Master Separation And Distribution Agreement

EXHIBIT 2.1


MASTER SEPARATION AND DISTRIBUTION AGREEMENT


BETWEEN


3COM CORPORATION


AND


PALM COMPUTING, INC.


EFFECTIVE AS OF


DECEMBER 13, 1999


TABLE OF CONTENTS


PAGE
---- ARTICLE I SEPARATION..................................................................................................2
Section 1.1 Separation Date............................................................................2
Section 1.2 Closing of Transactions....................................................................2
Section 1.3 Exchange of Secretary's Certificates.......................................................2


ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE.................................................2
Section 2.1 Documents to Be Delivered by 3Com..........................................................2
Section 2.2 Documents to Be Delivered by Palm..........................................................3


ARTICLE III THE IPO AND ACTIONS PENDING THE IPO.......................................................................3
Section 3.1 Transactions Prior to the IPO..............................................................3
Section 3.2 Cooperation................................................................................4
Section 3.3 Conditions Precedent to Consummation of the IPO............................................4


ARTICLE IV THE DISTRIBUTION...........................................................................................5
Section 4.1 The Distribution...........................................................................5
Section 4.2 Actions Prior to the Distribution..........................................................6
Section 4.3 Sole Discretion of 3Com....................................................................6
Section 4.4 Conditions Precedent to Distribution.......................................................6
Section 4.5 Fractional Shares..........................................................................7


ARTICLE V COVENANTS AND OTHER MATTERS.................................................................................8
Section 5.1 Other Agreements...........................................................................8
Section 5.2 Further Instruments........................................................................8
Section 5.3 Additional Transitional Services Agreements................................................8
Section 5.4 Agreement for Exchange of Information......................................................8
Section 5.5 Auditors and Audits; Annual and Quarterly Statements and Accounting.......................10
Section 5.6 Consistency with Past Practices...........................................................12
Section 5.7 Payment of Expenses.......................................................................12
Section 5.8 Foreign Subsidiaries......................................................................12
Section 5.9 Dispute Resolution........................................................................12
Section 5.10 Governmental Approvals....................................................................13
Section 5.11 No Representation or Warranty.............................................................13
Section 5.12 Non-Solicitation of Employees.............................................................14
Section 5.13 Employee Agreements.......................................................................14
Section 5.14 Cooperation in Obtaining New Agreements...................................................15
Section 5.15 Property Damage to Palm Assets Prior to the Separation Date...............................16


ARTICLE VI MISCELLANEOUS.............................................................................................16
Section 6.1 Limitation of Liability...................................................................16
Section 6.2 Entire Agreement..........................................................................16


Section 6.3 Governing Law.............................................................................17
Section 6.4 Termination...............................................................................17
Section 6.5 Notices...................................................................................17
Section 6.6 Counterparts..............................................................................17
Section 6.7 Binding Effect; Assignment................................................................17
Section 6.8 Severability..............................................................................18
Section 6.9 Failure or Indulgence Not Waiver; Remedies Cumulative.....................................18
Section 6.10 Amendment.................................................................................18
Section 6.11 Authority.................................................................................18
Section 6.12 Interpretation............................................................................18
Section 6.13 Conflicting Agreements....................................................................19


ARTICLE VII DEFINITIONS..............................................................................................19
Section 7.1 Affiliated Company........................................................................19
Section 7.2 Governmental Approvals....................................................................19
Section 7.3 Governmental Authority....................................................................19
Section 7.4 Information...............................................................................19
Section 7.5 IPO Closing Date..........................................................................19
Section 7.6 Palm Assets...............................................................................19
Section 7.7 Palm Group................................................................................19
Section 7.8 Palm's Auditors...........................................................................19
Section 7.9 Person....................................................................................20
Section 7.10 Record Date...............................................................................20
Section 7.11 Subsidiary................................................................................20
Section 7.12 3Com Group................................................................................20
Section 7.13 3Com's Auditors...........................................................................20


