Exhibit 2.01
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TALITY, LP,
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF
OCTOBER 4, 2000
TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS...................................................................................1
Section 1.1. Definitions..........................................................1
Section 1.2. Accounting Terms and Determinations..................................7
Section 1.3. Directly or Indirectly; Without Limitation...........................7
Section 1.4. References...........................................................7
ARTICLE II ORGANIZATION.........................................................................................7
Section 2.1. Organization.........................................................7
Section 2.2. Name.................................................................8
Section 2.3. Registered Office; Registered Agent; Principal Office in the United
States; Other Offices................................................8
Section 2.4. Term.................................................................8
ARTICLE III PURPOSE AND POWERS..................................................................................8
Section 3.1. Purpose..............................................................8
Section 3.2. Powers...............................................................8
Section 3.3. Other Authority......................................................8
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP UNITS.............................................9
Section 4.1. Capital Contributions................................................9
Section 4.2. Additional Capital Contributions....................................10
Section 4.3. Return of Contributions.............................................10
Section 4.4. Advances by Partners................................................11
Section 4.5. No Preemptive Rights................................................11
Section 4.6. Other Contribution Provisions.......................................11
Section 4.7. Additional Contributions by Tality; Relationship of Tality Common
Shares to Partnership Units.........................................11
Section 4.8. Incentive Plans.....................................................12
Section 4.9. Additional Contributions by Holdings................................13
Section 4.10. Splits and Reclassifications........................................14
ARTICLE V CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS......................................................15
Section 5.1. Capital Accounts....................................................15
Section 5.2. Allocation of Net Profit or Net Loss................................16
Section 5.3. Additional Allocations..............................................16
Section 5.4. Allocations for Tax Purposes........................................17
Section 5.5. Distributions.......................................................17
Section 5.6. Tax Distributions...................................................18
Section 5.7. Withholding.........................................................19
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ARTICLE VI MANAGEMENT..........................................................................................20
Section 6.1. Management by General Partner.......................................20
Section 6.2. Management Policies.................................................20
Section 6.3. No Compensation of General Partner..................................20
Section 6.4. Officers............................................................20
Section 6.5. Business Opportunities..............................................21
Section 6.6. Related Transactions/Intercompany Agreements........................22
Section 6.7. Certificate of Limited Partnership..................................22
Section 6.8. Title to Partnership Assets.........................................23
Section 6.9. Reimbursement of General Partner Expenses...........................23
Section 6.10. Liability of the General Partner....................................23
Section 6.11. Other Matters Concerning the General Partner........................24
Section 6.12. Rights of Limited Partners..........................................24
ARTICLE VII TRANSFERS AND EXCHANGES OF PARTNERSHIP INTERESTS...................................................24
Section 7.1. Transfer Restrictions...............................................24
Section 7.2. Permitted Transfers.................................................25
Section 7.3. Exchange of Partnership Units.......................................25
ARTICLE VIII LIMITED LIABILITY; INDEMNIFICATION................................................................26
Section 8.1. Limited Liability...................................................26
Section 8.2. Indemnification.....................................................26
Section 8.3. Contribution........................................................27
ARTICLE IX TAXES...............................................................................................28
Section 9.1. Tax Matters Partner; Tax Returns....................................28
Section 9.2. Partnership Status..................................................28
Section 9.3. Fiscal Year.........................................................29
ARTICLE X BOOKS, RECORDS AND BANK ACCOUNTS.....................................................................29
Section 10.1. Maintenance of Books................................................29
Section 10.2. Accounting Principles...............................................29
Section 10.3. Bank Accounts.......................................................29
Section 10.4. Tax Information.....................................................29
Section 10.5. Public Filings......................................................29
ARTICLE XI ADMISSION OF PARTNERS; WITHDRAWAL; CLASSES OF PARTNERSHIP INTERESTS.................................30
Section 11.1. Substitution of Partners............................................30
Section 11.2. Admission of Additional Partners....................................30
Section 11.3. Withdrawal..........................................................30
Section 11.4. Classes of Partnership Interests....................................30
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ARTICLE XII DISSOLUTION, LIQUIDATION AND TERMINATION...........................................................31
Section 12.1. Dissolution.........................................................31
Section 12.2. Liquidation and Termination.........................................32
Section 12.3. Distribution in Kind................................................33
Section 12.4. Deficit Capital Accounts............................................33
Section 12.5. Cancellation of Filings.............................................33
ARTICLE XIII GENERAL PROVISIONS................................................................................33
Section 13.1. Representations and Warranties of Partners..........................33
Section 13.2. Offset..............................................................34
Section 13.3. Notices.............................................................34
Section 13.4. Entire Agreement; Waivers and Modifications.........................34
Section 13.5. No Third-Party Beneficiaries........................................35
Section 13.6. Governing Law.......................................................35
Section 13.7. Further Assurances..................................................35
Section 13.8. Waiver of Certain Rights............................................35
Section 13.9. Severability........................................................35
Section 13.10. Successors and Assigns..............................................36
Section 13.11. Specific Performance................................................36
Section 13.12. Interpretation of Agreement.........................................36
Section 13.13. Multiple Counterparts...............................................36
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TALITY, LP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TALITY,
LP (this "AGREEMENT") is made and entered into as of October 4, 2000 by and
between Tality Corporation, a Delaware corporation, as general partner and as a
limited partner ("TALITY"), and Cadence Holdings, Inc., a Delaware corporation,
as a limited partner ("HOLDINGS").
WHEREAS, Tality and Holdings desire to form a limited partnership
under the Act (as defined below) with Tality as the initial general partner and
Holdings as the initial limited partner;
WHEREAS, Tality and Holdings intend that this Agreement shall be the
initial limited partnership agreement of such partnership, which was formed by
the filing of a Certificate of Limited Partnership with the Secretary of State
in accordance with the Act;
WHEREAS, Cadence, Holdings and Tality have entered into certain, and
intend to enter into certain other, Separation Agreements (as defined below),
whereby, at the time of the Separation (as defined below), certain assets will
be contributed to the Partnership in a manner consistent with the Separation
Agreements and Section 4.1(b);
WHEREAS, Holdings and Tality entered into that certain Agreement of
Limited Partnership of Tality, LP, dated as of July 21, 2000, which prior to the
date hereof has governed the matters described above (the "PRIOR AGREEMENT");
and
WHEREAS, each of the parties now desires to amend and restate the
Prior Agreement in its entirety pursuant to Section 13.4 thereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and the sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. DEFINITIONS. As used herein, the following terms shall have
the respective meanings set forth below:
"ACQUIRED ENTITY" has the meaning set forth in Section 4.7(a)(i).
"ACT" means the Delaware Revised Uniform Limited Partnership Act, 6
Del. C. Sections 17-101, ET SEQ., as amended from time to time, and any
successor statute.
