Exhibit 2.09
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
BY AND AMONG
CADENCE DESIGN SYSTEMS, INC.,
CADENCE HOLDINGS, INC.,
TALITY, LP
AND
TALITY CORPORATION
DATED AS OF
OCTOBER 4, 2000
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..........................................................................................1
Section 1.1 Action...............................................................................1
Section 1.2 Assets...............................................................................2
Section 1.3 Assignment Agreement.................................................................2
Section 1.4 Cadence Business.....................................................................2
Section 1.5 Cadence Facilities...................................................................2
Section 1.6 Cadence Indemnitees..................................................................2
Section 1.7 Cadence Taxes........................................................................2
Section 1.8 Coverage Amount......................................................................2
Section 1.9 Environmental Actions................................................................2
Section 1.10 Environmental Conditions.............................................................2
Section 1.11 Environmental Laws...................................................................2
Section 1.12 Foreign Transfer Agreement...........................................................2
Section 1.13 Group Tax Return.....................................................................2
Section 1.14 Hazardous Materials..................................................................3
Section 1.15 Indemnitee...........................................................................3
Section 1.16 Insurance Policies...................................................................3
Section 1.17 Insurance Proceeds...................................................................3
Section 1.18 Insurance Transition Period..........................................................3
Section 1.19 IPO Liabilities......................................................................3
Section 1.20 Liabilities..........................................................................3
Section 1.21 Party................................................................................3
Section 1.22 Release..............................................................................3
Section 1.23 Shared Cadence Percentage............................................................3
Section 1.24 Shared Tality Percentage.............................................................3
Section 1.25 Shared Percentage....................................................................3
Section 1.26 Straddle Period......................................................................3
Section 1.27 Straddle Period Tax Return...........................................................3
Section 1.28 Tality Contracts.....................................................................3
Section 1.29 Tality Covered Parties...............................................................3
Section 1.30 Tality Facilities....................................................................4
Section 1.31 Tality Indemnitees...................................................................4
Section 1.32 Tality Liabilities...................................................................4
Section 1.33 Tality Taxes.........................................................................4
Section 1.34 Tax or Taxes.........................................................................4
Section 1.35 Tax Returns..........................................................................4
Section 1.36 Termination Date.....................................................................4
Section 1.37 Third Party Claim....................................................................4
ARTICLE II MUTUAL RELEASES; INDEMNIFICATION....................................................................4
Section 2.1 Release of Pre-Closing Claims........................................................4
Section 2.2 Indemnification by Tality............................................................5
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 2.3 Indemnification by Cadence...........................................................6
Section 2.4 Indemnification With Respect to Environmental Actions and Conditions.................7
Section 2.5 Reductions for Insurance Proceeds and Other Recoveries...............................7
Section 2.6 Procedures for Defense, Settlement and Indemnification of Third Party Claims.........8
Section 2.7 Additional Matters...................................................................9
Section 2.8 Survival of Indemnities.............................................................10
ARTICLE III INSURANCE MATTERS.................................................................................10
Section 3.1 Tality Insurance Coverage During the Transition Period..............................10
Section 3.2 Cooperation and Agreement Not to Release Carriers...................................11
Section 3.3 Tality Insurance Coverage After the Insurance Transition Period.....................12
Section 3.4 Responsibilities for Deductibles and/or Self-insured Obligations....................12
Section 3.5 Procedures With Respect to Insured Tality Liabilities...............................12
Section 3.6 Insufficient Limits of Liability for Architect Liabilities and Tality Liabilities...13
Section 3.7 Cooperation.........................................................................13
Section 3.8 No Assignment or Waiver.............................................................13
Section 3.9 No Liability........................................................................13
Section 3.10 Additional or Alternate Insurance...................................................13
Section 3.11 Further Agreements..................................................................14
Section 3.12 Matters Governed by Employee Matters Agreement......................................14
ARTICLE IV TAX MATTERS........................................................................................14
Section 4.1 Liability for Taxes.................................................................14
Section 4.2 Tax Returns.........................................................................14
Section 4.3 Tax Refunds.........................................................................15
Section 4.4 Tax Contest Provisions..............................................................16
Section 4.5 Tax Information and Cooperation.....................................................16
Section 4.6 Redeterminations of Tax Liability...................................................16
Section 4.7 Status of Tality Group Member as Member of One or More Tax Groups...................17
ARTICLE V MISCELLANEOUS.......................................................................................18
Section 5.1 Incorporation by Reference..........................................................18
Section 5.2 Conflicting Agreements..............................................................18
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INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
THIS INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (this "AGREEMENT")
is entered into and effective as of October 4, 2000 by and among Cadence Design
Systems, Inc., a Delaware corporation ("CADENCE"), Cadence Holdings, Inc., a
Delaware corporation ("HOLDINGS"), Tality, LP, a Delaware limited partnership
(the "PARTNERSHIP"), and Tality Corporation, a Delaware corporation ("TALITY").
Capitalized terms used herein and not otherwise defined elsewhere herein shall
have the meanings ascribed to them in Article I or in the Separation Agreement
(defined below).
RECITALS
WHEREAS, Holdings currently owns approximately 98% of the issued and
outstanding shares of the capital stock of Tality;
WHEREAS, Tality is the sole general partner of, and owns both a general
and limited partnership interest in, the Partnership;
WHEREAS, each of the Boards of Directors of Cadence, Tality and
Holdings determined that it would be appropriate and desirable for Cadence to
transfer (or cause to be transferred) 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;
WHEREAS, Cadence, Tality and Holdings are parties to that certain
Master Separation Agreement, dated as of July 14, 2000, as amended or restated
(the "SEPARATION AGREEMENT"), pursuant to which Cadence, Tality, Holdings and
the Partnership have agreed, subject to certain conditions, to the legal
separation of the Tality Business from Cadence's other businesses and to have
the Partnership and its Subsidiaries own and operate the entire Tality Business;
and
WHEREAS, all conditions to the Separation have been satisfied or
waived, and Cadence, Holdings, the Partnership and Tality desire to set forth
certain agreements regarding indemnification and insurance.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following capitalized terms shall
have the meanings assigned to them below.
Section 1.1 "ACTION" has the meaning set forth in the Assignment
Agreement.
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Section 1.2 "ASSETS" has the meaning set forth in the Assignment
Agreement.
Section 1.3 "ASSIGNMENT AGREEMENT" means that certain General
Assignment and Assumption Agreement entered into by and among Cadence, Holdings,
Tality and the Partnership as of the date hereof.
