THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Palm, Inc. (PLMO)

8/10/2004 Proxy Information

Transactions with 3Com Corporation

Subsequent to the date of separation of palmOne from 3Com, palmOne paid 3Com for certain leased facilities through the first quarter of fiscal year 2004 and for transitional services required while palmOne established its independent infrastructure, with transitional services being completed in the third quarter of fiscal year 2002. Amounts paid to 3Com under these agreements since the separation date were approximately $0.6 million, $15.3 million and $25.2 million for fiscal years 2004, 2003 and 2002, respectively.

A Tax Sharing Agreement allocates 3Com's and palmOne's responsibilities for certain tax matters. The agreement requires palmOne to pay 3Com for the incremental tax costs of palmOne's inclusion in consolidated, combined or unitary tax returns with affiliated corporations. The agreement also provides for compensation or reimbursement as appropriate to reflect re-determinations of palmOne's tax liability for periods during which palmOne joined in filing consolidated, combined or unitary tax returns with affiliated corporations.

Each member of a consolidated group for United States federal income tax purposes is jointly and severally liable for the group's federal income tax liability. Accordingly, palmOne could be required to pay a deficiency in the group's federal income tax liability for a period during which palmOne was a member of the group even if the Tax Sharing Agreement allocates that liability to 3Com or another member.

Effective as of the date of separation of palmOne from 3Com, subject to specified exceptions, palmOne and 3Com each released the other from any liabilities arising from their respective businesses or contracts, as well as liabilities arising from a breach of the separation agreement or any ancillary agreement.

Transactions with PalmSource

palmOne's Chairman of the board of directors, Eric Benhamou, is also the Chairman of the board of directors of PalmSource. In December 2001, palmOne entered into a software license agreement with PalmSource which was amended and restated in June 2003. The agreement includes a minimum annual royalty and license commitment of $39.0 million, $41.0 million and $42.5 million during each of the contract years in the period ending December 3, 2006. Under the software license agreement, palmOne incurred expenses of $39.5 million, $38.9 million and $21.4 million during the fiscal years 2004, 2003 and 2002, respectively.

Subsequent to the date of separation of PalmSource from palmOne, PalmSource will continue to pay palmOne for certain transitional services. During the fiscal year 2004, palmOne recognized $0.4 million for these transitional services.

Upon the PalmSource distribution, palmOne contributed an additional $6.0 million of cash, forgave a $20.0 million intercompany note receivable and assigned $15.0 million of its $50 million convertible note with Texas Instruments to PalmSource.

As part of the agreements with PalmSource relating to the PalmSource distribution, palmOne agreed to assume liabilities arising out of the Xerox litigation and to indemnify PalmSource and PalmSource's licensees if any claim is brought against either of them alleging infringement of the Xerox patent by covered operating system versions for any damages it may incur related to this case. In the event that any damages are not paid by palmOne as prescribed by the agreement, PalmSource is obligated to pay any shortfall amounts; however, palmOne is not relieved of its obligation to make the payment or reimburse PalmSource.

A Tax Sharing Agreement allocates palmOne's and PalmSource's responsibilities for certain tax matters. palmOne has the responsibility to prepare and file all consolidated tax returns for PalmSource through the date of distribution including final consolidated federal income tax returns of the group. PalmSource's tax liability will generally be calculated as if PalmSource is a stand-alone corporation. Consistent with the stand-alone methodology, PalmSource will not receive any payments for use by palmOne of any PalmSource operating losses. To the extent those losses reduce PalmSource's tax liability as a stand-alone corporation in a future period, any required payment to palmOne would be reduced.

PalmSource will indemnify palmOne for increases (as a result of an amended return or audit or other dispute) in PalmSource's stand-alone income tax liability or other consolidated tax liability attributable to periods after December 3, 2001, for increases in certain non-income taxes (including payroll and employee withholding taxes) attributable to PalmSource's business whether before or after December 3, 2001, and for transfer taxes, if any, incurred on the transfer of assets by palmOne to PalmSource. PalmSource will indemnify palmOne for any tax liability incurred by palmOne on account of the sale of PalmSource common stock in connection with the PalmSource spin-off.