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"ADJUSTED CAPITAL ACCOUNT" of a Partner means such Partner's Capital
Account increased by such Partner's share of partnership nonrecourse debt
minimum gain and partnership minimum gain as defined in Treas. Reg.
Sections 1.704-2.
"AFFILIATE" means, with respect to a specified Person, any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the Person specified.
"AVAILABLE CASH" means, at any specified time, (x) the sum of all cash
receipts of the Partnership prior to such time from any and all sources, less
(y) all cash disbursements (including all distributions made to Partners, cash
payments made by the Partnership for purposes of operating expenses, loan
repayments, capital improvements and replacements) prior to such time and the
amount of Reserves at such time.
"BUSINESS" means the business of providing electronic design
engineering services, and intellectual property in connection therewith, to
electronic equipment manufacturers.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a
holiday on which national banking associations in California are required or
permitted by law to be closed.
"CADENCE" has the meaning ascribed thereto in the recitals hereto.
"CAPITAL ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 5.1, including all additions and subtractions thereto
pursuant to this Agreement.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any money
and property (net of any liability that the Partnership is considered to assume
or take subject to under Section 752 of the Code) contributed by such Partner to
the Partnership.
"CARRYING VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the Carrying Value of any asset contributed or
deemed contributed by a Partner to the Partnership shall be the gross
fair market value of such asset at the time of contribution as
reasonably determined by agreement of the contributing Partner and the
General Partner;
(ii) the Carrying Value of any asset distributed or
deemed distributed by the Partnership to any Partner shall be adjusted
immediately prior to such distribution to equal its gross fair market
value at such time as reasonably determined by the General Partner;
(iii) the Carrying Value of all Partnership assets shall
be adjusted to equal their respective gross fair market values, as
reasonably determined by the General Partner, as of:
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(1) the date of the acquisition of an
additional interest in the Partnership
by any new or existing Partner in
exchange for more than a DE MINIMIS
contribution to the capital of the
Partnership; or
(2) the distribution by the Partnership to a
retiring or continuing Partner of more
than a DE MINIMIS amount of money or
other Partnership property in reduction
of such Partner's interest in the
Partnership; or
(3) the liquidation of the Partnership
within the meaning of Treas. Reg.
Sections 1.704-1(b)(2)(ii)(g);
PROVIDED, HOWEVER, that an adjustment described in clauses (1) and (2)
above shall be made only if the General Partner reasonably determines
that such adjustment is necessary to reflect the relative economic
interests of the Partners in the Partnership; and, PROVIDED FURTHER,
that the General Partner may use such thresholds and other conventions
as it deems appropriate and consistent with the intent of the Treasury
regulations under Code Section 704(b) in aggregating contributions
described in clause (1) and distributions in clause (2) for purposes
of determining when and the extent to which Carrying Values will be
adjusted under this paragraph (iii);
(iv) any adjustments to the adjusted basis of any asset
of the Partnership pursuant to Section 734 or 743 of the Code shall be
taken into account in determining such asset's Carrying Value in a
manner consistent with Treas. Reg. Sections 1.704-1(b)(2)(iv)(m); and
(v) if the Carrying Value of an asset has been
determined pursuant to clauses (i) through (iv) above, such Carrying
Value shall thereafter be adjusted in the same manner as would the
asset's adjusted tax basis for federal income tax purposes, except
that depreciation, cost recovery and amortization deductions shall be
computed as provided in Treas. Reg. Sections 1.704-1(b)(2)(iv)(g), and
if the asset has a zero adjusted basis for federal income tax
purposes, depreciation, cost recovery or amortization deductions shall
be determined using any reasonable method selected by the General
Partner.
"CERTIFICATE" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Secretary of State, as amended or
restated or otherwise modified from time to time in accordance with the Act.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"CONTROL," "CONTROLS" or "CONTROLLING" means the possession, directly
or indirectly, through one or more intermediaries, of the power or authority,
through ownership of voting securities, as manager, general partner, trustee or
executor, by contract or otherwise, to direct the management, activities or
policies of a Person.
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"COVERED PERSON" has the meaning set forth in Section 6.10.
"DGCL" means the Delaware General Corporation Law, as amended and in
effect from time to time.
"DISINTERESTED DIRECTORS" means the directors of Tality who are not
officers, directors or employees of any of the Holdings Partners.
"EQUITY AWARD" means any compensatory stock option, stock appreciation
right, stock award, restricted stock award or other or similar right to receive
Tality Class A Shares.
"FISCAL YEAR" has the meaning set forth in Section 9.3.
"GAAP" means generally accepted accounting principles consistently
applied.
"GENERAL PARTNER" means Tality and any other Person admitted to the
Partnership as a general partner of the Partnership pursuant to this Agreement
until such Person's status as a General Partner is terminated in accordance with
this Agreement.
"GENERAL PARTNER INTEREST" means a Partnership Interest of a General
Partner that is held in its capacity as a General Partner.
"HOLDINGS" has the meaning ascribed thereto in the preamble hereto.
"HOLDINGS PARTNERS" means Holdings, Cadence and any Subsidiary of
Holdings or Cadence other than any of the Tality Partners.
"INCENTIVE PLAN" means any incentive compensation plan adopted by
Tality or by the Partnership and approved by the General Partner.
"IPO" means an initial public offering of Tality Common Shares.
"LIMITED PARTNER" means Tality in its capacity as a limited partner of
the Partnership, Holdings and any other Person admitted to the Partnership as a
limited partner pursuant to this Agreement, in each case until such Person's
status as a limited partner is terminated in accordance with this Agreement; any
reference herein to a "Limited Partner" shall refer to any one of the Limited
Partners.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner that is held in its capacity as a Limited Partner.
"LIQUIDATOR" means or one or more Persons appointed by the General
Partner to wind up the affairs of the Partnership and make final distributions
to Partners upon the dissolution of the Partnership as provided in Section 12.2.
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"MASTER SEPARATION AGREEMENT" means the Master Separation Agreement
dated as of July 14, 2000 by and among Cadence, Holdings and Tality, as may be
amended from time to time.
"NET PROFIT" and "NET LOSS" mean, respectively, for any period, the
taxable income and taxable loss of the Partnership for the period as determined
for federal income tax purposes, provided that for purpose of determining Net
Profit and Net Loss and each item thereof (and not for income tax purposes) (i)
there shall be taken into account any tax-exempt income of the Partnership; (ii)
any expenditures of the Partnership that are described in Section 705(a)(2)(B)
of the Code or that are deemed to be described in Section 705(a)(2)(B) of the
Code pursuant to Treasury Regulations under Section 704(b) of the Code shall be
treated as deductible expenses; (iii) if any Partnership asset has a Carrying
Value that differs from its adjusted tax basis as determined for federal income
tax purposes, income, gain, loss and deduction (including but not limited to
depreciation) with respect to such asset shall be computed based upon the
asset's Carrying Value rather than its adjusted tax basis; (iv) items of gross
income or deduction allocated pursuant to Section 5.3 shall be excluded from the
computation of Net Profit and Net Loss; (v) there shall be taken into account
any separately stated items under Section 702(a) of the Code; and (vi) if the
Carrying Value of any Partnership asset is adjusted pursuant to the definition
thereof, the amount of such adjustment shall be taken into account in the Fiscal
Year or other period of adjustment as gain or loss from the disposition of such
asset for purposes of computing Net Profit and Net Loss.
