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EXHIBIT 2.01
MASTER SEPARATION AGREEMENT
BY AND AMONG
CADENCE DESIGN SYSTEMS, INC.,
TALITY CORPORATION
AND
CADENCE HOLDINGS, INC.
DATED AS OF
JULY 14, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..........................................................................................2
SECTION 1.1 AFFILIATE............................................................................2
SECTION 1.2 APPLICABLE LAW.......................................................................2
SECTION 1.3 BUSINESS DAY.........................................................................2
SECTION 1.4 CADENCE'S AUDITORS...................................................................2
SECTION 1.5 CADENCE GROUP........................................................................2
SECTION 1.6 CLASS A COMMON STOCK.................................................................2
SECTION 1.7 CLASS B COMMON STOCK.................................................................2
SECTION 1.8 CLASS C COMMON STOCK.................................................................2
SECTION 1.9 CONTRACTS............................................................................2
SECTION 1.10 GOVERNMENTAL APPROVALS...............................................................2
SECTION 1.11 GOVERNMENTAL AUTHORITY...............................................................2
SECTION 1.12 INFORMATION..........................................................................2
SECTION 1.13 IPO CLOSING DATE.....................................................................3
SECTION 1.14 PERSON ............................................................................3
SECTION 1.15 SUBSIDIARY...........................................................................3
SECTION 1.16 TALITY'S AUDITORS....................................................................3
SECTION 1.17 TALITY GROUP.........................................................................3
SECTION 1.18 THIRD-PARTY APPROVALS................................................................3
ARTICLE II SEPARATION..........................................................................................3
SECTION 2.1 SEPARATION DATE......................................................................3
SECTION 2.2 DOCUMENTS TO BE DELIVERED BY CADENCE AND TALITY......................................3
SECTION 2.3 GOVERNMENTAL APPROVALS...............................................................4
SECTION 2.4 THIRD-PARTY APPROVALS................................................................4
SECTION 2.5 NO REPRESENTATIONS OR WARRANTIES.....................................................5
ARTICLE III THE IPO AND REGISTRATION RIGHTS....................................................................5
SECTION 3.1 TRANSACTIONS PRIOR TO THE IPO........................................................5
SECTION 3.2 COOPERATION..........................................................................6
SECTION 3.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO......................................6
SECTION 3.4 REGISTRATION RIGHTS..................................................................7
ARTICLE IV COVENANTS AND OTHER MATTERS........................................................................16
SECTION 4.1 FURTHER INSTRUMENTS.................................................................16
SECTION 4.2 AGREEMENT FOR EXCHANGE OF INFORMATION...............................................16
SECTION 4.3 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND ACCOUNTING.................18
SECTION 4.4 DISPUTE RESOLUTION..................................................................19
SECTION 4.5 NON-SOLICITATION OF EMPLOYEES.......................................................21
SECTION 4.6 EMPLOYEE AGREEMENTS.................................................................21
ARTICLE V MISCELLANEOUS.......................................................................................23
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SECTION 5.1 LIMITATION OF LIABILITY.............................................................23
SECTION 5.2 ENTIRE AGREEMENT....................................................................23
SECTION 5.3 GOVERNING LAW.......................................................................23
SECTION 5.4 TERMINATION.........................................................................23
SECTION 5.5 NOTICES.............................................................................24
SECTION 5.6 COUNTERPARTS........................................................................24
SECTION 5.7 BINDING EFFECT; ASSIGNMENT..........................................................24
SECTION 5.8 SEVERABILITY........................................................................25
SECTION 5.9 FAILURE OR DELAY NOT WAIVER; REMEDIES CUMULATIVE....................................25
SECTION 5.10 AMENDMENT...........................................................................25
SECTION 5.11 AUTHORITY...........................................................................25
SECTION 5.12 INTERPRETATION......................................................................25
SECTION 5.13 CONFLICTING AGREEMENTS..............................................................26
SECTION 5.14 PAYMENT OF EXPENSES.................................................................26
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MASTER SEPARATION AGREEMENT
THIS MASTER SEPARATION AGREEMENT (this "AGREEMENT") is entered into and
effective as of July 14 , 2000, by and among Cadence Design Systems, Inc., a
Delaware corporation ("CADENCE"), Tality Corporation, a Delaware corporation
("TALITY"), and Cadence Holdings, Inc., a Delaware corporation and wholly owned
subsidiary of Cadence ("HOLDINGS"). Capitalized terms used herein and not
defined elsewhere herein shall have the meanings ascribed to them in Article I.
RECITALS
WHEREAS, Cadence currently owns all of the issued and outstanding
shares of Tality capital stock;
WHEREAS, Cadence has formed Tality to engage in the business of acting
as the sole general partner of, and owning both a general and limited
partnership interest in, a partnership of which Holdings will be the other
initial limited partner (the "PARTNERSHIP"), which will be engaged in the
business of providing design engineering services, and intellectual property in
connection therewith, to electronic equipment manufacturers, all as described in
the Registration Statement (the "TALITY BUSINESS");
WHEREAS, the Boards of Directors of Cadence, Tality and Holdings have
each determined that it would be appropriate and desirable for Holdings and
Tality to form the Partnership and for Cadence to transfer to the Partnership,
on behalf of Holdings, and for the Partnership to receive and assume, directly
or indirectly, as a contribution from Holdings, certain assets and liabilities
of Cadence associated with the Tality Business (the "SEPARATION");
WHEREAS, Cadence, Holdings and Tality currently contemplate that,
immediately following the contribution of such assets to and assumption of such
liabilities by the Partnership, Tality shall commence an initial public offering
("IPO") of its Class A Common Stock, par value $0.001 per share (the "CLASS A
COMMON STOCK"), pursuant to a registration statement on Form S-1 promulgated by
the Securities and Exchange Commission (the "REGISTRATION STATEMENT"); and
WHEREAS, the parties intend for this Agreement to set forth the
principal arrangements between them regarding the Separation.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 "AFFILIATE" of any Person means any other Person that
controls, is controlled by, or is under common control with, such first 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 a
Person, whether through ownership of voting securities or other interests, by
contract or otherwise.
Section 1.2 "APPLICABLE LAW" means all laws and regulations of
Governmental Authorities applicable to the transaction, property or Persons at
issue.
Section 1.3 "BUSINESS DAY" means any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of California.
Section 1.4 "CADENCE'S AUDITORS" means Cadence's independent certified
public accountants from time to time.
Section 1.5 "CADENCE GROUP" means Cadence and each of its Subsidiaries
(other than any member of the Tality Group) on and after the Separation Date.
"Section 1.6 "CLASS A COMMON STOCK has the meaning set forth in the
recitals.
"Section 1.7 "CLASS B COMMON STOCK means the Class B Common Stock, par
value $0.001 per share, of Tality.
"Section 1.8 "CLASS C COMMON STOCK means the Class C Common Stock, par
value $0.001 per share, of Tality.
Section 1.9 "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 1.10 "GOVERNMENTAL APPROVALS" means any notices, reports or
other filings to be made with, or any consents, registrations, approvals,
permits or authorizations to be obtained from, any Governmental Authority.