EXHIBITS Exhibit A Certificate of Secretary of 3Com


Exhibit B Certificate of Secretary of Palm


Exhibit C General Assignment and Assumption Agreement


Exhibit D-1 Master Technology Ownership and License Agreement


Exhibit D-2 Master Patent Ownership and License Agreement


Exhibit D-3 Master Trademark Ownership and License Agreement


Exhibit E Employee Matters Agreement


Exhibit F Tax Sharing Agreement


Exhibit G Master Transitional Services Agreement


Exhibit H Real Estate Matters Agreement


Exhibit I Master Confidential Disclosure Agreement


Exhibit J Indemnification and Insurance Matters Agreement


Exhibit K Reorganization of Operations Outside the US (the Non-US Plan)


MASTER SEPARATION AND DISTRIBUTION AGREEMENT


This Master Separation and Distribution Agreement (this "AGREEMENT") is entered into as of December 13, 1999, between 3Com Corporation ("3COM "), a Delaware corporation, and Palm Computing, Inc. ("PALM"), a California corporation. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in ARTICLE VII hereof.


RECITALS


WHEREAS, 3Com currently owns all of the issued and outstanding common stock of Palm;


WHEREAS, Palm is engaged in the handheld computing business and related businesses as described in the IPO Registration Statement (the "PALM BUSINESS");


WHEREAS, the Boards of Directors of 3Com and Palm have each determined that it would be appropriate and desirable for 3Com to contribute and transfer to Palm, and for Palm to receive and assume, directly or indirectly, assets and liabilities currently held by 3Com and associated with the Palm Business (the "SEPARATION");


WHEREAS, 3Com and Palm currently contemplate that, following the contribution and assumption of assets and liabilities, Palm will make an initial public offering ("IPO") of an amount of its common stock pursuant to a registration statement on Form S-1 pursuant to the Securities Act of 1933, as amended (the "IPO REGISTRATION STATEMENT"), that will reduce 3Com's ownership of Palm after the IPO and any private placements of securities of Palm concluded prior to or concurrent with the IPO to not less than 80.1%;


WHEREAS, 3Com and Palm currently contemplate that in conjunction with the IPO, Palm will reincorporate from the State of California to the State of Delaware, and will change its name to Palm, Inc.;


WHEREAS, 3Com currently contemplates that, several months following such IPO, 3Com will distribute, pro rata, to the holders of its common stock, $0.001 par value, all of the shares of Palm common stock owned by 3Com (the "DISTRIBUTION");


WHEREAS, 3Com and Palm intend that the Separation and the Distribution will qualify as a tax-free reorganization under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the "CODE"), and that this Agreement is intended to be, and is hereby adopted as, a plan of reorganization under Section 368 of the Code; and


WHEREAS, the parties intend in this Agreement, including the Exhibits hereto, to set forth the principal arrangements between them regarding the separation of the Palm Business.


NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows:


ARTICLE I


SEPARATION


SECTION 1.1 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").


SECTION 1.2 CLOSING OF TRANSACTIONS. Unless otherwise provided herein, the closing of the transactions contemplated in ARTICLE II shall occur by the lodging of each of the executed instruments of transfer, assumptions of liability, undertakings, agreements, instruments or other documents executed or to be executed with Wilson Sonsini Goodrich & Rosati ("WSGR"), 650 Page Mill Road, Palo Alto, California 94304, to be held in escrow for delivery as provided in SECTION 1.3.


SECTION 1.3 EXCHANGE OF SECRETARY'S CERTIFICATES. Upon receipt of a certificate of the Secretary or an Assistant Secretary of 3Com in the form attached to this Agreement as EXHIBIT A, WSGR shall deliver to Palm on behalf of 3Com all of the items required to be delivered by 3Com hereunder pursuant to SECTION 2.1 and each such item shall be deemed to be delivered to Palm as of the Separation Date upon delivery of such certificate. Upon receipt of a certificate of the Secretary or an Assistant Secretary of Palm in the form attached to this Agreement as EXHIBIT B, WSGR shall deliver to 3Com on behalf of Palm all of the items required to be delivered by Palm pursuant to SECTION 2.2 hereunder and each such item shall be deemed to be delivered to 3Com as of the Separation Date upon receipt of such certificate.