"NOTICES" has the meaning set forth in Section 13.3.
"PARTNERS" means the General Partner and the Limited Partners; any
reference herein to a "Partner" shall refer to any one of the Partners. As the
context may require, in connection with the allocation of any item of income,
gain, loss, deduction, profit or distribution, but not otherwise, the term
"PARTNER" shall include a transferee of a Partnership Interest in accordance
with Article VII who is not admitted as a Partner but who is treated as a
partner of the Partnership for federal income tax purposes.
"PARTNERSHIP" means Tality, LP, the Delaware limited partnership
formed pursuant to the filing of the Certificate.
"PARTNERSHIP INTEREST" means an interest of a Limited Partner or
General Partner in the Partnership and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"PARTNERSHIP OPPORTUNITY" has the meaning set forth in Section 6.5(b).
"PARTNERSHIP UNIT" means the equal units into which the Partnership
Interests of all Partners issued pursuant to Article IV are divided and includes
any class or series of Partnership Units established after the date hereof. The
ownership of Partnership Units shall be evidenced
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by such form of certificate for Partnership Units as the General Partner may
adopt from time to time unless the General Partner determines that the
Partnership Units shall be uncertificated securities. The number of Partnership
Units outstanding and the Percentage Interests in the Partnership represented by
such Partnership Units are set forth on EXHIBIT A, as such Exhibit may be
amended from time to time. References to Partnership Units shall be deemed to
exclude Preferred Interests, unless and to the extent otherwise provided in
Section 11.4.
"PERCENTAGE INTEREST" means the quotient, expressed as a percentage,
determined from time to time, by dividing the number of Partnership Units held
by such Partner at that time by the aggregate number of Partnership Units then
outstanding.
"PERSON" means any natural person, corporation, limited liability
company, partnership, limited partnership, joint venture, trust, estate,
association, governmental entity or other individual or entity.
"PREFERRED INTERESTS" has the meaning set forth in Section 11.4.
"PROPORTIONATE CAPITAL ACCOUNT" of a Partner means such Partner's
Adjusted Capital Account at any specified time as a percentage of the Adjusted
Capital Accounts of all Partners as of such time.
"RESERVES" means funds of the Partnership set aside by the General
Partner for working capital and the payment of taxes, insurance, debt service,
repairs, replacements, renewals or other costs or expenses incident to the
business of the Partnership.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.
"SEPARATION" has the meaning set forth in the Master Separation
Agreement.
"SEPARATION AGREEMENTS" means, collectively, the Master Separation
Agreement and all other agreements entered into by Cadence or one of its
Subsidiaries (other than Tality and its Subsidiaries), on the one hand, and
Tality or one of its Subsidiaries, on the other hand, as contemplated by the
Master Separation Agreement.
"SUBSIDIARY" means, with respect to any Person, any other Person in
which such first Person owns, directly or indirectly, more than 50% of the
capital stock (or other voting interests) the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such Person or otherwise controls such Person (whether by contract or
otherwise). For purposes of clarification, the Partnership and all Subsidiaries
of the Partnership are Subsidiaries of Tality.
"TALITY" has the meaning ascribed thereto in the preamble hereto.
"TALITY CLASS A SHARES" means the shares of Class A Common Stock of
Tality, par value $.001 per share.
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"TALITY CLASS B SHARES" means the shares of Class B Common Stock of
Tality, par value $.001 per share.
"TALITY CLASS C SHARES" means the shares of Class C Common Stock of
Tality, par value $.001 per share.
"TALITY COMMON SHARES" means the shares of any class of Common Stock
of Tality, par value $.001 per share.
"TALITY PARTNERS" means Tality and any Subsidiary of Tality that is a
Partner in the Partnership.
"TAX-FREE SPIN-OFF" shall mean a transaction or series of transactions
pursuant to which Tality Common Shares are distributed to holders of common
stock of Cadence in a manner intended to qualify as a tax-free distribution
under Section 355(a) of the Code.
"TAX MATTERS PARTNER" has the meaning set forth in Section 9.1(a).
1.2. ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms
used herein and not otherwise defined shall have the meanings accorded to them
in accordance with GAAP, and, except as expressly provided herein, all
accounting determinations shall be made in accordance with GAAP, consistently
applied.
1.3. DIRECTLY OR INDIRECTLY; WITHOUT LIMITATION. Where any
provision in this Agreement refers to an action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any Affiliate of such Person. Throughout this
Agreement, the term "including" and words to the same or similar effect shall be
interpreted and construed to mean "including without limitation."
1.4. REFERENCES. All references herein to one gender shall
include the other and the singular shall include the plural and vice versa as
appropriate. Unless otherwise expressly provided, all references to "Articles"
and "Sections" are to Articles and Sections, respectively, of this Agreement and
all references to "Exhibits" and "Schedules" are to the exhibits and schedules,
respectively, attached hereto, each of which is made a part hereof for all
purposes.
ARTICLE II
ORGANIZATION
2.1. ORGANIZATION. The General Partner has caused the Partnership
to be formed as a Delaware limited partnership by filing the Certificate in the
office of the Secretary of State pursuant to the Act.
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2.2. NAME. The name of the Partnership is "Tality, LP" and all
Partnership business shall be conducted under that name or such other name or
names as the General Partner may determine from time to time.
2.3. REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE
UNITED STATES; OTHER OFFICES. The registered office of the Partnership in the
State of Delaware shall be the initial registered office designated in the
Certificate or such other office (which need not be a place of business of the
Partnership) as the General Partner may designate from time to time in the
manner provided by law. The registered agent of the Partnership in the State of
Delaware shall be the initial registered agent designated in the Certificate or
such other Person or Persons as the General Partner may designate from time to
time in the manner provided by law. The principal office of the Partnership in
the United States of America shall be in such place (which need not be within
the State of Delaware) as the General Partner may designate from time to time.
The Partnership shall have such other offices (which need not be within the
State of Delaware) as the General Partner may determine to be appropriate.
2.4. TERM. The Partnership shall commence on the date the
Certificate is filed with the Secretary of State and shall continue in existence
until December 31, 2099, unless earlier dissolved pursuant to Section 12.1 or as
otherwise provided by law.