Section 1.11 "GOVERNMENTAL AUTHORITY" means any federal, state, local,
foreign or international court or government of competent jurisdiction, or any
political subdivision thereof, or any department, commission, board, bureau,
agency, official or other regulatory, administrative body of any such government
of competent jurisdiction or political subdivision thereof.
Section 1.12 "INFORMATION" means information, whether or not patentable
or copyrightable, in written, oral, electronic or other tangible or intangible
form, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams,
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models, prototypes, samples, flow charts, data, computer data, disks, diskettes,
tapes, computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
Section 1.13 "IPO CLOSING DATE" means the date on which the first
closing of the IPO occurs.
Section 1.14 "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 or a Governmental
Authority.
Section 1.15 "SUBSIDIARY" of any Person means any other Person of which
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect at least a majority of the board of directors or
other body performing similar functions with respect to such other Person is
directly or indirectly owned or controlled (including by contract) by such first
Person. By way of example and not limitation, the Partnership shall be deemed to
be a Subsidiary of Tality.
Section 1.16 "TALITY'S AUDITORS" means Tality's independent certified
public accountants from time to time.
Section 1.17 "TALITY GROUP" means Tality and each of its Subsidiaries
on and after the Separation Date.
"Section 1.18 "THIRD-PARTY APPROVALS means any notices, consents or
authorizations of third parties (other than Governmental Approvals) required to
consummate the Separation.
ARTICLE II
SEPARATION
Section 2.1 SEPARATION DATE. Unless otherwise expressly provided in
this Agreement, any Ancillary Agreement (as defined in Section 2.2), the
Agreement of Limited Partnership of the Partnership or any other agreement among
the parties, the effective time and date of each transfer of assets and
property, assumption of liability, license, undertaking or other agreement in
connection with the Separation shall be 12:00 a.m., Pacific Time, October 1,
2000, or such other date as may be fixed by the Board of Directors of Cadence or
a duly authorized officer of Cadence (the "SEPARATION DATE").
Section 2.2 DOCUMENTS TO BE DELIVERED BY CADENCE AND TALITY. On the
Separation Date, each of Cadence and Tality shall duly execute and deliver, or
shall cause its appropriate Subsidiaries to duly execute and deliver, to the
other all of the following agreements, documents and other instruments
(collectively, together with all agreements and documents contemplated by such
agreements, the "ANCILLARY AGREEMENTS"):
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(a) The General Assignment and Assumption Agreement in
substantially the form attached hereto as EXHIBIT A (the "ASSIGNMENT
AGREEMENT");
(b) Certificates representing the stock and/or investments in
the Subsidiaries and other holdings of Cadence set forth on Schedule
2.1(b) with stock powers in the form proper for transfer;
(c) The Master Intellectual Property Agreement in
substantially the form attached hereto as EXHIBIT B;
(d) The Employee Matters Agreement in substantially the form
attached hereto as EXHIBIT C;
(f) The Master Corporate Services Agreement in substantially
the form attached hereto as EXHIBIT D;
(g) The Real Estate Matters Agreement in substantially the
form attached hereto as EXHIBIT E;
(h) The Master Confidentiality Agreement in substantially the
form attached hereto as EXHIBIT F (the "MASTER CONFIDENTIALITY
AGREEMENT");
(i) The Indemnification and Insurance Matters Agreement in
substantially the form attached hereto as EXHIBIT G (the
"INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT");
(j) The EDA Tools Agreement in substantially the form attached
hereto as EXHIBIT H;
(k) The Joint Technology Development and Support Agreement in
substantially the form attached hereto as EXHIBIT I;
(l) The Joint Target Account Agreement in substantially the
form attached hereto as EXHIBIT J;
(m) The resignation of each individual who is an officer or
director of Cadence or any member of the Cadence Group, immediately
prior to the Separation Date, and who shall be an employee of Tality
from and after the Separation Date; and
(n) Such other agreements, documents or instruments as the
parties may agree are necessary or desirable in order to achieve the
purposes hereof.
Section 2.3 GOVERNMENTAL APPROVALS. To the extent that the Separation
requires any Governmental Approvals, the parties shall use all commercially
reasonable efforts to obtain such Governmental Approvals on or prior to the
Separation Date.
Section 2.4 THIRD-PARTY APPROVALS. The parties shall use all
commercially reasonable efforts to obtain all Third-Party Approvals on or prior
to the Separation Date.
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Section 2.5 NO REPRESENTATIONS OR WARRANTIES. Neither Cadence nor any
other member of the Cadence Group makes, either in this Agreement or any
Ancillary Agreement, any representation as to, warranty of or covenant with
respect to:
(a) the value of any asset, property or other thing of value
to be transferred to Tality or any of its Subsidiaries;
(b) the kind, character, nature or extent of any liabilities
to be assumed by Tality or any of its Subsidiaries;
(c) the freedom from encumbrance of any asset, property or
other thing of value to be transferred to Tality or any of its
Subsidiaries;
(d) the absence of defenses or freedom from set-offs or
counterclaims with respect to any claim to be transferred to Tality or
any of its Subsidiaries; or
(e) the legal sufficiency of any assignment, document or
instrument delivered hereunder to convey title to any asset, property
or other thing of value upon its execution and delivery or filing.
Except as may be expressly set forth herein or in any Ancillary
Agreement, all assets, properties and other things of value to be transferred
to, and all liabilities to be assumed by, Tality or any of its Subsidiaries
shall be transferred or assumed, as applicable, "AS IS, WHERE IS," and Tality
and its Subsidiaries shall bear the economic and legal risk that any conveyance
shall prove to be insufficient to vest in Tality and its Subsidiaries good and
marketable title, free and clear of any lien, claim, equity or other
encumbrance.
ARTICLE III
THE IPO AND REGISTRATION RIGHTS
Section 3.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions
set forth in Section 3.3, each of Cadence and Tality shall use all commercially
reasonable efforts to consummate the IPO. Such efforts shall include the
following:
(a) REGISTRATION STATEMENT. Tality shall file the 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 Applicable Law or by the managing underwriters for the IPO
(the "UNDERWRITERS"), including filing such amendments to the
Registration Statement as may be required by the underwriting agreement
to be entered into between Tality and the Underwriters (the
"UNDERWRITING AGREEMENT"), the Securities and Exchange Commission (the
"COMMISSION") or federal, state or foreign securities laws. Cadence and
Tality shall also cooperate in preparing, filing with the Commission
and causing to become effective a registration statement registering
the Class A Common Stock under the Securities 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
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appropriate in connection with the IPO, the Separation or any of the
other transactions contemplated by this Agreement.
(b) UNDERWRITING AGREEMENT. Tality shall enter into the
Underwriting Agreement, in form and substance reasonably satisfactory
to Cadence and Tality, and shall comply with its obligations
thereunder.
(c) NASDAQ LISTING. Tality shall prepare, file and use all
commercially reasonable efforts to seek to make effective an
application for quotation of the Class A Common Stock issued in the IPO
on the Nasdaq National Market (the "NASDAQ"), subject to official
notice of issuance.
Section 3.2 COOPERATION. Tality shall consult with, and cooperate in
all respects with, Cadence in connection with the pricing of the Class A Common
Stock to be offered in the IPO and shall, at Cadence's direction, promptly take
any and all actions necessary or desirable to consummate the IPO as contemplated
by the Registration Statement and the Underwriting Agreement.