Section 1.4 "CADENCE BUSINESS" means any business of Cadence other than
the Tality Business.
Section 1.5 "CADENCE FACILITIES" means all of the real property and
improvements thereon owned or occupied at any time by any member of the Cadence
Group, for purposes of conducting the Cadence Business, excluding the Tality
Facilities.
Section 1.6 "CADENCE INDEMNITEES" means Cadence, each member of the
Cadence Group and each of their respective directors, officers, employees,
agents and representatives.
Section 1.7 "CADENCE TAXES" has the meaning set forth on SCHEDULE 4.1.
Section 1.8 "COVERAGE AMOUNT" has the meaning set forth in Section
3.6(a).
Section 1.9 "ENVIRONMENTAL ACTIONS" means any notice, claim, act, cause
of action, order, decree or investigation by any Person (including any
Governmental Authority) alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, damage to flora or fauna caused by Environmental
Conditions, real property damages, personal injuries or penalties) arising out
of, based on or resulting from the Release of or exposure of any individual to
any Hazardous Materials.
Section 1.10 "ENVIRONMENTAL CONDITIONS" means the presence in the
environment, including the soil, groundwater, surface water or ambient air, of
any Hazardous Material at a level which exceeds any applicable standard or
threshold under any Environmental Law or otherwise requires investigation or
remediation (including investigation, study, health or risk assessment,
monitoring, removal, treatment or transport) under any applicable Environmental
Laws.
Section 1.11 "ENVIRONMENTAL LAWS" means all laws and regulations of any
Governmental Authority with jurisdiction that relate to the protection of the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) including laws and regulations relating to the Release of
Hazardous Materials, or otherwise relating to the treatment, storage, disposal,
transport or handling of Hazardous Materials, or to the exposure of any
individual to a Release of Hazardous Materials.
Section 1.12 "FOREIGN TRANSFER AGREEMENT" has the meaning set forth in
the Assignment Agreement.
Section 1.13 "GROUP TAX RETURN" means any Tax Return of a Tax Filing
Group (as defined in Section 4.7).
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Section 1.14 "HAZARDOUS MATERIALS" means chemicals, pollutants,
contaminants, wastes, toxic substances, radioactive and biological materials,
hazardous substances, petroleum and petroleum products or any fraction thereof.
Section 1.15 "INDEMNITEE" has the meaning set forth in Section 2.5.
Section 1.16 "INSURANCE POLICIES" has the meaning set forth in the
Assignment Agreement.
Section 1.17 "INSURANCE PROCEEDS" has the meaning set forth in the
Assignment Agreement.
Section 1.18 "INSURANCE TRANSITION PERIOD" has the meaning set forth in
Section 3.1(a).
Section 1.19 "IPO LIABILITIES" means any Liabilities relating to,
arising out of or resulting from any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, with respect to all information contained in the Registration
Statement or any preliminary, final or supplemental prospectus forming a part of
the Registration Statement.
Section 1.20 "LIABILITIES" has the meaning set forth in the Assignment
Agreement.
Section 1.21 "PARTY" means Cadence or Holdings, on the one hand, and
Tality or the Partnership, on the other, and members of the Cadence Group or the
Tality Group, as applicable.
Section 1.22 "RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface water,
groundwater, wetlands, land or subsurface strata.
Section 1.23 "SHARED CADENCE PERCENTAGE" means eighty percent (80%).
Section 1.24 "SHARED TALITY PERCENTAGE" means twenty percent (20%).
Section 1.25 "SHARED PERCENTAGE" means the Shared Tality Percentage or
the Shared Cadence Percentage, as the case may be.
Section 1.26 "STRADDLE PERIOD" means any Tax period that includes but
does not end on the Separation Date.
Section 1.27 "STRADDLE PERIOD TAX RETURN" means any Tax Return with
respect to a Straddle Period.
Section 1.28 "TALITY CONTRACTS" has the meaning set forth in the
Assignment Agreement.
Section 1.29 "TALITY COVERED PARTIES" has the meaning set forth in
Section 3.1(a).
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Section 1.30 "TALITY FACILITIES" means all of those facilities to be
transferred to Tality on the Separation Date as set forth on Schedule 1 to the
Real Estate Matters Agreement.
Section 1.31 "TALITY INDEMNITEES" means Tality, each member of the
Tality Group and each of their respective directors, officers, employees, agents
and representatives.
Section 1.32 "TALITY LIABILITIES" has the meaning set forth in the
Assignment Agreement.
Section 1.33 "TALITY TAXES" has the meaning set forth on SCHEDULE 4.1.
Section 1.34 "TAX" or "TAXES" means any foreign or U.S. federal, state,
local or municipal income, alternative or add-on minimum, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, value added
or any other tax, custom, tariff, impost, levy, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount related thereto, imposed by any
governmental authority or any subdivision, agency, commission or authority
thereof, or any quasi-governmental or private body having jurisdiction over the
assessment, determination, collection or other imposition of the foregoing.
Section 1.35 "TAX RETURNS" means returns, reports, and information
statements with respect to Taxes required to be filed with the Internal Revenue
Service or any other federal, foreign, state, or provincial taxing authority,
including, without limitation, consolidated, combined and unitary tax returns.
Section 1.36 "TERMINATION DATE" has the meaning set forth in Section
3.1(a).
Section 1.37 "THIRD PARTY CLAIM" has the meaning set forth in Section
2.6(a).
ARTICLE II
MUTUAL RELEASES; INDEMNIFICATION
Section 2.1 RELEASE OF PRE-SEPARATION CLAIMS.
(a) TALITY RELEASE. Except as provided in Section 2.1(d) and
SCHEDULE 2.1, effective as of the date hereof, Tality does hereby, for itself
and as agent for each member of the Tality Group (including as general partner
of the Partnership), remise, release and forever discharge each and all of the
Cadence Indemnitees from any and all Liabilities whatsoever, whether at law or
in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the date hereof, including in connection with the
transactions and all other activities to implement any aspect of the Separation
and the IPO.
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(b) CADENCE RELEASE. Except as provided in Section 2.1(d) and
SCHEDULE 2.1, effective as of the date hereof, Cadence does hereby, for itself
and as agent for each member of the Cadence Group, remise, release and forever
discharge each and all of the Tality Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the date hereof, including in
connection with the transactions and all other activities to implement any
aspect of the Separation and the IPO.
(c) WAIVER OF SECTION 1542. Each party waives the benefits of
Section 1542 of the Civil Code of the State of California, and, to the extent
applicable, any comparable statute or other law of any other jurisdiction to the
extent such section or other laws may apply to this Agreement.