ARTICLE III
PURPOSE AND POWERS
3.1. PURPOSE. The nature of the business or purpose of the
Partnership is to engage in any lawful act or activity for which limited
partnerships may be formed under the Act, including entering into any lawful
transaction and engaging in any lawful activities in furtherance of the
foregoing purposes and as may be necessary, incidental or convenient to carry
out the business of the Partnership as contemplated by this Agreement.
3.2. POWERS. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership,
including, without limitation, full power and authority, directly or through its
ownership interest in other Persons, to enter into, perform and carry out
contracts of any kind, borrow money and issue evidences of indebtedness, whether
or not secured by mortgage, deed of trust, pledge or other lien, acquire, own,
manage, improve and develop real property, and lease, sell, transfer and dispose
of real property.
3.3. OTHER AUTHORITY. Notwithstanding anything to the contrary
contained in this Agreement, the Partnership shall have the authority to enter
into, deliver and perform the Separation Agreements, and any amendments to the
Separation Agreements and any such action taken prior to the date of this
Agreement is hereby ratified and confirmed in all respects.
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ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP UNITS
4.1. CAPITAL CONTRIBUTIONS.
(a) At or before the time of the Separation, Tality
shall contribute to the capital of the Partnership cash in the amount of
$14,812,500 in exchange for the issuance to Tality of a number of Partnership
Units set forth on Schedule 4.1(a), which shall represent General Partner
Interests and Limited Partner Interests as specified in Section 4.2(c) of this
Agreement. The Capital Account of Tality shall be increased by the amount of
such cash contribution.
(b) At the time of the Separation, Holdings shall
contribute, and Cadence shall contribute or cause to be contributed on behalf of
Holdings, to the capital of the Partnership their entire right, title and
interest in and to the assets, properties and rights of Cadence and its
Subsidiaries identified in the Separation Agreements as assets to be transferred
to the Partnership, and the Partnership shall assume such liabilities and other
obligations as specified in the Separation Agreements as liabilities and other
obligations to be assumed by the Partnership. Subject to Section 4.1(d), in
exchange for its contribution under this Section 4.1(b), Holdings shall receive
the number of Partnership Units constituting Limited Partner Interests set forth
on Schedule 4.1(b), the Capital Account of Holdings shall be increased as agreed
upon by Holdings and the General Partner, and upon such agreement EXHIBIT A
shall be modified accordingly.
(c) If an IPO occurs, Tality shall, immediately after
receiving the net proceeds of the IPO (and immediately after receiving the net
proceeds from any exercise of the underwriters' overallotment option),
contribute to the capital of the Partnership an amount in cash equal to the net
proceeds of the IPO, in exchange for:
(i) such additional number, if any, of
Partnership Units constituting General Partner Interests (after taking
into account Partnership Units constituting General Partner Interests
issued in exchange for the contribution that is made to the
Partnership pursuant to Section 4.1(a) of this Agreement) as would
cause Tality to have, immediately after the contribution pursuant to
this Section 4.1(c), a one percent (1%) Percentage Interest; and
(ii) such number of Partnership Units
constituting Limited Partner Interests equal to the number of Tality
Class A Shares issued in the IPO, less that number of Partnership
Units, if any, issued pursuant to clause (i) above, and EXHIBIT A
shall thereafter be modified to reflect such additional contribution
and issuance of Partnership Units.
(d) The number of Partnership Units to be issued to
Holdings pursuant to Section 4.1(b) is based on negotiations between
representatives of Holdings and Tality and reflects the intent that, if the IPO
occurs in the manner contemplated as of the date hereof by
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Holdings and Tality and the net proceeds of the IPO are contributed to the
Partnership as provided in Section 4.1(c), Tality will own an aggregate
Percentage Interest equal to that set forth on Schedule 4.1(d). If the IPO is
undertaken with the understanding that Tality will own a different Percentage
Interest following the IPO, the number of Partnership Units owned by Holdings
shall be adjusted to equal that number of Partnership Units necessary to give
Holdings a Percentage Interest equal to one (1) minus the Percentage Interest
of Tality immediately after the IPO and contribution, subject to any dilution
that occurs from issuances of Partnership Interests (other than as
contemplated by Sections 4.1(a), (b) and (c)), if any, between the date
hereof and the IPO.
4.2. ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) The terms of any contribution of cash (or
promissory obligations), property or services to the Partnership other than as
provided in this Agreement shall be determined by the General Partner at the
time of such contribution.
(b) Except as may be required by law or as
specifically provided herein, no Partner shall have any obligation to make any
further Capital Contribution to the Partnership.
(c) At all times while Tality is a General Partner and
holds Partnership Units, such Partnership Units shall constitute General Partner
Interests to the extent they represent at least one percent (1%) of the
outstanding Partnership Units, and any additional Partnership Units owned by
Tality shall be Limited Partner Interests.
(d) Each of Tality and Holdings acknowledges and
agrees that the Separation Agreements provide for assets to be transferred to or
by the Partnership in certain circumstances following the effectiveness of such
agreements (for example, in the case of adjustments made to the purchase price
for certain assets or payments made pursuant to indemnity obligations). Each of
Tality and Holdings agrees that such transfers have been taken into account in
establishing the initial Capital Accounts and Partnership Units of the Partners,
and that, except as otherwise provided herein or in any other written agreement
between a Holdings Partner and the General Partner, such transfers shall not be
treated as Capital Contributions or distributions under this Agreement and shall
not affect the Capital Account of or Partnership Units owned by the Partners. In
the event of such a transfer, the Carrying Values of the assets of the
Partnership shall be revised in a manner determined by the General Partner,
subject to the consent of Holdings (not to be unreasonably withheld).
4.3. RETURN OF CONTRIBUTIONS. A Partner is not entitled (except
as otherwise expressly provided otherwise by this Agreement) to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Partnership or of the other Partners. A
Partner is not required to contribute or to lend any cash or property to the
Partnership to enable the Partnership to return any other Partner's Capital
Contributions.
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4.4. ADVANCES BY PARTNERS. Except as approved by the General
Partner, or otherwise provided for specifically herein, no Partner may advance
any money or other property to, or contribute any money or property to, the
Partnership.
4.5. NO PREEMPTIVE RIGHTS. Except as provided in this Article IV,
no Person shall have any preemptive, preferential or other similar right with
respect to (i) additional Capital Contributions or loans to the Partnership; or
(ii) the issuance or sale of any Partnership Interests.
4.6. OTHER CONTRIBUTION PROVISIONS. If any Person is admitted as
a Partner and is given a Capital Account in exchange for services rendered to
the Partnership or to the General Partner on behalf of the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
4.7. ADDITIONAL CONTRIBUTIONS BY TALITY; RELATIONSHIP OF TALITY
COMMON SHARES TO PARTNERSHIP UNITS.
