com Stock Purchase Plan, except that the Palm Stock Purchase Plan shall
limit the payroll deductions that may be made by a participant thereunder,
when cumulated with his or her payroll deductions under the 3Com Stock
Purchase Plan, to an aggregate of ten percent (10%) of his or her
compensation (as such term is defined in the 3Com and Palm Stock Purchase
Plans).
6.6 ADMINISTRATIVE SERVICES. To the extent not provided otherwise
in this Article, 3Com shall provide certain administrative services to Palm
in conjunction with both the 3Com and Palm Bonus Plans, Executive Bonus Plan
and Stock Plans in such manner and for such period as 3Com and Palm may
mutually agree. Palm shall reimburse 3Com for any and all direct and indirect
costs and expenses related thereto, subject to Section 8.2.
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ARTICLE VII
FRINGE AND OTHER BENEFITS
7.1 EMPLOYEE ASSISTANCE PROGRAM. 3Com shall use its commercially
reasonable best efforts for and on behalf of Palm to procure, effective as of
the Distribution Date (or such other date as 3Com and Palm may mutually
agree), a contract with Concern, which is comparable in the aggregate in all
Material Features to 3Com's contract with Concern that provides for a Palm
Employee Assistance Program. Palm shall not unreasonably withhold its consent
to enter into such contracts and/or arrangements as procured by 3Com. Palm
shall cease to be a Participating Company in the 3Com Employee Assistance
Program coincident with Palm's establishment of the Palm Employee Assistance
Program. Palm shall reimburse 3Com for any and all direct and indirect costs
and expenses associated with its participation in the 3Com Employee
Assistance Program and 3Com's procurement of a contract or arrangement on
behalf of Palm, subject to Section 8.2.
7.2 EDUCATIONAL ASSISTANCE PROGRAM. Effective as of the
Distribution Date (or such other date as Palm and 3Com may mutually agree),
Palm shall provide a Palm Educational Assistance Program to Palm Employees
which is comparable in the aggregate in all Material Features to the 3Com
Educational Assistance Program. Palm shall cease to be a Participating
Company in the 3Com Educational Assistance Program coincident with Palm's
establishment of the Palm Educational Assistance Program. At such time, any
and all outstanding approved reimbursements under the 3Com Educational
Assistance Program for Palm Employees shall be made by Palm. Furthermore,
Palm shall reimburse 3Com for any and all direct and indirect costs and
expenses associated with its participation in the 3Com Educational Assistance
Program and 3Com's preparation of an Educational Assistance Program on behalf
of Palm, subject to Section 8.2.
7.3 CREDIT UNION. 3Com shall use its commercially reasonable best
efforts to make the AEA Technology Credit Union available to Palm Employees
on substantially similar terms and conditions as are offered to current
employees of the 3Com Group, through such date as Palm and 3Com may mutually
agree). 3Com shall use its commercially reasonable best efforts to make
certain other credit unions are available to former Employees of Palm on
substantially similar terms and conditions as offered to former employees of
the 3Com Group, through such date as Palm and 3Com may mutually agree). Palm
shall reimburse 3Com for any and all direct and indirect costs and expenses
related thereto, subject to Section 8.2.
7.4 CAFETERIA AND RELATED SUBSIDIES. 3Com shall continue to make
its cafeterias, vending machines, and other food or beverage provision
facilities at the 3Com Santa Clara campus (collectively, the "Food
Programs"), available to Palm Employees on substantially similar terms and
conditions as are offered to employees of the 3Com Group, until the
termination of the occupancy agreements between 3Com and Palm regarding
Palm's occupancy of the 3Com Santa Clara campus
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(or such other date as 3Com and Palm may mutually agree). 3Com and Palm shall
use their commercially reasonable best efforts to mutually agree on the
appropriate methods and/or processes to ensure continued tax-favored status
of 3Com's Food Programs under the Code. To the extent not otherwise addressed
in the occupancy agreements, Palm shall reimburse 3Com for any and all direct
and indirect costs and expenses associated with allowing Palm access to
3Com's Food Programs, subject to Section 8.2.
7.5 EMPLOYEE PRODUCT DISCOUNTS AND COMPANY STORE. 3Com shall
provide access to its Company Store until the termination of the occupancy
agreements between 3Com and Palm at the 3Com Santa Clara campus (or such
other date as 3Com and Palm may mutually agree). 3Com shall provide qualified
employee discounts available to Palm Employees on substantially similar terms
and conditions as such discounts are made available to employees of the 3Com
Group through the Distribution Date (or such other date as 3Com and Palm may
mutually agree). To the extent not otherwise addressed in the occupancy
agreements, 3Com and Palm shall each reimburse the other for any and all
direct and indirect costs and expenses relating to the provision of qualified
discounts and access to the Company Store, subject to Section 8.2.
7.6 WELLCOM. 3Com shall continue to provide access to its gym and
other athletic facilities (collectively, the "WellCom Program") available to
Palm Employees on substantially similar terms and conditions as are offered
to employees of the 3Com Group until the termination of the occupancy
agreements between 3Com and Palm regarding Palm's occupancy of the 3Com Santa
Clara campus (or such other date as 3Com and Palm may mutually agree). To the
extent not otherwise addressed in the occupancy agreements, Palm shall
reimburse 3Com for any and all direct and indirect costs and expenses
associated with allowing Palm access to 3Com's WellCom Program, subject to
Section 8.2.
7.7 SOS PLAN. Effective as of the Distribution Date (or such other
date as Palm and 3Com may mutually agree), Palm shall provide an SOS Plan to
Palm Employees. Palm shall cease to be a Participating Company in the 3Com
SOS Plan coincident with Palm's establishment of the Palm SOS Plan (or, if
none, Palm's written notice to 3Com of its withdrawal as a Participating
Company in the 3Com SOS Plan). At such time, any and all outstanding approved
matching charity contributions under the 3Com SOS Plan for Palm Employees
shall be made by Palm. Furthermore, Palm shall reimburse 3Com for any and all
direct and indirect costs and expenses associated with its participation in
the 3Com SOS Plan and 3Com's preparation of an SOS Plan on behalf of Palm,
subject to Section 8.2.
7.8 OTHER BENEFITS. To the extent that 3Com maintains, sponsors or
provides other fringe benefits specified in Schedule 7.8 to its eligible
employees, then 3Com shall, to the extent permitted by law, continue to make
such benefits available to Palm Employees on substantially similar terms and
conditions as are offered to the employees of the 3Com Group through the
Distribution Date (or such other date upon which Palm and 3Com mutually
agree). Palm shall reimburse 3Com for any and all direct and indirect costs
and expenses associated with, arising out of, or resulting from the provision
of such other fringe benefits to its employees, subject to Section 8.2. Palm
and 3Com
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agree to make commercially reasonable best efforts to mutually agree on
whether, when, and on what terms any member of the Palm Group shall maintain,
sponsor, or offer fringe benefits.
7.9 ADMINISTRATIVE SERVICES. To the extent not provided otherwise
in this Article, 3Com shall provide certain administrative services to Palm
in conjunction with both the 3Com and the Palm Fringe Benefit Plans in such
manner and for such period as 3Com and Palm may mutually agree. Palm shall
reimburse 3Com for any and all direct and indirect costs and expenses related
thereto, subject to Section 8.2.
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ARTICLE VIII
ADMINISTRATIVE PROVISIONS
8.1 MASTER TRANSITIONAL SERVICES AGREEMENT. On or prior to the
Separation Date (or such other date as Palm and 3Com may mutually agree),
3Com and Palm may enter into a services agreement covering the provisions of
interim services, including financial, accounting, legal, benefits-related
and other services by 3Com to Palm or, in certain circumstances, vice versa,
if appropriate or necessary.
8.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) EXPENSES AND COSTS CHARGEABLE TO A TRUST. Effective as of
the Separation Date, Palm shall pay its share of any contributions made to
any trust maintained in connection with a 3Com Plan while Palm is a
Participating Company in that 3Com Plan.
(b) CONTRIBUTIONS TO TRUSTS. With respect to 3Com Plans to
which Palm Employees and Palm Transferred Employees make contributions, 3Com
shall use reasonable procedures to determine Palm Assets and Liabilities
associated with each such Plan, taking into account such contributions,
settlements, refunds and similar payments.
(c) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST.
Effective as of the Separation Date, to the extent not charged pursuant to a
services agreement (as contemplated by Section 8.1) or another Ancillary
Agreement (including, without limitation, the Master Transitional Services
Agreement), and to the extent not otherwise agreed to in writing by 3Com and
Palm, and to the extent not chargeable to a trust established in connection
with a 3Com Plan (as provided in paragraph (a)), Palm shall be responsible,
through either direct payment or reimbursement to 3Com in accordance with
Section 5.3 of the Separation Agreement and/or with the Master Transitional
Services Agreement, for its allocable share of actual third party and/or
vendor costs and expenses incurred by 3Com and additional costs and expenses,
subject to the methodology reasonably agreed upon by 3Com and Palm, in the
administration of (i) the 3Com Plans while Palm participates in such 3Com
Plans, and (ii) the Palm Plans, to the extent 3Com procures, prepares,
implements and/or administers such Palm Plans. To the extent not otherwise
determinable through direct allocation of costs and expenses, Palm's
allocable share of such costs and expenses will be based on Palm Revenue as a
percentage of total 3Com Revenue.
(d) ALLOCATION OF COSTS AND EXPENSES. Except as otherwise
provided in this Agreement, the Master Transitional Services Agreement, or in
any services agreement between 3Com and Palm (as contemplated in Section 8.1)
relating to the Separation, the IPO, or the Distribution, all costs and
expenses of the parties hereto in connection with the Separation, the IPO
(including underwriting discounts and commissions) and the Distribution and
costs and expenses of the parties hereto in connection with the Separation
shall be allocated between Palm and 3Com.
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Palm and 3Com shall each be responsible for their own internal fees, costs
and expenses incurred in connection with the Separation, the IPO and the
Distribution.
8.3 TRANSITIONAL STAFFING SERVICES. 3Com shall provide certain
transitional staffing services and other services as 3Com and Palm may
mutually agree (provided, however, for purposes of the Workers' Compensation
Plan (as set forth in Section 5.13) the Transitional Staffing Services
Agreement for finance shall control) to Palm in such manner and for such
period as 3Com and Palm may mutually agree. Palm shall reimburse 3Com for any
and all direct and indirect costs and expenses related thereto, subject to
Section 8.2.
8.4 SHARING OF PARTICIPANT INFORMATION. In addition to the
responsibilities and obligations of 3Com and Palm specified in Exhibit I to
the Separation Agreement, 3Com and Palm shall share, or cause to be shared,
all participant information that is necessary or appropriate for the
efficient and accurate administration of each of the 3Com Plans and the Palm
Plans during the respective periods applicable to such Plans as Palm and 3Com
may mutually agree). 3Com and Palm and their respective authorized agents
shall, subject to applicable laws of confidentiality and data protection, be
given reasonable and timely access to, and may make copies of, all
information relating to the subjects of this Agreement in the custody of the
other party or its agents, to the extent necessary or appropriate for such
administration.
8.5 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While
Palm is a Participating Company in the 3Com Plans, Palm shall take, or cause
to be taken, all actions necessary or appropriate to facilitate the
distribution of all 3Com Plan-related communications and materials to
employees, participants and beneficiaries, including (without limitation)
summary plan descriptions and related summaries of material modification(s),
summary annual reports, investment information, prospectuses, notices and
enrollment material for the 3Com Plans and Palm Plans. Palm shall reimburse
3Com for the costs and expenses relating to the copies of all such documents
provided to Palm, except to the extent such costs are charged pursuant to
Section 8.2 (or are otherwise addressed in this Agreement) or pursuant to an
Ancillary Agreement. Palm shall assist 3Com in complying with all reporting
and disclosure requirements of ERISA, including the preparation of Form
Series 5500 annual reports for the 3Com Plans, as applicable.
8.6 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning
as of the Separation Date and ending on such date as 3Com and Palm may
mutually agree, 3Com and Palm and their duly authorized representatives shall
have the right to conduct joint audits with respect to any vendor contracts
that relate to both the 3Com Health and Welfare Plans and the Palm Health and
Welfare Plans. The scope of such audits shall encompass the review of all
correspondence, account records, claim forms, canceled drafts (unless
retained by the bank), provider bills, medical records submitted with claims,
billing corrections, vendor's internal corrections of previous errors and any
other documents or instruments relating to the services performed by the
vendor under the applicable vendor contracts. 3Com and Palm shall agree on
the performance standards, audit methodology, auditing policy and quality
measures, reporting requirements, and the manner in which costs and expenses
incurred in connection with such audits will be shared.
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8.7 EMPLOYEE IDENTIFICATION NUMBERS. Until the Distribution Date
(or such other period as 3Com and Palm may mutually agree), 3Com and Palm
shall not change any employee identification numbers assigned by 3Com. 3Com
and Palm mutually agree to establish a policy pursuant to which employee
identification numbers assigned to either employees of 3Com or Palm shall not
be duplicated between 3Com and Palm.
8.8 BENEFICIARY DESIGNATIONS. Subject to Section 8.11, all
beneficiary designations made by Palm Employees and Palm Transferred
Employees for the 3Com Plans shall be transferred to and be in full force and
effect under the corresponding Palm Plans, in accordance with the terms of
each such applicable Palm Plan, until such beneficiary designations are
replaced or revoked by the Palm Employees and Palm Transferred Employees who
made the beneficiary designations.
8.9 REQUESTS FOR IRS AND DOL OPINIONS. 3Com and Palm shall make
such applications to regulatory agencies, including the IRS and DOL, as may
be necessary or appropriate. Palm and 3Com shall cooperate fully with one
another on any issue relating to the transactions contemplated by this
Agreement for which 3Com and/or Palm elects to seek a determination letter or
private letter ruling from the IRS or an advisory opinion from the DOL.
8.10 FIDUCIARY MATTERS. 3Com and Palm each acknowledge that actions
contemplated to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and that no party shall be deemed to be in violation of this Agreement if
such party fails to comply with any provisions hereof based upon such party's
good faith determination that to do so would violate such a fiduciary duty or
standard.
8.11 CONSENT OF THIRD PARTIES. If any provision of this Agreement
is dependent on the consent of any third party (such as a vendor) and such
consent is withheld, 3Com and Palm shall use their commercially reasonable
best efforts to implement the applicable provisions of this Agreement. If any
provision of this Agreement cannot be implemented due to the failure of such
third party to consent, 3Com and Palm shall negotiate in good faith to
implement such provision in a mutually satisfactory manner.
8.12 3COM INTRANET. Through the Distribution Date (or such other
date as Palm and 3Com may mutually agree), 3Com shall make its 3Community
intranet site available to Palm Employees on substantially the same terms as
such intranet site is made available to 3Com Employees. Palm shall reimburse
3Com for any and all costs and expenses related to making its intranet site
available to Palm Employees, subject to the Master Transitional Services
Agreement. 3Com and Palm shall use their commercially reasonable best efforts
to mutually agree on the appropriate methods by which Palm shall establish
its own intranet site.
8.13 TAX COOPERATION. In connection with the interpretation and
administration of this Agreement, 3Com and Palm shall take into account the
agreements and policies established pursuant to the Separation Agreement and
the parties' intent to qualify the Distribution as a tax-free reorganization
under Code Sections 355 and 368(a)(1)(D).
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ARTICLE IX
EMPLOYMENT-RELATED MATTERS
9.1 TERMS OF PALM EMPLOYMENT. All basic terms and conditions of
employment for Palm Employees and Palm Transferred Employees including,
without limitation, their pay and benefits in the aggregate, shall, to the
extent legally and practicably possible, remain substantially the same
through the Distribution Date as the terms and conditions that were in place
when the Palm Employee or Palm Transferred Employee was employed by the 3Com
Group, as applicable. Notwithstanding the foregoing, Palm Employees and Palm
Transferred Employees shall be required to execute a new agreement regarding
confidential information and proprietary developments in a form approved by
Palm by the Distribution Date. In addition, nothing in the Separation
Agreement, this Agreement, or any Ancillary Agreement should be construed to
change the at-will status of the employment of any of the employees of the
3Com Group or the Palm Group.
9.2 HR DATA SUPPORT SYSTEMS. 3Com shall provide human resources
data support for Palm Employees and Palm Transferred Employees through
December 31, 2000 (or such other period as 3Com and Palm may mutually agree).
Palm agrees to fully reimburse 3Com for any and all direct and indirect costs
and expenses associated with its use of the 3Com human resources data support
systems, subject to Section 8.2. In the event that 3Com and Palm agree to
extend the time period beyond December 31, 2000, then the costs and expenses
will be computed in accordance with Section 8.2; provided, however, an
additional ten percent (10%) charge will be incurred by Palm. 3Com and Palm
each reserves the right to discontinue Palm's access to any 3Com human
resources data support systems with sixty (60) days notice (or such other
period as 3Com and Palm may mutually agree).
9.3 NON-SOLICITATION OF EMPLOYEES. Subject to Section 5.12 of the
Separation Agreement, 3Com and Palm each agree that, effective as of the IPO,
they shall not solicit or recruit, without the other party's express written
consent, the other party's employees for a period of two (2) years following
the Distribution Date. To the extent this prohibition is waived, any
recruitment efforts by either 3Com or Palm during the period of two (2) years
after the Distribution Date shall be coordinated with the Senior Vice
President, Human Resources of 3Com and the Vice President, Human Resources of
Palm or each of their respective designates and appropriate management.
Notwithstanding the foregoing, this prohibition on solicitation does not
apply to actions taken by a party either: (a) solely as a result of an
employee's affirmative response to a general recruitment effort carried out
through a public solicitation or general solicitation, or (b) as a result of
an employee's initiative.
9.4 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. Palm Employees
with U.S. work visas authorizing them to work for Palm will continue to hold
work authorization for the Palm Group after the Separation Date. Palm will
request amendments to the nonimmigrant visa status of Palm Employees and Palm
Transferred Employees with U.S. work visas authorizing them to work for 3Com,
excluding the Palm Group, to request authorization to work for Palm.
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9.5 CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision of
the Separation Agreement or any Ancillary Agreement shall be deemed to
release any individual for any violation of the 3Com non-competition
guideline or any agreement or policy pertaining to confidential or
proprietary information of any member of the 3Com Group, or otherwise relieve
any individual of his or her obligations under such non-competition
guideline, agreement, or policy.
9.6 PTO. Effective as of the Separation Date (or such other date
as 3Com and Palm may mutually agree), Palm shall establish the Palm PTO Plan
which shall be comparable in the aggregate in all Material Features to the
3Com PTO Plan. Effective as soon as administratively practicable after the
Separation Date (or such other date as 3Com and Palm may mutually agree),
3Com shall transfer to Palm all data and information relating to the 3Com PTO
Plan. Effective as soon as administratively practicable following the
Separation Date (or such other date as 3Com and Palm may mutually agree),
Palm shall assume all Liabilities attributable to Palm Employees under the
3Com PTO Plan. In the event that a 3Com Employee or Palm Employee transfers
his or her employment to the other party before the Distribution Date, such
transfer of employment shall not result in a payout or constitute a
termination event for purposes of the PTO Plan, and no duplication of
benefits shall occur as a result of any such transfer of employment between
3Com and Palm. Furthermore, the Liability attributable to any Palm Employee
or 3Com Employee who transfers employment between 3Com and Palm prior to the
Distribution Date shall be assumed by the employer subsequent to the transfer.
9.7 PERSONNEL RECORDS. Subject to applicable laws on
confidentiality and data protection, 3Com shall deliver to Palm prior to the
Distribution Date (or such other date as 3Com and Palm may mutually agree),
personnel records of Palm Employees and Palm Transferred Employees to the
extent such records relate to Palm Employees' and Palm Transferred Employees'
active employment by, leave of absence from, or termination of employment
with Palm. Palm shall fully reimburse 3Com for any and all direct and
indirect costs and expenses associated with such delivery, subject to Section
8.2.
9.8 MEDICAL RECORDS. Subject to applicable laws on confidentiality
and data protection, 3Com shall deliver to Palm prior to the Distribution
Date (or such other date as 3Com and Palm may mutually agree), medical
records of Palm Employees and Palm Transferred Employees to the extent such
records (a) relate to Palm Employees' and Palm Transferred Employees' active
employment by, leave of absence from, or termination of employment with Palm,
and (b) are necessary to administer and maintain employee benefit plans,
including Health Plans and Workers' Compensation Plan and for determining
eligibility for paid and unpaid Leaves of Absence for medical reasons. Palm
shall fully reimburse 3Com for any and all direct and indirect costs and
expenses associated with such delivery, subject to Section 8.2.
9.9 UNEMPLOYMENT INSURANCE PROGRAM.
(a) CLAIMS ADMINISTRATION THROUGH DISTRIBUTION DATE. Unless
otherwise directed by Palm, 3Com shall use its commercially reasonable best
efforts to cause Palm to receive service from 3Com's third party unemployment
insurance administrator through the Distribution Date (or
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such other date as 3Com and Palm may mutually agree). Palm shall reimburse
3Com for its allocable share of fees paid and related costs and expenses by
3Com to its third party unemployment insurance administrator for services
rendered during such period, pursuant to the Master Transitional Services
Agreement. Palm shall cooperate with the unemployment insurance administrator
by providing any and all necessary or appropriate information reasonably
available to Palm.
(b) CLAIM ADMINISTRATION POST-DISTRIBUTION DATE. Before the
Distribution Date, 3Com shall use its commercially reasonable best efforts
for and on behalf of Palm to procure an agreement with its third party
unemployment insurance administrator comparable in the aggregate in all
Material Features to the 3Com third party unemployment insurance agreement,
including, without limitation, administration of all unemployment
compensation claims of Palm Transferred Employees and Palm Employees,
regardless of whether such claims were filed before, on, or after the
Distribution Date. Palm shall not unreasonably withhold its consent to adopt
such an agreement with such administrator. Palm shall reimburse 3Com for any
and all direct and indirect costs and expenses associated with such
procurement, subject to the Master Transitional Services Agreement.
9.10 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES.
No provision of this Agreement, the Separation Agreement, or any Ancillary
Agreement shall be construed to create any right or accelerate entitlement to
any compensation or benefit whatsoever on the part of any Palm Employee, Palm
Transferred Employee or other former, present or future employee of 3Com or
Palm under any 3Com Plan or Palm Plan or otherwise. Without limiting the
generality of the foregoing: (a) neither the Distribution or Separation, nor
the termination of the Participating Company status of Palm or any member of
the Palm Group shall cause any employee to be deemed to have incurred a
termination of employment; and (b) no transfer of employment between 3Com and
Palm before the Distribution Date shall be deemed a termination of employment
for any purpose hereunder.