Section 3.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. The
obligations of the parties to use all commercially reasonable efforts to
consummate the IPO shall be conditioned on the satisfaction of all of the
following conditions:
(a) REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective by the Commission, and there shall not
have been issued or threatened any stop order with respect thereto
which remains in effect.
(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 Class A Common Stock to be issued in
the IPO shall have been accepted for quotation on the Nasdaq, upon
official notice of issuance.
(d) UNDERWRITING AGREEMENT. Tality shall have entered into the
Underwriting Agreement and all conditions to the obligations of Tality
and the Underwriters thereunder shall have been satisfied or waived.
(e) COMMON STOCK OWNERSHIP. Cadence shall be satisfied in its
sole discretion that the Cadence Group shall own voting securities of
Tality having at least 80% of the voting rights of all Tality
securities outstanding immediately following the IPO Closing Date.
(f) NO LEGAL RESTRAINTS. No order, injunction or decree issued
by any Governmental Authority 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 or been threatened.
(g) SEPARATION. The Separation Date shall have occurred.
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(h) NO TERMINATION. This Agreement shall not have been
terminated.
.Section 3.4 REGISTRATION RIGHTS
(a) DEFINITIONS. For purposes of this Section 3.4 only:
(i) "REGISTER", "REGISTERED" and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act of 1933, as amended, (the "SECURITIES
ACT"), and the declaration or ordering of effectiveness of such registration
statement.
(ii) "REGISTRABLE SECURITIES" means (A) any Class A
Common Stock or Class C Common Stock issued or issuable upon conversion of
Class B Common Stock, or in exchange for Limited Partnership Units in the
Partnership originally issued to Cadence or any other member of the Cadence
Group (the "LP UNITS"); (B) all shares of Class A Common Stock held by
Cadence Group members' officers or employees as of the date on which the
Registration Statement was first filed with the Commission; (C) any Class A
Common Stock or Class C Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of the securities described in (A) or (B) above; and
(D) all other shares of Class A Common Stock or Class C Common Stock
hereafter acquired by members of the Cadence Group. Notwithstanding the
foregoing, "Registrable Securities" shall exclude any Registrable Securities
sold by a Person in a transaction in which rights under this Section 4.4 are
not assigned in accordance with this Agreement or any Registrable Securities
sold in a public offering, whether sold pursuant to Rule 144 promulgated
under the Securities Act, or in a registered offering, or otherwise.
(iii) "HOLDER" means any Person owning of record
Registrable Securities (or any security convertible into or exchangeable for
Registrable Securities), that have not been sold in a public offering and any
permitted assignee of such Registrable Securities (or securities convertible
into or exchangeable into Registrable Securities) to whom rights under this
Section 3.4 have been duly assigned in accordance with this Agreement.
(iv) "FORM S-3" means such form under the Securities
Act as is in effect on the date hereof, or any successor registration form
under the Securities Act subsequently adopted by the Commission, which
permits inclusion or incorporation of substantial information by reference to
other documents filed by Tality with the Commission.
(b) DEMAND REGISTRATION.
(i) REQUEST BY HOLDERS. If Tality shall, at any time
after the expiration of the 180-day "lock-up" period pursuant to the
Underwriting Agreement (the "LOCK-UP EXPIRATION DATE"), receive a written
request from Cadence or any subsequent Holder of LP Units originally issued
to Cadence or any other member of the Cadence Group (or any Registrable
Securities issued in exchange therefor) holding at least ten percent (10%) of
the aggregate outstanding number of such LP Units that Tality file a
registration statement on form S-1 (or any successor form thereto) under the
Securities Act covering the registration of Registrable Securities pursuant
to this Section 3.4(b), then Tality shall, within ten (10) Business Days
after
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the receipt of such written request, give written notice of such request
("REQUEST NOTICE") to all Holders, and use its best efforts to effect, as soon
as practicable, the registration under the Securities Act of all Registrable
Securities that Holders request to be registered and included in such
registration by written notice given by such Holders to Tality within twenty
(20) days after receipt of the Request Notice, subject only to the limitations
of this Section 3.4(b); PROVIDED, HOWEVER, that the Registrable Securities
requested by all Holders to be registered pursuant to such request must be at
least ten percent (10%) of all Registrable Securities then held by or issuable
to them; and PROVIDED FURTHER, that Tality shall not be obligated to effect any
such registration if Tality has, within the six (6) month period preceding the
date of such request, already effected a registration under the Securities Act
pursuant to this Section 3.4(b) or Section 3.4(d), or in which the Holders had
an opportunity to participate pursuant to Section 3.4(c), other than a
registration from which the Registrable Securities of Holders have been excluded
(with respect to all or any portion of the Registrable Securities the Holders
requested be included in such registration) pursuant to Section 3.4(c)(i).
(ii) UNDERWRITING. If the Holders initiating the
registration request under this Section 3.4(b) (the "INITIATING HOLDERS")
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, then they shall so advise Tality as a part of their
request made pursuant to this Section 3.4(b)(i) and Tality shall include such
information in the Request Notice. In such event, the right of any Holder to
include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Holders of a majority of
the Registrable Securities being registered and reasonably acceptable to
Tality (including a market stand-off agreement of up to 180 days if required
by such underwriters). Notwithstanding any other provision of this Section
3.4(b), if the underwriter(s) advise(s) Tality in writing that marketing
factors require a limitation of the number of securities to be underwritten,
then Tality shall so advise all Holders of Registrable Securities which would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be
reduced as required by the underwriter(s) and allocated among the Holders of
Registrable Securities on a pro rata basis according to the number of
Registrable Securities of each Holder requesting registration (including the
initiating Holders); PROVIDED, HOWEVER, that the number of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of Tality and its officers and directors
(who are not also officers or directors of Cadence) are first entirely
excluded from the underwriting and registration. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(iii) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. Tality
shall be obligated to effect only three (3) such registrations pursuant to
this Section 3.4(b).
(iv) DEFERRAL. Notwithstanding the foregoing, if
Tality shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 3.4(b), a
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certificate signed by the President or Chief Executive Officer of Tality
stating that in the good faith judgment of the Board of Directors of Tality,
it would be materially detrimental to Tality and its stockholders for such
registration statement to be filed, then Tality shall have the right to defer
such filing for a period of not more than ninety (90) days after receipt of
the request of the initiating Holders; PROVIDED, HOWEVER, that Tality may not
utilize this right more than once in any twelve (12) month period.