(a) ISSUANCES OF TALITY SECURITIES. Tality shall not
issue any additional Tality Common Shares or rights, options, warrants or other
securities convertible into or exchangeable for equity securities of Tality
(other than Tality Common Shares issued pursuant to Section 4.8, 4.10 or 7.3 or
as otherwise provided in the Certificate of Incorporation of Tality (as the same
may be amended, but only to the extent such amendment has been approved by the
Holdings Partners) or incur any indebtedness, unless:
(i) Tality transfers to the Partnership or a
Subsidiary of the Partnership, as an additional Capital Contribution,
the net cash proceeds or other property received by Tality (or any
direct or indirect wholly owned Subsidiary of Tality) from, and causes
the Partnership to assume, or take such cash or other property subject
to, the liabilities incurred in connection with, the grant, award or
issuance of such additional Tality Common Shares or other securities
or indebtedness, as the case may be, or from the exercise of rights
contained in such additional Tality Common Shares or other securities,
as the case may be; PROVIDED, HOWEVER, that if the property received
by Tality in exchange for such issuance consists of stock of another
Person that becomes a direct or indirect wholly owned Subsidiary of
Tality (including an acquisition by means of a reverse triangular
merger), or if such property is received by a direct or indirect
wholly owned Subsidiary of Tality (in either case, the "ACQUIRED
ENTITY"), then Tality may cause the Acquired Entity to transfer all
(but not less than all) of its assets to the Partnership or a
Subsidiary of the Partnership, and cause the Partnership or such
Subsidiary of the Partnership to assume or take such assets subject to
all liabilities and other obligations of the Acquired Entity, in lieu
of Tality transferring its equity interest in the Acquired Entity;
PROVIDED FURTHER, that if any third party consent or approval shall be
necessary to effect the transfer of any such asset or assumption of
any such liability, the General Partner shall not be required to
effect such transfer or assumption until such consent or approval has
been obtained (and during the pendency of such transfer or assumption
the General Partner or such Acquired Entity shall hold such asset or
liability in trust for the
11
benefit or account of the Partnership, as the case may be, and the
General Partner and Partnership shall enter into such agreement
(including indemnities) or other arrangements as necessary to reflect
the transfer to the Partnership or one of its Subsidiaries of all
beneficial interest in such asset or responsibility for such
liability); and
(ii) the Partnership issues to Tality (or, in
the case of an Acquired Entity that has transferred all of its assets
as described in clause (i) above, to the Acquired Entity) Partnership
Units or rights, options, warrants or convertible or exchangeable
securities or indebtedness of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially the same as those of such additional Tality Common
Shares or other securities or indebtedness, as the case may be.
(b) ACQUISITION OF TALITY SECURITIES BY TALITY. If
Tality acquires Tality Common Shares for any reason and in any manner, then (i)
the Tality Common Shares so acquired shall be cancelled, (ii) the Partnership
shall pay to Tality an amount equal to the amount, if any, paid by Tality to
acquire such shares, and (iii) Tality shall surrender to the Partnership for
cancellation that number of Partnership Units held by Tality equal to the number
of Tality Common Shares so acquired. Similar requirements shall apply with
respect to the reacquisition by Tality of any of its securities other than
Tality Common Shares, such that the securities issued by the Partnership to
Tality that correspond to such Tality securities are surrendered to the
Partnership and the Partnership pays to Tality the amount paid by Tality to
reacquire such securities.
(c) ACQUISITION OF TALITY COMMON SHARES OR OTHER
SECURITIES BY THE PARTNERSHIP. Except as provided in Section 4.8, if the
Partnership or any of its Subsidiaries acquires Tality Common Shares (or other
equity securities) for any reason and in any manner, then (i) the Partnership
may (but shall not be required to) transfer such shares (or other securities) to
Tality for cancellation and (ii) if the Partnership effects such transfer,
Tality shall surrender an equal number of Partnership Units (or other
Partnership Interests or securities issued by the Partnership that relate to
such securities, as the case may be) to the Partnership for cancellation.
4.8. INCENTIVE PLANS.
(a) At any time Tality issues Tality Class A Shares
pursuant to an Incentive Plan (whether pursuant to an Equity Award or otherwise)
to directors, officers or employees of the Partnership or any of its
Subsidiaries, the following shall occur:
(i) Tality shall contribute the amount of
any exercise or purchase price received by Tality in connection with
the issuance of such Tality Class A Shares, and Tality shall be deemed
to contribute to the capital of the Partnership an amount of cash
equal to the excess of the current market price of such Tality Class A
Shares on the date such shares are issued (or if earlier, the date the
related option is exercised (if the Equity Award is a stock option))
over the amount of such exercise or purchase price actually
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contributed, and such amounts shall be treated as Capital
Contributions under this Agreement;
(ii) the Partnership shall be deemed to
purchase such Tality Class A Shares from Tality for an amount of cash
equal to the amount of cash contributed and deemed contributed by
Tality to the Partnership in subsection (a) above (and such shares
shall be deemed delivered to their owner by the Partnership);
(iii) the net proceeds actually received by
the Partnership with respect to such Tality Class A Shares, if any,
shall be retained by the Partnership; and
(iv) the Partnership shall issue to Tality
that number of Limited Partnership Units equal to the number of Tality
Class A Shares so issued.
(b) At any time Tality issues Tality Class A Shares
pursuant to an Incentive Plan (whether pursuant to an Equity Award or otherwise)
to Tality employees, officers or directors, and provided the General Partner
reasonably determines that the issuance of such Tality Class A Shares relates to
Tality's ownership or operation of, or was for the benefit of, the Partnership
as provided in Section 6.9(a), the following shall occur (unless the General
Partner reasonably determines that such issuance should be governed by Section
4.8(a) in which case Section 4.8(a) shall apply):
(i) Tality shall be treated as issuing such
Tality Class A Shares in the same manner as if this Section 4.8(b) did
not apply;
(ii) the Partnership shall be deemed to have
reimbursed Tality for the issuance of such Tality Class A Shares as
provided in Section 6.9(a) in an amount equal to the excess of the
current market price of such Tality Class A Shares on the date such
shares are issued (or, if earlier, the date the related option is
exercised (if the Equity Award is a stock option)) over the amount of
the exercise or purchase price received by Tality upon the issuance of
such Tality Class A Shares;
(iii) Tality shall contribute to the capital
of the Partnership the exercise or purchase price received by Tality
upon the issuance of such Tality Class A Shares, and shall be deemed
to have contributed to the capital of the Partnership the amount of
the deemed reimbursement paid by the Partnership pursuant to clause
(ii) above; and
(iv) the Partnership shall issue to Tality
that number of Partnership Units equal to the number of Tality Class A
Shares so issued.