Civil Code Section 1542 provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
(d) NO IMPAIRMENT. Nothing contained in Section 2.1(a) or (b)
shall impair any right of any Person to enforce the Separation Agreement, any
Foreign Transfer Agreement or any Ancillary Agreement (including this
Agreement), in each case in accordance with its terms.
(e) NO ACTIONS AS TO RELEASED CLAIMS. Tality agrees, for
itself and as agent for each member of the Tality Group (including as a general
partner of the Partnership), not to make any claim or demand, or commence any
Action asserting any claim or demand, including any claim of contribution or any
indemnification, against Cadence or any other member of the Cadence Group, or
any other Person released pursuant to Section 2.1(a), with respect to any
Liabilities released pursuant to Section 2.1(a). Cadence agrees, for itself and
as agent for each member of the Cadence Group, not to make any claim or demand,
or commence any Action asserting any claim or demand, including any claim of
contribution or any indemnification, against Tality or any member of the Tality
Group, or any other Person released pursuant to Section 2.1(b), with respect to
any Liabilities released pursuant to Section 2.1(b).
(f) FURTHER INSTRUMENTS. At any time, promptly upon the
request of the other party, each party hereto shall cause each member of, in the
case of Cadence, the Cadence Group, and in the case of Tality, the Tality Group
to execute and deliver releases reflecting the provisions hereof.
Section 2.2 INDEMNIFICATION BY TALITY. Except as otherwise provided in
this Agreement, Tality shall, for itself and as agent for each other member of
the Tality Group (including as general partner of the Partnership), indemnify,
defend (or, where applicable, pay the defense costs for) and hold harmless each
and all of the Cadence Indemnitees from and against any and all Liabilities that
any third party seeks to impose upon one or more of the
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Cadence Indemnitees, or which are imposed upon one or more of the Cadence
Indemnitees, and that relate to, arise out of or result from any of the
following (without duplication):
(i) the Tality Business, any Tality Liability or any
Tality Contract;
(ii) any breach by Tality or any other member of the
Tality Group of the Separation Agreement or any of
the Ancillary Agreements (including this Agreement);
(iii) any IPO Liabilities;
(iv) the litigation matters set forth on SCHEDULE 2.2(iv);
(v) any decrease in the purchase price pursuant to
Section 2.2(b) of the Asset Purchase Agreement by and
among Cadence Design Systems, Inc., Cadence Design
Systems Limited, and Symbionics Limited dated as of
October 3, 2000. ; and
(vi) any decrease in the purchase price pursuant to
Section 2.2(b) of the Asset Purchase Agreement by an
and among Cadence Design Systems (Canada) Limited and
Tality Canada Corporation dated as of October 4,
2000.
If any member of the Tality Group makes a payment to any of the Cadence
Indemnitees hereunder, such Cadence Indemnitee subsequently diminishes the
Liability on account of which such payment was made, either directly or through
a third-party recovery, Cadence shall promptly repay (or shall cause an Cadence
Indemnitee to promptly repay) such member of the Tality Group the amount by
which the payment made by such member of the Tality Group exceeds the actual
cost of the associated indemnified Liability. This Section 2.2 shall not apply
to any Liability indemnified pursuant to Section 2.4.
Section 2.3 INDEMNIFICATION BY CADENCE. Except as otherwise provided in
this Agreement, Cadence shall, for itself and as agent for each other member of
the Cadence Group, indemnify, defend (or, where applicable, pay the defense
costs for) and hold harmless each and all of the Tality Indemnitees from and
against any and all Liabilities that any third party seeks to impose upon one or
more of the Tality Indemnitees, or which are imposed upon one or more of the
Tality Indemnitees, and that relate to, arise out of or result from any of the
following (without duplication):
(i) the Cadence Business or any Liability of the Cadence
Group other than the Tality Liabilities;
(ii) any breach by Cadence or any other member of the
Cadence Group of the Separation Agreement or any of
the Ancillary Agreements (including this Agreement);
(iii) any increase in the purchase price pursuant to
Section 2.2(b) of the Asset Purchase Agreement by and
among Cadence Design
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Systems, Inc., Cadence Design Systems Limited, and
Symbionics Limited dated as of October 3, 2000; and
(iv) any increase in the purchase price pursuant to
Section 2.2(b) of the Asset Purchase Agreement by an
and among Cadence Design Systems (Canada) Limited and
Tality Canada corporation dated as of October 4,
2000..
If any member of the Cadence Group makes a payment to any of the Tality
Indemnitees hereunder, and such Tality Indemnitee subsequently diminishes the
Liability on account of which such payment was made, either directly or through
a third-party recovery, Tality shall promptly repay (or shall cause a Tality
Indemnitee to promptly repay) such member of the Cadence Group the amount by
which the payment made by such member of the Cadence Group exceeds the actual
cost of the indemnified Liability. This Section 2.3 shall not apply to any
Liability indemnified pursuant to Section 2.4.
Section 2.4 INDEMNIFICATION WITH RESPECT TO ENVIRONMENTAL ACTIONS AND
CONDITIONS.
(a) INDEMNIFICATION BY TALITY. Tality shall, for itself and as
agent for each member of the Tality Group (including as general partner of the
Partnership), indemnify, defend and hold harmless each and all of the Cadence
Indemnitees from and against any and all (i) Environmental Actions relating to,
arising out of or resulting from operations of the Tality Business or (ii)
Environmental Conditions existing on, under, about or in the vicinity of any of
the Tality Facilities, including any Release of Hazardous Materials that
migrates to any of the Tality Facilities (except to the extent that such
Environmental Conditions relate to, arise out of or result from the operations
of the Cadence Business).
(b) INDEMNIFICATION BY CADENCE. Cadence shall, for itself and
as agent for each other member of the Cadence Group, indemnify, defend and hold
harmless each and all of the Tality Indemnitees from and against any and all (i)
Environmental Actions relating to, arising out of or resulting from operations
of the Cadence Business or (ii) Environmental Conditions existing on, under,
about or in the vicinity of any of the Cadence Facilities, including any Release
of Hazardous Materials that migrates to any of the Cadence Facilities (except to
the extent that such Environmental Conditions relate to, arise out of or result
from the operations of the Tality Business).
