Under the capital restructuring, Elevation Partners will pay $325 million in cash for a 25% stake in the company, and Palm will pay a special distribution of $9 per share, or about $940 million in cash, to shareholders for their reduction in ownership.
Palm will also get a new executive board chair -- Jonathan Rubinstein, the former head of Apple's iPod division -- after the transaction closes.
Elevation partners Fred Anderson, Apple's former chief financial officer, and Roger McNamee, a veteran Silicon Valley investor, will also join the board, replacing outgoing directors Eric Benhamou and Bruce Dunlevie. D. Scott Mercer, who previously announced his resignation, will remain on the board.
Rubinstein, who ran the iPod division at Apple from 2004 to 2006 and led the creation of Apple's iMac computer before that, was part of the executive team that joined Apple after Steve Jobs returned to run the company.
Ed Colligan, Palm's president and CEO, said getting Rubinstein to join Palm was a critical part of the restructuring plan.
"There are a lot of moving parts here, but the goal is to bring in a transformation and change the dynamics of the company," Colligan said in an interview Wednesday.