4.9 ADDITIONAL CONTRIBUTIONS BY HOLDINGS. If the Partnership
issues additional Partnership Units to a Tality Partner or any other Person
(other than a Holdings Partner) for any reason other than pursuant to Section
4.8 or 4.10 (including in connection with an acquisition or other business
combination between the Partnership and any Person other than Tality), then:
13
(a) Holdings shall have the right, but not the
obligation, to contribute to the Partnership cash or other property, if of a
type acceptable to the General Partner and subject to Section 6.6, in an amount
equal to the product obtained by multiplying:
(i) the amount of cash or value of other
property contributed by such Tality Partner or other Person to the Partnership
in exchange for such additional Partnership Units, times
(ii) a fraction, the numerator of which shall
be the aggregate Percentage Interest then held by the Holdings Partners and the
denominator of which shall be the aggregate Percentage Interest held by all
Partners other than the Holdings Partners (in each case, determined immediately
prior to the contribution referred to in clause (i) above).
(b) In exchange for any such contribution by Holdings
pursuant to Section 4.9(a), Holdings shall receive that number of Partnership
Units equal to the product obtained by multiplying:
(i) the number of such additional
Partnership Units issued to the Tality Partner or such other Person, times
(ii) a fraction, the numerator of which shall
be the aggregate Percentage Interest then held by the Holdings Partners and the
denominator of which shall be the aggregate Percentage Interest held by all
Partners other than the Holdings Partners (in each case, determined immediately
prior to the issuance of Partnership Units referred to in clause (i) above).
(c) In connection with any additional capital
contribution made in the form of property under this Section 4.9, such property
shall be valued at its fair value as determined by a nationally recognized
independent appraiser (including an investment banker, public accounting firm or
other expert) selected by Holdings and reasonably satisfactory to the General
Partner.
4.10. SPLITS AND RECLASSIFICATIONS. The Partnership shall not in
any manner subdivide (by any unit split, distribution, reclassification,
recapitalization or otherwise) or combine (by reverse unit split,
reclassification, recapitalization or otherwise) the outstanding Partnership
Units (or other Partnership Interests or securities) unless Tality is
subdividing or combining the Tality Class A Shares (or, if applicable, such
other securities of Tality issued in connection with the issuance of such
Partnership Interests or other securities), in which event the Partnership Units
shall be subdivided or combined concurrently with, to the same extent as, and in
the same manner as, the Tality Class A Shares (or such other securities).
14
ARTICLE V
CAPITAL ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS
5.1. CAPITAL ACCOUNTS.
(a) The Partnership shall maintain for each Partner
owning a Partnership Interest a single, separate Capital Account with respect to
such Partnership Interest in accordance with the rules of Treas. Reg. Sections
1.704-1(b)(2)(iv). The initial Capital Account balance of each of the Partners
shall be as set forth on EXHIBIT A.
(b) Subject to rules of Treas. Reg. Sections
1.704-1(b)(2)(iv), the Capital Account of each Partner shall be increased by (i)
except as otherwise provided in this Agreement, the amount of any money and the
fair market value of any property (net of any liabilities of such Partner
assumed by the Partnership or which are secured by any property contributed by
such Partner to the Partnership) contributed by such Partner to the Partnership,
(ii) the Net Profit allocated to such Partner pursuant to Section 5.2, and (iii)
the items in the nature of income or gain allocated to such Partner pursuant to
Section 5.3. If the General Partner and the contributing Partner agree as the
value of an item of property contributed to the Partnership, such agreement
shall govern the amount credited to such Partner's Capital Account. Absent such
an agreement, subject to Section 4.9(c), the value of any property contributed
to the Partnership shall be determined by the General Partner.
(c) The Capital Account of each Partner shall be
reduced by (i) the amount of any distribution of cash or the fair market value
of any property (net of any Partnership liabilities assumed by such Partner or
secured by any property distributed to such Partner) distributed to such Partner
when such distribution is made, (ii) the Net Loss allocated to such Partner
pursuant to Section 5.2, and (iii) any items in the nature of deduction or loss
allocated to such Partner pursuant to Section 5.3. If the General Partner and
the distributee Partner agree as the value of an item of property distributed
from the Partnership, such agreement shall govern the amount debited to such
Partner's Capital Account. Absent such an agreement, the value of any property
distributed by the Partnership shall be determined by the General Partner.
(d) Except as otherwise provided in this Agreement,
whenever it is necessary to determine the Capital Account of any Partner, the
Capital Account of such Partner shall be determined after giving effect to the
allocations of Net Profit, Net Loss and other items realized prior or
concurrently to such time (including, without limitation, any Net Profits and
Net Losses attributable to adjustments to Carrying Values with respect to any
concurrent distribution), and all contributions and distributions made prior or
concurrently to the time as of which such determination is to be made. The
General Partner may use such accounting conventions and other methods for
computing interim balances of the Partners' Capital Accounts as the General
Partner deems appropriate.
(e) A transferee of a Partnership Interest shall
succeed to a pro rata portion of the Capital Account of the transferor relating
to the Partnership Interest so transferred.
15
5.2. ALLOCATION OF NET PROFIT OR NET LOSS. Except as otherwise
necessary in connection with a liquidation or dissolution of the Partnership or
as required pursuant to the terms of any Preferred Interests:
(a) Net Profit for any Fiscal Year or other period
shall be allocated to the Partners as follows:
(i) First, to each Partner whose
Proportionate Capital Account is less than its Percentage Interest, an
amount of Net Profit necessary to cause its Proportionate Capital
Account to equal its Percentage Interest, provided that if there is
not sufficient Net Profit to cause each Partner's Proportionate
Capital Account to equal its Percentage Interest, Net Profits shall be
allocated to each Partner so as to cause a pro rata percentage
reduction in such difference for each such Partner; and
(ii) Second, pro rata among the Partners in
accordance with their Percentage Interests.
(b) Net Loss for any Fiscal Year or other period shall
be allocated to the Partners as follows:
(i) First, to each Partner whose
Proportionate Capital Account is greater than its Percentage Interest,
an amount of Net Loss necessary to cause its Proportionate Capital
Account to equal its Percentage Interest, provided that if there is
not sufficient Net Loss to cause each Partner's Proportionate Capital
Account to equal its Percentage Interest, Net Loss shall be allocated
to each Partner so as to cause a pro rata percentage reduction in such
difference for each such Partner; and;
(ii) Second, pro rata among the Partners in
accordance with their Percentage Interests.
5.3. ADDITIONAL ALLOCATIONS.
(a) Notwithstanding any other provision of this
Agreement, (i) "partner nonrecourse deductions" (as defined in Treas. Reg.
Sections 1.704-2(i)), if any, of the Partnership shall be allocated to the
Partner that bears the economic risk of loss within the meaning of Treas.
Reg. Sections 1.704-2(i), (ii) "nonrecourse deductions" (as defined in Treas.