Other Transactions and Relationships

In fiscal year 2003, palmOne made a $1.0 million equity investment in and entered into a product procurement agreement with Mobile Digital Media, Inc., a company founded by Barry Cottle, the former Senior Vice President and Chief Internet Officer of palmOne until his employment with palmOne terminated in February 2002. This equity investment is included in other assets. palmOne paid $11.0 million and $4.6 million for products purchased under the product procurement agreement during the fiscal years 2004 and 2003, respectively. These products were purchased by palmOne for resale.

palmOne purchased $41,000, $112,000 and $81,000 of products from SanDisk Corporation during the fiscal years 2004, 2003 and 2002, respectively, through a series of purchase orders and without further obligations on the part of palmOne. Judy Bruner, palmOne's former Senior Vice President and Chief Financial Officer, is now the Executive Vice President of Administration and Chief Financial Officer of SanDisk.

palmOne purchased $154,000, $317,000 and $32,000 of software licenses and services from Kontiki, Inc. during the fiscal years 2004, 2003 and 2002, respectively. Michael Homer, a current member of palmOne's board of directors, is the Chairman of Kontiki, Inc. Bruce Dunlevie, a current member of palmOne's board of directors, is a partner at Benchmark Capital, which owns more than 10% of the Kontiki stock and has a partner, Kevin Harvey, on the board of directors of Kontiki, Inc.

palmOne recorded revenues of $5.3 million during the fiscal year 2004 from T-Mobile USA, Inc. Susan Swenson, a current member of palmOne's board of directors and the chairperson of palmOne's Audit Committee, became the Chief Operating Officer of T-Mobile USA, Inc. in February 2004. In addition, palmOne recorded expenses of approximately $80,000 in fiscal year 2004 for mobile telephone services.

palmOne paid $36,000 and $175,000 during the fiscal years 2004 and 2003 and, respectively, to RealNetworks in connection with bundling of products, web site referrals and engineering assistance. Eric Benhamou, Chairman of palmOne's board of directors, is also a member of RealNetworks' board of directors.

palmOne is involved in a co-promotional sales and marketing relationship with Good Technology. Good Technology is also an indirect distributor and reseller of palmOne products. John Doerr, a current member of palmOne's board of directors, serves as a member of Good Technology's board of directors and is a partner at Kleiner Perkins Caufield & Byers, which owns more than 10% of the Good Technology stock. Bruce Dunlevie, a current member of palmOne's board of directors, also serves as a member of Good Technology's board of directors and is a partner at Benchmark Capital, which owns more than 10% of the Good Technology stock.

Compensation Committee Interlocks and Insider Participation

During fiscal year 2004, Gordon A. Campbell, Bruce W. Dunlevie and Susan G. Swenson served as members of the Compensation Committee of palmOneÕs board of directors, none of whom is or has been an officer or employee of palmOne or any of its subsidiaries. In addition, during fiscal year 2004, Eric A. Benhamou, the Chief Executive Officer of palmOne until October 2003, served as a member of the Compensation Committee. None of palmOneÕs executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on palmOneÕs board of directors or Compensation Committee. No member of palmOneÕs board of directors is an executive officer of a company in which one of palmOneÕs executive officers serves as a member of the board of directors or compensation committee of that company.

Mr. Benhamou is also the Chairman of the board of directors of PalmSource, which licenses to palmOne the operating system used in its handhelds and smartphones. In December 2001, palmOne entered into a software license agreement with PalmSource which was amended and restated in June 2003. The agreement includes a minimum annual royalty and license commitment of $39.0 million, $41.0 million and $42.5 million during each of the contract years in the period ending December 3, 2006. Under the software license agreement, palmOne incurred expenses of $39.5 million during fiscal year 2004.

Subsequent to the date of separation of PalmSource from palmOne, PalmSource continued to pay palmOne for certain transitional services. During the fiscal year 2004, palmOne recognized $0.4 million for these transitional services.

Upon the PalmSource distribution, palmOne contributed an additional $6.0 million of cash, forgave a $20.0 million intercompany note receivable and assigned $15.0 million of a $50.0 million convertible note to PalmSource.

Ms. Dubinsky, is the former Chief Executive Officer of Handspring which was acquired by palmOne on October 29, 2003.