(c) AGREEMENT REGARDING PAYMENTS TO INDEMNITEE. If an
Indemnifying Party makes any payment to or on behalf of an Indemnitee with
respect to an Environmental Action for which the Indemnifying Party is obligated
to indemnify under this Section 2.4, and the Indemnitee subsequently receives
any payment from a third party on account of the same financial obligation
covered by the payment made by the Indemnifying Party for that Environmental
Action or otherwise diminishes the financial obligation, the Indemnitee shall
promptly repay the Indemnifying Party the amount by which the payment made by
the Indemnifying Party, exceeds the actual cost of the financial obligation.
Section 2.5 REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER RECOVERIES. The
amount that any party hereto or any other member of the Cadence Group or Tality
Group, as the case
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may be (an "INDEMNIFYING PARTY"), is or may be required to pay to any other
Person pursuant to Section 2.2, 2.3 or 2.4, as applicable (an "INDEMNITEE"),
shall be reduced (retroactively or prospectively) by any Insurance Proceeds or
other amounts actually recovered from third parties by or on behalf of such
Indemnitee in respect of the related loss. The existence of a claim by an
Indemnitee for monies from an insurer or against a third party in respect of any
indemnifiable loss shall not, however, delay any payment pursuant to the
indemnification provisions contained herein and otherwise determined to be due
and owing by an Indemnifying Party. Rather, the Indemnifying Party shall make
payment in full of the amount determined to be due and owing by it against an
assignment by the Indemnitee to the Indemnifying Party of the entire claim of
the Indemnitee for Insurance Proceeds or against such third party.
Notwithstanding any other provision of this Agreement, it is the intention of
the parties hereto that no insurer or any other third party shall be (i)
entitled to a benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions or (ii) relieved of the responsibility to
pay any claims for which it is obligated. If an Indemnitee has received the
payment required by this Agreement from an Indemnifying Party in respect of any
indemnifiable loss and later receives Insurance Proceeds or other amounts in
respect of such indemnifiable loss, then such Indemnitee shall hold such
Insurance Proceeds or other amounts in trust for the benefit of the Indemnifying
Party or Indemnifying Parties and shall pay to it or them, as promptly as
practicable after receipt thereof, a sum equal to the amount of such Insurance
Proceeds or other amounts received, up to the aggregate amount of any payments
received from the Indemnifying Party pursuant to this Agreement in respect of
such indemnifiable loss (or, if there is more than one Indemnifying Party, the
Indemnitee shall pay each Indemnifying Party, its proportionate share (based on
payments received from the Indemnifying Parties) of such Insurance Proceeds).
Section 2.6 PROCEDURES FOR DEFENSE, SETTLEMENT AND INDEMNIFICATION OF
THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIMS. If an Indemnitee shall receive notice or
otherwise learn of the assertion by a Person (including any Governmental
Authority) who is not a member of the Cadence Group or the Tality Group of any
claim or of the commencement by any such Person of any Action (any such claim or
Action, a "THIRD PARTY CLAIM") with respect to which an Indemnifying Party may
be obligated to provide indemnification to such Indemnitee pursuant to Section
2.2, 2.3 or 2.4, or the Separation Agreement or any Ancillary Agreement
(including this Agreement), Cadence and Tality (as applicable) shall ensure that
such Indemnitee shall give such Indemnifying Party written notice thereof
promptly and in any event within 30 days after becoming aware of such Third
Party Claim. Any such notice shall describe the Third Party Claim in reasonable
detail. Notwithstanding the foregoing, the delay or failure of any Indemnitee or
other Person to give notice as provided in this Section 2.6(a) shall not relieve
the related Indemnifying Party of its obligations under this Article II, except
to the extent that such Indemnifying Party is actually and substantially
prejudiced by such delay or failure to give notice.
(b) DEFENSE BY INDEMNIFYING PARTY. An Indemnifying Party shall
manage the defense of and, subject to subsection (e) below, may settle or
compromise any Third Party Claim (except Third Party Claims related to the
litigation matters set forth on SCHEDULE 2.2(iv), the defense of which shall be
managed by Cadence and, subject to subsection (e) below, Cadence may settle or
comprise such Third Party Claims). Within 30 days after the receipt of notice
from
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an Indemnitee in accordance with Section 2.6(a) (or sooner, if the nature of
such Third Party Claim so requires), the Indemnifying Party shall notify the
Indemnitee that the Indemnifying Party is assuming responsibility for managing
the defense of such Third Party Claim. The Indemnifying Party shall be solely
responsible for the fees, costs and expenses of the defense. The Indemnified
Party shall cooperate with and provide reasonable assistance to the Indemnifying
Party, where requested by the Indemnifying Party, in respect of such defense.
(c) DEFENSE BY INDEMNITEE. If an Indemnifying Party fails to
assume responsibility for managing the defense of a Third Party Claim, or fails
to notify an Indemnitee that it shall assume responsibility as provided in
Section 2.6(b), such Indemnitee may manage the defense of such Third Party
Claim; PROVIDED, HOWEVER, that the Indemnifying Party shall reimburse all such
reasonable fees, costs and expenses, including attorney's and other professional
fees and expenses, in the event it is ultimately determined that the
Indemnifying Party is obligated to indemnify the Indemnitee with respect to such
Third Party Claim.
(d) NO SETTLEMENT BY INDEMNITEE WITHOUT CONSENT. Unless the
Indemnifying Party has failed to manage the defense of the Third Party Claim in
accordance with the terms of this Agreement, no Indemnitee may settle or
compromise any Third Party Claim without the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed, it being understood
that it is not unreasonable to withhold consent where a full release in favor of
the Indemnifying Party is not obtained.
(e) NO CONSENT TO CERTAIN JUDGMENTS OR SETTLEMENTS WITHOUT
CONSENT. Notwithstanding any provision of this Section 2.6, no Party ( shall
consent to entry of any judgment or enter into any settlement of a Third Party
Claim without the consent of the other Party (such consent not to be
unreasonably withheld or delayed) if the effect of such judgment or settlement
is to (A) permit any injunction, declaratory judgment, other order or other
nonmonetary relief to be entered, directly or indirectly, against the other
Party; (B) affect the other Party in a material fashion due to the allocation of
Liabilities and related indemnities set forth in the Separation Agreement, this
Agreement or any other Ancillary Agreement; (C) cause the other Party to incur
any obligations of performance to which it does not consent in writing; or (D)
cause the other Party to convey or otherwise grant licenses to its intellectual
property or royalties derived therefrom. It is expressly understood among the
Parties that it is not unreasonable for a Party to withhold its consent where a
full release in favor of the Party whose consent is sought has not been
obtained.
Section 2.7 ADDITIONAL MATTERS.