ARTICLE II


DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE


SECTION 2.1 DOCUMENTS TO BE DELIVERED BY 3COM . On the Separation Date or such other date as agreed in connection with the Non-US Plan (as defined in SECTION 5.8), 3Com will deliver, or will cause its appropriate Subsidiaries to deliver, to Palm all of the following items and agreements (collectively, together with all agreements and documents contemplated by such agreements, the "ANCILLARY AGREEMENTS"):


(a) A duly executed General Assignment and Assumption Agreement (the "ASSIGNMENT AGREEMENT") substantially in the form attached hereto as EXHIBIT C;


(b) A duly executed Master Technology Ownership and License Agreement substantially in the form attached hereto as EXHIBIT D-1, a duly executed Master Patent Ownership and License Agreement substantially in the form attached hereto as EXHIBIT D-2 and a duly executed Master Trademark Ownership and License Agreement substantially in the form attached as EXHIBIT D-3;


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(c) A duly executed Employee Matters Agreement substantially in the form attached hereto as EXHIBIT E;


(d) A duly executed Tax Sharing Agreement substantially in the form attached hereto as EXHIBIT F;


(e) A duly executed Master Transitional Services Agreement substantially in the form attached hereto as EXHIBIT G;


(f) A duly executed Real Estate Matters Agreement substantially in the form attached hereto as EXHIBIT H;


(g) A duly executed Master Confidential Disclosure Agreement substantially in the form attached hereto as EXHIBIT I;


(h) A duly executed Indemnification and Insurance Matters Agreement substantially in the form attached hereto as EXHIBIT J;


(i) A plan of Reorganization of Operations Outside the US, as described in EXHIBIT K;


(j) Resignations of each person who is an officer or director of 3Com or its Subsidiaries, immediately prior to the Separation Date, and who will be employees of Palm from and after the Separation Date; and


(k) Such other agreements, documents or instruments as the parties may agree are necessary or desirable in order to achieve the purposes hereof.


SECTION 2.2 DOCUMENTS TO BE DELIVERED BY PALM. As of the Separation Date, Palm will deliver to 3Com all of the following:


(a) In each case where Palm is a party to any agreement or instrument referred to in SECTION 2.1, a duly executed counterpart of such agreement or instrument; and


(b) Resignations of each person who is an officer or director of Palm, immediately prior to the Separation Date, and who will be an employee of 3Com from and after the Separation Date.


ARTICLE III


THE IPO AND ACTIONS PENDING THE IPO


SECTION 3.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified in SECTION 3.3, 3Com and Palm shall use their reasonable commercial efforts to consummate the IPO. Such efforts shall include, but not necessarily be limited to, those specified in this SECTION 3.1


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(a) REGISTRATION STATEMENT. Palm shall file the IPO Registration Statement, and such amendments or supplements thereto as may be necessary in order to cause the same to become and remain effective as required by law or by the managing underwriters for the IPO (the "UNDERWRITERS"), including, but not limited to, filing such amendments to the IPO Registration Statement as may be required by the underwriting agreement to be entered into between Palm and the Underwriters (the "UNDERWRITING AGREEMENT"), the Securities and Exchange Commission (the "COMMISSION") or federal, state or foreign securities laws. 3Com and Palm shall also cooperate in preparing, filing with the Securities and Exchange Commission and causing to become effective a registration statement registering the common stock of Palm under the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and any registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the IPO, the Separation, the Distribution or the other transactions contemplated by this Agreement.


(b) UNDERWRITING AGREEMENT. Palm shall enter into the Underwriting Agreement, in form and substance reasonably satisfactory to Palm, and shall comply with its obligations thereunder.