(v) EXPENSES. All expenses incurred in connection
with any registration pursuant to this Section 3.4(b), including all federal
and "blue sky" registration, filing and qualification fees, printer's and
accounting fees, and fees and disbursements of counsel for Tality and one
counsel for the Holders, reasonably acceptable to Tality (but excluding
underwriters' discounts and commissions relating to shares sold by the
Holders), shall be borne by Tality. Each Holder participating in a
registration pursuant to this Section 3.4(b) shall bear such Holder's
proportionate share (based on the total number of shares sold in such
registration other than for the account of Tality) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering by the Holders. Notwithstanding the foregoing, Tality
shall not be required to bear any expenses of any registration proceeding
begun pursuant to this Section 3.4(b) if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, unless the Holders of a majority of
the Registrable Securities agree that such registration constitutes the use
by the Holders of one (1) demand registration pursuant to this Section 3.4(b)
(in which case such registration shall also constitute the use by all Holders
of Registrable Securities of one (l) such demand registration); PROVIDED
FURTHER, that if at the time of such withdrawal, the Holders have learned of
a material adverse change in the condition (financial or otherwise), business
or prospects of Tality not known to the Holders at the time of their request
for such registration and have withdrawn their request for registration with
reasonable promptness after learning of such material adverse change, then
the Holders shall not be required to pay any of such expenses and such
registration shall not constitute the use of a demand registration pursuant
to this Section 3.4(b).
(c) PIGGYBACK REGISTRATIONS. Tality shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior
to filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of Tality (including registration
statements relating to secondary offerings of securities of Tality, but
excluding registration statements relating to any registration under Section
3.4(b) or Section 3.4(d) or to any employee benefit plan or a corporate
reorganization) and shall afford each such Holder an opportunity to include
in such registration statement all or any part of the Registrable Securities
of such Holder. Each Holder desiring to include in any such registration
statement all or any part of such Holder's Registrable Securities shall
within twenty (20) days after receipt of the above-described notice from
Tality, so notify Tality in writing, and in such notice shall inform Tality
of the number of Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by
Tality, such Holder shall nevertheless continue to have the right to include
any of such Holder's Registrable Securities in any subsequent registration
statement or registration statements as may be filed by Tality with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
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(i) UNDERWRITING. If a registration statement as to
which Tality gives notice under this Section 3.4(c) is for an underwritten
offering, then Tality shall so advise the Holders of Registrable Securities.
In such event, the right of any such Holder's Registrable Securities to be
included in a registration pursuant to this Section 3.4(c) shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting (including a market stand-off agreement of up
to 180 days if required by such underwriters). Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in
good faith that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may exclude
Registrable Securities from the registration and the underwriting, and the
number of shares that may be included in the registration and the
underwriting shall be allocated, FIRST to Tality and, SECOND, to each of the
Holders requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of
Registrable Securities of each such Holder; PROVIDED, HOWEVER, that the right
of the underwriters to exclude Registrable Securities from the registration
and underwriting as described above shall be restricted so that (A) the
number of Registrable Securities included in any such registration is not
reduced below twenty-five percent (25%) of the aggregate number of
Registrable Securities for which inclusion has been requested; and (B) all
shares that are not Registrable Securities and are held by any other Person,
including any employee, officer or director (other than a director who is
also an officer or director of Cadence) of Tality (or any Subsidiary of
Tality) shall first be excluded from such registration and underwriting
before any Registrable Securities are so excluded. If any Holder disapproves
of the terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to Tality and the underwriter(s), delivered at
least ten (10) Business Days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the partners and retired
partners of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing Persons, and for any Holder that is a corporation, the Holder and
all corporations that are affiliates of such Holder, shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder"
shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "Holder," as
defined in this sentence.
(ii) EXPENSES. All expenses incurred in connection
with a registration pursuant to this Section 3.4(c), including fees and
disbursements of one counsel for the Holders, reasonably acceptable to Tality
(but excluding underwriters' and brokers' discounts and commissions relating
to shares sold by the Holders), including all federal and "blue sky"
registration, filing and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel for Tality, shall be borne by Tality.
(iii) NOT DEMAND REGISTRATION. Registration pursuant to
this Section 3.4(c) shall not be deemed to be a demand registration pursuant
to Section 3.4(b) above. Except as otherwise provided herein, there shall be
no limit on the number of times the Holders may request registration of
Registrable Securities under this Section 3.4(c).
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(d) FORM S-3 REGISTRATION. In case Tality shall, at any
time after the Lock-Up Expiration Date, receive a written request from
Cadence or any subsequent Holder of LP Units originally issued to Cadence or
any other member of the Cadence Group (or any Registrable Securities issued
in exchange therefor) holding at least ten percent (10%) of the aggregate
outstanding number of such LP Units that Tality effect a registration on Form
S-3, and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, then
Tality shall:
(i) NOTICE. Promptly give written notice of the
proposed registration and the Holder's or Holders' request therefor, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(ii) REGISTRATION. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all
or such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such request
as are specified in a written request given within twenty (20) days after
Tality provides the notice contemplated by Section 3.4(d)(i); PROVIDED,
HOWEVER, that Tality shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 3.4(d):
(A) if Form S-3 is not available to
Tality for such offering by the Holders;
(B) if the Holders, together with the
holders of any other securities of Tality entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than
$5,000,000;
(C) if Tality shall furnish to the
Holders a certificate signed by the President or Chief Executive Officer of
Tality stating that in the good faith judgment of the Board of Directors of
Tality, it would be materially detrimental to Tality and its stockholders for
such Form S-3 Registration to be effected at such time, in which event Tality
shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of
not more than ninety (90) days after receipt of the request of the Holder or
Holders under this Section 3.4(d);
(D) if Tality has, within the six (6)
month period preceding the date of such request, already effected a
registration under the Securities Act other than a registration from which
the Registrable Securities of Holders have been excluded (with respect to all
or any portion of the Registrable Securities the Holders requested be
included in such registration) pursuant to Section 3.4(c)(i); or
(E) in any particular jurisdiction in
which Tality would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(iii) EXPENSES. Tality shall pay all expenses incurred
in connection with each registration requested pursuant to this Section
3.4(d), including federal and "blue sky"
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registration, filing and qualification fees, printers' and accounting fees
and fees and disbursements of counsel, including one counsel for the Holders,
reasonably acceptable to Tality, but excluding underwriters' or brokers'
discounts and commissions relating to shares sold by the Holders.
(iv) NOT DEMAND REGISTRATION. Form S-3 registrations
shall not be deemed to be demand registrations as described in Section 3.4(b)
above. Except as otherwise provided herein, there shall be no limit on the
number of times the Holders may request registration of Registrable
Securities under this Section 3.4(d).
(e) OBLIGATIONS OF TALITY. Whenever required to effect the
registration of any Registrable Securities under this Agreement Tality shall,
as expeditiously as reasonably possible:
(i) REGISTRATION STATEMENT. Prepare and file with the
Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective; PROVIDED, HOWEVER, that Tality shall not be required to
keep any such registration statement effective for more than ninety (90) days.
(ii) AMENDMENTS AND SUPPLEMENTS. Prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement.
(iii) PROSPECTUSES. Furnish to the Holders whose
Registrable Securities are requested to be included in the registration such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
(iv) BLUE SKY. Use its best efforts to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that Tality shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(v) UNDERWRITING. In the event of any underwritten
public offering, enter into and perform its obligations under an underwriting
agreement in usual and customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(vi) NOTIFICATION. Notify each Holder of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
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(vii) OPINION AND COMFORT LETTER. Furnish, at the
request of any Holder requesting registration of Registrable Securities, on
the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (A)
an opinion, dated as of such date, of the counsel representing Tality for the
purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (B) a "comfort" letter
dated as of such date, from the independent certified public accountants of
Tality, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
(f) FURNISH INFORMATION. It shall be a condition precedent
to the obligations of Tality to take any action pursuant to Section 3.4(b),
(c) or (d) that the selling Holders shall furnish to Tality such information
regarding themselves, the Registrable Securities held by them, and the
intended method of disposition of such securities as shall be reasonably
required to timely effect the Registration of their Registrable Securities.