(a) COOPERATION IN DEFENSE AND SETTLEMENT. With respect to any
Third Party Claim that implicates one or more members of the Tality Group
(including as general partner or the Partnership) and one or more members of the
Cadence Group in a material fashion due to the allocation of Liabilities,
responsibilities for management of defense and related indemnities set forth in
the Separation Agreement, this Agreement or any of the other Ancillary
Agreements, or where the other Party, on reasonable cause in reflection of its
own interest, seeks to participate actively in the defense of a Third Party
Claim for which it is the Indemnitee and the other Party is the Indemnifying
Party, the Parties agree to cooperate fully and maintain a joint defense (in a
manner that shall preserve the attorney-client privilege with respect thereto)
so as to minimize
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such Liabilities and defense costs associated therewith. Except as the Parties
otherwise may mutually agree, where both Parties hereto participate in the
defense of a Third Party Claim, the responsibility for managing the defense
shall be as allocated by Section 2.6(b) and (c) of this Agreement. The Party
that is not responsible for managing the defense of such Third Party Claims
shall, upon its reasonable request, be consulted with respect to significant
matters relating thereto and may, if it deems necessary or helpful, and at its
own expense, assume an active role in the defense of such claims and associate
separate counsel for such purpose, subject to a continuing duty to coordinate
reasonably with the Party managing the defense.
(b) SUBSTITUTION. In the event of an Action involving
potential indemnification obligations pursuant to this Agreement in which the
Indemnifying Party is not a named defendant, if either the Indemnitee or the
Indemnifying Party shall so request, the parties shall endeavor to substitute
the Indemnifying Party for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this Article II shall not be altered.
(c) SUBROGATION. In the event of payment by or on behalf of
any Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
Section 2.8 SURVIVAL OF INDEMNITIES. Subject to Section 1.3, the rights
and obligations of the members of the Cadence Group and Tality Group under this
Article II shall survive the sale or other transfer by any of the members of the
Cadence Group or the Tality Group of any Assets or businesses or the assignment
by it of any Liabilities or the sale by any member of the Cadence Group or the
Tality Group of the capital stock or other equity interests of any Subsidiary to
any Person.
ARTICLE III
INSURANCE MATTERS
Section 3.1 TALITY INSURANCE COVERAGE DURING THE TRANSITION PERIOD.
(a) MAINTAIN COMPARABLE INSURANCE. Throughout the period (the
"INSURANCE TRANSITION PERIOD") beginning on the Separation Date and ending on
the date that is the earlier of (A) one (1) year after the Separation Date (or
upon the mutual consent of Cadence and the Partnership) and (B) the date on
which coverage is canceled following the giving of notice as provided in this
Section 3.1(a) (the "TERMINATION DATE"), Cadence shall, subject to insurance
market conditions and other factors beyond its control, maintain policies of
insurance, including for the benefit of the Tality Group (inclusive of Tality or
any of its Subsidiaries, directors,
10
officers, employees or other covered parties (collectively, the "TALITY COVERED
PARTIES")) which are comparable to those maintained for such purposes by Cadence
immediately prior to the Separation Date; PROVIDED, HOWEVER, that (i) if Cadence
determines that, due to circumstances beyond its authority or control (A) the
amount or scope of such coverage shall be reduced by actions of insurance
carrier(s) to a level that is eighty percent (80%) or less than the level of
coverage in existence immediately prior to the Insurance Transition Period or
(B) insurance carrier(s) come to require that the retention or deductible level
applicable to such coverage, if any, shall be increased to a level that is
twenty percent (20%) or more than the levels in existence immediately prior to
the Insurance Transition Period, Cadence shall give the Partnership notice of
such determination (a "COVERAGE DETERMINATION") as promptly as practicable; and
(ii) Tality and the Partnership shall be solely responsible for the maintenance
of director and officer liability insurance in relation to the directors and
officers of Tality. Upon notice of a Coverage Determination, and subject to any
time limitation placed upon Cadence by an insurance carrier whose actions have
prompted the giving of such notice, the Partnership shall be entitled to no less
than sixty (60) days to evaluate its options regarding continuance of coverage
hereunder. Cadence shall cooperate to assist in such evaluation, and the
Partnership, in its sole discretion, may instruct Cadence to cause to be
cancelled the Partnership's interest in all or any portion of such coverage as
of any day within such 60 day period. Should the Partnership not respond to such
notice, Cadence shall maintain such coverage for the benefit of the Partnership
as it reasonably deems appropriate, provided that it may accept reduced coverage
in order to avoid a material increase in policy expense. Except as so provided,
in no case may Cadence, without the express consent of the Partnership, cancel
or cause to be canceled, or reduce the amount or scope of, insurance coverage
during the Insurance Transition Period.
(b) REIMBURSEMENT FOR PREMIUMS. The Partnership shall promptly
pay or reimburse Cadence, as the case may be, for premium expenses, and Tality
Covered Parties shall promptly pay or reimburse Cadence for any costs and
expenses which Cadence may incur in connection with the insurance coverages
maintained pursuant to this Section 3.1, including to any subsequent premium
adjustments. All payments and reimbursements by the Partnership and Tality
Covered Parties to Cadence shall be made within thirty (30) days after the
Partnership's receipt of an invoice from Cadence.
Section 3.2 COOPERATION AND AGREEMENT NOT TO RELEASE CARRIERS. Each of
Cadence and the Partnership shall share such information as is reasonably
necessary in order to permit the other to manage and conduct its insurance
matters in an orderly fashion. Each of Cadence and the Partnership, at the
request of the other, shall cooperate with and use commercially reasonable
efforts to assist the other in recoveries for claims made under any insurance
policy for the benefit of any insured party, and neither Cadence nor the
Partnership, nor any of member of the Cadence Group or the Tality Group, shall
take any action which would intentionally jeopardize or otherwise interfere with
either party's ability to collect any proceeds payable pursuant to any insurance
policy. Except as otherwise contemplated by the Separation Agreement, this
Agreement or any other Ancillary Agreement, after the Separation Date, neither
Cadence nor the Partnership shall (and shall ensure that no member of the
Cadence Group or the Tality Group, respectively, shall), without the consent of
the other, provide any insurance carrier with a release, or amend, modify or
waive any rights under any such policy or agreement, if such release, amendment,
modification or waiver would adversely affect any rights or potential rights of
the other party or any member of, in the case the other party is Cadence, the
Cadence Group, and in
11
the case the other party is the Partnership, the Tality Group thereunder.