9.11 EMPLOYMENT LITIGATION.
(a) CLAIMS TO BE TRANSFERRED TO PALM AND/OR JOINTLY
DEFENDED BY 3COM AND PALM. On or before the Separation Date, 3Com and Palm
will enter into a written agreement that specifies the legal responsibility
and accompanying Liability for identified claims of Palm.
(b) UNSCHEDULED CLAIMS. Palm shall have the sole
responsibility for all employment-related claims regarding Palm Employees and
Palm Transferred Employees that exist, or come into existence, on or after
the Separation Date relating to, arising out of, or resulting from their
employment with the Palm Business or the Palm Group.
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ARTICLE X
GENERAL PROVISIONS
10.1 EFFECT IF SEPARATION, IPO AND/OR DISTRIBUTION DOES NOT OCCUR.
Subject to Section 10.10, if the Separation, IPO and/or Distribution does not
occur, then all actions and events that are, under this Agreement, to be
taken or occur effective as of the Separation Date, IPO, and/or Distribution
Date, or otherwise in connection with the Separation, IPO and/or
Distribution, shall not be taken or occur except to the extent specifically
agreed by Palm and 3Com.
10.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, the understanding and agreement being that no provision contained
herein, and no act of the parties, shall be deemed to create any relationship
between the parties other than the relationship set forth herein.
10.3 AFFILIATES. Each of 3Com and Palm shall cause to be performed
and hereby guarantee the performance of any and all actions of the 3Com Group
or the Palm Group, respectively.
10.4 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. The
following provisions of the Separation Agreement are hereby incorporated
herein by reference, and unless otherwise expressly specified herein, such
provisions shall apply as if fully set forth herein (references in this
Section to an "Article" or "Section" shall mean Articles or Sections of the
Separation Agreement, and, except as expressly set forth below, references
within the material incorporated herein by reference shall be references to
the Separation Agreement): Section 5.4 (relating to Agreement for Exchange of
Information); Section 5.9 (relating to Dispute Resolution); Section 5.11
(relating to No Representation or Warranty); and Article V (relating to
Covenants and Other Matters).
10.5 GOVERNING LAW. To the extent not preempted by applicable
federal law, including, without limitation, ERISA, the Code and applicable
securities laws, this Agreement shall be governed by, construed and
interpreted in accordance with the laws of the State of California,
irrespective of the choice of law principles of the State of California, as
to all matters, including matters of validity, construction, effect,
performance and remedies.
10.6 ASSIGNMENT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective legal representatives
and successors, and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. This Agreement may be
enforced separately by each member of the 3Com Group and each member of the
Palm Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party,
and any such assignment shall be void; provided, however, either party may
assign this Agreement to a successor entity in conjunction with such party's
reincorporation.
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10.7 SEVERABILITY. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible and in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest possible extent.
10.8 INTERPRETATION. The headings contained in this Agreement or
any Schedule hereto and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule
but not otherwise defined therein shall have the meaning assigned to such
term in this Agreement. When a reference is made in this Agreement to an
Article, Section or Schedule, such reference shall be to an Article of,
Section of, or Schedule to this Agreement unless otherwise indicated.
10.9 AMENDMENT. The Board of Directors of Palm and 3Com may
mutually agree to amend the provisions of this Agreement at any time or
times, for any reason, either prospectively or retroactively, to such extent
and in such manner as the Boards mutually deem advisable. Each Board may
delegate its amendment power, in whole or in part, to one or more Persons or
committees as it deems advisable. The Senior Vice President, Human Resources
of 3Com and the Vice President, Human Resources of Palm have full power and
authority to mutually adopt an amendment to this Agreement (subject to each
of their authority to amend Plans). No change or amendment will be made to
this Agreement, except by an instrument in writing signed by authorized
individuals.
10.10 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the IPO Closing Date by and in
the sole discretion of 3Com without the approval of Palm. This Agreement may
be terminated at any time after the IPO Closing Date and before the
Distribution Date by mutual consent of 3Com and Palm. In the event of
termination pursuant to this Section, no party shall have any liability of
any kind to the other party.
10.11 CONFLICT. In the event of any conflict between the provisions
of this Agreement and the Separation Agreement, any Ancillary Agreement, or
Plan, the provisions of this Agreement shall control.
10.12 COUNTERPARTS. This Agreement, including the Schedules hereto
and the other documents referred to herein, may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same agreement.
38
<PAGE>
IN WITNESS WHEREOF, each of the parties have caused this Employee
Matters Agreement to be executed on its behalf by its officers thereunto duly
authorized on the day and year first above written.
3COM CORPORATION
By:___________________________________
Name:_________________________________
Title:
PALM, INC.
By: __________________________________
Name: ________________________________
Title:
<PAGE>
SCHEDULE 2.7
FOREIGN PLANS
-------------
- ------------------------------------------------------------------------------
Actions Required in Relation to Palm at Separation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Country Benefit Action
- -------------------- ------------------------------------- ------------------------------------------------------------
<S> <C> <C>
- -------------------- ------------------------------------- ------------------------------------------------------------
UK Pension Plan Amend plan to enable Palm Employees to participate until
Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
Healthcare Amend current arrangements to enable Palm Employees to
continue to participate until April 2001 (renewal data)
- -------------------- ------------------------------------- ------------------------------------------------------------
Life Assurance Amend current arrangements to enable Palm Employees to
continue to participate until Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
PHI Amend current arrangements to enable Palm Employees to
continue to participate until Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
France Supplementary Pension Plan Withdraw this benefit
- -------------------- ------------------------------------- ------------------------------------------------------------
Healthcare/Disability Replicate current arrangements
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Sweden Pension/Life/Disability Replicate current arrangements at Separation
- -------------------- ------------------------------------- ------------------------------------------------------------
Healthcare Arrange for Palm Employees to participate in 3Com
arrangements until Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Switzerland Life/Pension Disability Replicate current arrangements
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Italy Personal Replicate current arrangements
Accident/Healthcare/Medical Check Up
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Netherlands Pension Arrange for Palm Employees to participate in 3Com
arrangements until Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
Healthcare/Life/Disability Arrange for Palm Employees to participate in 3Com
arrangements until Distribution Date
- -------------------- ------------------------------------- ------------------------------------------------------------
- -------------------- ------------------------------------- ------------------------------------------------------------
Germany Support Fund Replicate current arrangements
- -------------------- ------------------------------------- ------------------------------------------------------------
Direct Insurance Transfer Palm Employees' arrangements to Palm
- -------------------- ------------------------------------- ------------------------------------------------------------
-i-
</TABLE>
<PAGE>
SCHEDULE 5.1(a)
PALM HEALTH AND WELFARE PLANS
Palm Health Plans:
- Aetna US Healthcare Exclusive Provider Organization (EPO)
- Aetna US Healthcare Preferred Provider Organization (PPO)
- Aetna US Healthcare Out-of-Area Plan
- Kaiser HMO
- MetLife Dental Plan
- Vision Service Plan
Palm Welfare Plans
Group Life Plan
AD&D Plan
Severance Plan
Sabbatical Plan
Disability Plans
Business Travel Accident Insurance
Section 125 Plan
Leave of Absence Programs and FMLA
3Com Workers' Compensation Plan
-ii-
<PAGE>
SCHEDULE 5.1(c)(i)
THIRD PARTY ASO
Aetna US Healthcare Medical Plans
MetLife Dental Plans
Matrix Short-Term Disability Plan Administrator
-iii-
<PAGE>
SCHEDULE 5.1(c)(ii)
GROUP INSURANCE POLICIES
Prudential Life Insurance
Prudential LTD Insurance
The Hartford Accidental Death and Dismemberment (AD&D) Insurance
The Hartford Business Travel Accident (BTA) Insurance
-iv-
<PAGE>
SCHEDULE 5.1(c)(iii)
HMO AGREEMENT
Kaiser HMO
-v-
<PAGE>
SCHEDULE 5.2(a)
3COM HEALTH AND WELFARE PLANS
3Com Health Plans:
- Aetna US Healthcare Exclusive Provider Organization (EPO)
- Aetna US Healthcare Preferred Provider Organization (PPO)
- Aetna US Healthcare Out-of-Area Plan
- Harvard Pilgrim Health Care HMO
- HMO Illinois
- Kaiser HMO
- MetLife Dental Plan
- Vision Service Plan
3Com Welfare Plans
Group Life Plan AD&D Plan
Severance Plan
Sabbatical Plan
Disability Plans
Business Travel Accident Insurance
Long-Term Care Plan
Section 125 Plan
Leave of Absence Programs and FMLA
Workers' Compensation Plan
-vi-
<PAGE>
SCHEDULE 6.3
OPTIONS HELD BY CERTAIN NON-U.S. PALM
TRANSFERRED EMPLOYEES
Certain Non-U.S. jurisdictions require the consent of Palm Transferred Employees
to Palm's assumption of such Employee's 3Com Options. To the extent that such
consent is not obtained, the Options held by such Palm Transferred Employees
shall not be assumed and shall generally terminate three (3) months after the
Distribution.
-vii-
<PAGE>
SCHEDULE 6.4
3COM RESTRICTED STOCK HELD BY
NON-U.S. PALM TRANSFERRED EMPLOYEES
NONE
-viii-
<PAGE>
SCHEDULE 7.8
OTHER FRINGE BENEFITS
Financial Engines Retirement Web Advisor
Human Resources Education and Development Program
Hyatt Legal
International SOS Assistance (travel protection)
MetLife Group Auto and Home Insurance
Outplacement Services
Training
-ix-
<PAGE>
Exhibit 2.7
TAX SHARING AGREEMENT
This Tax Sharing Agreement, dated February 26, 2000, is by and between
3Com Corporation ("3Com"), a Delaware corporation, and Palm, Inc. ("Palm"), a
Delaware corporation.
RECITALS
A. U.S. Robotics Corporation ("USR"), a Delaware corporation, acquired
all of the stock of Palm on September 1, 1995. Consequently, Palm was a member
of the affiliated group of corporations of which USR was the common parent (the
"USR Group"), beginning on September 2, 1995, and ending on June 12, 1997, when
3Com acquired all of the stock of USR.
B. During the period that Palm was a member of the USR Group, it joined
other members of the group in filing consolidated federal income tax returns.
For its taxable years ended October 1, 1995, and September 26, 1996, Palm
incurred net operating losses that reduced the consolidated tax liability of the
USR Group. Palm received no compensation from USR or other members of the Group
for the use of Palm's net operating losses to offset taxable income of other
members of the Group. For its taxable year ended June 12, 1997, when 3Com
acquired USR, Palm had taxable income that increased the consolidated tax
liability of the USR Group. Palm did not pay USR to compensate USR for Palm's
share of the group's consolidated federal income tax liability.
C. When 3Com acquired USR, both USR and Palm became members of the
affiliated group of corporations of which 3Com was the common parent (the "3Com
Group"). Beginning with its taxable year ended May 31, 1998, Palm has joined the
other members of the 3Com Group in filing consolidated federal income tax
returns. During its 1998 taxable year, Palm earned taxable income that was
offset by net operating losses incurred by other members of the group. Palm did
not pay 3Com to compensate for the use of losses of other group members to
offset Palm's income.
D. Under the tax laws of some states and foreign jurisdictions, Palm
has joined other members of the USR Group or the 3Com Group in filing
consolidated, combined, or unitary returns. Palm has made no payments to other
members in respect of its share of the tax liability reported on those returns
or to compensate other members for the use of their losses, credits or similar
tax attributes to reduce Palm's share of the aggregate tax liability. Similarly,
Palm has received no payments from other members to compensate Palm for the use
of its losses, credits, or similar tax attributes to reduce the aggregate tax
liability.
E. Palm plans to issue new shares of its common stock through a
combination of private placements to strategic investors and a public offering.
Thereafter, pursuant to a Master Separation and Distribution Agreement dated
December 13, 1999, between 3Com and Palm, 3Com will distribute all of its stock
in Palm to its shareholders (the "Distribution"). The Distribution will cause
Palm to leave the 3Com Group.
F. In anticipation of Palm's departure from the 3Com Group, 3Com and
Palm would like to allocate responsibilities for certain tax matters. In
particular, the parties would like to provide for the
<PAGE>
payment by Palm of its share of tax liabilities determined on a consolidated,
combined, or unitary basis and to compensate affiliates for the use of their
losses, credits, or other tax attributes to reduce Palm's share of the
aggregate tax liability. Similarly, the parties would like to provide for the
compensation of Palm for the use of its losses, credits, or similar tax
attributes to reduce the aggregate tax liability. The parties would also like
to provide for compensation or reimbursement as appropriate to reflect
redeterminations of the tax liability of Palm for periods during which it
joined in the filing of consolidated, combined, or unitary returns with 3Com
or other affiliates. Finally, the parties would like to provide and fix the
responsibilities for certain administrative matters, such as (1) the
preparation and filing of tax returns for periods beginning before the date
of the Distribution (the "Distribution Date"), (2) the payment of taxes shown
to be due and payable on those returns (as well as any estimated or advance
payments required before the filing of those returns), (3) the retention,
maintenance and provision of access to all records necessary to prepare and
file appropriate tax returns, and (4) the conduct of audits, examinations,
and proceedings that could result in a redetermination of tax liabilities of
3Com, Palm or other subsidiaries of 3Com for periods beginning before the
Distribution Date.
AGREEMENT
To accomplish the purposes described above, 3Com and Palm agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the term "Tax" shall
mean all federal, state, local, foreign or other taxes, assessments or other
governmental charges, including income, estimated income, business occupation,
franchise, property, sales, use, excise, employment, unemployment, payroll,
social security, ad valorem, transfer, gains, profits, capital stock, license,
gross receipts, stamp, real estate, severance and withholding taxes, customs
duties and harbor maintenance fees. Taxes associated with improper
classification of employees as independent contractors shall be treated as
payroll taxes and thus included within the definition of Taxes. Other
capitalized terms not defined in this Agreement shall have the meaning given
those terms by the Master Separation and Distribution Agreement entered into as
of December 13, 1999, between 3Com and Palm.
2. COMPUTATION OF TAX LIABILITY. The computation of Tax liability on
any consolidated, combined or unitary return that includes Palm and at least one
other corporation and covers a period beginning before the Distribution (a
"Pre-Distribution Group Return") shall, to the extent permitted by law, be made
in accordance with the methods used in comparable returns filed before the date
of this Agreement.
3. ALLOCATION OF TAX LIABILITY
(a) REGULAR FEDERAL INCOME TAX. If the consolidated federal income tax
liability of the USR Group or 3Com Group for any taxable year for which the
group filed or files a Pre-Distribution Group Return is determined on a regular
tax basis, the amount of federal income taxes allocable to Palm shall be
determined using the method described in section 1.1502-32(b)(3)(iv)(D) of the
Treasury regulations. Thus, Palm shall be required to pay for any reduction in
its separate company
-2-
<PAGE>
liability because of the absorption of losses, credits or other tax
attributes of other members. Conversely, Palm shall be entitled to
compensation to the extent that the absorption of its losses, credits, or
other tax attributes reduces the group's consolidated federal income tax
liability.
(b) FEDERAL ALTERNATIVE MINIMUM TAX.
(i) GENERAL RULE. If the USR Group or 3Com Group pays
alternative minimum tax (AMT) for any year for which it filed or files
a Pre-Distribution Group Return, Palm's share of the group's
consolidated federal income taxes shall equal its share of the group's
consolidated AMT, determined under Section 3(b)(ii), with the
adjustments provided in Section 3(b)(iii) to reflect the absorption of
losses, credits or other tax attributes.
(ii) PALM'S SHARE OF CONSOLIDATED AMT. Palm's share of the
group's consolidated AMT for any year shall equal the excess, if any,
of (A) the total consolidated AMT, over (B) the consolidated AMT for
the year computed by excluding Palm's items of income, gain, deduction
and loss, and Palm's credits.
(iii) ADJUSTMENTS FOR ABSORPTION OF TAX ATTRIBUTES. Palm's
share of the group's consolidated AMT shall be adjusted to reflect the
absorption of losses, credits or other tax attributes, based on
principles similar to those underlying the method of allocating regular
federal income taxes described in section 1.1502-32(b)(3)(iv)(D) of the
Treasury regulations. If, for any taxable year, the regular tax
attributes allocable to members other than Palm that can be carried
forward to the succeeding taxable year are less than those
carryforwards would have been if Palm had not been a member of the
group, then Palm's share of the group's consolidated federal income tax
liability shall be increased to reflect the incremental absorption of
the tax attributes of other members. Conversely, if Palm's regular tax
attributes are used to offset taxable income of other members, or tax
liability attributable to such income, then Palm's share of the group's
consolidated federal income tax liability shall be decreased to reflect
such use of Palm's tax attributes. The amount of the adjustment for
absorbed credits shall equal the amount of those credits. The amount of
the adjustment for absorbed losses shall equal the product of the
absorbed losses and the highest marginal regular federal income tax
rate in effect for the year in which the losses are absorbed. If the
adjustment described in this Section 3(b)(iii) exceeds the amount
determined in Section 3(b)(ii), the excess shall be credited against
Palm's liability for other taxable years or, in the case of taxable
years covered by returns filed after the public offering, Palm shall be
entitled to receive the amount of such excess pursuant to Section 4(b).
(c) OTHER TAXES. Palm's share of Taxes other than federal income taxes
that are determined on a consolidated, combined, or unitary basis shall be
determined by applying the principles underlying the allocation method described
in section 1.1502-32(b)(3)(iv)(D) of the Treasury regulations. Thus, Palm's
share of the Taxes will generally equal the Tax liability that Palm would have
had if it had filed a separate return for the relevant period. Palm shall be
required to pay 3Com to the extent that Palm's separate company liability is
reduced by the absorption of losses, credits or
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<PAGE>
other tax attributes of other members. Conversely, 3Com shall compensate Palm
to the extent that the absorption of Palm's losses, credits, or other tax
attributes reduces the combined tax liability.
4. PAYMENT OF ALLOCATED TAX.
(a) RETURNS FILED BEFORE PUBLIC OFFERING. Within 10 days after
completion of the planned public offering of common shares of Palm,
Palm shall pay to 3Com the net, cumulative amount of its share of the
taxes assessed pursuant to Pre-Distribution Group Returns filed prior
to the public offering.
(b) RETURNS FILED AFTER PUBLIC OFFERING. Palm shall pay to
3Com Palm's share of any Tax liability assessed pursuant to a
Pre-Distribution Group Return filed after the public offering referred
to in Section 4(a) within 30 days after the filing of that return.
Within that same period, 3Com shall make to Palm any payments required
as a result of benefits realized by 3Com or other members of the 3Com
Group from the use Palm's tax attributes.
5. REFUNDS. 3Com shall be entitled to receive any overpayment of Taxes
shown on any Pre-Distribution Group Return, as originally filed.
6. ALLOCATION OF MINIMUM TAX CREDITS. When Palm leaves the 3Com Group,
the group shall allocate to Palm a portion of its consolidated minimum tax
credit equal to the ratio that (a) the cumulative amounts of consolidated AMT
allocated to Palm pursuant to Section 3(b)(ii) bears to (b) the total amounts of
consolidated AMT paid by the USR Group or 3Com Group for taxable years for which
the group filed a Pre-Distribution Group Return. If the Treasury Department
issues regulations that require an allocation of a different amount of
consolidated minimum tax credit to Palm, Palm shall be required to pay (or
entitled to receive) the amount by which its share of the consolidated minimum
tax credit allocated pursuant to the regulations exceeds (or is less than) the
amount that would have been allocated to Palm pursuant to this Section 6.
7. CARRYBACK OF POST-DISTRIBUTION TAX ATTRIBUTES OF PALM. If, for any
taxable period beginning on or after the Distribution Date, Palm recognizes a
loss, credit, or similar tax attribute that, under applicable law, can or must
be carried back to a taxable period during which Palm joined in filing a
Pre-Distribution Group Return, 3Com shall, at Palm's expense, file appropriate
refund claims within a reasonable period after being requested by Palm. 3Com
shall promptly remit to Palm any refunds received with respect to any tax
attribute so carried back.
8. CONDUCT OF TAX CONTESTS.
(a) SEPARATE PALM CLAIMS. Palm shall have sole and complete authority
to contest any claim by a taxing authority arising from an examination of a
return that includes only Palm (a "Separate Palm Claim").
(b) GROUP CLAIMS. 3Com shall be entitled to control the contest of any
claim by a taxing authority arising from an examination of a Pre-Distribution
Group Return (a "Group Claim"). 3Com
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<PAGE>
shall notify Palm of the commencement of any such examination and shall keep
Palm apprised of the status of the examination. Palm shall be entitled to
advise 3Com regarding the handling of claims that could affect Palm's
allocable share of the consolidated, combined or unitary Tax liability, and
3Com shall not unreasonably reject Palm's advice. If a claim affects only
Palm's share of the consolidated, combined or unitary Tax liability, and not
that of any other member of the 3Com Group, Palm shall be entitled to prepare
any written materials submitted to the taxing authority in defense against
the claim. Neither Palm nor its representatives shall be entitled to attend
meetings with representatives of the taxing authority without 3Com's consent.
3Com shall have sole authority to make decisions regarding the settlement of
Group Claims. Palm shall bear any expenses it incurs in participating in the
contest of a Group Claim.
(c) COOPERATION. 3Com and Palm shall each provide the assistance
reasonably requested by the other in conducting any tax contest, including
execution of any powers of attorney or other appropriate documentation,
attendance of administrative or judicial proceedings as requested, performance
of necessary computations, and, subject to the confidentiality provisions of
Section 14, provision of access to or furnishing books, records, tax returns,
and supporting work papers.
9. REDETERMINED TAX LIABILITIES.
(a) SEPARATE PALM CLAIMS. If a redetermination of Taxes results from a
Separate Palm Claim, Palm shall pay any resulting increases in Tax liability and
shall be entitled to receive any refunds related to a decrease in Tax liability
attributable to the claim.