(g) INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under Section 3.4(b), (c)
or (d):
(i) BY TALITY. To the extent permitted by Applicable
Law, Tality shall indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder, any underwriter (as determined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, as amended, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act,
the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively, a "VIOLATION"):
(A) any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto;
(B) the omission or alleged omission to
state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or
(C) any violation or alleged violation by
Tality of the Securities Act, the Exchange Act, any federal or
state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or
state
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securities law in connection with the offering covered by such
registration statement;
and Tality shall reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 3.4(g)(i) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Tality (which consent
shall not be unreasonably withheld or delayed), nor shall Tality be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(ii) BY SELLING HOLDERS. To the extent permitted by
Applicable Law, each selling Holder shall indemnify and hold harmless Tality,
each of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls Tality within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors
or officers or any person who controls such Holder within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which Tality or any such director, officer,
controlling person, underwriter or other such Holder, partner or director,
officer or controlling person of such other Holder may become subject under
the Securities Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder shall
reimburse any legal or other expenses reasonably incurred by Tality or any
such director, officer, controlling person, underwriter or other Holder,
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 3.4(g)(ii) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld or delayed); and PROVIDED, FURTHER, that the
total amounts payable in indemnity by a Holder under this Section 3.4(g)(ii)
in respect of any Violation shall not exceed the net proceeds received by
such Holder in the registered offering out of which such Violation arises.
(iii) NOTICE. Promptly after receipt by an indemnified
party under this Section 3.4(g) of notice of the commencement of any action
(including any action by a Governmental Authority), such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 3.4(g), deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the parties;
PROVIDED, HOWEVER, that an indemnified party shall have the right to
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retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to an
actual or potential conflict of interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall relieve such indemnifying party
of liability to the indemnified party under this Section 3.4(g) to the extent
(but only to the extent) the indemnifying party is materially prejudiced as a
result thereof, but the omission so to deliver written notice to the
indemnified party shall not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 3.4(g).
(iv) DEFECT ELIMINATED IN FINAL PROSPECTUS. The
foregoing indemnity agreements of Tality and the Holders are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the Commission at the time the registration statement in question becomes
effective or the amended prospectus filed with the Commission pursuant to
Commission Rule 424(b) (the "FINAL PROSPECTUS"), such indemnity agreement
shall not inure to the benefit of any Person if a copy of the Final
Prospectus was timely furnished to the indemnified party and was not
furnished to the Person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(v) CONTRIBUTION. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any
case in which either (A) any Holder exercising rights under this Agreement,
or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 3.4(g) but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 3.4(g) provides for
indemnification in such case, or (B) contribution under the Securities Act
may be required on the part of any such selling Holder or any such
controlling person in circumstances for which indemnification is provided
under this Section 3.4(g); then, and in each such case, Tality and such
Holder shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold
under such registration statement, and Tality and other selling Holders are
responsible for the remaining portion; PROVIDED, HOWEVER, that, in any such
case: (1) no such Holder shall be required to contribute any amount in excess
of the public offering price of all such Registrable Securities offered and
sold by such Holder pursuant to such registration statement; and (2) no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
(vi) SURVIVAL. The obligations of Tality and Holders
under this Section 3.4(g) shall survive until the fifth anniversary of the
completion of any offering of Registrable Securities in a registration
statement, regardless of the expiration of any statutes of limitation or
extensions of such statutes.
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(h) TERMINATION OF TALITY'S OBLIGATIONS. Tality shall have
no obligations pursuant to Sections 3.4(b) through (d) with respect to any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 3.4(b), (c) or (d) more than seven (7) years after the
Separation Date, or, if, in the opinion of independent counsel to Tality (and
acceptable to the Holders), all such Registrable Securities proposed to be
sold by a Holder may then be sold under Rule 144 in one transaction without
exceeding the volume limitations thereunder.
(i) NO REGISTRATION RIGHTS TO THIRD PARTIES. Without the
prior written consent of Cadence, Tality covenants and agrees that it shall
not grant, or cause or permit to be created, for the benefit of any Person
any registration rights of any kind (whether similar to the demand,
"piggyback" or Form S-3 registration rights described in this Section 3.4 or
otherwise) relating to any equity securities of Tality, other than rights
that are subordinate in right to those granted hereunder.
ARTICLE IV
COVENANTS AND OTHER MATTERS
Section 4.1 FURTHER INSTRUMENTS. At the request of Tality, and
without further consideration, Cadence shall execute and deliver, and shall
cause all other members of the Cadence Group to execute and deliver, to
Tality and its Subsidiaries such other instruments of transfer, conveyance,
assignment, substitution and confirmation and take such action as Tality may
reasonably deem necessary in order to effectively transfer, convey and assign
to Tality and its Subsidiaries and confirm Tality's and its Subsidiaries'
title to all of the assets and rights contemplated to be transferred to
Tality and its Subsidiaries pursuant to this Agreement and the Ancillary
Agreements to put Tality and its Subsidiaries in actual possession and
operating control thereof and to permit Tality and its Subsidiaries to
exercise all rights with respect thereto (including rights under contracts
and other arrangements as to which the consent of any third party to the
transfer thereof shall not have previously been obtained). At the request of
Cadence and without further consideration, Tality shall execute and deliver,
and shall cause all other members of the Tality Group to execute and deliver,
to Cadence and its Subsidiaries all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as
Cadence may reasonably deem necessary in order to have Tality fully and
unconditionally assume and discharge the liabilities contemplated to be
assumed by Tality and its Subsidiaries under this Agreement and the Ancillary
Agreements and to relieve each member of the Cadence Group of any liability
or obligation with respect thereto and evidence the same to third parties.
Neither Cadence nor Tality shall be obligated, in connection with the
foregoing, to expend money other than reasonable out-of-pocket expenses,
attorneys' fees and disbursements and recording or similar fees. Furthermore,
each party hereto, at the request of the other party, shall execute and
deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated by this Agreement and the Ancillary Agreements.
Section 4.2 AGREEMENT FOR EXCHANGE OF INFORMATION.
(a) GENERALLY. Each of Cadence and Tality agrees to provide,
or cause to be provided, to the other, at any time before or after the
Separation Date, as soon as
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reasonably practicable after written request therefor, any
Information in the possession or under the control of such party
that the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities laws) by a
Governmental Authority having jurisdiction over the requesting
party; (ii) for use in any other judicial, regulatory,
administrative or other proceeding, or in order to satisfy audit,
accounting, claims, regulatory, litigation or other similar
requirements; (iii) to comply with its obligations under this
Agreement or any Ancillary Agreement; or (iv) in connection with the
ongoing businesses of Cadence or Tality, as the case may be;
PROVIDED, HOWEVER, that if a party determines that providing its
Information to the other party could be commercially detrimental to
such party, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable
measures to permit its compliance with such disclosure obligation in
a manner that avoids any such harm or consequence.