However, nothing in this Section 3.2 shall (A) preclude any member of either the
Cadence Group or the Tality Group from presenting any claim or from exhausting
any policy limit; (B) require any member of either the Cadence Group or the
Tality Group to pay any premium or other amount or to incur any Liability; or
(C) require any member of either the Cadence Group or the Tality Group to renew,
extend or continue any policy in force.
Section 3.3 TALITY INSURANCE COVERAGE AFTER THE INSURANCE TRANSITION
PERIOD. From and after the Termination Date, the Partnership shall be
responsible for obtaining and maintaining, at its sole expense, insurance
programs for its risk of loss and such insurance arrangements shall be separate
and apart from Cadence's insurance programs. Notwithstanding the foregoing,
Cadence, upon the request of the Partnership, shall cooperate with and use
commercially reasonable efforts to assist the Partnership in the transition to
its own separate insurance programs from and after the Termination Date, and
shall provide the Partnership with any information that is in the possession of
Cadence and is reasonably available and necessary to either obtain insurance
coverages for the Partnership or to assist the Partnership in preventing
unintended self-insurance, in whatever form.
Section 3.4 RESPONSIBILITIES FOR DEDUCTIBLES AND/OR SELF-INSURED
OBLIGATIONS. The Partnership shall reimburse Cadence for all amounts necessary
to exhaust or otherwise satisfy all applicable self-insured retentions, amounts
for fronted policies, deductibles and retrospective premium adjustments and
similar amounts not covered by Insurance Policies in connection with Tality
Liabilities and Insured Tality Liabilities. Any amounts to be reimbursed by the
Partnership shall be paid within ten (10) days after the Partnership's receipt
of notice of the amount due to Cadence.
Section 3.5 PROCEDURES WITH RESPECT TO INSURED TALITY LIABILITIES.
(a) REIMBURSEMENT. The Partnership shall promptly reimburse,
within ten (10) days after receiving notice thereof, Cadence for all reasonable
amounts incurred by Cadence to pursue insurance recoveries from Insurance
Policies for Insured Tality Liabilities.
(b) MANAGEMENT OF CLAIMS. The defense of claims, suits or
actions giving rise to potential or actual Insured Tality Liabilities shall
be managed (in conjunction with Cadence's insurers, as appropriate) by the
party that would have had responsibility for managing such claims, suits or
actions had such Insured Tality Liabilities been Tality Liabilities,
PROVIDED, HOWEVER, that (i) if such party fails to assume responsibility for
managing the claim, suit or action, the other party may assume this
responsibility, and may act to seek an extension of time, or take other
unilateral, commercially reasonable actions, where necessary to protect the
interest of the insured party; PROVIDED, FURTHER, that the party originally
responsible shall reimburse all such reasonable fees, costs and expenses,
including attorney's and other professional fees, so incurred in the
management of the claim, suit or action; and (ii) with respect to such
claims, suits or actions, in which the party not responsible for management
determines, on reasonable cause in reflection of its own interest, that it
wishes to participate actively in the claim, suit or action, the parties
agree to cooperate fully and maintain a joint defense (in a manner that shall
preserve the attorney-client privilege with respect thereto), and the party
that is not responsible for managing actions shall, upon its reasonable
request, be consulted with respect to significant matters relating
12
thereto and may, if it deems necessary or helpful, and at its own expense,
assume an active role in the respect to such claims, suits or actions, and
associate separate counsel for such purpose, subject to a continuing duty to
coordinate reasonably with the party managing the claim, suit or action.
Section 3.6 INSUFFICIENT LIMITS OF LIABILITY FOR CADENCE LIABILITIES
AND TALITY LIABILITIES. If there shall be insufficient limits of liability
available under Cadence's Insurance Policies in effect prior to the Termination
Date to cover the Liabilities of Cadence and/or the Partnership that would
otherwise be covered by such Insurance Policies, then to the extent that other
insurance is not available to Cadence and/or Tality for such Liabilities an
adjustment shall be made in accordance with the following procedures:
(a) Each Party shall be allocated an amount equal to its
Shared Percentage of the lesser of (A) the available limits of liability
available under Cadence's Insurance Policies in effect prior to the Termination
Date net of uncollectible amounts attributable to insurer insolvencies, and (B)
the proceeds received from Cadence's Insurance Policies if the Liabilities are
the subject of disputed coverage claims and, following consultation with each
other, Cadence and/or the Partnership agree to accept less than full policy
limits from Cadence's and the Partnership's insurers (the "COVERAGE AMOUNT").
(b) A Party that receives more than its share of the Coverage
Amount (the "OVERALLOCATED PARTY") agrees to reimburse the other Party (the
"UNDERALLOCATED PARTY") to the extent that the Liabilities of the Underallocated
Party that would have been covered under such Insurance Policies is less than
the Underallocated Party's share of the Coverage Amount.
(c) This Section 3.6(a) shall terminate ten (10) years
following the Termination Date.
Section 3.7 COOPERATION. Cadence and the Partnership shall cooperate
with each other in all respects, and they shall execute any additional documents
which are reasonably necessary, to effectuate the provisions of this Article
III.
Section 3.8 NO ASSIGNMENT OR WAIVER. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy of
any member of the Cadence Group in respect of any Insurance Policy or any other
contract or policy of insurance.
Section 3.9 NO LIABILITY. Tality and the Partnership do hereby, for
themselves, as agents for each other member of the Tality Group, agree that no
member of the Cadence Group or any Cadence Indemnitee shall have any Liability
whatsoever to any member of the Tality Group as a result of the Insurance
Policies and insurance practices of Cadence and its Subsidiaries as in effect at
any time prior to the Termination Date, including as a result of the level or
scope of any such insurance, the creditworthiness of any insurance carrier, the
terms and conditions of any policy, the adequacy or timeliness of any notice to
any insurance carrier with respect to any claim or potential claim or otherwise.
Section 3.10 ADDITIONAL OR ALTERNATE INSURANCE. Notwithstanding any
provision of this Agreement, during the Insurance Transition Period Cadence and
the Partnership shall work
13
together to evaluate insurance options and secure additional or alternate
insurance for the Partnership and/or Cadence if desired and cost effective.
Nothing in this Agreement shall be deemed to restrict any member of the Tality
Group from acquiring at its own expense any other insurance policy in respect of
any Liabilities or covering any period; PROVIDED, HOWEVER, that, if the
Partnership elects to acquire other insurance, it must promptly notify Cadence
of its intention to do so and, within thirty (30) days of the policy date of
such new insurance, it must furnish Cadence with a copy of the policy binder
and, when available, a copy of the certificate of insurance, and such other
information concerning the policy as Cadence may reasonably request.