Reg. Sections 1.704-2(b)), if any, of the Partnership with respect to each
period shall be allocated in proportion to the Partners' respective
Percentage Interests, and (iii) a Partner's proportionate share of the
"excess nonrecourse liabilities" of the Partnership within the meaning of
Treas. Reg. Sections 1.752-3(a)(3) shall be in proportion to its Percentage
Interest.
(b) This Agreement shall be deemed to include
"qualified income offset," "minimum gain chargeback" and "partner non-recourse
debt minimum gain chargeback" provisions within the meaning of the Treasury
Regulations promulgated under Section 704(b) of the Code. Accordingly,
notwithstanding any other provision of this Agreement, items of gross
16
income shall be allocated to the Partners on a priority basis to the extent and
in the manner required by such provisions.
(c) Any special allocation of items pursuant to
Sections 5.3(a) and (b), including anticipated reversals of such items, shall be
taken into account in computing subsequent allocations pursuant to Section 5.2
so that the cumulative net amount of all items allocated to each Partner shall,
to the extent possible, be equal to the amount that would have been allocated to
such Partner if there had never been any special allocation pursuant to Sections
5.3(a) and (b).
(d) Any income, gain, loss or deduction realized as a
direct or indirect result of the issuance of Partnership Units by the
Partnership to a Partner (the "ISSUANCE ITEMS") shall be allocated among the
Partners so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Partner, shall
be equal to the net amount that would have been allocated to each such Partner
if the Issuance Items had not been realized.
5.4. ALLOCATIONS FOR TAX PURPOSES. For income tax purposes
only, (i) all items of income, gain, loss, deduction and expense shall be
allocated to the Partners in the same manner as the correlative items of
"book" income, gain, loss, deduction and expense are allocated pursuant to
Sections 5.2 and 5.3 and (ii) each tax credit for any period shall be
allocated to Partners in proportion to their Percentage Interests; PROVIDED,
HOWEVER, that in accordance with Sections 704(c) of the Code, the Treas. Reg.
promulgated thereunder and Treasury Regulation Sections 1.704-1(b)(4)(i),
items of income, gain, loss, deduction, expense and credit with respect to
any property whose Carrying Value differs from its adjusted basis for tax
purposes shall, solely for income tax purposes, be allocated among the
Partners so as to take account of both the amount and character of such
variation. Absent the prior written consent of Holdings, the Partnership
shall use the "traditional method" described in Treas. Reg. Sections
1.704-3(b) in making such allocations in accordance with Code Section 704(c)
with respect to any such property contributed by or on behalf of a Holdings
Partner.
5.5. DISTRIBUTIONS.
(a) Except as otherwise required by law or as provided
in this Agreement (including pursuant to the terms of any Preferred Interest),
no Partner shall have any right to withdraw any portion of its Capital Account
without the consent of both the General Partner and of Partners holding a
majority of the Partnership Units constituting Limited Partner Interests.
(b) Except as otherwise provided herein or pursuant to
the terms of any Preferred Interests, the Partnership shall distribute Available
Cash or other property available to be distributed in-kind to the Partners to
each Partner in proportion to such Partner's Percentage Interest, at such times
and in such amounts as the General Partner shall determine; PROVIDED, HOWEVER,
that, absent the prior written consent of Holdings, no in-kind distribution of
any asset may be made other than on a pro rata basis in accordance with the
Partners' Percentage Interests; PROVIDED FURTHER, that with the prior written
consent of Holdings, an in-kind distribution of any
17
asset may be made on other than a pro rata basis in accordance with the
Partners' Percentage Interests so long as the total value of all cash and other
in-kind distributions made in connection with such in-kind non-pro rata
distribution when combined with such distribution is distributed in accordance
with the Partners' Percentage Interests.
(c) If a Holdings Partner exchanges or transfers its
Partnership Units for Tality Class A Shares or Tality Class C Common Shares,
pursuant to the Amended and Restated Certificate of Incorporation of Tality (as
the same may be amended from time to time), on any date after a record date for
a distribution to the Partners of Available Cash or other property but before
actual payment thereof, such exchanging or transferring Partner shall be
entitled to receive the full amount of such distribution as if such Partner
continued to hold the exchanged or transferred Partnership Units on the date of
such distribution.
5.6. TAX DISTRIBUTIONS.
(a) Until such time as an event causing a dissolution
of the Partnership has occurred pursuant to Section 12.1, at least 10 days prior
to any Estimated Tax Payment Date (as hereinafter defined), the Partnership
shall make a distribution to each Partner equal to the Estimated Tax
Distribution (as hereinafter defined) for such date. Unless otherwise specified
by the General Partner in writing, all distributions made with respect to a
given year (as determined by the General Partner) shall be applied against and
reduce the Estimated Tax Distribution due from the Partnership with respect to
that year.
(b) Within one hundred eighty (180) days after the end
of each Fiscal Year, the Partnership shall provide to each Partner a report for
the prior Fiscal Year computing for each Partner the amount by which the sum of
the Estimated Tax Distributions for the prior year exceeds or falls short of the
product of (i) the taxable income of Partnership allocated to such Partner for
such prior year, and (ii) the Applicable Tax Rate for such year, less any Excess
Tax Distribution (as hereinafter defined) with respect to such prior year. An
amount equal to any shortfall shall be distributed to such Partner with the
report. Any excess will be treated as an "EXCESS TAX DISTRIBUTION" for such year
and credited against future Estimated Tax Distributions pursuant to Section
5.6(e)(iii) and this Section 5.6(b).
(c) Notwithstanding anything to the contrary herein,
(i) distributions under this Section 5.6 shall be made in proportion to the
Partners' Percentage Interests, and this clause (i) shall operate to increase
the distribution to be otherwise made under Section 5.6 to any Partner to the
extent necessary so that distributions under this Section 5.6 are made in
proportion to the Partners' Percentage Interests, and (ii) in all events the
Estimated Tax Distributions and the distributions under Section 5.6(b) above
shall be sufficient to enable each Tality Partner to pay when due its corporate
income and franchise tax liability, including its estimated tax liability
(taking into account the carryforward of losses available to Tality and any
alternative minimum tax); provided, however, that this clause (ii) shall not
apply to any such corporate income or franchise tax liability of any Tality
Partner to the extent such liability is materially in excess of the corporate
income and franchise tax liability of such Tality Partners arising solely from
its
18
interest in the Partnership unless the transactions giving rise to such
liability were approved by Holdings or Cadence.
(d) In making the computations under this Section 5.6
with respect to any Partner, capital losses of the Partnership shall be taken
into account only to the extent of capital gains of the Partnership against
which such capital losses may be offset by such Partner (taking into account the
applicable carryback and carryover period for such Partner), determined as if
such Partner had no income or loss from any source other than the Partnership.