(b) GROUP CLAIMS. Any Tax deficiency arising from a Group Claim shall
be paid to the relevant taxing authority by 3Com, and 3Com shall be entitled to
receive any tax refund arising from the contest of the Group Claim. Within 30
days after the final determination of the Group Claim, 3Com shall allocate the
Tax liabilities for the affected periods, as redetermined, among the members of
the 3Com Group that joined in filing the relevant Pre-Distribution Group
Returns. In allocating the redetermined Tax liabilities, 3Com shall apply the
allocation method prescribed by Section 3. If the amount of redetermined Tax
liability allocated to Palm for any period exceeds the amounts previously paid
by Palm to 3Com in respect of Palm's allocated Tax liability for that period,
Palm shall pay such excess to 3Com within 10 days of receiving notice from 3Com
of the amount due. If the amounts previously paid by Palm to 3Com in respect of
Palm's allocated Tax liability for any period exceed the amount of redetermined
Tax liability allocated to Palm for that period, 3Com shall pay such excess to
Palm within 40 days after the final determination of the Group Claim that led to
the redetermination of Tax liability.
(c) INTEREST. If applicable law provides for interest on any Tax
deficiency or refund to which Section 9(b) applies, then any payments made
between Palm and 3Com pursuant to that Section as a result of the deficiency or
refund shall also bear interest, computed at the same rate or rates and for the
same period as the deficiency or refund bears interest.
10. RETENTION OF AND ACCESS TO RECORDS; COOPERATION AND ASSISTANCE.
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<PAGE>
(a) RETENTION OF AND ACCESS TO RECORDS. Each party shall retain all tax
returns for periods beginning before the Distribution Date, together with all
related reports, work papers, schedules or other documents or computer files,
and, subject to the confidentiality provisions of Section 14, shall make these
documents or files available to the other upon request. Neither party shall
dispose of any of these documents or files without the other's permission.
(b) COOPERATION AND ASSISTANCE. Subject to the confidentiality
provisions of Section 14, 3Com and Palm shall provide each other with such
cooperation, assistance, and information as either of them may reasonably
request of the other with respect to the filing with any taxing authority of any
tax return, amended return, claim for refund, or other document. With respect to
any Pre-Distribution Group Return, such assistance shall include the timely
submission by Palm to 3Com of pro forma tax returns for Palm, including a pro
forma return for the tax period of Palm that will end on the Distribution Date.
11. PREPARATION OF TAX RETURNS; ESTIMATED PAYMENTS.
(a) FILING OF RETURNS. 3Com shall prepare and timely file all
Pre-Distribution Group Returns. Within 75 days after the close of each taxable
period (including, if applicable, the period that ends on the Distribution
Date), Palm shall, subject to the confidentiality provisions of Section 14: (1)
furnish to 3Com draft tax returns for Palm and all supporting information and
documentation useful in preparing the relevant Pre-Distribution Group Return;
(2) allow 3Com access at any reasonable time after the Distribution Date to all
tax returns of Palm and supporting papers for those returns; and (3) furnish to
3Com such additional tax information and documents as 3Com may reasonably
request. Palm shall cooperate in connection with the preparation of any
Pre-Distribution Group Returns. 3Com shall be responsible for any payments to
the applicable taxing authorities required in connection with those returns.
(b) AMENDED RETURNS. 3Com shall not amend any Pre-Distribution Group
Return in a respect that would affect Palm's allocable share of the Tax
liability for the period covered by the return without providing Palm an
opportunity to review and comment on the proposed amended return. 3Com shall not
unreasonably reject any comments provided by Palm on the proposed amended
return.
(c) ESTIMATED PAYMENTS. 3Com shall make all estimated payments to any
taxing authorities required in connection with Pre-Distribution Group Returns,
and all payments required in connection with requests for extensions of time to
file those returns. After making such a payment, 3Com shall promptly notify Palm
of any portion of the payment that 3Com believes in good faith to be
attributable to Palm's share of the aggregate Tax liability, as determined under
Section 3. Within 10 days after its receipt of such notice, Palm shall pay such
amount to 3Com or advise 3Com of the basis for its disagreement.
12. INDEMNIFICATION.
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<PAGE>
(a) INDEMNITY OBLIGATIONS OF 3COM. 3Com shall indemnify Palm and hold
Palm harmless from and against:
(i) any liability, cost, or expense arising out of fraudulent
or negligently prepared information, workpapers, documents, or other
items used in the preparation of, or presented in, any return, amended
return, or claim for refund prepared by 3Com; and
(ii) any Tax liability, and related cost or expense, incurred
or paid by Palm in excess of that portion of the Tax liability
allocated to Palm by this Agreement.
(b) INDEMNITY OBLIGATIONS OF PALM. Palm shall indemnify 3Com and its
subsidiaries and hold them harmless from and against any liability for:
(i) sales Taxes attributable to sales of products purchased by
3Com from Palm on or before the Distribution Date;
(ii) customs duties or harbor maintenance fees on products
exported or imported by 3Com on behalf of Palm;
(iii) any Taxes resulting from the application to the
Distribution of section 355(e) of the Internal Revenue Code by reason
of an acquisition of Palm stock;
(iv) any Taxes on income or gain recognized by 3Com or a
subsidiary of 3Com as a result of the transfer of an asset to Palm or a
subsidiary of Palm in preparation for the Distribution, provided that
3Com consulted with Palm regarding the transfer and its expected tax
consequences and that, after such consultation, Palm agreed to the
transfer; and
(v) any interest or penalties related to Taxes described in
this Section 12(b).
13. GROSS-UP FOR TAXES ON REQUIRED PAYMENTS. If the receipt or accrual
of any payment required by this Agreement is subject to any Tax, the payor shall
pay an additional amount so that the total amount received by the payee, net of
any applicable Taxes, equals the amount of the required payment.
14. CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Any documents or
information provided pursuant to this Agreement in connection with a tax contest
or filing with a tax authority shall be provided or disclosed by the recipient
only to those of its employees responsible for the tax contest or filing or to
attorneys or accountants advising the recipient on these matters. Any wider
dissemination of these documents or this information shall be allowed only if
required by law or authorized by the party providing the documents or
information.
15. DISPUTE RESOLUTION.
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<PAGE>
(a) If a dispute, controversy or claim ("Dispute") arises between the
parties relating to the interpretation or performance of this Agreement, or the
grounds for the termination hereof, appropriate senior executives (e.g. director
or V.P. level) of each party who shall have the authority to resolve the matter
shall meet to attempt in good faith to negotiate a resolution of the Dispute
prior to pursuing other available remedies. The initial meeting between the
appropriate senior executives shall be referred to herein as the "Dispute
Resolution Commencement Date." Discussions and correspondence relating to trying
to resolve such Dispute shall be treated as confidential information developed
for the purpose of settlement and shall be exempt from discovery or production
and shall not be admissible. If the senior executives are unable to resolve the
Dispute within thirty (30) days from the Dispute Resolution Commencement Date,
and either party wishes to pursue its rights relating to such Dispute, then the
Dispute will be mediated by a mutually acceptable mediator appointed pursuant to
the mediation rules of JAMS/Endispute within thirty (30) days after written
notice by one party to the other demanding non-binding mediation. Neither party
may unreasonably withhold consent to the selection of a mediator or the location
of the mediation. Both parties will share the costs of the mediation equally,
except that each party shall bear its own costs and expenses, including
attorney's fees, witness fees, travel expenses, and preparation costs. The
parties may also agree to replace mediation with some other form of non-binding
or binding ADR.
(b) Any Dispute which the parties cannot resolve through mediation
within ninety (90) days of the Dispute Resolution Commencement Date, unless
otherwise mutually agreed, shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by three (3) arbitrators in Santa Clara County, California.
Such arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA rules.
The arbitrators will be instructed to prepare and deliver a written, reasoned
opinion stating their decision within thirty (30) days of the completion of the
arbitration. The prevailing party in such arbitration shall be entitled to
expenses, including costs and attorneys' and other professional fees, incurred
in connection with the arbitration (but excluding any costs and fees associated
with prior negotiation or mediation). The decision of the arbitrator shall be
final and non-appealable and may be enforced in any court of competent
jurisdiction. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to adversely affect the rights of either
party.
(c) Any Dispute regarding the following is not required to be
negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality; any claim
where interim relief from the court is sought to prevent serious and irreparable
injury to one of the parties or to others. However, the parties to the Dispute
shall make a good faith effort to negotiate and mediate such Dispute, according
to the above procedures, while such court action is pending.
(d) Unless otherwise agreed in writing, the parties will continue to
honor all commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Section 15 with respect to all
matters not subject to such dispute, controversy, or claim.
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<PAGE>
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
17. GOVERNING LAW. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sales of Goods. The Superior Court
of Santa Clara County and/or the United States District Court for the Northern
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to Section 15.
18. NOTICES. Notices, Demands, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be given in writing to the respective parties to the following
addresses:
if to 3Com:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
Or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
19. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
20. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced
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separately by each member of the 3Com Group (defined, for this purpose, as
provided in section 7.14 of the Master Separation and Distribution Agreement)
and each member of the Palm Group. Neither party may assign this Agreement or
any rights or obligations hereunder, without the prior written consent of the
other party, and any such assignment shall be void; provided, however, either
party may assign this Agreement to a successor entity in conjunction with
such party's reincorporation.
21. SEVERABILITY. If any term or any other provision of this
Agreement is determined by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
22. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any agreement herein, nor shall any single or partial exercise of
any such right preclude other or further exercise thereof or of any other right.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
23. AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
24. AUTHORITY. Each of the parties hereto represents to the other that
(a) it has the corporate or other requisite power and authority to execute,
deliver, and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other actions, (c) it has duly and validly executed and delivered this
Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
25. INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated.
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IN WITNESS WHEREOF, the parties have caused this Tax Sharing Agreement
to be duly executed as of the date first set forth above.
3COM CORPORATION PALM, INC.
By: By:
----------------------------- --------------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
----------------------------- --------------------------
<PAGE>
MASTER TRANSITIONAL SERVICES AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
EFFECTIVE AS OF FEBRUARY 26, 2000
<PAGE>
MASTER TRANSITIONAL SERVICES AGREEMENT
This Master Transitional Services Agreement (the "Agreement") is
effective as of February 26, 2000 (the "Effective Date"), between 3Com
Corporation, a Delaware corporation ("3Com"), having an office at 5400 Bayfront
Plaza, Santa Clara, California, 95052 and Palm, Inc., a Delaware corporation
("Palm"), having an office at 5470 Great America Parkway, Santa Clara,
California, 95052.
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement, the following capitalized terms
shall have the following meanings:
1.1 ADDITIONAL SERVICES. "Additional Services" shall have the meaning
set forth in Section 3.5.
1.2 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the meaning
set forth in the Master Separation and Distribution Agreement.
1.3 DISTRIBUTION DATE. "Distribution Date" shall have the meaning set
forth in the Master Separation and Distribution Agreement.
1.4 IMPRACTICABLE. "Impracticable" shall have the meaning set forth in
Section 3.3.
1.5 LOCALIZED VERSION. "Localized Version" means localized versions of
the Software.
1.6 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT. "Master Confidential
Disclosure Agreement" shall mean that certain Master Confidential Disclosure
Agreement between 3Com and Palm.
1.7 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation
and Distribution Agreement" shall mean that certain Master Separation and
Distribution Agreement between 3Com and Palm.
1.8 SEPARATION DATE. Unless otherwise provided in this Agreement, or in
any agreement to be executed in connection with this Agreement, the effective
time and date of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation shall be 12:01 a.m.,
Pacific Time, February 26, 2000 or such other date as may be fixed by the Board
of Directors of 3Com (the "Separation Date").
1.9 SERVICE(S). "Service(s)" shall have the meaning set forth in
Section 3.1.
<PAGE>
1.10 SOFTWARE. "Software" means 3Com's software program(s), in object
code only, listed and described in the relevant Transition Service Schedule.
1.11 SOURCE CODE. "Source Code" means any human readable code,
including interpreted code, of 3Com, listed and described in the relevant
Transition Service Schedule.
1.12 SOURCE CODE DOCUMENTATION. "Source Code Documentation" means the
manuals and other documentation that are reasonably necessary to use the Source
Code licensed herein, including those items listed and described in the relevant
Transition Service Schedule hereto.
1.13 SUBSIDIARY. "Subsidiary" of any Person means a corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly-owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person. For purposes of this Agreement, Palm shall be deemed not
to be a subsidiary of 3Com.
ARTICLE 2
TRANSITION SERVICE SCHEDULES
This Agreement will govern individual transitional services as
requested by Palm and provided by 3Com, the details of which are set forth in
the Transition Service Schedules attached to this Agreement. Each Service shall
be covered by this Agreement upon execution of a transition service schedule in
the form attached hereto (each transition service schedule, a "Transition
Service Schedule").
For each Service, the parties shall set forth, among other things, the
time period during which the Service will be provided if different from the term
of this Agreement determined pursuant to Article 4 hereof, a summary of the
Service to be provided; a description of the Service; and the estimated charge,
if any, for the Service and any other terms applicable thereto on the Transition
Service Schedule. Obligations regarding each Transition Service Schedule shall
be effective upon execution of this Agreement. This Agreement and all the
Transition Service Schedules shall be defined as the "Agreement" and
incorporated herein wherever reference to it is made.
ARTICLE 3
SERVICES
3.1 SERVICES GENERALLY. Except as otherwise provided herein, for the
term determined pursuant to Article 4 hereof, 3Com shall provide or cause to be
provided to Palm the service(s) described in the Transition Service Schedule(s)
attached hereto. The service(s) described
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on a single Transition Service Schedule shall be referred to herein as a
"Service." Collectively, the services described on all the Transition Service
Schedules (including Additional Services) shall be referred to herein as
"Services."
3.2 SERVICE BOUNDARIES. Except as provided in a Transition Service
Schedule for a specific Service: (i) 3Com shall be required to provide the
Services only to the extent and only at the locations such Services are being
provided by 3Com for Palm immediately prior to the Effective Date; and (ii) the
Services will be available only for purposes of conducting the business of Palm
substantially in the manner it was conducted prior to the Effective Date.
3.3 IMPRACTICABILITY. 3Com shall not be required to provide any Service
to the extent the performance of such Service becomes "Impracticable" as a
result of a cause or causes outside the reasonable control of 3Com including
unfeasible technological requirements, or to the extent the performance of such
Services would require 3Com to violate any applicable laws, rules or regulations
or would result in the breach of any software license or other applicable
contract.
3.4 ADDITIONAL RESOURCES. Except as provided in a Transition Service
Schedule for a specific Service, in providing the Services, 3Com shall not be
obligated to: (i) hire any additional employees; (ii) maintain the employment of
any specific employee; (iii) purchase, lease or license any additional equipment
or software; or (iv) pay any costs related to the transfer or conversion of
Palm's data to Palm or any alternate supplier of Services.
3.5 ADDITIONAL SERVICES. From time to time after the Effective Date,
the parties may identify additional services that one party will provide to the
other party in accordance with the terms of this Agreement (the "Additional
Services"). Accordingly, the parties shall execute additional Transition Service
Schedules for such Additional Services pursuant to Article 2. Except as set
forth in Section 3.6, the parties may agree in writing on Additional Services
during the term of this Agreement.
3.6 OBLIGATIONS AS TO ADDITIONAL SERVICES. Except as set forth in the
next sentence, 3Com shall be obligated to perform, at a charge determined using
the principles for determining fees under Section 5.1, any Additional Service
that: (a) was provided by 3Com immediately prior to the Separation Date and that
Palm reasonably believes was inadvertently or unintentionally omitted from the
list of Services, or (b) is essential to effectuate an orderly transition under
the Master Separation and Distribution Agreement unless such performance would
significantly disrupt 3Com's operations or materially increase the scope of its
responsibility under this Agreement. If 3Com reasonably believes the performance
of Additional Services required under subparagraphs (a) or (b) would
significantly disrupt its operations or materially increase the scope of its
responsibility under this Agreement, 3Com and Palm shall negotiate in good faith
to establish terms under which 3Com can provide such Additional Services, but
3Com shall not be obligated to provide such Additional Services if, following
good faith negotiation, it is unable to reach agreement on such terms.
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ARTICLE 4
TERM
The term of this Agreement shall commence on the Effective Date and
shall remain in effect until one (1) year after the Effective Date (the
"Expiration Date"), unless earlier terminated under Article 7. This Agreement
may be extended by the parties in writing, either in whole or with respect to
one or more of the Services; provided, however, that such extension shall only
apply to the Services for which the Agreement was extended. The parties shall be
deemed to have extended this Agreement with respect to a specific Service if the
Transition Service Schedule for such Service specifies a completion date beyond
the aforementioned Expiration Date. The parties may agree on an earlier
expiration date respecting a specific Service by specifying such date on the
Transition Service Schedule for that Service. Services shall be provided up to
and including the date set forth in the applicable Transition Service Schedule,
subject to earlier termination as provided herein.
ARTICLE 5
COMPENSATION
5.1 CHARGES FOR SERVICES. Palm shall pay 3Com the charges, if any, set
forth on the Transition Service Schedules for each of the Services listed
therein as adjusted, from time to time, in accordance with the processes and
procedures established under Section 5.4 and Section 5.5 hereof. Such fees shall
include the direct costs, as determined using the process described in such
Transition Service Schedule, and indirect costs of providing the Services plus
five percent (5%), unless specifically indicated otherwise on a Transition
Service Schedule. However, if the term of this Agreement is extended beyond the
Expiration Date as provided in Article 4, Palm will reimburse 3Com such costs
plus ten percent (10%) for the Services unless the Transition Service Schedule
for such Service indicates it is to extend beyond the Expiration Date. The
parties also intend for charges to be easy to administer and justify and,
therefore, they hereby acknowledge it may be counterproductive to try to recover
every cost, charge or expense, particularly those that are insignificant or de
minimus. The parties shall use good faith efforts to discuss any situation in
which the actual charge for a Service is reasonably expected to exceed the
estimated charge, if any, set forth on a Transition Service Schedule for a
particular Service; provided, however, that the incurrence of charges in excess
of any such estimate on such Transition Service Schedule shall not justify
stopping the provision of, or payment for, Services under this Agreement.
5.2 PAYMENT TERMS. 3Com shall bill Palm monthly for all charges
pursuant to this Agreement. Such bills shall be accompanied by reasonable
documentation or other reasonable explanation supporting such charges. Palm
shall pay 3Com for all Services provided hereunder within forty-five (45) days
after receipt of an invoice therefor. Late payments shall bear interest at the
lesser of 12% or the maximum rate allowed by law.
5.3 PERFORMANCE UNDER ANCILLARY AGREEMENTS. Notwithstanding anything
to the contrary contained herein, Palm shall not be charged under this
Agreement for any
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obligations that are specifically required to be performed under the Master
Separation and Distribution Agreement or any other Ancillary Agreement and
any such other obligations shall be performed and charged for (if applicable)
in accordance with the terms of the Master Separation and Distribution
Agreement or such other Ancillary Agreement.
5.4 ERROR CORRECTION; TRUE-UPS; ACCOUNTING. The parties shall
reasonably agree on a process and procedure for conducting internal audits and
making adjustments to charges as a result of the movement of employees and
functions between parties, the discovery of errors or omissions in charges, as
well as a true-up of amounts owed. In no event shall such processes and
procedures extend beyond two (2) years after completion of a Service.
5.5 PRICING ADJUSTMENTS. In the event of a tax audit adjustment
relating to the pricing of any or all Services provided pursuant to this
Agreement in which it is determined by a taxing authority that any of the
charges, individually or in combination, did not result in an arm's-length
payment, as determined under internationally accepted arm's-length standards,
then the parties, including any 3Com subcontractor providing Services hereunder,
may agree to make corresponding adjustments to the charges in question for such
period to the extent necessary to achieve arm's-length pricing. Any adjustment
made pursuant to this Section 5.5 at any time during the term of this Agreement
or after termination of this Agreement and shall be reflected in the parties'
legal books and records, and the resulting underpayment or overpayment shall
create, respectively, an obligation to be paid in the manner specified in
Section 5.2, or shall create a credit against amounts owed under this Agreement.
ARTICLE 6
GENERAL OBLIGATIONS; STANDARD OF CARE
6.1 PERFORMANCE METRICS: 3COM. Subject to Sections 3.4 and any other
terms and conditions of this Agreement, 3Com shall maintain sufficient resources
to perform its obligations hereunder. Specific performance metrics for 3Com for
a specific Service may be set forth in the corresponding Transition Service
Schedule. Where none is set forth, 3Com shall use reasonable efforts to provide
Services in accordance with the policies, procedures and practices in effect
before the Effective Date and shall exercise the same care and skill as it
exercises in performing similar services for itself.
6.2 DISCLAIMER OF WARRANTIES. 3COM MAKES NO WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SERVICES, SOFTWARE OR OTHER DELIVERABLES PROVIDED BY IT HEREUNDER.
6.3 PERFORMANCE METRICS: PALM. Specific performance metrics for Palm
for a specific Service may be set forth in the corresponding Transition Service
Schedule. Where none is set forth, Palm shall use reasonable efforts, in
connection with receiving Services, to follow the policies, procedures and
practices in effect before the Effective Date including providing
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information and documentation sufficient for 3Com to perform the Services as
they were performed before the Effective Date and making available, as
reasonably requested by 3Com, sufficient resources and timely decisions,
approvals and acceptances in order that 3Com may accomplish its obligations
hereunder in a timely manner.
6.4 TRANSITIONAL NATURE OF SERVICES; CHANGES. The parties acknowledge
the transitional nature of the Services and that 3Com may make changes from time
to time in the manner of performing the Services if 3Com is making similar
changes in performing similar services for itself and if 3Com furnishes to Palm
sixty (60) days written notice regarding such changes.
6.5 RESPONSIBILITY FOR ERRORS; DELAYS. 3Com's sole responsibility to
Palm:
(a) for errors or omissions in Services, shall be to furnish
correct information, payment and/or adjustment in the Services, at no additional
cost or expense to Palm; provided, Palm must promptly advise 3Com of any such
error or omission of which it becomes aware after having used reasonable efforts
to detect any such errors or omissions in accordance with the standard of care
set forth in Section 6.1; and
(b) for failure to deliver any Service because of
Impracticability, shall be to use reasonable efforts, subject to Section 3.3, to
make the Services available and/or to resume performing the Services as promptly
as reasonably practicable.
6.6 GOOD FAITH COOPERATION; CONSENTS. The parties will use good faith
efforts to cooperate with each other in all matters relating to the provision
and receipt of Services. Such cooperation shall include exchanging information,
performing true-ups and adjustments, and obtaining all third party consents,
licenses, sublicenses or approvals necessary to permit each party to perform its
obligations hereunder (including by way of example, not by way of limitation,
rights to use third party software needed for the performance of Services). The
costs of obtaining such third party consents, licenses, sublicenses or approvals
shall be borne by Palm. The parties will maintain in accordance with its
standard document retention procedures, documentation supporting the information
relevant to cost calculations contained in the Transition Service Schedules and
cooperate with each other in making such information available as needed in the
event of a tax audit, whether in the United States or any other country.