Section 3.11 FURTHER AGREEMENTS. The Parties acknowledge that they
intend to allocate financial obligations without violating any Applicable Law
regarding insurance, self-insurance or other financial responsibility. If it is
determined that any action undertaken pursuant to the Separation Agreement, this
Agreement or any other Ancillary Agreement is violative of any insurance,
self-insurance or related financial responsibility law or regulation, the
parties agree to work together to do whatever is necessary to comply with such
law or regulation while trying to accomplish, as much as possible, the
allocation of financial obligations as intended in the Separation Agreement,
this Agreement and any other Ancillary Agreement.
Section 3.12 MATTERS GOVERNED BY EMPLOYEE MATTERS AGREEMENT. This
Article III shall not apply to any insurance policies that are the subject of
the Employee Matters Agreement.
ARTICLE IV
TAX MATTERS
Section 4.1 LIABILITY FOR TAXES.
(a) CADENCE TAXES. Cadence shall be liable for, and shall
indemnify, defend and hold harmless each member of the Tality Group from and
against (i) all Cadence Taxes, and (ii) all losses, liabilities, damages, and
reasonable expenses incurred or sustained by the Tality Group by reason of or in
connection with Cadence Taxes.
(b) TALITY TAXES. Each member of the Tality Group shall be
jointly and severally liable for, and shall indemnify, defend and hold harmless
the Cadence Group from and against (i) all Tality Taxes, and (ii) all losses,
liabilities, damages, and reasonable expenses incurred or sustained by any
member of the Cadence Group by reason of or in connection with Tality Taxes;
PROVIDED, HOWEVER, that it is understood that the Cadence Group shall be liable
for any income Taxes imposed with respect to its allocable share of income of
the Partnership.
Section 4.2 TAX RETURNS.
(a) TAX RETURNS TO BE PREPARED AND FILED BY CADENCE. Cadence
will be responsible for and will cause to be prepared and duly filed (i) all Tax
Returns of the Tality Group (other than Group Tax Returns) to the extent that
any member of the Cadence Group may be liable for the payment of any Tax due
with respect to any such Tax Return, except for any Tax Return pertaining to
degrouping under the applicable provisions of UK law, (ii) all Straddle Period
Tax Returns, and (iii) all Group Tax Returns. All such Tax Returns shall be
prepared in a manner consistent with prior periods to the extent such Tax
Returns have been filed in prior
14
periods. All such Tax Returns that require the payment of material amounts by
the Tality Group shall be submitted to Tality no later than ten days prior to
the due date and filing thereof, and Tality shall have the right to review and
comment thereon (without such submission review or lack thereof affecting the
indemnification obligations of Cadence under this Agreement). Such Tax Returns,
as modified by reasonable comments of Tality (if applicable), shall be filed
with applicable taxing authorities. Cadence shall pay or cause to be paid any
and all Cadence Taxes that are due with respect to such Tax Returns, and the
Tality Group shall pay any Tality Taxes that are due with respect to such Tax
Returns.
(b) TAX RETURNS TO BE PREPARED AND FILED BY THE TALITY GROUP.
Except as provided in Section 4.2(a), the Tality Group shall be responsible for
and will cause to be prepared and duly filed all Tax Returns of or with respect
to any member of the Tality Group to the extent that they may be liable for the
payment of any Tax due with respect to any such Tax Return and all Tax Returns
(including information returns) that are required to be filed by the
Partnership. The Tality Group shall pay all Tality Taxes that are due with
respect to such Tax Returns.
(c) AMENDED TAX RETURNS. Without the prior written consent of
Cadence, no member of the Tality Group shall (i) make any election relating to
Taxes or (ii) file any amended Tax Returns or propose or agree to any adjustment
of any item with the Internal Revenue Service or any other taxing authority that
would have the effect of increasing the liability of any member of the Cadence
Group for any Cadence Taxes. Without the prior written consent of Tality, no
member of the Cadence Group shall (i) make any election relating to Taxes or
(ii) file any amended Tax Returns or propose or agree to any adjustment of any
item with the Internal Revenue Service or any other taxing authority that would
have the effect of increasing the liability for any member of the Tality Group
for any Tality Taxes, except to the extent such election is reflected in a Tax
Return filed by Cadence in accordance with Section 4.2(a).
Section 4.3 TAX REFUNDS.
(a) Subject to Section 4.3(b), Cadence and Tality shall be
entitled to any refund of any Cadence Taxes and Tality Taxes, respectively,
including interest received thereon. If either Cadence or Tality elects to make
a claim for refund, the other party shall cooperate fully in connection
therewith. Notwithstanding the foregoing, Cadence and Tality shall not be
entitled to make any claim for refund of Cadence Taxes and Tality Taxes,
respectively, if such refund claim would materially adversely affect the Tax
liability of the other party without the prior written consent of the other
party; PROVIDED, HOWEVER, that such consent shall not be unreasonably withheld
or delayed and such consent shall not be necessary to the extent that the party
making the refund claim has indemnified the other party against the effects of
any such claim for refund. The party making a refund claim shall reimburse the
other party for reasonable out-of-pocket expenses incurred in providing such
cooperation.
(b) If an indemnified party receives a refund or credit of
Taxes for which it has been indemnified pursuant to this Article IV, it shall
pay to the indemnifying party the amount of such refund or credit (including any
interest received thereon), less any Taxes incurred as a result of the receipt
thereof, after taking into account the Tax benefit of the payment).
15
Section 4.4 TAX CONTEST PROVISIONS.
(a) Whenever any member of the Tality Group receives a notice
of any pending or threatened Tax audit or assessment with respect to Cadence
Taxes, it shall promptly inform Cadence in writing. Whenever any member of the
Cadence Group receives a notice of any pending or threatened Tax audit or
assessment with respect to any Tality Taxes, it shall promptly inform Tality in
writing.
(b) Cadence shall have the right to control, at its own cost,
any proceedings relating to any pending or threatened Tax audit or assessment
for any Cadence Taxes, or any Taxes with respect to a Straddle Period or a Group
Tax Return, and to determine whether and when to settle any such claim,
assessment or dispute. Notwithstanding the foregoing, Tality shall have the
right to participate in the defense of any claim for Taxes with respect to a
Straddle Period or Group Tax Return for which it may have material liability
hereunder, and Cadence shall not be entitled to settle, either administratively
or after the commencement of litigation, any claim for Taxes which would
materially adversely affect the liability of the Tality Group for any Tality
Taxes without the prior written consent of Tality, provided that such consent
shall not be unreasonably withheld or delayed.