(c) NASDAQ LISTING. Palm shall prepare, file and use reasonable commercial efforts to seek to make effective, an application for listing of the common stock of Palm issued in the IPO on the Nasdaq National Market ("NASDAQ"), subject to official notice of issuance.


SECTION 3.2 COOPERATION. Palm shall consult with, and cooperate in all respects with, 3Com in connection with the pricing of the common stock of Palm to be offered in the IPO and shall, at 3Com's direction, promptly take any and all actions necessary or desirable to consummate the IPO as contemplated by the IPO Registration Statement and the Underwriting Agreement.


SECTION 3.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. The IPO closing is currently scheduled to occur on or before June 2, 2000 (the "IPO CLOSING DATE"). The obligations of the parties to use their reasonable commercial efforts to consummate the IPO shall be conditioned on the satisfaction of the following conditions:


(a) REGISTRATION STATEMENT. The IPO Registration Statement shall have been filed and declared effective by the Commission, and there shall be no stop-order in effect with respect thereto.


(b) BLUE SKY. The actions and filings with regard to state securities and blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) shall have been taken and, where applicable, have become effective or been accepted.


(c) NASDAQ LISTING. The common stock of Palm to be issued in the IPO shall have been accepted for listing on the Nasdaq, on official notice of issuance.


(d) UNDERWRITING AGREEMENT. Palm shall have entered into the Underwriting Agreement and all conditions to the obligations of Palm and the Underwriters shall have been satisfied or waived.


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(e) COMMON STOCK OWNERSHIP. 3Com shall be satisfied in its sole discretion that it will own at least 80.1% of the outstanding common stock of Palm following the IPO and any private placements of securities of Palm concluded prior to or concurrent with the IPO. All other conditions to permit the Distribution to qualify as a tax-free distribution to 3Com, Palm and 3Com's stockholders shall, to the extent applicable as of the time of the IPO, be satisfied. There shall be no event or condition that is likely to cause any of such conditions not to be satisfied as of the time of the Distribution or thereafter.


(f) NO LEGAL RESTRAINTS. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation or the IPO or any of the other transactions contemplated by this Agreement shall be in effect.


(g) SEPARATION. The Separation shall have become effective by execution of this Agreement and the Ancillary Agreements.


(h) OTHER ACTIONS. Such other actions as the parties hereto may, based upon the advice of counsel, reasonably request to be taken prior to the IPO in order to assure the successful completion of the IPO shall have been taken.


(i) NO TERMINATION. This Agreement shall not have been terminated.


ARTICLE IV


THE DISTRIBUTION


SECTION 4.1 THE DISTRIBUTION.


(a) DELIVERY OF SHARES FOR DISTRIBUTION. Subject to SECTION 4.4 hereof, on or prior to the date the Distribution is effective (the "DISTRIBUTION DATE"), 3Com will deliver to the distribution agent (the "DISTRIBUTION AGENT") to be appointed by 3Com to distribute to the stockholders of 3Com the shares of common stock of Palm held by 3Com pursuant to the Distribution for the benefit of holders of record of common stock of 3Com on the Record Date, a single stock certificate, endorsed by 3Com, representing all of the outstanding shares of common stock of Palm then owned by 3Com, and shall cause the transfer agent for the shares of common stock of 3Com to instruct the Distribution Agent to distribute on the Distribution Date the appropriate number of such shares of common stock of Palm to each such holder or designated transferee or transferees of such holder.


(b) SHARES RECEIVED. Subject to SECTIONS 4.4 and 4.5, each holder of common stock of 3Com on the Record Date (or such holder's designated transferee or transferees) will be entitled to receive in the Distribution a number of shares of common stock of Palm equal to the number of shares of common stock of 3Com held by such holder on the Record Date multiplied by a fraction the numerator of which is the number of shares of common stock of Palm beneficially owned by 3Com on the Record Date and the denominator of which is the number of shares of common stock of 3Com outstanding on the Record Date.