9/26/2003 10-K Information

Transactions with 3Com Corporation

After the legal separation from 3Com in February 2000, Palm has paid 3Com for certain leased facilities and for transitional services required while Palm established its independent infrastructure. Amounts paid to 3Com under these agreements since the separation date were approximately $12.9 million, $25.2 million and $31.9 million for fiscal years 2003, 2002 and 2001, respectively.

A Tax Sharing Agreement allocates 3ComÕs and PalmÕs responsibilities for certain tax matters. The agreement requires Palm to pay 3Com for the incremental tax costs of PalmÕs inclusion in consolidated, combined or unitary tax returns with affiliated corporations. The agreement also provides for compensation or reimbursement as appropriate to reflect re-determinations of PalmÕs tax liability for periods during which Palm joined in filing consolidated, combined or unitary tax returns with affiliated corporations.

Each member of a consolidated group for U.S. federal income tax purposes is jointly and severally liable for the groupÕs federal income tax liability. Accordingly, Palm could be required to pay a deficiency in the groupÕs federal income tax liability for a period during which Palm was a member of the group even if the Tax Sharing Agreement allocates that liability to 3Com or another member.

Effective as of the date of PalmÕs legal separation from 3Com, subject to specified exceptions, Palm and 3Com each released the other from any liabilities arising from their respective businesses or contracts, as well as liabilities arising from a breach of the separation agreement or any ancillary agreement.

Under the terms of a software license agreement between PalmSource and 3Com, PalmSource recorded $0.4 million and $0.2 million of support revenues for fiscal years 2003 and 2002, respectively.

Transactions between Palm and PalmSource

See ŌThe PalmSource SeparationĶ in this joint proxy statement/prospectus for a description of the principal agreements relating to the separation of PalmSource from Palm.

At the date of the PalmSource distribution, PalmSource will assume $15.0 million of a note payable to Texas Instruments made by Palm, which bears interest at 5.0% per annum and is due December 6, 2006.

In December 2001, Palm entered into the software license agreement with PalmSource, which was amended and restated in June 2003. David C. Nagel, one of our directors, is the President and Chief Executive Officer of PalmSource. Under the software license agreement, we recorded aggregate payments of $21.4 million to PalmSource in fiscal year 2002 and $38.9 million in fiscal year 2003, respectively. The agreement establishes minimum annual license and royalty commitments which are $37.5 million for the contract year ending December 3, 2003 and $39.0 million for the contract year ending December 3, 2004.

Palm entered into a business consulting agreement effective as of June 2002 with Satjiv Chahil, who was formerly PalmÕs Chief Marketing Officer. Under this consulting agreement, Palm paid Mr. Chahil approximately $0.4 million in consulting fees during fiscal year 2003. This consulting agreement expired on May 31, 2003. Mr. Chahil served as a Palm spokesperson, delivering keynote addresses at industry forums and assisting with industry and analyst relations activities, assisted with the separation of PalmSource from Palm, and solicited advice and feedback from key influencers and opinion leaders on PalmÕs strategy and products.

In fiscal year 2003, Palm made a $1.0 million equity investment in and entered into a product procurement agreement with Mobile Digital Media, Inc., a company founded by Barry Cottle, the former Senior Vice President and Chief Internet Officer of Palm until his employment with Palm terminated in February 2002. Palm paid $4.6 million for products purchased under the product procurement agreement during fiscal year 2003. These products were purchased by Palm for resale.

In fiscal year 2003, Palm purchased $0.3 million of software licenses and services from Kontiki, Inc. Michael Homer, a current member of PalmÕs board of directors, is the Chairman and Chief Executive Officer of Kontiki, Inc.

In fiscal year 2003, Palm purchased $0.1 million of products from SanDisk Corporation through a series of purchase orders and without further obligations on the part of Palm. Judy Bruner, PalmÕs current chief financial officer, serves as a member of the board of directors of SanDisk Corporation.

Eric Benhamou is the Chairman of the board of directors of both Palm and PalmSource and is currently employed by Palm as its Chief Executive Officer.

David Nagel is currently a member of the board of directors of both Palm and PalmSource and is currently employed by PalmSource as its President and Chief Executive Officer.

Marianne Jackson, Senior Vice President and Chief Human Resources Officer of Palm, is the sister of Robert J. Finnochio, a director of PalmSource.