(c) Except as provided in Section 4.4(b), Tality shall have
the right to control, at its cost, any proceedings relating to any pending or
threatened Tax audit or assessment relating to any Tality Taxes and to determine
whether and when to settle any such claim, assessment or dispute.
Notwithstanding the foregoing, Tality shall not be entitled to settle, either
administratively or after the commencement of litigation, any claim for Taxes
which would materially adversely affect the liability of Cadence for any Cadence
Taxes without the prior written consent of Cadence, provided that such consent
shall not be unreasonably withheld or delayed.
Section 4.5 TAX INFORMATION AND COOPERATION.
(a) After the Separation, the Cadence Group and the Tality Group will
make available to the other, as reasonably requested, all information, records
or documents relating to liabilities for Tality Taxes and Cadence Taxes,
respectively, and shall not dispose of such information, records or documents
prior to six (6) months after the expiration of any applicable statute of
limitations (including extensions thereof) with respect to the assessment of
such Taxes, without first offering such materials to the other party.
(b) Each of Cadence and Tality agrees to cooperate fully and to cause
their respective affiliates to cooperate fully and in a timely manner in
connection with the preparation of Tax Returns, preparation of Tax refund
claims, and the conduct of any Tax contest.
Section 4.6. REDETERMINATIONS OF TAX LIABILITY.
If there is a redetermination of Cadence Taxes or Tality Taxes pursuant
to a Final Determination (as defined below), the payments required to be made by
Cadence and Tality pursuant to Sections 4.1 and 4.2 shall be recomputed by
substituting the amount of the Tax liability as so redetermined. Any additional
payment, or any refund, shall be paid no later than three (3) Business Days
before the date that such payment is required to be made to, or the
16
refund is received from, the relevant Tax authority by reason of such
redetermination. "FINAL DETERMINATION" shall mean (i) a decision, judgment,
decree or other order by any court of competent jurisdiction, which has become
final and is either no longer subject to appeal or for which a determination not
to appeal has been made; (ii) a closing agreement made under Section 7121 of the
Code or any comparable foreign, state, local, municipal or other Taxing statute;
(iii) a final disposition by any Tax authority of a claim for refund; or (iv)
any other written agreement or other state of facts that results in a
redetermination of Taxes for any tax period becoming final and that prohibits
such Tax authority from seeking any further legal or administrative remedies
with respect to such Taxes.
Section 4.7 STATUS OF TALITY GROUP MEMBER AS MEMBER OF ONE OR MORE TAX
GROUPS.
(a) Cadence and Tality shall mutually determine whether and
for what periods any member of the Cadence Group, on the one hand, and any
member of the Tality Group, on the other hand, are members of the same
"affiliated group" (as defined in Section 1504 of the Internal Revenue Code of
1986, as amended) or the same combined, consolidated, unitary or other similar
group for state, local or foreign tax purposes (in each case, a "TAX FILING
GROUP").
(b) Any dispute regarding the status of a Person as a member
of a Tax Filing Group shall be resolved as follows: With respect to a Tax period
all or any portion of which is included in the financial statements of Cadence
and Tality that are or will be audited by the same firm of certified public
accountants, then a dispute with respect to such period shall be resolved by
that firm. In any other case, the dispute shall be resolved by a firm of
certified public accountants mutually acceptable to Cadence and Tality, and if
the parties are unable to agree on a firm to resolve such dispute, the firm
shall be selected by lot from among four nationally recognized firms of
certified public accountants, two of whom are selected by Cadence and two of
whom are selected by Tality.
(c) If any member of the Tality Group is included in any Group
Tax Return for any Straddle Period and the Cadence Taxes for the post-Separation
portion of the Straddle Period pertaining to such Group Tax Return are lower
than they would have been in the absence of such inclusion, the Cadence Group
shall pay to the Tality Group on the due date of such return an amount equal to
such reduction in Cadence Taxes. For purposes of the preceding sentence, Cadence
Taxes for the post-Separation portion of the Straddle Period shall be calculated
by means of a closing of the books and records as of the close of the Separation
Date, as if such taxable period ended as of the close of the Separation Date.
(d) If any member of the Tality Group is included in any Group
Tax Return for any taxable year that begins after the Separation Date and the
cumulative Cadence Taxes pertaining to such Group Tax Return for all taxable
periods following the Separation Date (including the post-Separation portion of
any Straddle Period) are lower than they would have been for such periods in the
absence of such inclusion, , the Cadence Group shall pay to the Tality Group on
the due date of such return an amount equal to such reduction in Cadence Taxes,
less amounts previously paid by Cadence under this Paragraph (d). .
17
Section 4.8. Articles II and III of this Agreement shall not apply to
any matter relating to Taxes. Any matter relating to Taxes shall be covered by
Article IV of this Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1 INCORPORATION BY REFERENCE. Section 4.4 and all of the
provisions of Article V (except for Section 5.13 thereof) of the Separation
Agreement are incorporated into and made a part of this Agreement, as if fully
set forth herein.
Section 5.2 CONFLICTING AGREEMENTS. In the event of any irreconcilable
conflict between this Agreement and the Separation Agreement, any Foreign
Transfer Agreement, any other Ancillary Agreement (including Article III of the
Assignment Agreement) or other agreement executed in connection herewith or
therewith, the provisions of such other agreement shall prevail to the extent
that they specifically address the subject matter of the conflict. Nothing set
forth herein shall restrict or limit any indemnification obligations set forth
in any Foreign Transfer Agreement.
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WHEREFORE, the parties have executed and delivered this Agreement
effective as of the date first set forth above.
CADENCE DESIGN SYSTEMS, INC. TALITY, LP
By: /s/X.X. Xxxxx Xxxxxxxxx By: TALITY CORPORATION,
--------------------------------- AS GENERAL PARTNER
Name: X.X. Xxxxx XxXxxxxxx
Title: Senior Vice President and General Counsel By: /s/Xxxxx X. Xxxx
--------------------
Name: Xxxxx X. Xxxx
Title: Senior Vice President,
Chief Financial Officer
CADENCE HOLDINGS, INC. TALITY CORPORATION
By: /s/X.X. Xxxxx Xxxxxxxxx By: /s/Xxxxx X. Xxxx
-------------------------------- ---------------------------------
Name: X.X. Xxxxx XxXxxxxxx Name: Xxxxx X. Xxxx
Title: Secretary Title: Senior Vice President,
Chief Financial Officer
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