(b) INTERNAL ACCOUNTING CONTROLS; FINANCIAL INFORMATION. After
the Separation Date, each party shall (i) maintain in effect at its own
cost and expense adequate systems and controls for its business to the
extent necessary to enable the other party to satisfy its reporting,
accounting, audit and other obligations; and (ii) provide, or cause to
be provided, to the other party and its Subsidiaries in such form as
requested and at no charge to the requesting party, all financial and
other data and information as the requesting party determines necessary
or advisable in order to prepare its financial statements and reports
or filings with any Governmental Authority.
(c) OWNERSHIP OF INFORMATION. Any Information owned by a party
that is provided to a requesting party pursuant to this Section 4.2
shall remain the property of the providing party. Unless specifically
set forth herein, nothing contained in this Agreement shall be
construed as granting or conferring ownership or license rights in any
such Information or varying an attorney-client or other privilege
applicable to such Information.
(d) LIMITATION OF LIABILITY. No member of either the Cadence
Group or the Tality Group shall have any liability to a member of the
Tality Group or Cadence Group, respectively, in the event that any
Information exchanged or provided pursuant to this Section 4.2 is found
to be incomplete or inaccurate, in the absence of gross negligence or
willful misconduct by the party providing such Information.
(e) OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION.
The rights and obligations granted under this Section 4.2 are subject
to any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of Information set
forth in this Agreement and any Ancillary Agreement, including the
Master Confidentiality Agreement.
(f) PRODUCTION OF WITNESSES; RECORDS; COOPERATION. After the
Separation Date, except in the case of a legal or other proceeding by
one party hereto against the other party (which shall be governed by
such discovery rules as may be applicable under Section 4.4 or
otherwise), each party hereto shall use all commercially reasonable
efforts to make available to the other party, upon written request, the
former, current and future
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directors, officers, employees, other personnel and agents of such
party as witnesses and any books, records or other documents within
its control or which it otherwise has the ability to make available,
to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and
agents) or books, records or other documents may reasonably be
required in connection with any legal, administrative or other
proceeding in which the requesting party may from time to time be
involved, regardless of whether any such legal, administrative or
other proceeding is a matter with respect to which indemnification
may be sought hereunder. The requesting party shall bear all costs
and expenses in connection therewith.
Section 4.3 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND
ACCOUNTING. For so long as Cadence is required in accordance with United States
generally accepted accounting principles to consolidate Tality's results of
operations and financial position:
(a) SELECTION OF AUDITORS. Tality shall ensure that Tality's
Auditors are the same as Cadence's Auditors.
(b) FISCAL YEAR. Tality shall ensure that its fiscal year for
financial, accounting and federal, state and local income tax purposes
shall be the same as Cadence's fiscal year.
(c) DATE OF AUDITORS' OPINION AND QUARTERLY REVIEWS. Tality
shall use all commercially reasonable efforts to enable and cause the
Tality Auditors to complete their audit such that they shall date their
opinion on Tality's audited annual financial statements on the same
date that Cadence's Auditors date their opinion on Cadence's audited
annual financial statements, and to enable Cadence to meet its
timetable for the printing, filing and public dissemination of
Cadence's annual financial statements. Tality shall use all
commercially reasonable efforts to enable and cause the Tality Auditors
to complete their quarterly review procedures such that they shall
provide clearance on Tality's quarterly financial statements on the
same date that Cadence's Auditors provide clearance on Cadence's
quarterly financial statements.
(d) ANNUAL, QUARTERLY AND OTHER FINANCIAL STATEMENTS. Tality
shall provide to Cadence on a timely basis all Information that Cadence
requests to meet its schedule for the preparation, printing, filing and
public dissemination of Cadence's annual, quarterly and other financial
statements. Without limiting the generality of the foregoing, Tality
shall provide all required financial Information with respect to Tality
and its Subsidiaries to Tality's Auditors in a sufficient and
reasonable time and in sufficient detail to permit Tality's Auditors to
take all steps and perform all reviews necessary to provide sufficient
assistance to Cadence's Auditors with respect to financial Information
to be included or contained in Cadence's annual, quarterly and other
financial statements. Similarly, Cadence shall provide to Tality on a
timely basis all financial Information that Tality reasonably requires
to meet its schedule for the preparation, printing, filing and public
dissemination of Tality's annual and quarterly financial statements.
Without limiting the generality of the foregoing, Cadence shall provide
all required financial Information with respect to Cadence and its
Subsidiaries to Cadence's Auditors in a sufficient and reasonable time
and in sufficient detail to permit Cadence's Auditors to take all steps
and
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perform all reviews necessary to provide sufficient assistance to
Tality's Auditors with respect to Information to be included or
contained in Tality's annual and quarterly financial statements.
(e) IDENTITY OF PERSONNEL PERFORMING THE ANNUAL AUDIT AND
QUARTERLY REVIEWS. Tality shall authorize Tality's Auditors to make
available to Cadence's Auditors both the personnel who performed or
shall perform the annual audits and quarterly reviews of Tality and
work papers related to the annual audits and quarterly reviews of
Tality, in all cases within a reasonable time prior to Tality's
Auditors' opinion date, so that Cadence's Auditors are able to perform
the procedures they consider necessary to take responsibility for the
work of Tality's Auditors as it relates to Cadence's Auditors' report
on Cadence's financial statements, all within sufficient time to enable
Cadence to meet its timetable for the printing, filing and public
dissemination of Cadence's annual and quarterly statements. Similarly,
Cadence shall authorize Cadence's Auditors to make available to
Tality's Auditors both the personnel who performed or shall perform the
annual audits and quarterly reviews of Cadence and work papers related
to the annual audits and quarterly reviews of Cadence, in all cases
within a reasonable time prior to Cadence's Auditors' opinion date, so
that Tality's Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of Cadence's Auditors as
it relates to Tality's Auditors' report on Tality's statements, all
within sufficient time to enable Tality to meet its timetable for the
printing, filing and public dissemination of Tality's annual and
quarterly financial statements.
(f) ACCESS TO BOOKS AND RECORDS. Tality shall, as requested by
Cadence, provide Cadence's internal auditors and their designees access
to Tality's and its Subsidiaries' books and records so that Cadence may
conduct reasonable audits relating to the financial statements provided
by Tality pursuant hereto as well as to the internal accounting
controls and operations of Tality and its Subsidiaries. Similarly,
Cadence shall provide Tality's internal auditors and their designees
access to Cadence's and its Subsidiaries' books and records so that
Tality may conduct reasonable audits relating to the financial
statements provided by Cadence pursuant hereto as well as to the
internal accounting controls and operations of Cadence and its
Subsidiaries.
(g) NOTICE OF CHANGE IN ACCOUNTING PRINCIPLES. Tality shall
provide Cadence with as much prior notice as reasonably practicable
(but in no event less than 30 days notice) of any proposed
determination of, or any significant changes in, its accounting
estimates, principles or methods from those in effect on the Separation
Date. Tality shall consult with Cadence and, if requested by Cadence,
Tality shall consult with Cadence's Auditors with respect to any such
proposed determination or change.
Section 4.4 DISPUTE RESOLUTION.