6.7 ALTERNATIVES. If 3Com reasonably believes it is unable to provide
any Service because of a failure to obtain necessary consents, licenses,
sublicenses or approvals pursuant to Section 6.6 or because of Impracticability,
the parties shall cooperate to determine the best alternative approach. Until
such alternative approach is found or the problem otherwise resolved to the
satisfaction of the parties, 3Com shall use reasonable efforts, subject to
Section 3.3 and Section 3.4, to continue providing the Service. To the extent an
agreed upon alternative approach requires payment above and beyond that which is
included in 3Com's charge for the Service in question, the parties shall share
equally in making any such payment unless they otherwise agree in writing.
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ARTICLE 7
TERMINATION
7.1 TERMINATION. Palm may terminate this Agreement, either with respect
to all or with respect to any one or more of the Services provided to Palm
hereunder, for any reason or for no reason, at any time upon sixty (60) days
prior written notice to 3Com. In addition, subject to the provisions of Article
16 below, either party may terminate this Agreement with respect to a specific
Service if the other party materially breaches a material provision with regard
to that particular Service and does not cure such breach (or does not take
reasonable steps required under the circumstances to cure such breach going
forward) within sixty (60) days after being given notice of the breach;
provided, however, that the non-terminating party may request that the parties
engage in a dispute resolution negotiation as specified in Article 16 below
prior to termination for breach.
7.2 SURVIVAL. Those Sections of this Agreement that, by their nature,
are intended to survive termination will survive in accordance with their terms.
Notwithstanding the foregoing, in the event of any termination with respect to
one or more, but less than all Services, this Agreement shall continue in full
force and effect with respect to any Services not terminated hereby.
7.3 USER IDS, PASSWORDS. The parties shall use good faith efforts at
the termination or expiration of this Agreement or any specific Service hereto
to ensure that all applicable user IDs and passwords are canceled.
ARTICLE 8
RELATIONSHIP BETWEEN THE PARTIES
The relationship between the parties established under this Agreement
is that of independent contractors and neither party is an employee, agent,
partner, or joint venturer of or with the other. 3Com will be solely responsible
for any employment-related taxes, insurance premiums or other employment
benefits respecting its personnels' performance of Services under this
Agreement. Palm agrees to grant 3Com personnel access to sites, systems and
information (subject to the provisions of confidentiality in Article 13 below)
as necessary for 3Com to perform its obligations hereunder. 3Com personnel agree
to obey any and all security regulations and other published policies of Palm.
ARTICLE 9
SUBCONTRACTORS
3Com may engage a "Subcontractor" to perform all or any portion of
3Com's duties under this Agreement, provided that any such Subcontractor agrees
in writing to be bound by confidentiality obligations at least as protective as
the terms of Article 13 regarding confidentiality below, and provided further
that 3Com remains responsible for the performance of such
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Subcontractor. As used in this Agreement, "Subcontractor" will mean any
individual, partnership, corporation, firm, association, unincorporated
organization, joint venture, trust or other entity engaged to perform
hereunder.
ARTICLE 10
INTELLECTUAL PROPERTY
10.1 ALLOCATION OF RIGHTS BY ANCILLARY AGREEMENTS. This Agreement and
the performance of this Agreement will not affect the ownership of any
copyrights or other intellectual property rights allocated in the Ancillary
Agreements.
10.2 EXISTING OWNERSHIP RIGHTS UNAFFECTED. Neither party will gain, by
virtue of this Agreement, any rights of ownership of copyrights, patents, trade
secrets, trademarks or any other intellectual property rights owned by the
other.
10.3 OWNERSHIP OF DEVELOPED WORKS. Except as set forth in Section 10.2,
3Com will own all copyrights, patents, trade secrets, trademarks and other
intellectual property rights subsisting in the Software Deliverables (as defined
in Section 11.1 below) and other works developed by 3Com for purposes of this
Agreement.
10.4 LICENSE TO PREEXISTING WORKS. Palm grants 3Com a non-exclusive,
worldwide, royalty-free license to use, copy, and make derivative works of,
distribute, display, perform and transmit Palm's pre-existing copyrighted works
or other intellectual property rights solely to the extent necessary to perform
its obligations under this Agreement.
ARTICLE 11
SOFTWARE LICENSE
11.1 SOFTWARE DELIVERABLE/LICENSE. Unless otherwise agreed by the
parties under the Ancillary Agreements or any separate license or technology
agreement, if 3Com supplies Palm with a deliverable that in whole or in part
consists of software, firmware, or other computer code (referred to as a
"Software Deliverable") as indicated in a Transition Service Schedule, such
Software Deliverables will be supplied in object code form only and will be
subject to the terms of this Article 11. In the event that such Software
Deliverables are licensed to 3Com by third parties, Palm agrees to be bound by
any different or additional conditions that are required by such third parties
and are communicated in writing by 3Com to Palm.
11.2 DELIVERY AND ACCEPTANCE.
(a) DELIVERY. 3Com agrees to deliver to Palm one (1): (i)
master copy of the Software in object code form only (as specified on the
relevant Transition Service Schedule of the Agreement) on the media described
on the relevant Transition Service Schedule and (ii) Documentation for the
Software on the media described in the relevant Transition Service Schedule
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((i) and (ii) collectively a "Complete Copy") as listed in the relevant
Transition Service Schedule no later than ten (10) days after the Effective
Date (or any other start date as specifically indicated in the relevant
Transition Service Schedule). If Source Code is licensed under this
Agreement, 3Com agrees to deliver one (1) copy of such Source Code no later
than ten (10) days after the Effective Date (or any other start date as
specifically indicated in the relevant Transition Service Schedule).
Additional Software or Source Code may be added to this Agreement from time
to time by execution by the parties of a Transition Service Schedule.
(b) ACCEPTANCE OF SOFTWARE (NON-SOURCE CODE). Palm will have
thirty (30) days from the date of receipt of a Complete Copy of the Software to
evaluate the Software for conformity with the manuals and other documentation
that 3Com makes available with the Software to end users or which are reasonably
necessary to use the Software licensed herein, including those items listed and
described in the relevant Transition Service Schedule hereto (the
"Documentation") and specifications, and either accept, return for rework
(provided the Software has not previously been reworked), or reject the
Software. Palm shall accept the Software if it substantially conforms with
Documentation and specifications. Palm will be entitled to test and evaluate the
Software and 3Com hereby grants to Palm the right to use and reproduce the
Software only to the extent necessary for Palm to perform its evaluation. Such
license will include the right of Palm to use third party subcontractors bound
by the relevant restrictions herein solely as necessary to achieve the
foregoing. If Palm returns the Software for rework, 3Com will use reasonable
commercial efforts to correct the identified defects and resubmit the Software
for re-evaluation under the same acceptance procedure. In the event Palm rejects
the Software a second time, this Agreement will terminate with respect to that
Software. Payment due from Palm to 3Com under a Transition Service Schedule that
includes Software to be licensed shall be reduced by the pro rata portion of
compensation attributable to the Software unless the Software has been accepted
by Palm in writing or Palm fails to reject the Software within such 30 day
period.
(c) ACCEPTANCE OF SOURCE CODE. The Source Code is provided for
Palm's reference only and subject to the limitations below in Section 11.3. The
Source Code may not be accepted or rejected according to the provisions above in
Section 11.2(b). If Palm rejects the Source Code, Palm must destroy all copies
of such rejected Source Code and promptly furnish evidence of such rejection and
destruction to 3Com.
11.3 RIGHTS GRANTED AND RESTRICTIONS.
(a) LICENSE TO SOFTWARE. Subject to the terms and conditions
of this Agreement, 3Com hereby grants to Palm, under 3Com's intellectual
property rights in and to the Software, a non-exclusive, nontransferable
worldwide license to (a) use and display the Software for its own internal
information processing services and computing needs, and to make sufficient
copies as necessary for such use, and (b) use the Documentation in connection
with the permitted use of the Software and make sufficient copies as necessary
for such use.
(b) LICENSE TO SOURCE CODE. Subject to the terms and
conditions of this Agreement, 3Com hereby grants to Palm, under 3Com's
intellectual property rights in and to the Software, a non-exclusive,
nontransferable worldwide license to (a) use and reproduce (for archival
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and back-up purposes only), and prepare derivative works of the Source Code,
for the sole purpose of supporting the object code version of the Software
(if such object code exists), or, if no object code exists, for the sole
purpose of its own internal information processing services and computing
needs and (b) to use Source Code Documentation in connection with the
permitted use of the Source Code and make copies for archival and back-up
purposes only.
(c) RESTRICTIONS. Palm shall not itself, or through any
Subsidiary, affiliate, agent or third party: (a) sell, lease, license or
sublicense the Software, the Source Code, the Documentation or the Source Code
Documentation; (b) decompile, disassemble, or reverse engineer the Software or
Source Code, in whole or in part, except to the extent such restriction is
prohibited by applicable law; (c) allow access to the Software or Source Code by
any user other than Palm; (d) write or develop any derivative software or any
other software program based upon the Software or Source Code; (e) use the
Software or Source Code to provide processing services to third parties, or (f)
otherwise use the Software or Source Code on a "service bureau" basis; or
provide, disclose, divulge or make available to, or permit use of the Software
or Source Code by any third party without 3Com's prior written consent.
(d) CONFIDENTIALITY. The Source Code and Source Code
Documentation are hereby deemed "Confidential Information" and subject to the
terms and procedures of the Master Confidential Disclosure Agreement. The period
of disclosure shall be one (1) year from the Effective Date of this Agreement,
and the period of confidentiality shall be perpetual.
(e) TRADEMARKS. Neither party is granted any ownership in or
license to the trademarks, marks or trade names (collectively, "Marks") of the
other party with respect to this Software.
(f) OWNERSHIP. 3Com hereby reserves all rights to the
Software, Source Code and Documentation, and any copyrights, patents, or
trademarks, embodied therein or used in connection therewith, except for the
rights expressly granted herein.
(g) COPYRIGHT NOTICES. Palm agrees that it will not remove any
copyright notices, proprietary markings, trademarks or trade names from the
Software, Source Code, Documentation, or Source Code Documentation.
(h) TECHNICAL ASSISTANCE AND TRAINING. 3Com agrees to provide
technical assistance and training to Palm personnel only if such assistance is
set forth in the relevant Transition Service Schedule.
11.4 AS-IS WARRANTY.
(a) AS-IS WARRANTY. THE SOFTWARE AND SOURCE CODE PROVIDED
HEREUNDER IS LICENSED ON AN "AS-IS" BASIS ONLY, WITHOUT ANY EXPRESS WARRANTIES
OF ANY KIND.
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(b) IMPLIED WARRANTY DISCLAIMER. 3COM MAKES NO WARRANTIES
WHATSOEVER, EITHER EXPRESS OR IMPLIED, REGARDING THE SOFTWARE OR SOURCE CODE
(INCLUDING DOCUMENTATION AND SOURCE CODE DOCUMENTATION), ITS MERCHANTABILITY OR
ITS FITNESS FOR ANY PARTICULAR PURPOSE.
11.5 MISCELLANEOUS.
(a) NO OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITY
OR OBLIGATIONS WHATEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN
THE PARTIES
(b) NON-RESTRICTIVE RELATIONSHIP. Nothing in this Agreement
will be construed to preclude Palm from independently developing, acquiring or
marketing computer software packages which may perform the same or similar
functions as the Software provided by 3Com.
ARTICLE 12
INFRINGEMENT DEFENSE
Notwithstanding anything to the contrary in Article 13 below or the
Master Confidential Disclosure Agreement, to the extent 3Com delivers or
licenses any intellectual property to Palm after the Separation Date in
performance of this Agreement, 3Com agrees to defend Palm and its directors,
officers, employees and agents against any and all claims, actions or suits (any
of the foregoing, a "Claim") incurred by or asserted against Palm based upon
infringement of a third party patent or other intellectual property right. Palm
agrees to notify 3Com promptly of any Claim and permit 3Com at 3Com's expense to
defend such Claim and will cooperate in the defense thereof. 3Com agrees to pay
any awards or settlement amounts arising from a Claim. Neither 3Com nor Palm
will enter into or permit any settlement of any such Claim without the express
written consent of the other party. Palm may, at its option and expense, have
its own counsel participate in any proceeding that is under the direction of
3Com and will cooperate with 3Com and its insurer in the disposition of any such
matter.
ARTICLE 13
CONFIDENTIALITY
The terms of the Master Confidential Disclosure Agreement between the
parties shall apply to any Confidential Information (as defined therein) which
is the subject matter of this Agreement.
ARTICLE 14
LIMITATION OF LIABILITY
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<PAGE>
NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY LOST PROFITS, LOSS OF
DATA, LOSS OF USE, COST OF COVER, BUSINESS INTERRUPTION OR OTHER SPECIAL,
INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED, UNDER
ANY THEORY OF LIABILITY, ARISING FROM THE PERFORMANCE OF, OR RELATING TO, THIS
AGREEMENT. THE FOREGOING LIMITATION WILL NOT LIMIT 3COM'S OBLIGATIONS WITH
RESPECT TO PAYMENT OF DAMAGES OF ANY KIND INCLUDED IN AN AWARD OR SETTLEMENT OF
A THIRD PARTY CLAIM UNDER ANY INDEMNITY OR INFRINGEMENT DEFENSE PROVISIONS
SPECIFIED HEREIN.
ARTICLE 15
FORCE MAJEURE
Each party will be excused for any failure or delay in performing any
of its obligations under this Agreement, other than the obligations of Palm to
make certain payments to 3Com pursuant to Article 5 hereof for services
rendered, if such failure or delay is caused by Force Majeure. "Force Majeure"
means any act of God or the public enemy, any accident, explosion, fire, storm,
earthquake, flood, or any other circumstance or event beyond the reasonable
control of the party relying upon such circumstance or event.
ARTICLE 16
DISPUTE RESOLUTION
16.1 MEDIATION. If a dispute, controversy or claim ("Dispute") arises
between the parties relating to the interpretation or performance of this
Agreement or the Ancillary Agreements, or the grounds for the termination
hereof, appropriate senior executives (e.g. director or V.P. level) of each
party who shall have the authority to resolve the matter shall meet to attempt
in good faith to negotiate a resolution of the Dispute prior to pursuing other
available remedies. The initial meeting between the appropriate senior
executives shall be referred to herein as the "Dispute Resolution Commencement
Date." Discussions and correspondence relating to trying to resolve such Dispute
shall be treated as confidential information developed for the purpose of
settlement and shall be exempt from discovery or production and shall not be
admissible. If the senior executives are unable to resolve the Dispute within
thirty (30) days from the Dispute Resolution Commencement Date, and either party
wishes to pursue its rights relating to such Dispute, then the Dispute will be
mediated by a mutually acceptable mediator appointed pursuant to the mediation
rules of JAMS/Endispute within thirty (30) days after written notice by one
party to the other demanding non-binding mediation. Neither party may
unreasonably withhold consent to the selection of a mediator or the location of
the mediation. Both parties will share the costs of the mediation equally,
except that each party shall bear its own costs and expenses, including
attorney's fees, witness fees, travel expenses, and preparation costs. The
parties may also agree to replace mediation with some other form of non-binding
or binding ADR.
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<PAGE>
16.2 ARBITRATION. Any Dispute which the parties cannot resolve through
mediation within ninety (90) days of the Dispute Resolution Commencement Date,
unless otherwise mutually agreed, shall be submitted to final and binding
arbitration under the then current Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), by three (3) arbitrators in Santa Clara County,
California. Such arbitrators shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the aforesaid
AAA rules. The arbitrators will be instructed to prepare and deliver a written,
reasoned opinion stating their decision within thirty (30) days of the
completion of the arbitration. The prevailing party in such arbitration shall be
entitled to expenses, including costs and reasonable attorneys' and other
professional fees, incurred in connection with the arbitration (but excluding
any costs and fees associated with prior negotiation or mediation). The decision
of the arbitrator shall be final and non-appealable and may be enforced in any
court of competent jurisdiction. The use of any ADR procedures will not be
construed under the doctrine of laches, waiver or estoppel to adversely affect
the rights of either party.
16.3 COURT ACTION. Any Dispute regarding the following is not required
to be negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality;
infringement, misappropriation, or misuse of any intellectual property right;
any other claim where interim relief from the court is sought to prevent serious
and irreparable injury to one of the parties or to others. However, the parties
to the Dispute shall make a good faith effort to negotiate and mediate such
Dispute, according to the above procedures, while such court action is pending.
16.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article 16 with respect
to all matters not subject to such dispute, controversy or claim.
ARTICLE 17
MISCELLANEOUS
17.1 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements and the Exhibits and
Schedules referenced or attached hereto and thereto constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all prior written and oral and all contemporaneous
oral agreements and understandings with respect to the subject matter hereof and
thereof.
17.2 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior Court
of Santa Clara County and/or the United States District Court for the Northern
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<PAGE>
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to Article 16 above.
17.3 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
17.4 NOTICES. Notices, offers, requests, or other communications
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be given in writing to the respective parties to the following
addresses:
if to 3Com :
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
17.5 NONASSIGNABILITY. Except as specifically permitted under Article
10 above, neither party may, directly or indirectly, in whole or in part,
whether by operation of law or otherwise, assign or transfer this Agreement,
without the other party's prior written consent, and any attempted assignment,
transfer or delegation without such prior written consent shall be voidable at
the sole option of such other party. Notwithstanding the foregoing, each party
(or its permitted successive assignees or transferees hereunder) may assign or
transfer this Agreement as a whole without consent to an entity that succeeds to
all or substantially all of the business or assets of such party. Without
limiting the foregoing, this Agreement will be binding upon and inure to the
benefit of the parties and their permitted successors and assigns.
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<PAGE>
17.6 SEVERABILITY. If any term or other provision of this Agreement is
determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement will nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
17.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. If any term
or other provision of this Agreement or the Exhibits or Schedules attached
hereto is determined by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
17.8 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representatives.
3COM CORPORATION PALM, INC.
By: By:
---------------------- ---------------------------
Title: Title:
------------------- ------------------------
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<PAGE>
TRANSITION SERVICE SCHEDULE TO MASTER TRANSITIONAL SERVICES AGREEMENT
1. TRANSITION SERVICE SCHEDULE #:
-------------------
(To be inserted by responsible individual or department.)
2. FUNCTIONAL AREA:
------------------
3. START/END DATE: The Services start on the Effective Date of the Master
Transitional Services Agreement between 3Com Corporation ("3Com") and
Palm Computing, Inc. ("Palm") to which this Transition Service Schedule
is attached and end on February 1, 2001 unless otherwise indicated
below.
INDICATE BELOW IF OTHER START/END DATE:
START DATE:
------------------
END DATE:
------------------
If Start and End dates vary by service and/or country, please
indicate in Section 5 below.
4. SUMMARY OF SERVICES (Describe the service to be provided in appropriate
detail.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------------------------------------------------------
SERVICE NAME DESCRIPTION
- -------------------------------------------------------------- ------------------------------------------------------------
<S> <C>
</TABLE>
5. LIST OF SERVICES TO BE PROVIDED PER COUNTRY AND SITE: (List all the
services to be provided at each site. Enter Start Date and End Date if
different than Section 3 above.)
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------- ----------------------- ------------------------
COUNTRY SITE SERVICE(S) START DATE END DATE
- -------------------------- ----------------------- ----------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
- -------------------------- ----------------------- ----------------------- ----------------------- ------------------------
- -------------------------- ----------------------- ----------------------- ----------------------- ------------------------
</TABLE>
6. PERFORMANCE PARAMETERS/SERVICE LEVEL: (State minimum performance
expected from each service, if applicable.):
7. ESTIMATED TOTAL COMPENSATION:
------------------------------------
<PAGE>
8. DESCRIBE COST METHODOLOGY AND COST DRIVERS AFFECTING ESTIMATED TOTAL
COMPENSATION (Describe on an individual service basis if necessary):
9. DESCRIBE THE PROCESS BY WHICH THE COST OF SERVICES WILL BE ADJUSTED IN
THE INSTANCE OF AN INCREASE/REDUCTION IN THE SERVICES PROVIDED:
(Describe on an individual service basis if necessary.)
<TABLE>
<CAPTION>
<S> <C>
10. SOFTWARE: Will software be used or included with the Services to be provided
under this Transition Service Schedule: ____ Yes ____ No
If yes, will source code be provided: ____ Yes ____ No
List software to be provided:
SOFTWARE APPLICATION NUMBER OF LICENSES TO BE PROVIDED
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
Upon execution of this Transition Service Schedule by both parties, this
Transition Service Schedule is hereby deemed incorporated into and made part of
that certain Master Transitional Services Agreement between 3Com Corporation and
Palm Computing, Inc.
3COM CORPORATION PALM, INC.
By: By:
---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature
Date: Date:
-------------------------- -----------------------------
Name: Name:
-------------------------- -----------------------------
Title: Title:
------------------------- ----------------------------
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<PAGE>
REAL ESTATE MATTERS AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
FEBRUARY 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I PROPERTY...................................................................1
Section 1.1 Leased Property..................................................1
Section 1.2 Shared Properties................................................1
Section 1.3 Headquarters Facility............................................2
Section 1.4 Obtaining the Lease Consents.....................................2
Section 1.5 Occupation by Palm...............................................3
Section 1.6 Obligation to Complete...........................................4
Section 1.7 Form of Transfer.................................................5
Section 1.8 Casualty; Lease Termination......................................6
Section 1.9 Tenant's Fixtures and Fittings...................................6
Section 1.10 Costs............................................................6
ARTICLE II MISCELLANEOUS.............................................................7
Section 2.1 Limitation of Liability..........................................7
Section 2.2 Entire Agreement.................................................7
Section 2.3 Governing Law....................................................7
Section 2.4 Notices..........................................................7
Section 2.5 Counterparts.....................................................8
Section 2.6 Binding Effect; Assignment.......................................8
Section 2.7 Severability.....................................................8
Section 2.8 Failure or Indulgence Not Waiver; Remedies Cumulative............8
Section 2.9 Amendment........................................................9
Section 2.10 Authority........................................................9
Section 2.11 Interpretation...................................................9
Section 2.12 Disputes.........................................................9
ARTICLE III DEFINITIONS..............................................................9
</TABLE>
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<PAGE>
REAL ESTATE MATTERS AGREEMENT
This Real Estate Matters Agreement (this "AGREEMENT") is entered into
on February 26, 2000 between 3Com Corporation, a Delaware corporation ("3COM"),
and Palm, Inc., a Delaware corporation ("PALM"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Separation Agreement (as defined below).