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(c) OBLIGATION TO PROVIDE INFORMATION. Palm and 3Com, as the case may be, will provide to the Distribution Agent all share certificates and any information required in order to complete the Distribution on the basis specified above.


SECTION 4.2 ACTIONS PRIOR TO THE DISTRIBUTION.


(a) INFORMATION STATEMENT. 3Com and Palm shall prepare and mail, prior to the Distribution Date, to the holders of common stock of 3Com, such information concerning Palm and the Distribution and such other matters as 3Com shall reasonably determine are necessary and as may be required by law. 3Com and Palm will prepare, and Palm will, to the extent required under applicable law, file with the Commission any such documentation which 3Com and Palm determine is necessary or desirable to effectuate the Distribution, and 3Com and Palm shall each use its reasonable commercial efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable.


(b) BLUE SKY. 3Com and Palm shall take all such actions as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution.


(c) NASDAQ LISTING. Palm shall prepare and file, and shall use its reasonable commercial efforts to have approved, an application for the additional listing of the common stock of Palm to be distributed in the Distribution on the Nasdaq, subject to official notice of distribution.


(d) CONDITIONS. 3Com and Palm shall take all reasonable steps necessary and appropriate to cause the conditions set forth in SECTION 4.4 to be satisfied and to effect the Distribution on the Distribution Date.


SECTION 4.3 SOLE DISCRETION OF 3COM. 3Com currently intends, following the consummation of the IPO, to complete the Distribution by December 1, 2000. 3Com shall, in its sole and absolute discretion, determine the date of the consummation of the Distribution and all terms of the Distribution, including, without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and conditions to the consummation of the Distribution. In addition, 3Com may at any time and from time to time until the completion of the Distribution, modify or change the terms of the Distribution, including, without limitation, by accelerating or delaying the timing of the consummation of all or part of the Distribution. Palm shall cooperate with 3Com in all respects to accomplish the Distribution and shall, at 3Com's direction, promptly take any and all actions necessary or desirable to effect the Distribution, including, without limitation, the registration under the Securities Act of the common stock of Palm on an appropriate registration form or forms to be designated by 3Com. 3Com shall select any investment banker(s) and manager(s) in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and outside counsel for 3Com; PROVIDED, HOWEVER, that nothing herein shall prohibit Palm from engaging (at its own expense) its own financial, legal, accounting and other advisors in connection with the Distribution.


SECTION 4.4 CONDITIONS PRECEDENT TO DISTRIBUTION. The following are conditions that must take place prior to the consummation of the Distribution. The conditions are for the sole benefit of


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3Com and shall not give rise to or create any duty on the part of 3Com or the 3Com Board of Directors to waive or not waive any such condition.


(a) IRS RULING. 3Com shall have obtained a private letter ruling from the Internal Revenue Service in form and substance satisfactory to 3Com (in its sole discretion), and such ruling shall remain in effect as of the Distribution Date, to the effect that (i) the transfer by the 3Com Group to the Palm Group of the property, subject to liabilities, held by 3Com of the Palm Business, and Palm's assumption of liabilities held by 3Com related to the Palm Business, followed by the distribution by 3Com of all of its Palm stock to the stockholders of 3Com, will qualify as a reorganization under Sections 368(a)(1)(D) and 355 of the Code; (ii) no gain or loss will be recognized by 3Com on its transfer of property of the Palm Business to Palm; (iii) no gain or loss will be recognized by Palm on its receipt of property of the Palm Business from 3Com; and (iv) no gain or loss will be recognized by (and no amount will otherwise be included in the income of) the stockholders of 3Com upon their receipt of Palm common stock pursuant to the Distribution.


(b) GOVERNMENT APPROVALS. Any material governmental approvals and consents necessary to consummate the Distribution shall have been obtained and be in full forc ...