(a) NEGOTIATION/MEDIATION. If a dispute, controversy or claim
(a "DISPUTE") arises between the parties or any of their Subsidiaries
relating to the interpretation or performance of this Agreement or any
Ancillary Agreement, or any grounds for the termination hereof, duly
authorized officers or employees of each party shall meet to attempt in
good faith to negotiate a resolution of the Dispute prior to pursuing
other
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available remedies. The date of receipt of written notice of a
dispute given by one party to the other with a request for a meeting
between the parties 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 in court or any arbitration proceeding. If the parties
are unable to resolve the Dispute within thirty (30) days after the
Dispute Resolution Commencement Date, and either party wishes to
pursue its rights relating to such Dispute, then the Dispute shall
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. The
parties shall share the costs of the mediation equally, except that
each party shall bear its own costs and expenses, including
attorneys' fees and expenses, witness fees and expenses, travel
expenses, and preparation costs. The parties may also agree to
replace mediation with some other form of non-binding or binding
alternative dispute resolution ("ADR").
(b) ARBITRATION. Any Dispute which the parties cannot resolve
through mediation within ninety (90) days after the Dispute Resolution
Commencement Date, unless otherwise mutually agreed in writing, shall
be submitted to final and binding arbitration under the then current
Commercial Arbitration Rules of the American Arbitration Association
(the "AAA"), by one (1) arbitrator in Santa Clara County, California.
Such arbitrator shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the
aforesaid AAA rules. The arbitrator shall be instructed to prepare and
deliver a written, reasoned opinion stating his 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 shall
not be construed under the doctrine of laches, waiver or estoppel to
adversely affect the rights of either party.
(c) EXCEPTIONS. Any Dispute regarding any of the following
matters 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; or 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.
(d) CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise
agreed in writing, the parties shall 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 Section 5.4 with respect to all matters not subject
to any particular Dispute.
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Section 4.5 NON-SOLICITATION OF EMPLOYEES. For a period of one (1) year
following the Separation Date, Tality agrees (and shall cause its Subsidiaries)
not to solicit or recruit or hire employees of any member of the Cadence Group,
without the prior consent of Cadence's Senior Vice President of Human Resources
(or his or her designee). Notwithstanding the foregoing, this prohibition on
solicitation, recruitment or hiring shall not apply to actions taken by any
member of the Tality Group either (a) solely as a result of an employee's
affirmative response to a general recruitment effort carried out through a
public solicitation or (b) as a result of an employee's initiative.
Section 4.6 EMPLOYEE AGREEMENTS. As used in this Section 4.6, "EMPLOYEE
AGREEMENT" means the Employee Proprietary Information and Inventions Agreement
and corresponding agreements in foreign countries executed by each employee of
Cadence or any of its Subsidiaries.
(a) SURVIVAL OF EMPLOYEE AGREEMENT OBLIGATIONS AND CADENCE'S
COMMON LAW RIGHTS. The Employee Agreements of all Cadence employees
transferring to Tality or one of its Subsidiaries as of the Separation
Date shall remain in full force and effect according to their terms;
PROVIDED, HOWEVER, that none of the following acts committed by former
Cadence employees within the scope of their employment with Tality or
one of its Subsidiaries shall constitute a breach of such Employee
Agreements: (i) the use or disclosure of Confidential Information (as
that term is defined in the former Cadence employee's Employee
Agreement) for or on behalf of Tality or one of its Subsidiaries, if
such disclosure is consistent with the rights granted to Tality and its
Subsidiaries and restrictions imposed on Tality and its Subsidiaries
under this Agreement or any Ancillary Agreement; (ii) the disclosure
and assignment to Tality or one of its Subsidiaries of rights in
proprietary developments authored or conceived by the former Cadence
employee after the Separation Date and resulting from the use of, or
based upon intellectual property (whether patented or not) which is
retained by Cadence, provided that in no event shall such disclosure
and assignment be regarded as assigning or licensing the underlying
intellectual property to Tality or one of its Subsidiaries; (iii) the
rendering of any services, directly or indirectly, to Tality or one of
its Subsidiaries to the extent such services are consistent with the
assignment or license of rights granted to Tality and the restrictions
imposed on Tality and its Subsidiaries under this Agreement, any
Ancillary Agreement or any other agreement between the parties; and
(iv) solicitation of the employees of one party by the other party
prior to the Separation Date (so long as such solicitation does not
violate Section 4.5). Further, Cadence retains any rights it has under
statute or common law with respect to actions by its former employees
to the extent such actions are inconsistent with the rights granted to
Tality and restrictions imposed on Tality under this Agreement or any
Ancillary Agreement.
(b) ASSIGNMENT, COOPERATION FOR COMPLIANCE AND ENFORCEMENT. To
the extent permissible under Applicable Law, the following shall apply:
(i) Cadence retains all rights under the Employee
Agreements of all former Cadence employees necessary to permit
Cadence to protect the rights and interests of Cadence, but
hereby transfers and assigns to Tality and its Subsidiaries
its rights under the Employee Agreements of all former Cadence
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employees to the extent required to permit Tality to enjoin,
restrain, recover damages from or obtain specific performance
of the Employee Agreements or obtain other remedies against
any employee who breaches his/her Employee Agreement;
PROVIDED, HOWEVER, that if such partial transfer and
assignment is not permissible under Applicable Law, Cadence
shall be deemed to have transferred and assigned all such
rights.
(ii) Each of Cadence and Tality agrees, at its own
cost and expense, to cooperate with the other as follows: (A)
Tality shall advise Cadence of: (1) any violation(s) of the
Employee Agreement by former Cadence employees, and (2) any
violation(s) of the Tality Employee Agreement which affect
Cadence's rights; and (B) Cadence shall advise Tality of any
violations of the Employee Agreement by current or former
Cadence employees which affect Tality's rights; PROVIDED,
HOWEVER, that the foregoing obligations shall only apply to
violations which become known to an attorney within the legal
department of the party obligated to provide notice thereof.
(iii) Tality may enforce all rights transferred and
assigned to it under this Agreement relating to the Employee
Agreements. In addition, if Cadence has retained any rights
under the Employee Agreements, Tality shall, if requested by
Cadence, enforce the Employee Agreements of former Cadence
employees to the extent necessary to reasonably protect the
interests of any member of the Cadence Group; PROVIDED,
HOWEVER, that Tality shall not commence any legal action
relating thereto without first consulting with Cadence's
General Counsel (or his/her designee). If Tality, in seeking
to enforce any Employee Agreement, notifies Cadence that it
requires, or desires, Cadence to join in such action, then
Cadence shall do so. In addition, if Cadence commences or
becomes a party to any action to enforce a Employee Agreement
of a former Cadence employee, Cadence shall, whether or not it
becomes a party to the action, cooperate with Tality by making
available its files and employees who have information or
knowledge relevant to the dispute, subject to appropriate
measures to protect the confidentiality of any proprietary or
confidential information that may be disclosed in the course
of such cooperation or action and subject to any relevant
privacy laws and regulations. Any such action shall be
conducted at the expense of Tality and Cadence and Tality
shall agree on a case by case basis on compensation, if any,
of Cadence for the value of the time of Cadence employees as
reasonably required in connection with the action.