RECITALS
WHEREAS, 3Com has transferred or will transfer to Palm effective as of
the Separation Date, substantially all of the business and assets of the Palm
Business owned by 3Com in accordance with the Master Separation and Distribution
Agreement dated as of December 13, 1999 between 3Com and Palm's predecessor
corporation, Palm Computing, Inc., a California corporation (the "SEPARATION
AGREEMENT").
WHEREAS, the parties desire to set forth certain agreements regarding
real estate matters.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
PROPERTY
SECTION 1.1 LEASED PROPERTY
(a) 3Com shall assign or cause its applicable Subsidiary to assign, and
Palm shall accept and assume, or cause its applicable Subsidiary to accept and
assume, 3Com's or its Subsidiary's interest in the Leased Properties, subject to
the other provisions of this Agreement and (to the extent not inconsistent with
the provisions of this Agreement) the terms of the Separation Agreement and the
other Ancillary Agreements. Such assignment shall be completed on the later of:
(i) the Separation Date; and (ii) the earlier of (A) the fifth (5th) business
day after the relevant Lease Consent has been granted and (B) the date agreed
upon by the parties in accordance with Section 1.6(a) below.
(b) Subject to the completion of the assignment to Palm or its
applicable Subsidiary of the relevant Leased Property, with respect to each
Leased Property which is also a Shared Property, Palm shall grant or cause its
applicable Subsidiary to grant to 3Com or its applicable Subsidiary a license to
occupy that part of the relevant Leased Property identified in Section A of
Schedule 1 of this Agreement currently occupied by 3Com or its applicable
Subsidiary and 3Com shall accept or cause its applicable Subsidiary to accept
the same. Such license shall be completed immediately following completion of
the transfer of the relevant Leased Property to Palm or its applicable
Subsidiary.
SECTION 1.2 SHARED PROPERTIES
3Com shall grant or cause its applicable Subsidiary to grant to Palm or
its applicable Subsidiary a license to occupy those parts of the Shared
Properties identified in Section B of
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<PAGE>
Schedule 1 of this Agreement currently occupied by Palm or its applicable
Subsidiary and Palm shall accept or cause its applicable Subsidiary to accept
the same, subject to the other provisions of this Agreement and (to the
extent not inconsistent with the provisions of this Agreement) the terms of
the Separation Agreement and the other Ancillary Agreements. Such license
shall be completed on the Separation Date.
SECTION 1.3 HEADQUARTERS FACILITY
3Com shall grant to Palm a lease of those parts of the Headquarters
Facility identified in Section C of Schedule 1 of this Agreement as leased and a
sublease of those parts of the Headquarters Facility identified in Section C of
Schedule 1 of this Agreement as subleased, and Palm shall accept the same,
subject to the other provisions of this Agreement and (to the extent not
inconsistent with the provisions of this Agreement) the terms of the Separation
Agreement and the other Ancillary Agreements. Such lease and sublease shall be
completed on the Separation Date.
SECTION 1.4 OBTAINING THE LEASE CONSENTS
(a) 3Com confirms that, with respect to each Leased Property, an
application has been made or will be made by the Separation Date to the relevant
Landlord for the Lease Consents required with respect to the transactions
contemplated by this Agreement.
(b) 3Com will use its reasonable commercial efforts to obtain the Lease
Consents as to each Leased Property, but 3Com shall not be required to commence
judicial proceedings for a declaration that a Lease Consent has been
unreasonably withheld or delayed, nor shall 3Com be required to pay any
consideration in excess of that required by the Relevant Lease or that which is
typical in the open market to obtain the relevant Lease Consent. Palm shall
cooperate as reasonably requested by 3Com to obtain the Lease Consents.
(c) Palm and 3Com will promptly satisfy or cause their applicable
Subsidiaries to satisfy the lawful requirements of the Landlord, and Palm will
take or cause its applicable Subsidiary to take all steps to assist 3Com in
obtaining the Lease Consents as to each Leased Property, including, without
limitation:
(i) if properly required by the Landlord, entering into an
agreement with the relevant Landlord to observe and perform the tenant's
obligations contained in the Relevant Lease throughout the remainder of the term
of the Relevant Lease, subject to any statutory limitations of such liability;
(ii) if properly required by the Landlord, providing a
guarantee, surety or other security (including, without limitation, a security
deposit) for the obligations of Palm or its applicable Subsidiary as tenant
under the Relevant Lease, and otherwise taking all steps which are reasonably
necessary and which Palm or its applicable Subsidiary is reasonably capable of
doing to meet the lawful requirements of the Landlord so as to ensure that the
Lease Consents are obtained; and
(iii) using all reasonable commercial efforts to assist 3Com
with obtaining the Landlord's consent to the release of any guarantee, surety or
other security which 3Com or its
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<PAGE>
Subsidiary may have previously provided to the Landlord and, if required,
offering the same or equivalent security to the Landlord in order to obtain
such release.
Notwithstanding the foregoing, (1) except with respect to guarantees, sureties
or other security referenced in Section 1.4(c)(ii) above, Palm shall not be
required to obtain a release of any obligation entered into by 3Com or its
Subsidiary with any Landlord or other third party with respect to any Property
and (2) Palm shall not communicate or permit its applicable Subsidiary to
communicate directly with any of the Landlords unless Palm can show 3Com
reasonable grounds for doing so.
(d) If, with respect to any Leased Properties, 3Com and Palm are unable
to obtain a release by the Landlord of any guarantee, surety or other security
which 3Com or its Subsidiary has previously provided to the Landlord, Palm shall
indemnify, defend, protect and hold harmless 3Com and its Subsidiary from and
after the Separation Date against all losses, costs, claims, damages, or
liabilities incurred by 3Com or its Subsidiary as a result of Palm's occupancy
of the Leased Property with respect to such guarantee, surety or other security.
SECTION 1.5 OCCUPATION BY PALM
(a) Subject to compliance with Section 1.5(b) below, in the event that
the Actual Completion Date for any Leased Property does not occur on the
Separation Date, Palm or its applicable Subsidiary shall, commencing on the
Separation Date, be entitled to occupy the relevant Property (except to the
extent that the same is a Retained Part) as a licensee upon the terms and
conditions contained in 3Com's Lease. Such license shall not be revocable prior
to the date for completion as provided in Section 1.1(a) unless an enforcement
action or forfeiture by the relevant Landlord due to Palm's or its applicable
Subsidiary's occupation of the Property constituting a breach of 3Com's Lease
cannot, in the reasonable opinion of 3Com, be avoided other than by requiring
Palm or its applicable Subsidiary to immediately vacate the relevant Property,
in which case 3Com may by notice to Palm immediately require Palm or its
applicable Subsidiary to vacate the relevant Property. Palm will be responsible
for all costs, expenses and liabilities incurred by 3Com or its applicable
Subsidiary as a consequence of such occupation, except for any losses, claims,
costs, demands and liabilities incurred by 3Com or its Subsidiary as a result of
any enforcement action taken by the Landlord against 3Com or its Subsidiary with
respect to any breach by 3Com or its Subsidiary of the Relevant Lease in
permitting Palm or its applicable Subsidiary to so occupy the Property without
obtaining the required Lease Consent, for which 3Com or its Subsidiary shall be
solely responsible. Neither Palm nor its applicable Subsidiary shall be entitled
to make any claim or demand against, or obtain reimbursement from, 3Com or its
applicable Subsidiary with respect to any costs, losses, claims, liabilities or
damages incurred by Palm or its applicable Subsidiary as a consequence of being
obliged to vacate the Property or in obtaining alternative premises, including,
without limitation, any enforcement action which a Landlord may take against
Palm or its applicable Subsidiary.
(b) In the event that the Actual Completion Date for any Leased
Property does not occur on the Separation Date, whether or not Palm or its
applicable Subsidiary occupies a Property as licensee as provided in Section
1.5(a) above, Palm shall, effective as of the Separation Date, (i) pay or cause
its applicable Subsidiary to pay 3Com all rents, service charges, insurance
premiums and other sums
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<PAGE>
payable by 3Com or its applicable Subsidiary under any Relevant Lease, (ii)
observe or cause its applicable Subsidiary to observe the tenant's covenants,
obligations and conditions contained in 3Com's Lease and (iii) indemnify,
defend, protect and hold harmless 3Com and its applicable Subsidiary from and
against all losses, costs, claims, damages and liabilities arising on account
of any breach thereof by Palm or its applicable Subsidiary.
(c) 3Com shall supply promptly to Palm copies of all invoices, demands,
notices and other communications received by 3Com or its applicable Subsidiaries
or agents in connection with any of the matters for which Palm or its applicable
Subsidiary may be liable to make any payment or perform any obligation pursuant
to Section 1.5(a) or (b), and shall, at Palm's cost, take any steps and pass on
any objections which Palm or its applicable Subsidiary may have in connection
with any such matters. Palm shall promptly supply to 3Com any notices, demands,
invoices and other communications received by Palm or its applicable Subsidiary
or agents from any Landlord while Palm or its applicable Subsidiary occupies any
Property without the relevant Lease Consent.
SECTION 1.6 OBLIGATION TO COMPLETE
(a) If, with respect to any Leased Property, at any time the relevant
Lease Consent is formally and unconditionally refused in writing, 3Com and Palm
shall commence good faith negotiations and use commercially reasonable efforts
to determine how to allocate the applicable Property, based on the relative
importance of the applicable Property to the operations of each party, the size
of the applicable Property, the number of employees of each party at the
applicable Property and the potential risk and liability to each party in the
event an enforcement action is brought by the applicable Landlord. Such
commercially reasonable efforts shall include consideration of alternate
structures to accommodate the needs of both parties and the allocation of the
costs thereof, including entering into amendments of the size, term or other
terms of the Relevant Lease, restructuring a proposed lease assignment to be a
sublease and relocating one party. If the parties are unable to agree upon an
allocation of the Property within fifteen (15) days after commencement of
negotiations between the parties as described above, then either party may, by
delivering written notice to the other, require that the matter be referred to
the Chief Financial Officers of both parties. In such event, the Chief Financial
Officers shall use commercially reasonable efforts to determine the allocation
of the Property, including having a meeting or telephone conference within ten
(10) days thereafter. If the parties are unable to agree upon the allocation of
an applicable Property within fifteen (15) days after the matter is referred to
the Chief Financial Officers of the parties as described above, the disposition
of the applicable Property and the risks associated therewith shall be allocated
between the parties as set forth in subparts (b) and (c) of this section below.
(b) If, with respect to any Leased Property, the parties are unable to
agree upon the allocation of a Property as set forth in Section 1.6(a), 3Com may
by written notice to Palm elect to apply to the relevant Landlord for consent to
sublease all of the relevant Property to Palm or its applicable Subsidiary for
the remainder of the Relevant Lease term less three (3) days at a rent equal to
the rent from time to time under the Relevant Lease, but otherwise on
substantially the same terms and conditions as the Relevant Lease. If 3Com makes
such an election, until such time as the relevant Lease Consent is obtained and
a sublease is completed, the provisions of Section 1.5 will apply and, on the
grant of the Lease Consent required to sublease the Leased Property in question,
3Com shall sublease or cause its applicable Subsidiary to sublease to Palm or
its applicable Subsidiary the
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<PAGE>
relevant Property which sublease shall be for the term and rent set forth in
the Relevant Lease and otherwise on the terms of the Relevant Lease.
(c) If the parties are unable to agree upon the allocation of a
Property as set forth in Section 1.6(a) and 3Com does not make an election
pursuant to Section 1.6(b) above, 3Com may elect by written notice to Palm to
require Palm or its applicable Subsidiary to vacate the relevant Property
immediately or by such other date as may be specified in the notice served by
3Com (the "NOTICE DATE"), in which case Palm shall vacate or cause its
applicable Subsidiary to vacate the relevant Property on the Notice Date but
shall indemnify 3Com and its applicable Subsidiary from and against all costs,
claims, losses, liabilities and damages in relation to the relevant Property
arising from and including the Separation Date to and including the later of the
Notice Date and date on which Palm or its applicable Subsidiary vacates the
relevant Property, except for any costs, losses, damages, claims and liabilities
incurred by 3Com or its Subsidiary with respect to any enforcement action taken
by the Landlord against 3Com or its Subsidiary with respect to any breach by
3Com or its Subsidiary of the Relevant Lease in permitting Palm or its
applicable Subsidiary to so occupy the Property without obtaining the required
Lease Consent. Neither Palm nor its applicable Subsidiary shall be entitled to
make any claim or demand against or obtain reimbursement from 3Com or its
applicable Subsidiary with respect to any costs, losses, claims, liabilities or
damages incurred by Palm or its applicable Subsidiary as a consequence of being
obliged to vacate the Property or obtaining alternative premises, including,
without limitation, any enforcement action which a Landlord may take against
Palm or its applicable Subsidiary.
SECTION 1.7 FORM OF TRANSFER
(a) The assignment to Palm or its applicable Subsidiary of each
relevant Leased Property shall be in substantially the form attached in Schedule
2, with such amendments which in the reasonable opinion of 3Com are necessary
with respect to a particular Property, including, without limitation, in all
cases where a relevant Landlord has required a guarantor or surety to guarantee
the obligations of Palm or its applicable Subsidiary contained in the relevant
Lease Consent or any other document which Palm or its applicable Subsidiary is
required to complete, the giving of such guarantee by a guarantor or surety, and
the giving by Palm or its applicable Subsidiary and any guarantor or surety of
Palm's or its applicable Subsidiary's obligations of direct obligations to 3Com
or third parties where required under the terms of any of the Lease Consent or
any covenant, condition, restriction, easement, lease or other encumbrance to
which the Property is subject. Such amendments shall be submitted to Palm for
approval, which approval shall not be unreasonably withheld or delayed.
(b) The licenses to be granted by Palm or its applicable Subsidiary to
3Com or its applicable Subsidiary, and 3Com or its applicable Subsidiary to Palm
or its applicable Subsidiary, with respect to the Shared Properties shall be at
the rental rates and terms set forth in Section B of Schedule 1 hereof. Rent
shall be abated for the period from the Separation Date to March 1, 2000. The
license shall be substantially in the form of the License Form, with such
amendments as are, in the reasonable opinion of 3Com, necessary with respect to
a particular Property. Such amendments shall be submitted to Palm for approval,
which approval shall not be unreasonably withheld.
(c) The lease and sublease to be granted to Palm with respect to the
Headquarters Facility
-5-
<PAGE>
shall be at a monthly rental rate of $3.72 per square foot full service gross
including furniture and copier rental through February 28, 2001, $3.82 per
square foot full service gross including furniture and copier rental from
March 1, 2001 through February 28, 2002 and $3.93 per square foot full
service gross including furniture and copier rental thereafter, and be for a
term commencing on the Separation Date and expiring (i) February 28, 2003 as
to Buildings 12 and 15 and the related common areas and (ii) August 1, 2002
as to Buildings 9 and 10 and the related common areas; provided, however,
that in the event 3Com extends its underlying lease as to Buildings 9 and 10
or purchases the underlying fee interest in such property, the expiration
date as to Buildings 9 and 10 and the related common areas shall be
automatically extended to February 28, 2003. Either party may terminate the
lease or sublease as to any of the buildings then subject to the lease or
sublease upon six (6) months prior notice, which notice may be given at any
time after December 31, 2000; provided, however, that any given termination
notice may apply as to only one building and neither party may give a
termination notice within thirty (30) days of any previous termination notice
given by either party. The lease and sublease shall commence as to the
various buildings within the Headquarters Facility in accordance with the
schedule set forth in Section C of Schedule 1 hereof; provided, however, that
the lease as to Building 15 shall not commence until such building is
delivered to Tenant. Rent shall be abated for the period from the Separation
Date to March 1, 2000. Such lease and sublease shall be substantially in the
form of the lease and sublease forms attached hereto as Schedule 4 and shall
include such amendments which in the reasonable opinion of 3Com are necessary
with respect to a particular Property. Such amendments shall be submitted to
Palm for approval, which approval shall not be unreasonably withheld or
delayed.
SECTION 1.8 CASUALTY; LEASE TERMINATION
The parties hereto shall grant and accept assignments, leases,
subleases or licenses of the Properties as described in this Agreement,
regardless of any casualty damage or other change in the condition of the
Properties. In addition, subject to 3Com's obligations in Section 5.6 of the
Separation Agreement, in the event that 3Com's Lease with respect to a Leased
Property or a Shared Property or 3Com's interest in the leased portion of the
Headquarters Facility is terminated prior to the Separation Date, (a) 3Com or
its applicable Subsidiary shall not be required to assign, sublease or license
such Property, (b) Palm or its applicable Subsidiary shall not be required to
accept an assignment, sublease or license of such Property and (c) neither party
shall have any further liability with respect to such Property hereunder.
SECTION 1.9 TENANT'S FIXTURES AND FITTINGS
The provisions of the Separation Agreement and the other Ancillary
Agreements shall apply to any trade fixtures and personal property located at
each Property. The lease and sublease of the Headquarters Facility and the
licenses as to the Shared Properties shall include the rental of the furniture
at such Properties.
SECTION 1.10 COSTS
3Com shall pay all reasonable costs and expenses incurred in connection
with obtaining the Lease Consents, including, without limitation, Landlord's
consent fees and attorneys' fees and any costs and expenses relating to
re-negotiation of 3Com's Leases.
-6-
<PAGE>
ARTICLE II
MISCELLANEOUS
SECTION 2.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER
OF THE 3COM GROUP OR PALM GROUP BE LIABLE TO ANY OTHER MEMBER OF THE 3COM
GROUP OR PALM GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR
PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT
EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS
SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT.
SECTION 2.2 ENTIRE AGREEMENT. This Agreement, the Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
referenced or attached hereto and thereto, constitute the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
SECTION 2.3 GOVERNING LAW. This Agreement shall be construed in
accordance with and all Disputes hereunder shall be governed by the laws of
the State of California, excluding its conflict of law rules and the United
Nations Convention on Contracts for the International Sale of Goods. The
Superior Court of Santa Clara County and/or the United States District Court
for the Northern District of California shall have jurisdiction and venue
over all Disputes between the parties that are permitted to be brought in a
court of law pursuant to Section 5.9 of the Separation Agreement.
Notwithstanding the foregoing, the applicable Property transfers shall be
performed in accordance with the laws of the state in which the applicable
Property is located.
SECTION 2.4 NOTICES. Notices, demands, offers requests or other
communications required or permitted to be given by either party pursuant to
the terms of this Agreement shall be given in writing to the respective
parties to the following addresses:
if to 3Com:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: 408.326.6434
-7-
<PAGE>
if to Palm:
Palm Computing, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
SECTION 2.5 COUNTERPARTS. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, may be
executed in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
SECTION 2.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives and successors, and nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement. This
Agreement may be enforced separately by each member of the 3Com Group and
each member of the Palm Group. Neither party may assign this Agreement or any
rights or obligations hereunder, without the prior written consent of the
other party, and any such assignment shall be void; provided, however, either
party may assign this Agreement to a successor entity in conjunction with
such party's reincorporation.
SECTION 2.7 SEVERABILITY. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
court, administrative agency or arbitrator to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
fullest extent possible.
SECTION 2.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of either party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement or the Exhibits or Schedules attached
hereto are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
-8-
<PAGE>
SECTION 2.9 AMENDMENT. No change or amendment will be made to this
Agreement or the Exhibits or Schedules attached hereto except by an
instrument in writing signed on behalf of each of the parties to such
agreement.
SECTION 2.10 AUTHORITY. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and
authority to execute, deliver and perform this Agreement, (b) the execution,
delivery and performance of this Agreement by it have been duly authorized by
all necessary corporate or other action, (c) it has duly and validly executed
and delivered this Agreement, and (d) this Agreement is a legal, valid and
binding obligation, enforceable against it in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general equity
principles.
SECTION 2.11 INTERPRETATION. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table or contents to
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized term
used in any Schedule or Exhibit but not otherwise defined therein, shall have
the meaning assigned to such term in this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
SECTION 2.12 DISPUTES. Any Disputes that arise under this Agreement
shall be resolved in accordance with the provisions of Section 5.9 of the
Separation Agreement.
ARTICLE III
DEFINITIONS
The following terms, as used herein, shall have the following meanings:
ACTUAL COMPLETION DATE means, with respect to each Property, the date upon which
completion of the assignment, lease or sublease of that Property actually takes
place.
HEADQUARTERS FACILITY means Buildings 9, 10, 12 and 15 located at 3Com's campus
at Santa Clara, California, as set forth in Section C of Schedule 1 of this
Agreement, together with the non-exclusive right to use the Building 1 and
Building 9 cafeterias, the Building 6 bistro cafe and the Building 5 annex,
located on 3Com's campus upon the terms and subject to the restrictions set
forth in the lease and sublease forms attached hereto a Schedule 4 .
LANDLORD means the landlord under 3Com's Lease, and its successors and assigns,
and includes the holder of any other interest which is superior to the interest
of the landlord under 3Com's Lease.
LEASE CONSENTS means all consents, waivers or amendments required from the
Landlord or other third parties under the Relevant Leases to assign the Relevant
Leases to Palm or its applicable Subsidiary.
LEASED PROPERTIES means those Properties in Section A of Schedule 1 of this
Agreement.
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<PAGE>
LICENSE FORM means the form license attached hereto as Schedule 3.
PROPERTY means the Leased Properties, the Shared Properties and the
Headquarters Facility.
RELEVANT LEASES means those of 3Com's Leases with respect to which the
Landlord's consent is required for assignment or sublease to a third party or
which prohibit assignments or subleases.
RETAINED PARTS means those parts of the Leased Properties which, following
assignment to Palm or its applicable Subsidiary, are intended to be licensed
to 3Com or its applicable Subsidiary.
SHARED PROPERTIES means those Properties listed in (a) Section A of Schedule
1 as a Property involving a license back to 3Com and (b) Section B of
Schedule 1 of this Agreement.
3COM'S LEASE means, in relation to each Property, the lease(s) or sublease(s)
or license(s) under which 3Com or its applicable Subsidiary holds such
Property and any other supplemental document completed prior to the Actual
Completion Date.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Real Estate
Matters Agreement to be executed on its behalf by its officers thereunto duly
authorized on the day and year first above written.