(iv) Cadence and Tality understand and acknowledge
that matters relating to the making, performance, enforcement,
assignment and termination of employee agreements are
typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an
employee resides, or where an employee's services are
rendered, and that such laws and regulations may supersede or
limit the applicability or enforceability of this Section 4.6.
In such circumstances, Cadence and Tality agree to take action
with respect to the employee agreements that best accomplishes
the parties' objectives as set forth in this Section 4.6 and
that is consistent with applicable law.
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Section 4.7 GOVERNMENT AND THIRD PARTY APPROVALS. If and to the extent
that the valid, complete and perfected transfer, assignment or novation of any
asset or liability pursuant to the Assignment Agreement would be a violation of
Applicable Law or require any Third-Party Approval or Governmental Approval in
connection with the Separation or the IPO, then, unless Cadence shall otherwise
determine, the transfer or assignment to, or novation by, the Tality Group, as
the case may be, of such assets or liabilities shall be automatically deemed
deferred and any such purported transfer, assignment or novation shall be null
and void until such time as all such Third-Party Approvals or Governmental
Approvals have been obtained. Notwithstanding the foregoing, any asset allocated
to Tality the transfer of which is so delayed shall still be considered an asset
of Tality for purposes of determining whether any associated liability is a
liability of Tality; PROVIDED, HOWEVER, that if such Third-Party Approvals or
Governmental Approvals have not been obtained within six months after the
Separation Date, the parties shall use all commercially reasonable efforts to
achieve an alternative solution in accordance with the parties' intentions.
Tality shall (and it shall cause its Subsidiaries to) reimburse Cadence for all
additional costs and expenses incurred by Cadence or any other member of the
Cadence Group in connection with the performance of its obligations under this
Section 4.7.
ARTICLE V
MISCELLANEOUS
Section 5.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF
THE CADENCE GROUP OR TALITY GROUP BE LIABLE TO ANY MEMBER OF THE TALITY GROUP OR
CADENCE GROUP, RESPECTIVELY, 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
(OTHER THAN AS SET FORTH IN ARTICLE III) OR ANY ANCILLARY 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 AS SET FORTH IN THE INDEMNIFICATION
AND INSURANCE MATTERS AGREEMENT.
Section 5.2 ENTIRE AGREEMENT. This Agreement, the 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.
Section 5.3 GOVERNING LAW. This Agreement shall be construed in
accordance with and all Disputes hereunder shall be governed by the laws of the
State of Delaware, 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 4.4.
Section 5.4 TERMINATION. This Agreement and all Ancillary Agreements
may be terminated at any time prior to the IPO Closing Date by and in the sole
discretion of Cadence
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without the approval or consent of Tality. This Agreement may be terminated
at any time after the IPO Closing Date by mutual consent of Cadence and
Tality. In the event of termination pursuant to this Section 5.4, no party
shall have any liability of any kind to the other party.
Section 5.5 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 Cadence :
Cadence Design Systems, Inc
2655 Seely Avenue
Building 5
San Jose, California 95134
Attention: R.L. Smith McKeithen, General Counsel
Fax: (408) 944-6855
if to Tality:
Tality Corporation
2655 Seely Avenue
Building 9
San Jose, California 95134
Attention: Robert Wiederhold, Chief Executive Officer
Fax: (408) 894-2605
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 U.S. 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 receipt and three (3)
days from the date of postmark.
Section 5.6 COUNTERPARTS. This Agreement and each of 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.
Section 5.7 BINDING EFFECT; ASSIGNMENT. This Agreement and each
Ancillary Agreement shall inure to the benefit of and be binding upon the
parties hereto and thereto and their respective legal representatives and
successors, and nothing in this Agreement or any Ancillary 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 and
each Ancillary Agreement may be enforced separately by each member of the
Cadence Group and each member of the Tality Group. Neither party may assign this
Agreement or any rights or obligations hereunder, without the prior written
consent of the other party (except in connection with a merger, consolidation or
sale of all or substantially all of the party's assets), and any such attempted
assignment shall be void and in violation hereof.
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Section 5.8 SEVERABILITY. If any term or other provision of this
Agreement or any Ancillary Agreement, or any of the Exhibits and 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.
Section 5.9 FAILURE OR DELAY 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 any Ancillary Agreement, or the Exhibits or Schedules
attached hereto or thereto are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
Section 5.10 AMENDMENT. No modification or amendment shall be made to
this Agreement or any Ancillary Agreement, or the Exhibits or Schedules attached
hereto or thereto, except by an instrument in writing signed on behalf of each
of the parties to such agreement.
Section 5.11 AUTHORITY. Each of the parties hereto and each of the
Ancillary Agreements represents to the other that (a) it has the corporate or
other requisite power and authority to execute, deliver and perform this
Agreement or such Ancillary Agreement, as the case may be; (b) the execution,
delivery and performance of this Agreement and each of the Ancillary Agreements
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 each of the
Ancillary Agreements; and (d) this Agreement and each of the Ancillary
Agreements 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 5.12 INTERPRETATION. The headings contained in this Agreement
and each of the Ancillary Agreements, in any Exhibit or Schedule hereto and in
the table of contents to this Agreement and each of the Ancillary Agreements are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or such Ancillary Agreement. Any capitalized
term used in any Exhibit or Schedule hereto or to any Ancillary Agreement but
not otherwise defined therein, shall have the meaning assigned to such term in
this Agreement or such Ancillary Agreement, as the case may be. When a reference
is made in this Agreement or any Ancillary 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 or such Ancillary Agreement, as the case
may be, unless otherwise indicated. All Exhibits and Schedules hereto and to
each Ancillary Agreement are incorporated into and made a part of this Agreement
and the applicable Ancillary Agreement, respectively. The terms "including" and
"include" employed in this Agreement or any Ancillary Agreement (including any
of the Exhibits and
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Schedules incorporated into and made a part of this Agreement or any such
Ancillary Agreement) mean "including, without limitation," and "includes,
without limitation," respectively.
Section 5.13 CONFLICTING AGREEMENTS. In the event of any irreconcilable
conflict between this Agreement and any Ancillary Agreement or other agreement
executed in connection herewith, the provisions of such Ancillary Agreement
shall prevail to the extent that they specifically address the subject matter of
the conflict.
Section 5.14 PAYMENT OF EXPENSES. Except as otherwise provided in this
Agreement or any of the Ancillary Agreements or any other agreement related to
the IPO, all costs and expenses of the parties hereto in connection with the
Separation and the IPO (including underwriting discounts and commissions) shall
be allocated between Tality and Cadence as determined by Cadence in its sole and
absolute discretion.
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WHEREFORE, the parties have executed and delivered this Master
Separation Agreement effective as of the date first set forth above.
CADENCE DESIGN SYSTEMS, INC. TALITY CORPORATION
By: /s/ William Porter By: /s/ Robert P. Wiederhold
---------------------------- ----------------------------------------
Name: William Porter Name: Robert P. Wiederhold
Title: Senior Vice President, Title: President and Chief Executive Officer
Chief Financial Officer
CADENCE HOLDINGS, INC.
By: /s/ William Porter
----------------------------
Name: William Porter
Title: Treasurer
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