3COM CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
PALM, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
-11-
<PAGE>
SCHEDULE 1
Properties
Section A: Leased Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Address License back Approximate
to 3Com? Area to be
(Y/N) licensed
- -----------------------------------------------------------------
<S> <C> <C>
Tour Kupka A Y 5,200
18 Rue Hoche
92800 Paris La Defense, France
- -----------------------------------------------------------------
3180 139th Ave. SE, N
Ste. # 200
Bellevue, WA
- -----------------------------------------------------------------
</TABLE>
<PAGE>
Section B
Shared Properties
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Location Address Current Additional Cost Per Current License
PALM HC Square Footage Person Per Monthly Cost Expiration
(@ $9.50 per Month Date
sf per month)*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SANTA CLARA 5400 Bayfront Plaza, Bldg 1 5 $ 1,900 $ 9,500 12/31/00
Santa Clara, CA 95052
- -----------------------------------------------------------------------------------------------------------------------------------
SANTA CLARA (whse) 2940-2990 Mead Avenue #1 0 800 $ 880 12/31/00
*Note: cost = $1.10 psf Santa Clara, CA 95051
- -----------------------------------------------------------------------------------------------------------------------------------
SALT LAKE CITY 605 N. 5600 WEST 1 $ 1,900 $ 1,900 3/31/00
Salt Lake City, UT 84116
- -----------------------------------------------------------------------------------------------------------------------------------
CHICAGO 3800 Golf Rd. 11 910 $ 1,900 $ 29,545 8/31/00
Rolling Meadows, IL 60008
- -----------------------------------------------------------------------------------------------------------------------------------
ATLANTA, GA Six Concourse Pkwy # 1450 1 $ 1,900 $ 1,900 3/31/00
Atlanta, GA 30328-5346
- -----------------------------------------------------------------------------------------------------------------------------------
BLOOMINGTON, MN 7760 France Ave. S., 6th floor 1 $ 1,900 $ 1,900 3/31/00
Bloomington MN 55435
- -----------------------------------------------------------------------------------------------------------------------------------
VIENNA, VA 2070 CHAIN BRIDGE ROAD 1 $ 1,900 $ 1,900 3/31/00
Vienna, VA 22182
- -----------------------------------------------------------------------------------------------------------------------------------
WINNERSH 220 WHARFDALE ROAD 26 $ 1,900 $ 49,400 5/31/00
Winnersh, Wokingham
Berkshire RG41 5TB England
- -----------------------------------------------------------------------------------------------------------------------------------
MAARSEN, NETHERLANDS 3Com Benelux 2 $ 1,900 $ 3,800 3/31/00
PLANET PARK II PLANETENBAAN 118
3606 AK Maarssen
Maarsen, Netherlands
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICH, GERMANY 3Com GmbH 8 100 $ 1,900 $ 16,150 3/31/00
MAX-PLANCK-STRASSE 3
D-85609 ASCHHEIM-DORNACH
Germany
- -----------------------------------------------------------------------------------------------------------------------------------
SOLNA, SWEDEN FROSUNDAVIKS ALLE 15, Box 1251 4 $ 1,900 $ 7,600 3/31/00
171 24 Solna, Sweden
- -----------------------------------------------------------------------------------------------------------------------------------
ZURICH, SWITZERLAND 3Com (Schweiz) AG 1 $ 1,900 $ 1,900 3/31/00
54 THURGAUER STRASSE
CH-8050 Zurich, Switzerland
- -----------------------------------------------------------------------------------------------------------------------------------
DUBLIN, IRELAND 3Com Dublin 3 $ 1,900 $ 5,700 6/30/00
Ballycoolin Business Park
Blanchardstown, Dublin 15, Ireland
- -----------------------------------------------------------------------------------------------------------------------------------
MILAN, ITALY 3Com Italia S.p.A. 1 $ 1,900 $ 1,900 3/31/00
Via Michaelangelo Buonarroti, 1
20093 Cologno Monzese
- -----------------------------------------------------------------------------------------------------------------------------------
HONG KONG 3Com Asia LTD 5 120 $ 1,900 $ 10,640 5/31/00
23F,
Li Po Chun Chambers
89 Des Voeux Rd.
Central Hong Kong
- -----------------------------------------------------------------------------------------------------------------------------------
NORTH SYDNEY, AUSTRALIA 65 BERRY ST., level 12/13 4 $ 1,900 $ 7,600 3/31/00
Sidney, NSW, Australia 2060
- -----------------------------------------------------------------------------------------------------------------------------------
JAPAN 21F, Center Office 5 520 $ 1,900 $ 14,440 5/31/00
Bunkyo Green Court
2-28-8 Honkomagome
Bunkyo-Ku, Tokyo Japan, 113-6591
- -----------------------------------------------------------------------------------------------------------------------------------
SINGAPORE (SALES OFFICE) 50 RAFFLES PLACE 4 $ 1,900 $ 7,600 5/31/00
#27-05/06
Singapore Land Tower
048623 Singapore
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Location Address Current Additional Cost Per Current License
PALM HC Square Footage Person Per Monthly Cost Expiration
(@ $9.50 per Month Date
sf per month)*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINGAPORE (MFG ) 3Com Technologies 5 284 $ 1,900 $ 2,198 5/31/00
3 Changi North ST. 2
498827 Singapore
- -----------------------------------------------------------------------------------------------------------------------------------
MEXICO Paseo de las Palmas 1 $ 1,900 $ 1,900 3/31/00
405-903 Torre Optima, Pico 9
Mexico City, Mexico 11000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MONTHLY RENT FOR LICENSED PREMISES 89 $188,353
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section C: Headquarters Facility
<TABLE>
<CAPTION>
- ---------------------------- ----------------- -------------------- --------------------
Address Leased or Estimated Estimated Square
Subleased? Area Commencement Date Footage
- ---------------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
5400 Bayfront Plaza, Leased 3/1/00 35,000
Bldg 12
Santa Clara, CA
- ---------------------------- ----------------- -------------------- --------------------
5400 Bayfront Plaza, Leased 11/15/00 35,000
Bldg. 15
Santa Clara, CA
- ---------------------------- ----------------- -------------------- --------------------
5400 Bayfront Plaza, Subleased 3/1/00 63,600
Bldg. 9
- ---------------------------- ----------------- -------------------- --------------------
5400 Bayfront Plaza, Subleased 3/1/00 83,100
Bldg. 10
- ---------------------------- ----------------- -------------------- --------------------
Common Area Subleased 3/1/00 12,800
- ---------------------------- ----------------- -------------------- --------------------
</TABLE>
<PAGE>
SCHEDULE 2
Form Assignment for Leased Properties
<PAGE>
SCHEDULE 3
Form License for Shared Properties
<PAGE>
SCHEDULE 4
Form Lease and Sublease for the Headquarters Facility
<PAGE>
MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
EFFECTIVE AS OF FEBRUARY 26, 2000
<PAGE>
MASTER CONFIDENTIAL DISCLOSURE AGREEMENT
This Master Confidential Disclosure Agreement (the "Agreement") is
effective as of February 26, 2000 (the "Effective Date"), between 3Com
Corporation, a Delaware corporation ("3Com"), having an office at 5400
Bayfront Plaza, Santa Clara, California, 95052 and Palm, Inc., a Delaware
corporation ("Palm"), having an office at 5470 Great America Parkway, Santa
Clara, California, 95052.
WHEREAS, the Board of Directors of 3Com has determined that it is in
the best interest of 3Com and its stockholders to separate 3Com's existing
businesses into two independent businesses;
WHEREAS, as part of the foregoing, 3Com and Palm's predecessor, Palm
Computing, Inc., a California Corporation, have entered into a Master
Separation and Distribution Agreement (as defined below), which provides,
among other things, for the separation of certain Palm assets and Palm
liabilities, the initial public offering of Palm stock, the distribution of
such stock, and the execution and delivery of certain other agreements in
order to facilitate and provide for the foregoing; and
WHEREAS, also as part of the foregoing, the parties further desire
to enter into this Agreement to provide for the protection of their
Confidential Information (as defined below).
NOW, THEREFORE, in consideration of the mutual promises of the
parties, and of good and valuable consideration, it is agreed by and between
the parties as follows:
ARTICLE 1
DEFINITIONS
For the purpose of this Agreement the following capitalized terms
are defined in this Article 1 and shall have the meaning specified herein:
1.1 ANCILLARY AGREEMENTS. "Ancillary Agreements" means the items
and agreements listed in Section 2.1 of the Master Separation and
Distribution Agreement and all agreements and documents contemplated by such
agreements.
1.2 CONFIDENTIAL INFORMATION.
(a) "Confidential Information" means business information,
technical data, know-how and other information which is not otherwise in the
public domain and of which the owner actively undertakes to restrict or
control the disclosure to Third Parties in a manner reasonably intended to
maintain its confidentiality, and which (i) the Disclosing Party disclosed to
the Receiving Party or the Receiving Party had access to on or before the
Separation Date, (ii) is the subject of any Transaction Agreement and known
to or in the possession of the Receiving Party as of the Separation Date or
(iii) is disclosed to the Receiving Party pursuant to any Transaction
Agreement for a period of one (1) year after the Effective Date. Confidential
Information may include information relating to, by way of example, research,
products, services, customers, markets,
-1-
<PAGE>
software, developments, inventions, processes, designs, drawings,
engineering, marketing or finances, and may be in writing, disclosed orally
or learned by inspection of computer programming code, equipment or
facilities.
(b) Confidential Information of Third Parties that is known
to, in the possession of or acquired by a Receiving Party pursuant to a
relationship with the Disclosing Party shall be deemed the Disclosing Party's
Confidential Information for purposes herein.
(c) Notwithstanding the foregoing provisions of this Section
1.2, Confidential Information shall exclude information that: (i) was in the
Receiving Party's possession before receipt from the Disclosing Party and
obtained from a source other than the Disclosing Party and other than through
the prior relationship of the Disclosing Party and the Receiving Party before
the Separation Date; (ii) is or becomes a matter of public knowledge through
no fault of the Receiving Party; (iii) is rightfully received by the
Receiving Party from a Third Party without a duty of confidentiality; (iv) is
disclosed by the Disclosing Party to a Third Party without a duty of
confidentiality on the Third Party; (v) is independently developed by the
Receiving Party; or (vi) is disclosed by the Receiving Party with the
Disclosing Party's prior written approval.
1.3 CONFIDENTIALITY PERIOD. "Confidentiality Period" means, (i)
with respect to Confidential Information that is not Highly Confidential
Information, five (5) years, and (ii) with respect to Highly Confidential
Information, in perpetuity, after either (A) the Separation Date with respect
to Confidential Information of the Disclosing Party that is known to or in
the possession of the Receiving Party as of the Separation Date or (B) the
date of disclosure with respect to Confidential Information that is disclosed
by the Disclosing Party to the Receiving Party after the Separation Date.
1.4 DISCLOSING PARTY. "Disclosing Party" means the party owning or
disclosing the relevant Confidential Information.
1.5 DISTRIBUTION DATE. "Distribution Date" has the meaning set
forth in the Master Separation and Distribution Agreement.
1.6 HIGHLY CONFIDENTIAL INFORMATION. "Highly Confidential
Information" means Confidential Information that is source code for products
that are commercially released or for which substantial steps have been taken
to commercialization.
1.7 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master
Separation and Distribution Agreement" means that certain Master Separation
and Distribution Agreement between 3Com and Palm.
1.8 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, and a
governmental entity or any department, agency or political subdivision
thereof.
1.9 RECEIVING PARTY. "Receiving Party" means the non-owning party
or recipient of the relevant Confidential Information.
-2-
<PAGE>
1.10 SEPARATION DATE. "Separation Date" means 12:01 a.m., Pacific
Time, February 26, 2000, or such other date as may be fixed by the Board of
Directors of 3Com.
1.11 SUBSIDIARY. "Subsidiary" of any Person means a corporation or
other organization, whether incorporated or unincorporated, of which at least
a majority of the securities or interests having by the terms thereof
ordinary voting power to elect at least a majority of the board of directors
or others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
Person or by any one or more of its Subsidiaries, or by such Person and one
or more of its Subsidiaries; provided, however, that no Person that is not
directly or indirectly wholly-owned by any other Person shall be a Subsidiary
of such other Person unless such other Person controls, or has the right,
power or ability to control, that Person. For purposes of this Agreement,
Palm shall be deemed not to be a subsidiary of 3Com.
1.12 THIRD PARTY. "Third Party" means a Person other than 3Com and
its Subsidiaries and Palm and its Subsidiaries.
1.13 TRANSACTION AGREEMENTS. "Transaction Agreements" mean the
Master Separation and Distribution Agreement and the Ancillary Agreements.
ARTICLE 2
CONFIDENTIALITY
2.1 CONFIDENTIALITY AND NON-USE OBLIGATIONS. During the
Confidentiality Period, the Receiving Party shall (i) protect the
Confidential Information of the Disclosing Party by using the same degree of
care, but no less than a reasonable degree of care, to prevent the
unauthorized use, dissemination, or publication of the Confidential
Information as Receiving Party uses to protect its own confidential
information of a like nature, (ii) not use such Confidential Information in
violation of any use restriction in any Transaction Agreement, and (iii) not
disclose such Confidential Information to any Third Party, except as
expressly permitted under this Agreement, in the Transaction Agreements or in
any other agreements entered into between the parties in writing, without
prior written consent of the Disclosing Party.
2.2 DISCLOSURE TO SUBLICENSEES. The Receiving Party has the right
to disclose to its sublicensees permitted under a Transaction Agreement
portions of Confidential Information as reasonably necessary in the exercise
of the Receiving Party's sublicense rights under such Transaction Agreement,
subject to the sublicensee's agreement in writing to confidentiality and
non-use terms at least as protective of the Disclosing Party as the
provisions of this Agreement.
2.3 CONTRACT MANUFACTURERS AND FOUNDRIES. The Receiving Party has
the right to disclose to its contract manufacturers and foundries permitted
under any Transaction Agreement portions of the Confidential Information as
reasonably necessary in the exercise of the Receiving Party's "have made"
rights under any Transaction Agreement, subject to the contract
manufacturer's and foundry's agreement in writing to confidentiality and
non-use terms at least as protective of the Disclosing Party as the
provisions of this Agreement.
-3-
<PAGE>
2.4 RESIDUALS. Notwithstanding any other provision of this
Agreement, the Receiving Party shall be free, and the Disclosing Party hereby
grants to the Receiving Party, except as otherwise provided in this Section
2.4, the right, to use or exploit for any purpose and without restriction the
Residuals resulting from access to or work with the Confidential Information
of the Disclosing Party. "Residuals" means information retained in the
unaided memory of an individual who has had access to Confidential
Information. The Receiving Party shall have no obligation to pay royalties
for any use of Residuals. However, this Section 2.4 does not grant the
Receiving Party any rights under any patents or copyrights of the Disclosing
Party.
2.5 COMPELLED DISCLOSURE. If the Receiving Party or any of its
respective Subsidiaries believes that it will be compelled by a court or
other authority to disclose Confidential Information of the Disclosing Party,
it shall (i) give the Disclosing Party prompt written notice so that the
Disclosing Party may take steps to oppose such disclosure, and (ii) cooperate
with the Disclosing Party in its attempts to oppose such disclosure. If the
Receiving Party complies with the above, it shall not be prohibited from
complying with such requirement to disclose, but shall take all reasonable
steps to make such disclosure subject to a suitable protective order or
otherwise prevent unrestricted or public disclosure.
2.6 NO RESTRICTION ON DISCLOSING PARTY. Nothing in this Agreement
shall restrict the Disclosing Party from using, disclosing, or disseminating
its own Confidential Information in any way.
2.7 NO RESTRICTION ON REASSIGNMENT. This Agreement shall not
restrict reassignment of the Receiving Party's employees.
2.8 THIRD PARTY RESTRICTIONS. Nothing in the Agreement supersedes
any restriction imposed by Third Parties on their Confidential Information,
and there is no obligation on the Disclosing Party to conform Third Party
agreements to the terms of this Agreement.
ARTICLE 3
WARRANTY DISCLAIMER
EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL CONFIDENTIAL INFORMATION
IS PROVIDED ON AN "AS IS, WHERE IS" BASIS AND THAT NEITHER PARTY NOR ANY OF
ITS SUBSIDIARIES HAS MADE OR WILL MAKE ANY WARRANTY WHATSOEVER, EXPRESS,
IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY
OR NON-INFRINGEMENT.
ARTICLE 4
CONFIDENTIALITY OF AGREEMENT
Each party agrees that the terms and conditions of the Transaction
Agreements marked as confidential shall be treated as Confidential
Information and that neither party will disclose such
-4-
<PAGE>
terms or conditions to any Third Party without the prior written consent of
the other party, provided, however, that each party may disclose such terms
and conditions of such agreements marked as confidential:
(a) as required by any court or other governmental body
(subject to Section 2.5);
(b) as otherwise required by law (subject to Section 2.5);
(c) in confidence, to legal counsel of the parties,
accountants, and other professional advisors;
(d) in confidence to banks, investors and other financing
sources and their advisors;
(e) in connection with the enforcement of this Agreement or
rights under this Agreement; or
(f) in confidence, in connection with an actual or prospective
merger or acquisition or similar transaction.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM. This Agreement shall remain in full force and effect
unless and until terminated by the mutual written agreement of the parties.
5.2 SURVIVAL. Articles 2 (with respect to Confidential Information
acquired or disclosed prior to the date of termination), 3, 4, 6, 7 and 8
shall survive any termination of this Agreement.
ARTICLE 6
DISPUTE RESOLUTION
6.1 MEDIATION. If a dispute, controversy or claim ("Dispute")
arises between the parties relating to the interpretation or performance of
this Agreement or the grounds for the termination hereof, appropriate senior
executives (e.g. director or V.P. level) of each party who shall have the
authority to resolve the matter shall meet to attempt in good faith to
negotiate a resolution of the Dispute prior to pursuing other available
remedies. The initial meeting between the appropriate senior executives shall
be referred to herein as the "Dispute Resolution Commencement Date."
Discussions and correspondence relating to trying to resolve such Dispute
shall be treated as confidential information developed for the purpose of
settlement and shall be exempt from discovery or production and shall not be
admissible. If the senior executives are unable to resolve the Dispute within
thirty (30) days from the Dispute Resolution Commencement Date, and either
party wishes to pursue its rights relating to such Dispute, then the Dispute
will be mediated by a mutually acceptable
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mediator appointed pursuant to the mediation rules of JAMS/Endispute within
thirty (30) days after written notice by one party to the other demanding
non-binding mediation. Neither party may unreasonably withhold consent to the
selection of a mediator or the location of the mediation. Both parties will
share the costs of the mediation equally, except that each party shall bear
its own costs and expenses, including attorney's fees, witness fees, travel
expenses, and preparation costs. The parties may also agree to replace
mediation with some other form of non-binding or binding ADR.
6.2 ARBITRATION. Any Dispute which the parties cannot resolve
through mediation within ninety (90) days of the Dispute Resolution
Commencement Date, unless otherwise mutually agreed, shall be submitted to
final and binding arbitration under the then current Commercial Arbitration
Rules of the American Arbitration Association ("AAA"), by three (3)
arbitrators in Santa Clara County, California. Such arbitrators shall be
selected by the mutual agreement of the parties or, failing such agreement,
shall be selected according to the aforesaid AAA rules. The arbitrators will
be instructed to prepare and deliver a written, reasoned opinion stating
their decision within thirty (30) days of the completion of the arbitration.
The prevailing party in such arbitration shall be entitled to expenses,
including costs and reasonable attorneys' and other professional fees,
incurred in connection with the arbitration (but excluding any costs and fees
associated with prior negotiation or mediation). The decision of the
arbitrator shall be final and non-appealable and may be enforced in any court
of competent jurisdiction. The use of any ADR procedures will not be
construed under the doctrine of laches, waiver or estoppel to adversely
affect the rights of either party.
6.3 COURT ACTION. Any Dispute regarding the following is not
required to be negotiated, mediated or arbitrated prior to seeking relief
from a court of competent jurisdiction: breach of any obligation of
confidentiality; infringement, misappropriation, or misuse of any
intellectual property right; any other claim where interim relief from the
court is sought to prevent serious and irreparable injury to one of the
parties or to others. However, the parties to the Dispute shall make a good
faith effort to negotiate and mediate such Dispute, according to the above
procedures, while such court action is pending.
6.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed
in writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the
course of dispute resolution pursuant to the provisions of this Article 6
with respect to all matters not subject to such dispute, controversy or
claim.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 EXPORT RESTRICTIONS. Both parties shall adhere to all
applicable laws, regulations and rules relating to the export of technical
data, and shall not export or reexport any technical data, any products
received from Disclosing Party, or the direct product of such technical data,
to any proscribed country listed in such applicable laws, regulations and
rules unless properly authorized.
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7.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall
be construed as conferring any rights by implication, estoppel or otherwise,
under any intellectual property right, other than the rights expressly
granted in this Agreement with respect to Confidential Information. Neither
party is required hereunder to furnish or disclose to the other any technical
or other information.
7.3 INFRINGEMENT SUITS. Neither party shall have any obligation
hereunder to institute any action or suit against Third Parties for
misappropriation of any of its Confidential Information or to defend any
action or suit brought by a Third Party that alleges infringement of any
intellectual property rights by the Receiving Party's authorized use of the
Disclosing Party's Confidential Information.
7.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY
RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES
AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN
AGREEMENT BETWEEN THE PARTIES.
7.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and
Distribution Agreement and the other Ancillary Agreements and the Exhibits
and Schedules referenced or attached hereto and thereto constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the
subject matter hereof and thereof. Notwithstanding the foregoing, the parties
agree that any agreements entered into between them on or after the
Separation Date for the protection of specific Confidential Information shall
supersede the terms of this Agreement with respect to such Confidential
Information.
7.6 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior
Court of Santa Clara County and/or the United States District Court for the
Northern District of California shall have jurisdiction and venue over all
Disputes between the parties that are permitted to be brought in a court of
law pursuant to Section 6 above.
7.7 INTERPRETATION. The headings contained in this Agreement, in
any Exhibit hereto and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit
but not otherwise defined therein, shall have the meaning assigned to such
term in this Agreement. When a reference is made in this Agreement to an
Article or a Section or an Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated.
7.8 NOTICES. Notices, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of
this Agreement shall be given in writing to the respective parties to the
following addresses:
if to 3Com :
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3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also
be sent via certified mail, return receipt requested. All other notices may
also be sent by fax, confirmed by first class mail. All notices shall be
deemed to have been given and received on the earlier of actual delivery or
three (3) days from the date of postmark.
7.9 NONASSIGNABILITY. Neither party may, directly or indirectly,
in whole or in part, whether by operation of law or otherwise, assign or
transfer this Agreement, without the other party's prior written consent, and
any attempted assignment, transfer or delegation without such prior written
consent shall be voidable at the sole option of such other party.
Notwithstanding the foregoing, each party (or its permitted successive
assignees or transferees hereunder) may assign or transfer this Agreement as
a whole without consent to a Person that succeeds to all or substantially all
of the business or assets of such party as long as such Person agrees to
accept all the terms and conditions set forth herein. Without limiting the
foregoing, this Agreement will be binding upon and inure to the benefit of
the parties and their permitted successors and assigns.
7.11 SEVERABILITY. If any term or other provision of this Agreement
or the Exhibits attached hereto is determined by a court, administrative
agency or arbitrator to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
7.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of either party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement or the Exhibits attached hereto are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
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7.13 AMENDMENT. No change or amendment will be made to this
Agreement or the Exhibits attached hereto except by an instrument in writing
signed on behalf of each of the parties to such agreement.
7.14 COUNTERPARTS. This Agreement, including the Ancillary
Agreements and the Exhibits and Schedules hereto and thereto and the other
documents referred to herein or therein, may be executed in counterparts,
each of which shall be deemed to be an original but all of which shall
constitute one and the same agreement.
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WHEREFORE, the parties have signed this Master Confidential
Disclosure Agreement effective as of the date first set forth above.
3COM CORPORATION PALM, INC.
By: By:
------------------------------------- -----------------------------
Name: Name:
----------------------------------- ---------------------------
Title: Title:
---------------------------------- --------------------------
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INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
BETWEEN
3COM CORPORATION
AND
PALM, INC.
FEBRUARY 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I. MUTUAL RELEASES; INDEMNIFICATION...........................................................................1
Section 1.1. Release of Pre-Closing Claims...............................................................1
Section 1.2. Indemnification by Palm.....................................................................2
Section 1.3. Indemnification by 3Com.....................................................................2
Section 1.4. Indemnification With Respect to Environmental Actions and Conditions........................3
Section 1.5. Reductions for Insurance Proceeds and Other Recoveries......................................4
Section 1.6. Procedures for Defense, Settlement and Indemnification of Third Party Claims................4
Section 1.7. Additional Matters..........................................................................5
Section 1.8. Survival of Indemnities.....................................................................6
ARTICLE II. INSURANCE MATTERS.........................................................................................6
Section 2.1. Palm Insurance Coverage During the Transition Period........................................6
Section 2.2. Cooperation and Agreement Not to Release Carriers...........................................7
Section 2.3. Palm Insurance Coverage After the Insurance Transition Period...............................7
Section 2.4. Responsibilities for Deductibles and/or Self-insured Obligations............................7
Section 2.5. Procedures With Respect to Insured Palm Liabilities.........................................8
Section 2.6. Insufficient Limits of Liability for 3Com Liabilities and Palm Liabilities..................8
Section 2.7. Cooperation.................................................................................8
Section 2.8. No Assignment or Waiver.....................................................................8
Section 2.9. No Liability................................................................................8
Section 2.10. Additional or Alternate Insurance...........................................................9
Section 2.11. Further Agreements..........................................................................9
Section 2.12. Matters Governed by Employee Matters Agreement..............................................9
ARTICLE III. MISCELLANEOUS............................................................................................9
Section 3.1. Entire Agreement............................................................................9
Section 3.2. Governing Law...............................................................................9
Section 3.3. Dispute Resolution..........................................................................9
Section 3.4. Notices....................................................................................10
Section 3.5. Parties in Interest........................................................................11
Section 3.6. Other Agreements Evidencing Indemnification Obligations....................................11
Section 3.7. Counterparts...............................................................................11
Section 3.8. Assignment.................................................................................11
Section 3.9. Severability...............................................................................11
Section 3.10. Failure or Indulgence Not Waiver...........................................................12
Section 3.11. Amendment..................................................................................12
Section 3.12. Authority..................................................................................12
Section 3.13. Interpretation.............................................................................12
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TABLE OF CONTENTS
(Continued)
<CAPTION>
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ARTICLE IV. DEFINITIONS..............................................................................................12
Section 4.1. 3Com Business..............................................................................12
Section 4.2. 3Com Facilities............................................................................12
Section 4.3. 3Com Group.................................................................................12
Section 4.4. 3Com Indemnitees...........................................................................13
Section 4.5. Action.....................................................................................13
Section 4.6. Affiliated Company.........................................................................13
Section 4.7. Assets.....................................................................................13
Section 4.8. Assignment Agreement.......................................................................13
Section 4.9. Coverage Amount............................................................................13
Section 4.10. Employee Matters Agreement.................................................................13
Section 4.11. Environmental Actions......................................................................13
Section 4.12. Environmental Conditions...................................................................13
Section 4.13. Environmental Laws.........................................................................14
Section 4.14. Hazardous Materials........................................................................14
Section 4.15. Indemnitee.................................................................................14
Section 4.16. Insurance Policies.........................................................................14
Section 4.17. Insurance Proceeds.........................................................................14
Section 4.18. Insurance Transition Period................................................................14
Section 4.19. Insured Palm Liability.....................................................................14
Section 4.20. IPO Date...................................................................................14
Section 4.21. IPO Liabilities............................................................................14
Section 4.22. IPO Registration Statement.................................................................14
Section 4.23. Liabilities................................................................................15
Section 4.24. Non-US Plan................................................................................15
Section 4.25. Palm Business..............................................................................15
Section 4.26. Palm Contracts.............................................................................15
Section 4.27. Palm Covered Parties.......................................................................15
Section 4.28. Palm Facilities............................................................................15
Section 4.29. Palm Group.................................................................................15
Section 4.30. Palm Indemnitees...........................................................................15
Section 4.31. Palm Liabilities...........................................................................15
Section 4.32. Person.....................................................................................15
Section 4.33. Pre-Separation Third Party Site Liabilities................................................15
Section 4.34. Release....................................................................................15
Section 4.35. Separation.................................................................................16
Section 4.36. Separation Agreement.......................................................................16
Section 4.37. Separation Date............................................................................16
Section 4.38. Shared 3Com Percentage.....................................................................16
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TABLE OF CONTENTS
(Continued)
<CAPTION>
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Section 4.39. Shared Palm Percentage.....................................................................16
Section 4.40. Shared Percentage..........................................................................16
Section 4.41. Subsidiary.................................................................................16
Section 4.42. Tax Sharing Agreement......................................................................16
Section 4.43. Taxes......................................................................................16
Section 4.44. Third Party Claim..........................................................................16
</TABLE>
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<PAGE>
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
This Indemnification and Insurance Matters Agreement (this
"AGREEMENT") is entered into on February 26, 2000 between 3Com Corporation, a
Delaware corporation ("3COM"), and Palm, Inc., a Delaware corporation
("PALM"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the ARTICLE IV below.
RECITALS
WHEREAS, 3Com and its Subsidiaries have transferred or will transfer
to Palm and its Subsidiaries effective as of the Separation Date,
substantially all of the assets of the Palm Business in accordance with the
Master Separation and Distribution Agreement dated as of December 13, 1999
between 3Com and Palm's predecessor corporation, Palm Computing, Inc., a
California corporation (the "SEPARATION AGREEMENT").
WHEREAS, the parties desire to set forth certain agreements
regarding indemnification and insurance.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
MUTUAL RELEASES; INDEMNIFICATION
SECTION 1.1. RELEASE OF PRE-CLOSING CLAIMS.
(a) PALM RELEASE. Except as provided in SECTION 1.1(c) and SCHEDULE
1.1 to this Agreement, effective as of the Separation Date, Palm does hereby,
for itself and as agent for each member of the Palm Group, remise, release
and forever discharge the 3Com Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or
any conditions existing or alleged to have existed on or before the
Separation Date, including in connection with the transactions and all other
activities to implement any of the Separation, the IPO and the Distribution.
(b) 3COM RELEASE. Except as provided in SECTION 1.1(c) and SCHEDULE
1.1 to this Agreement, effective as of the Separation Date, 3Com does hereby,
for itself and as agent for each member of the 3Com Group, remise, release
and forever discharge the Palm Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or
any conditions existing or alleged to have existed on or before the
Separation Date,
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including in connection with the transactions and all other activities to
implement any of the Separation, the IPO and the Distribution.
(c) NO IMPAIRMENT. Nothing contained in Section 1.1(a) or (b) shall
impair any right of any Person to enforce the Separation Agreement or any
other Ancillary Agreement (including this Agreement), in each case in
accordance with its terms.
(d) NO ACTIONS AS TO RELEASED CLAIMS. Palm agrees, for itself and as
agent for each member of the Palm Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including any claim of
contribution or any indemnification, against 3Com or any member of the 3Com
Group, or any other Person released pursuant to SECTION 1.1(A), with respect
to any Liabilities released pursuant to SECTION 1.1(A). 3Com agrees, for
itself and as agent for each member of the 3Com Group, not to make any claim
or demand, or commence any Action asserting any claim or demand, including
any claim of contribution or any indemnification, against Palm or any member
of the Palm Group, or any other Person released pursuant to SECTION 1.1(B),
with respect to any Liabilities released pursuant to SECTION 1.1(B).
(e) FURTHER INSTRUMENTS. At any time, at the request of any other
party, each party shall cause each member of its respective Group to execute
and deliver releases reflecting the provisions hereof.
SECTION 1.2. INDEMNIFICATION BY PALM. Except as otherwise provided
in this Agreement, Palm shall, for itself and as agent for each member of the
Palm Group, indemnify, defend (or, where applicable, pay the defense costs
for) and hold harmless the 3Com Indemnitees from and against any and all
Liabilities that any third party seeks to impose upon the 3Com Indemnitees,
or which are imposed upon the 3Com Indemnitees, and that relate to, arise out
of or result from any of the following items (without duplication):
(i) the Palm Business, any Palm Liability or any Palm
Contract;
(ii) any breach by Palm or any member of the Palm Group of
the Separation Agreement or any of the Ancillary Agreements (including this
Agreement); and
(iii) any IPO Liabilities.
In the event that any member of the Palm Group makes a payment to the 3Com
Indemnitees hereunder, and any of the 3Com Indemnitees subsequently diminishes
the Liability on account of which such payment was made, either directly or
through a third-party recovery, 3Com will promptly repay (or will procure a 3Com
Indemnitee to promptly repay) such member of the Palm Group the amount by which
the payment made by such member of the Palm Group exceeds the actual cost of the
associated indemnified Liability. This SECTION 1.2 shall not apply to any
Liability indemnified under SECTION 1.4.
SECTION 1.3. INDEMNIFICATION BY 3COM. Except as otherwise provided
in this Agreement, 3Com shall, for itself and as agent for each member of the
3Com Group, indemnify, defend (or, where applicable, pay the defense costs
for) and hold harmless the Palm Indemnitees from and
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against any and all Liabilities that any third party seeks to impose upon the
Palm Indemnitees, or which are imposed upon the Palm Indemnitees, and that
relate to, arise out of or result from any of the following items (without
duplication):
(i) the 3Com Business or any Liability of the 3Com Group
other than the Palm Liabilities; and
(ii) any breach by 3Com or any member of the 3Com Group of
the Separation Agreement or any of the Ancillary Agreements (including this
Agreement).
In the event that any member of the 3Com Group makes a payment to the Palm
Indemnitees hereunder, and any of the Palm Indemnitees subsequently
diminishes the Liability on account of which such payment was made, either
directly or through a third-party recovery, Palm will promptly repay (or will
procure a Palm Indemnitee to promptly repay) such member of the 3Com Group
the amount by which the payment made by such member of the 3Com Group exceeds
the actual cost of the indemnified Liability. This SECTION 1.3 shall not
apply to any Liability indemnified under SECTION 1.4.
SECTION 1.4. INDEMNIFICATION WITH RESPECT TO ENVIRONMENTAL ACTIONS
AND CONDITIONS.
(a) INDEMNIFICATION BY PALM. Palm shall, for itself and as agent for
each member of the Palm Group, indemnify, defend and hold harmless the 3Com
Indemnitees from and against any and all Environmental Actions relating to,
arising out of or resulting from Environmental Conditions (i) arising out of
operations occurring on and after the Separation Date at any of the Palm
Facilities, or (ii) on any of the Palm Facilities arising from an event
causing contamination that first occurs on or after the Separation Date
(including any Release of Hazardous Materials occurring after the Separation
Date that migrates to any of the Palm Facilities), except to the extent that
such Environmental Conditions arise out of the operations of the 3Com Group
on and after the Separation Date.
(b) INDEMNIFICATION BY 3COM. 3Com shall, for itself and as agent for
each member of the 3Com Group, indemnify, defend and hold harmless the Palm
Indemnitees from and against any and all Environmental Actions relating to,
arising out of or resulting from any of the following items:
(i) Environmental Conditions (x) existing on, under, about
or in the vicinity of any of the Palm Facilities prior to the Separation
Date, or (y) arising out of operations occurring on or before the Separation
Date at any of the Palm Facilities;
(ii) Except as arising out of the operations of the Palm
Group on and after the Separation Date, Environmental Conditions on, under,
about or arising out of operations occurring at any time, whether before or
after the Separation Date, at any of the 3Com Facilities; and
(iii) Pre-Separation Third Party Site Liabilities.
(C) AGREEMENT REGARDING PAYMENTS TO INDEMNITEE. In the event an
Indemnifying Party makes any payment to or on behalf of an Indemnitee with
respect to an Environmental Action for
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which the Indemnifying Party is obligated to indemnify under this SECTION
1.4, and the Indemnitee subsequently receives any payment from a third party
on account of the same financial obligation covered by the payment made by
the Indemnifying Party for that Environmental Action or otherwise diminishes
the financial obligation, the Indemnitee will promptly pay the Indemnifying
Party the amount by which the payment made by the Indemnifying Party, exceeds
the actual cost of the financial obligation.
SECTION 1.5. REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER
RECOVERIES. The amount that any party (an "Indemnifying Party") is or may be
required to pay to any other Person (an "Indemnitee") pursuant to Section
1.2, 1.3 or 1.4, as applicable, shall be reduced (retroactively or
prospectively) by any Insurance Proceeds or other amounts actually recovered
from third parties by or on behalf of such Indemnitee in respect of the
related loss. The existence of a claim by an Indemnitee for monies from an
insurer or against a third party in respect of any indemnifiable loss shall
not, however, delay any payment pursuant to the indemnification provisions
contained herein and otherwise determined to be due and owing by an
Indemnifying Party. Rather the Indemnifying Party shall make payment in full
of the amount determined to be due and owing by it against an assignment by
the Indemnitee to the Indemnifying Party of the entire claim of the
Indemnitee for Insurance Proceeds or against such third party.
Notwithstanding any other provisions of this Agreement, it is the intention
of the parties that no insurer or any other third party shall be (i) entitled
to a benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions, or (ii) relieved of the responsibility
to pay any claims for which it is obligated. If an Indemnitee has received
the payment required by this Agreement from an Indemnifying Party in respect
of any indemnifiable loss and later receives Insurance Proceeds or other
amounts in respect of such indemnifiable loss, then such Indemnitee shall
hold such Insurance Proceeds or other amounts in trust for the benefit of the
Indemnifying Party (or Indemnifying Parties) and shall pay to the
Indemnifying Party, as promptly as practicable after receipt, a sum equal to
the amount of such Insurance Proceeds or other amounts received, up to the
aggregate amount of any payments received from the Indemnifying Party
pursuant to this Agreement in respect of such indemnifiable loss (or, if
there is more than one Indemnifying Party, the Indemnitee shall pay each
Indemnifying Party, its proportionate share (based on payments received from
the Indemnifying Parties) of such Insurance Proceeds).
SECTION 1.6. PROCEDURES FOR DEFENSE, SETTLEMENT AND
INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIMS. If a 3Com Indemnitee or a Palm Indemnitee (as
applicable) (an "INDEMNITEE") shall receive notice or otherwise learn of the
assertion by a Person (including any Governmental Authority) who is not a member
of the 3Com Group or the Palm Group of any claim or of the commencement by any
such Person of any Action (collectively, a "THIRD PARTY CLAIM") with respect to
which a party (an "INDEMNIFYING PARTY") may be obligated to provide
indemnification to such Indemnitee pursuant to SECTION 1.2, 1.3 or 1.4, or any
other section of the Separation Agreement or any Ancillary Agreement (including
this Agreement), 3Com and Palm (as applicable) will ensure that such Indemnitee
shall give such Indemnifying Party written notice thereof within 30 days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the delay
or
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failure of any Indemnitee or other Person to give notice as provided in this
SECTION 1.6(A) shall not relieve the related Indemnifying Party of its
obligations under this ARTICLE I, except to the extent that such Indemnifying
Party is actually and substantially prejudiced by such delay or failure to
give notice.
(b) DEFENSE BY INDEMNIFYING PARTY. An Indemnifying Party will manage
the defense of and may settle or compromise any Third Party Claim. Within 30
days after the receipt of notice from an Indemnitee in accordance with
SECTION 1.6(A) (or sooner, if the nature of such Third Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee that the
Indemnifying Party will assume responsibility for managing the defense of
such Third Party Claim, which notice shall specify any reservations or
exceptions.
(c) DEFENSE BY INDEMNITEE. If an Indemnifying Party fails to assume
responsibility for managing the defense of a Third Party Claim, or fails to
notify an Indemnitee that it will assume responsibility as provided in
SECTION 1.6(A), such Indemnitee may manage the defense of such Third Party
Claim; PROVIDED, HOWEVER, that the Indemnifying Party shall reimburse all
such costs and expenses in the event it is ultimately determined that the
Indemnifying Party is obligated to indemnify the Indemnitee with respect to
such Third Party Claim.
(d) NO SETTLEMENT BY INDEMNITEE WITHOUT CONSENT. Unless the
Indemnifying Party has failed to manage the defense of the Third Party Claim
in accordance with the terms of this Agreement, no Indemnitee may settle or
compromise any Third Party Claim without the consent of the Indemnifying
Party.
(e) NO CONSENT TO CERTAIN JUDGMENTS OR SETTLEMENTS WITHOUT CONSENT.
Notwithstanding any provision of this SECTION 1.6, no party shall consent to
entry of any judgment or enter into any settlement of a Third Party Claim
without the consent of the other party (such consent not to be unreasonably
withheld) if the effect of such judgment or settlement is to (A) permit any
injunction, declaratory judgment, other order or other nonmonetary relief to
be entered, directly or indirectly, against the other party or (B) affect the
other party in a material fashion due to the allocation of Liabilities and
related indemnities set forth in the Separation Agreement, this Agreement or
any other Ancillary Agreement.
SECTION 1.7. ADDITIONAL MATTERS.
(a) COOPERATION IN DEFENSE AND SETTLEMENT. With respect to any Third
Party Claim that implicates both Palm and 3Com in a material fashion due to
the allocation of Liabilities, responsibilities for management of defense and
related indemnities set forth in the Separation Agreement, this Agreement or
any of the Ancillary Agreements, the parties agree to cooperate fully and
maintain a joint defense (in a manner that will preserve the attorney-client
privilege with respect thereto) so as to minimize such Liabilities and
defense costs associated therewith. The party that is not responsible for
managing the defense of such Third Party Claims shall, upon reasonable
request, be consulted with respect to significant matters relating thereto
and may, if necessary or helpful, associate counsel to assist in the defense
of such claims.
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(b) SUBSTITUTION. In the event of an Action in which the Indemnifying
Party is not a named defendant, if either the Indemnitee or the Indemnifying
Party shall so request, the parties shall endeavor to substitute the
Indemnifying Party for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this ARTICLE I shall not be altered.
(c) SUBROGATION. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(d) NOT APPLICABLE TO TAXES. This Agreement shall not apply to Taxes
(which are covered by the Tax Sharing Agreement).
SECTION 1.8. SURVIVAL OF INDEMNITIES. Subject to SECTION 3.8, the
rights and obligations of the members of the 3Com Group and the Palm Group
under this ARTICLE I shall survive the sale or other transfer by any party of
any Assets or businesses or the assignment by it of any Liabilities or the
sale by any member of the 3Com Group or the Palm Group of the capital stock
or other equity interests of any Subsidiary to any Person.
ARTICLE II.
INSURANCE MATTERS
SECTION 2.1. PALM INSURANCE COVERAGE DURING THE TRANSITION PERIOD.
(a) MAINTAIN COMPARABLE INSURANCE. Throughout the period beginning on
the Separation Date and ending on the Distribution Date (i.e., the "INSURANCE
TRANSITION PERIOD"), 3Com shall, subject to insurance market conditions and
other factors beyond its control, maintain policies of insurance, including for
the benefit of Palm or any of its Subsidiaries, directors, officers, employees
or other covered parties (collectively, the "PALM COVERED PARTIES") which are
comparable to those maintained generally by 3Com; PROVIDED, HOWEVER, that if
3Com determines that (i) the amount or scope of such coverage will be reduced to
a level materially inferior to the level of coverage in existence immediately
prior to the Insurance Transition Period or (ii) the retention or deductible
level applicable to such coverage, if any, will be increased to a level
materially greater than the levels in existence immediately prior to the
Insurance Transition Period, 3Com shall give Palm notice of such determination
as promptly as practicable. Upon notice of such determination, Palm shall be
entitled to no less than 60 days to evaluate its options regarding continuance
of coverage hereunder and may cancel its interest in all or any portion of such
coverage as of any day within such 60 day period.
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(b) REIMBURSEMENT FOR PREMIUMS. Palm shall promptly pay or reimburse
3Com, as the case may be, for premium expenses, and Palm Covered Parties shall
promptly pay or reimburse 3Com for any costs and expenses which 3Com may incur
in connection with the insurance coverages maintained pursuant to this SECTION
2.1, including but not limited to any subsequent premium adjustments. All
payments and reimbursements by Palm and Palm Covered Parties to 3Com shall be
made within thirty (30) days after Palm's receipt of an invoice from 3Com.
SECTION 2.2. COOPERATION AND AGREEMENT NOT TO RELEASE CARRIERS.
Each of 3Com and Palm will share such information as is reasonably necessary
in order to permit the other to manage and conduct its insurance matters in
an orderly fashion. Each of 3Com and Palm, at the request of the other, shall
cooperate with and use commercially reasonable efforts to assist the other in
recoveries for claims made under any insurance policy for the benefit of any
insured party, and neither 3Com nor Palm, nor any of their Subsidiaries,
shall take any action which would intentionally jeopardize or otherwise
interfere with either party's ability to collect any proceeds payable
pursuant to any insurance policy. Except as otherwise contemplated by the
Separation Agreement, this Agreement or any Ancillary Agreement, after the
Separation Date, neither 3Com nor Palm shall (and shall ensure that no member
of their respective Groups shall), without the consent of the other, provide
any insurance carrier with a release, or amend, modify or waive any rights
under any such policy or agreement, if such release, amendment, modification
or waiver would adversely affect any rights or potential rights of any member
of the other Group thereunder. However, nothing in this SECTION 2.2 shall (A)
preclude any member of any Group from presenting any claim or from exhausting
any policy limit, (B) require any member of any Group to pay any premium or
other amount or to incur any Liability, or (C) require any member of any
Group to renew, extend or continue any policy in force.
SECTION 2.3. PALM INSURANCE COVERAGE AFTER THE INSURANCE TRANSITION
PERIOD. From and after expiration of the Insurance Transition Period, Palm
shall be responsible for obtaining and maintaining insurance programs for its
risk of loss and such insurance arrangements shall be separate and apart from
3Com's insurance programs. Notwithstanding the foregoing, 3Com, upon the
request of Palm, shall use all commercially reasonable efforts to assist Palm
in the transition to its own separate insurance programs from and after the
Insurance Transition Period, and shall provide Palm with any information that
is in the possession of 3Com and is reasonably available and necessary to
either obtain insurance coverages for Palm or to assist Palm in preventing
unintended self-insurance, in whatever form.
SECTION 2.4. RESPONSIBILITIES FOR DEDUCTIBLES AND/OR SELF-INSURED
OBLIGATIONS. Palm will reimburse 3Com for all amounts necessary to exhaust or
otherwise satisfy all applicable self-insured retentions, amounts for fronted
policies, deductibles and retrospective premium adjustments and similar
amounts not covered by Insurance Policies in connection with Palm Liabilities
and Insured Palm Liabilities.
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SECTION 2.5. PROCEDURES WITH RESPECT TO INSURED PALM LIABILITIES.
(a) REIMBURSEMENT. Palm will reimburse 3Com for all amounts incurred to
pursue insurance recoveries from Insurance Policies for Insured Palm
Liabilities.
(b) MANAGEMENT OF CLAIMS. The defense of claims, suits or actions
giving rise to potential or actual Insured Palm Liabilities will be managed (in
conjunction with 3Com's insurers, as appropriate) by the party that would have
had responsibility for managing such claims, suits or actions had such Insured
Palm Liabilities been Palm Liabilities.
SECTION 2.6. INSUFFICIENT LIMITS OF LIABILITY FOR 3COM LIABILITIES
AND PALM LIABILITIES.
In the event that there are insufficient limits of liability available
under 3Com's Insurance Policies in effect prior to the Distribution Date to
cover the Liabilities of 3Com and/or Palm that would otherwise be covered by
such Insurance Policies, then to the extent that other insurance is not
available to 3Com and/or Palm for such Liabilities an adjustment will be made in
accordance with the following procedures:
(a) Each party will be allocated an amount equal to their Shared
Percentage of the lesser of (A) the available limits of liability available
under 3Com's Insurance Policies in effect prior to the Distribution Date net of
uncollectible amounts attributable to insurer insolvencies, and (B) the proceeds
received from 3Com's Insurance Policies if the Liabilities are the subject of
disputed coverage claims and, following consultation with each other, 3Com
and/or Palm agree to accept less than full policy limits from 3Com's and Palm's
insurers (the "COVERAGE AMOUNT").
(b) A party who receives more than its share of the Coverage Amount
(the "OVERALLOCATED PARTY") agrees to reimburse the other party (the
"UNDERALLOCATED PARTY") to the extent that the Liabilities of the Underallocated
Party that would have been covered under such Insurance Policies is less than
the Underallocated Party's share of the Coverage Amount.
(c) This SECTION 2.6(a) shall terminate ten years following the
Distribution Date.
SECTION 2.7. COOPERATION. 3Com and Palm will cooperate with each
other in all respects, and they shall execute any additional documents which
are reasonably necessary, to effectuate the provisions of this ARTICLE II.
SECTION 2.8. NO ASSIGNMENT OR WAIVER. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy
of any member of the 3Com Group in respect of any Insurance Policy or any
other contract or policy of insurance.
SECTION 2.9. NO LIABILITY. Palm does hereby, for itself and as
agent for each other member of the Palm Group, agree that no member of the
3Com Group or any 3Com Indemnitee shall have any Liability whatsoever as a
result of the insurance policies and practices of 3Com and its Subsidiaries
as in effect at any time prior to the Distribution Date, including as a
result of the level or scope of any such insurance, the creditworthiness of
any insurance carrier, the terms and conditions
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of any policy, the adequacy or timeliness of any notice to any insurance
carrier with respect to any claim or potential claim or otherwise.
SECTION 2.10. ADDITIONAL OR ALTERNATE INSURANCE. Notwithstanding
any provision of this Agreement, during the Insurance Transition Period 3Com
and Palm shall work together to evaluate insurance options and secure
additional or alternate insurance for Palm and/or 3Com if desired and cost
effective. Nothing in this Agreement shall be deemed to restrict any member
of the Palm Group from acquiring at its own expense any other insurance
policy in respect of any Liabilities or covering any period.
SECTION 2.11. FURTHER AGREEMENTS. The Parties acknowledge that they
intend to allocate financial obligations without violating any laws regarding
insurance, self-insurance or other financial responsibility. If it is
determined that any action undertake pursuant to the Separation Agreement,
this Agreement or any Ancillary Agreement is violative of any insurance,
self-insurance or related financial responsibility law or regulation, the
parties agree to work together to do whatever is necessary to comply with
such law or regulation while trying to accomplish, as much as possible, the
allocation of financial obligations as intended in the Separation Agreement,
this Agreement and any Ancillary Agreement.
SECTION 2.12. MATTERS GOVERNED BY EMPLOYEE MATTERS AGREEMENT. This
ARTICLE II shall not apply to any insurance policies that are the subject of
the Employee Matters Agreement.
ARTICLE III.
MISCELLANEOUS
SECTION 3.1. ENTIRE AGREEMENT. This Agreement, the Master
Separation Agreement, the other Ancillary Agreements and the Exhibits and
Schedules attached hereto and thereto, constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
SECTION 3.2. GOVERNING LAW. This Agreement shall be construed in
accordance with and all Disputes hereunder shall be governed by the laws of
the State of California, excluding its conflict of law rules and the United
Nations Convention on Contracts for the International Sale of Goods. The
Superior Court of Santa Clara County and/or the United States District Court
for the Northern District of California shall have jurisdiction and venue
over all Disputes between the parties that are permitted to be brought in a
court of law pursuant to SECTION 3.3.
SECTION 3.3. DISPUTE RESOLUTION. If a dispute, controversy or claim
("Dispute") arises between the parties relating to the interpretation or
performance of this Agreement, or the grounds for the termination hereof,
appropriate senior executives (e.g. director or V.P. level) of each party who
shall have the authority to resolve the matter shall meet to attempt in good
faith to negotiate a resolution of the Dispute prior to pursuing other
available remedies. The initial meeting between the appropriate senior
executives shall be referred to herein as the "Dispute Resolution
Commencement Date." Discussions and correspondence relating to trying to
resolve such Dispute shall be treated as
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confidential information developed for the purpose of settlement and shall be
exempt from discovery or production and shall not be admissible. If the
senior executives are unable to resolve the Dispute within thirty (30) days
from the Dispute Resolution Commencement Date, and either party wishes to
pursue its rights relating to such Dispute, then the Dispute will be mediated
by a mutually acceptable mediator appointed pursuant to the mediation rules
of JAMS/Endispute within thirty (30) days after written notice by one party
to the other demanding non-binding mediation. Neither party may unreasonably
withhold consent to the selection of a mediator or the location of the
mediation. Both parties will share the costs of the mediation equally, except
that each party shall bear its own costs and expenses, including attorney's
fees, witness fees, travel expenses, and preparation costs. The parties may
also agree to replace mediation with some other form of non-binding or
binding ADR.
Any Dispute which the parties cannot resolve through mediation within
ninety (90) days of the Dispute Resolution Commencement Date, unless otherwise
mutually agreed, shall be submitted to final and binding arbitration under the
then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by three (3) arbitrators in Santa Clara County, California.
Such arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA rules.
The arbitrators will be instructed to prepare and deliver a written, reasoned
opinion stating their decision within thirty (30) days of the completion of the
arbitration. The prevailing party in such arbitration shall be entitled to
expenses, including costs and attorneys' and other professional fees, incurred
in connection with the arbitration (but excluding any costs and fees associated
with prior negotiation or mediation). The decision of the arbitrator shall be
final and non-appealable and may be enforced in any court of competent
jurisdiction. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to adversely affect the rights of either
party.
Any Dispute regarding the following is not required to be negotiated,
mediated or arbitrated prior to seeking relief from a court of competent
jurisdiction: breach of any obligation of confidentiality; infringement,
misappropriation, or misuse of any intellectual property right; any other claim
where interim relief from the court is sought to prevent serious and irreparable
injury to one of the parties or to others. However, the parties to the Dispute
shall make a good faith effort to negotiate and mediate such Dispute, according
to the above procedures, while such court action is pending.
SECTION 3.4. NOTICES. Notices, offers, requests or other
communications required or permitted to be given by either party pursuant to
the terms of this Agreement shall be given in writing to the respective
parties to the following addresses:
if to 3Com:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 326-6434
if to Palm:
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Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.
SECTION 3.5. PARTIES IN INTEREST. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein,
shall be binding upon 3Com, 3Com's Subsidiaries, Palm and Palm's Subsidiaries
and inure solely to the benefit of the Palm Indemnitees and the 3Com
Indemnitees and their respective permitted assigns, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 3.6. OTHER AGREEMENTS EVIDENCING INDEMNIFICATION
OBLIGATIONS. 3Com hereby agrees to execute, for the benefit of any Palm
Indemnitee, such documents as may be reasonably requested by such Palm
Indemnitee, evidencing 3Com's agreement that the indemnification obligations
of 3Com set forth in this Agreement inure to the benefit of and are
enforceable by such Palm Indemnitee. Palm hereby agrees to execute, for the
benefit of any 3Com Indemnitee, such documents as may be reasonably requested
by such 3Com Indemnitee, evidencing Palm's agreement that the indemnification
obligations of Palm set forth in this Agreement inure to the benefit of and
are enforceable by such 3Com Indemnitee.
SECTION 3.7. COUNTERPARTS. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, may be
executed in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
SECTION 3.8. ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement. This Agreement
may be enforced separately by each member of the 3Com Group and each member
of the Palm Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party,
and any such assignment shall be void; provided, however, either party may
assign this Agreement to a successor entity in conjunction with such party's
reincorporation.
SECTION 3.9. SEVERABILITY. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated
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hereby is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
SECTION 3.10. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay
on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence
in, any breach of any representation, warranty or agreement herein, nor shall
any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right.
SECTION 3.11. AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.
SECTION 3.12. AUTHORITY. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and
authority to execute, deliver and perform this Agreement, (b) the execution,
delivery and performance of this Agreement by it have been duly authorized by
all necessary corporate or other action, (c) it has duly and validly executed
and delivered this Agreement, and (d) this Agreement is a legal, valid and
binding obligation, enforceable against it in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and general equity
principles.
SECTION 3.13. INTERPRETATION. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table or contents to
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized term
used in any Schedule or Exhibit but not otherwise defined therein, shall have
the meaning assigned to such term in this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
ARTICLE IV.
DEFINITIONS
SECTION 4.1. 3COM BUSINESS. "3COM BUSINESS" means any business of
3Com other than the Palm Business.
SECTION 4.2. 3COM FACILITIES. "3COM FACILITIES" means all of the
real property and improvements thereon owned or occupied at any time on or
before the Separation Date by any member of the 3Com Group, whether for the
3Com Business or the Palm Business, excluding the Palm Facilities.
SECTION 4.3. 3COM GROUP. "3COM GROUP" means 3Com, each Subsidiary
and Affiliated Company of 3Com (other than any member of the Palm Group)
immediately after the Separation
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Date, after giving effect to the Non-US Plan and each Person that becomes a
Subsidiary or Affiliate Company of 3Com after the Separation Date.
SECTION 4.4. 3COM INDEMNITEES. "3COM INDEMNITEES" means 3Com, each
member of the 3Com Group and each of their respective directors, officers and
employees.
SECTION 4.5. ACTION. "ACTION" means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before
any federal, state, local, foreign or international governmental authority or
any arbitration or mediation tribunal.
SECTION 4.6. AFFILIATED COMPANY. "AFFILIATED COMPANY" of any Person
means any entity that controls, is controlled by, or is under common control
with such Person. As used herein, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such entity, whether through ownership of voting securities
or other interests, by contract or otherwise.
SECTION 4.7. ASSETS. "ASSETS" has the meaning set forth in SECTION
4.4 of the Assignment Agreement.
SECTION 4.8. ASSIGNMENT AGREEMENT. "ASSIGNMENT AGREEMENT" means the
General Assignment and Assumption Agreement attached as EXHIBIT C to the
Separation Agreement.
SECTION 4.9. COVERAGE AMOUNT. "COVERAGE AMOUNT" has the meaning set
forth in SECTION 2.6(a) of this Agreement.
SECTION 4.10. EMPLOYEE MATTERS AGREEMENT. "EMPLOYEE MATTERS
AGREEMENT" means the Employee Matters Agreement attached as EXHIBIT E to the
Separation Agreement.
SECTION 4.11. ENVIRONMENTAL ACTIONS. "ENVIRONMENTAL ACTIONS" means
any notice, claim, act, cause of action, order, decree or investigation by
any third party (including, without limitation, any Governmental Authority)
alleging potential liability (including potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
damage to flora or fauna caused by Environmental Conditions, real property
damages, personal injuries or penalties) arising out of, based on or
resulting from the Release of or exposure of any individual to any Hazardous
Materials.
SECTION 4.12. ENVIRONMENTAL CONDITIONS. "ENVIRONMENTAL CONDITIONS"
means the presence in the environment, including the soil, groundwater,
surface water or ambient air, of any Hazardous Material at a level which
exceeds any applicable standard or threshold under any Environmental Law or
otherwise requires investigation or remediation (including, without
limitation, investigation, study, health or risk assessment, monitoring,
removal, treatment or transport) under any applicable Environmental Laws.
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SECTION 4.13. ENVIRONMENTAL LAWS. "ENVIRONMENTAL LAWS" means all
laws and regulations of any Governmental Authority with jurisdiction that
relate to the protection of the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) including laws and
regulations relating to the Release of Hazardous Materials, or otherwise
relating to the treatment, storage, disposal, transport or handling of
Hazardous Materials, or to the exposure of any individual to a Release of
Hazardous Materials.
SECTION 4.14. HAZARDOUS MATERIALS. "HAZARDOUS MATERIALS" means
chemicals, pollutants, contaminants, wastes, toxic substances, radioactive
and biological materials, hazardous substances, petroleum and petroleum
products or any fraction thereof.
SECTION 4.15. INDEMNITEE. "INDEMNITEE" has the meaning set forth in
SECTION 1.5(a) hereof.
SECTION 4.16. INSURANCE POLICIES. "INSURANCE POLICIES" means
insurance policies pursuant to which a Person makes a true risk transfer to
an insurer.
SECTION 4.17. INSURANCE PROCEEDS. "INSURANCE PROCEEDS" means those
monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
from Insurance Policies.
SECTION 4.18. INSURANCE TRANSITION PERIOD. "INSURANCE TRANSITION
PERIOD" has the meaning set forth in SECTION 2.1 of this Agreement.
SECTION 4.19. INSURED PALM LIABILITY. "Insured Palm Liability" means
any Palm Liability to the extent that (i) it is covered under the terms of
3Com's Insurance Policies in effect prior to the Distribution Date, and (ii)
Palm is not a named insured under, or otherwise entitled to the benefits of,
such Insurance Policies.
SECTION 4.20. IPO DATE. "IPO DATE" means the date on which Palm
effects its initial public offering of common stock. Scheduled to occur on or
before June 2, 2000.
SECTION 4.21. IPO LIABILITIES. "IPO LIABILITIES" means any
Liabilities relating to, arising out of or resulting from any untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, with respect to all
information contained in the IPO Registration Statement or any preliminary,
final or supplemental prospectus forming a part of a IPO Registration
Statement.
SECTION 4.22. IPO REGISTRATION STATEMENT. "IPO REGISTRATION
STATEMENT" means the registration statement on Form S-1 pursuant to the
Securities Act to be filed with the SEC registering the shares of common
stock of Palm to be issued in the IPO, together with all amendments thereto.
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SECTION 4.23. LIABILITIES. "LIABILITIES" has the meaning set forth
in SECTION 4.15 of the Assignment Agreement.
SECTION 4.24. NON-US PLAN. "NON-US PLAN" means the plan of
reorganization described in EXHIBIT K of the Separation Agreement.
SECTION 4.25. PALM BUSINESS. "PALM BUSINESS" means the business and
operations of Palm, as described in the IPO Registration Statement and except
as otherwise expressly provided herein, any terminated, divested or
discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Palm Business as then
conducted.
SECTION 4.26. PALM CONTRACTS. "PALM CONTRACTS" has the meaning set
forth in SECTION 4.23 of the Assignment Agreement.
SECTION 4.27. PALM COVERED PARTIES. "PALM COVERED PARTIES" shall
have the meaning set forth in SECTION 2.1(a) of this Agreement.
SECTION 4.28. PALM FACILITIES. "PALM FACILITIES" means all of those
facilities to be transferred to Palm on the Separation Date as set forth on
Schedule 1 to the Real Estate Matters Agreement.
SECTION 4.29. PALM GROUP. "PALM GROUP" means Palm, each Subsidiary
and Affiliated Company of Palm immediately after the Separation Date or that
is contemplated to be a Subsidiary or Affiliated Company of Palm pursuant to
the Non-US Plan and each Person that becomes a Subsidiary or Affiliate
Company of Palm after the Separation Date.
SECTION 4.30. PALM INDEMNITEES. "PALM INDEMNITEES" means Palm, each
member of the Palm Group and each of their respective directors, officers and
employees.
SECTION 4.31. PALM LIABILITIES. "PALM LIABILITIES" has the meaning
set forth in SECTION 1.3 of the Assignment Agreement.
SECTION 4.32. PERSON. "PERSON" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision
thereof.
SECTION 4.33. PRE-SEPARATION THIRD PARTY SITE LIABILITIES.
"PRE-SEPARATION THIRD PARTY SITE LIABILITIES" means any and all Environmental
Actions arising out of Hazardous Materials found on, under or about any
landfill any waste, storage, transfer or recycling site and resulting from or
arising out of Hazardous Materials stored, treated, recycled disposed or
otherwise handled at such site prior to the Separation Date (whether for the
operation of the Palm Business or for the operation of any past or presently
(as of the date hereof) existing 3Com Business as operated on or before the
Separation Date).
SECTION 4.34. RELEASE. "RELEASE" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor
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environment, including, without limitation, the movement of Hazardous
Materials through ambient air, soil, surface water, groundwater, wetlands,
land or subsurface strata.
SECTION 4.35. SEPARATION. "SEPARATION" means the transfer and
contribution from 3Com to Palm, and Palm's receipt and assumption of,
directly or indirectly, substantially all of the Assets and Liabilities
currently associated with the Palm Business and the stock, investments or
similar interests currently held by 3Com in subsidiaries and other entities
that conduct such business.
SECTION 4.36. SEPARATION AGREEMENT. "SEPARATION AGREEMENT" means the
Master Separation and Distribution Agreement dated as of December 13, 1999,
of which this is an Exhibit thereto.
SECTION 4.37. SEPARATION DATE. "SEPARATION DATE" means the effective
date and time of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation, which shall be
12:01 a.m., Pacific Time, February 26, 2000, or such date as may be fixed by
the Board of Directors of 3Com.
SECTION 4.38. SHARED 3COM PERCENTAGE. "SHARED 3COM PERCENTAGE" means
90%.
SECTION 4.39. SHARED PALM PERCENTAGE. "SHARED PALM PERCENTAGE" means
10%.
SECTION 4.40. SHARED PERCENTAGE. "SHARED PERCENTAGE" means the
Shared Palm Percentage or the Shared 3Com Percentage, as the case may be.
SECTION 4.41. SUBSIDIARY. "SUBSIDIARY" of any Person means a
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries; provided, however, that no
Person that is not directly or indirectly wholly-owned by any other Person
shall be a Subsidiary of such other Person unless such other Person controls,
or has the right, power or ability to control, that Person.
SECTION 4.42. TAX SHARING AGREEMENT. "TAX SHARING AGREEMENT" means
the Tax Sharing Agreement, attached as EXHIBIT F to the Separation Agreement.
SECTION 4.43. TAXES. "TAXES" has the meaning set forth in the Tax
Sharing Agreement.
SECTION 4.44. THIRD PARTY CLAIM. "THIRD PARTY CLAIM" has the meaning
set forth in SECTION 1.5(a) of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
-16-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Indemnification and Insurance Matters Agreement to be executed on its behalf
by its officers thereunto duly authorized on the day and year first above
written.
3COM CORPORATION PALM, INC.
By: By:
---------------------------------- ---------------------------------
Name: Name:
-------------------------------- -------------------------------
Title: Title:
------------------------------- ------------------------------
<PAGE>
SCHEDULE 1.1
Section 1.1, Release of Pre-Closing Claims, shall not include any
inter-company balances between Palm and 3Com existing as of the Separation
Date.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-02-2000
<PERIOD-END> FEB-25-2000
<CASH> 40,005
<SECURITIES> 0
<RECEIVABLES> 118,818
<ALLOWANCES> 4,498
<INVENTORY> 29,774
<CURRENT-ASSETS> 212,503
<PP&E> 17,918
<DEPRECIATION> 7,365
<TOTAL-ASSETS> 238,544
<CURRENT-LIABILITIES> 317,693
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (79,532)
<TOTAL-LIABILITY-AND-EQUITY> 238,544
<SALES> 707,352
<TOTAL-REVENUES> 707,352
<CGS> 399,821
<TOTAL-COSTS> 399,821
<OTHER-EXPENSES> 251,419
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 56,744
<INCOME-TAX> 23,271
<INCOME-CONTINUING> 33,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,473
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