(e) Definitions:
(i) "APPLICABLE TAX RATE" means, for any
year, the highest marginal combined tax rate, as reasonably determined by the
Tax Matters Partner, under the U.S. federal and applicable state, local and
foreign franchise or income tax laws as in effect for such year to which a
Holdings Partner or a Tality Partner is subject by reason of its ownership of
Partnership Units, taking into account the deductibility of state, local and
foreign income taxes for federal income tax purposes.
(ii) "ESTIMATED TAX PAYMENT DATE" means, with
respect to any calendar year, any of April 15, June 15, September 15 and
December 15 of such year.
(iii) "ESTIMATED TAX DISTRIBUTION" means, with
respect to any Partner and any Estimated Tax Payment Date, an amount equal to
the excess (if any) of (A) the product of (x) an estimate of the Partnership's
taxable income for the year, as estimated in good faith by the Tax Matters
Partner, allocable to such Partner for such year, less the excess, if any, of
cumulative tax losses of the Partnership over cumulative taxable income
allocated to such Partner in prior years, (y) the Applicable Tax Rate, and (z)
the Proration Percentage over (B) the sum of (u) the prior Estimated Tax
Distributions distributed to such Partner with respect to the same year and (v)
Excess Tax Distributions with respect to the prior year.
(iv) "PRORATION PERCENTAGE" means with
respect to April 15, 25%; June 15, 50%; September 15, 75%; and December 15, 100%
(adjusted to the corresponding dates in the event the fiscal year of Tality is
not the calendar year).
5.7. WITHHOLDING. The Partnership shall comply with all income
tax withholding requirements under federal, state, local or foreign law. To the
extent that the Partnership is required to withhold and pay over to any taxing
authority any amount resulting from an allocation of income or distribution to
any Partner, the amount withheld shall be treated as an advance distribution to
such Partner of amounts to which such Partner is otherwise entitled pursuant to
this Agreement or as a loan to such Partner immediately payable to the
Partnership, as determined by the General Partner. Each Partner shall use all
commercially reasonable efforts to minimize the amount that the Partnership is
required to withhold; PROVIDED, HOWEVER, that the foregoing shall not be deemed
to prohibit the Partnership from making distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Partnership, and
19
the General Partner on behalf of the Partnership, shall not be required to make
a distribution to any Partner on account of its interest in the Partnership if
such distribution would violate Section 17-607 of the Act or any other
applicable law.
ARTICLE VI
MANAGEMENT
6.1. MANAGEMENT BY GENERAL PARTNER.
(a) The General Partner shall manage the business and
affairs of the Partnership. The General Partner shall have the power and
authority to make all decisions regarding the business, affairs and properties
of the Partnership and to perform any and all other lawful acts or activities
necessary or convenient to the conduct, promotion or attainment of the business,
purposes and activities of the Partnership, including the execution, delivery
and performance of the Separation Agreements on behalf of the Partnership. No
Limited Partner shall have any authority to act for, or undertake or assume any
obligation or responsibility on behalf of, the Partnership.
(b) The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through duly
appointed agents (who may be designated as officers of the Partnership),
attorneys-in-fact, or other Persons and each such agent, attorney-in-fact or
other Person shall, to the extent delegated by the General Partner, have full
power and authority to do and perform all and every act and duty which is
permitted or required to be done by the General Partner hereunder. Any approval
or action taken by the General Partner in accordance with this Agreement shall
constitute approval or action taken by the Partnership and shall be binding on
the Partners.
6.2. MANAGEMENT POLICIES. The General Partner and officers of the
Partnership will develop and implement management policies consistent with the
general policies and programs established by this Agreement, the Certificate and
the Separation Agreements.
6.3. NO COMPENSATION OF GENERAL PARTNER. Except as provided in
Section 6.9, the General Partner shall not be entitled to any compensation from
the Partnership solely for acting in its capacity as the General Partner.
6.4. OFFICERS. The General Partner may appoint such officers of
the Partnership (including, but not limited to, a president and chief executive
officer, one or more vice presidents, a secretary, one or more assistant
secretaries, a treasurer and one or more assistant treasurers) upon such terms
and conditions as the General Partner deems necessary and appropriate.
20
6.5. BUSINESS OPPORTUNITIES.
(a) Except as Cadence may otherwise agree in writing,
Cadence may engage or invest, and avail itself of opportunities, in the same or
similar business activities or lines of business as the Partnership. Except in
the case of a Partnership Opportunity (as defined in subsection (b) below), the
Partnership shall have no interest or expectancy in any such engagement,
investment or opportunity or that Cadence will not engage in, any of the
foregoing activities, any such interest or expectancy being hereby renounced by
the Partnership so that Cadence shall not violate any duty to the Partnership by
engaging in, investing in or availing itself of opportunities in any such
business activities or line of business.
(b) For purposes of this Agreement, "PARTNERSHIP
OPPORTUNITY" shall mean a transaction, potential transaction or other business
opportunity that (i) the Partnership is financially able to undertake, (ii)
relates exclusively to the Business, (iii) is one in which the Partnership has
or, but for the effect of subsection (a) above the Partnership would have, an
interest or reasonable expectancy and (iv) if offered to a director, officer or
employee of the Partnership who is also a director, officer or employee of
Cadence, such transaction, potential transaction or other business opportunity
is offered to him or her solely in his or her capacity as a director, officer or
employee of the Partnership; PROVIDED, HOWEVER, that a "Partnership Opportunity"
not include (A)(1) any transaction in which the Partnership or Cadence is
permitted to participate pursuant to any agreement between them or their
Affiliates in effect as of the time any Partnership Interest is first held of
record by any Person other than Cadence, or as may be amended thereafter with
the approval of a majority of the Disinterested Directors, or (2) any such
transaction provided for in any subsequent agreement between the Partnership and
Cadence approved by a majority of the Disinterested Directors; (B) any
transaction, potential transaction or other business opportunity that is also
offered to or learned of by a director, officer or employee of Cadence (other
than as described in clause (iv) above) by or from a Person other than the
Partnership; or (C) any transaction, potential transaction or other business
opportunity that arises from ideas independently conceived, acquired or
developed by Cadence.
(c) For purposes of this Section 6.5 and Section 6.6,
"PARTNERSHIP" shall mean the Partnership, the General Partner and Subsidiaries
of the Partnership and the General Partner, collectively, and any successors
thereto and assigns thereof; PROVIDED, HOWEVER, that where, in order to
effectuate the intent of this definition to provide Cadence with protection in
its dealings with an Affiliate of the Partnership, action on the part of any
such Affiliate of the Partnership is required (E.G., without limitation, to
renounce an interest in a transaction, potential transaction or other business
opportunity, or to adopt guidelines pursuant to Section 6.6), the Partnership
and the General Partner shall cause such Affiliate to take such action. For
purposes of this Section 6.5 and Section 6.6, "Cadence" shall mean Cadence and
all of its Affiliates (other than Tality, the Partnership and Subsidiaries of
Tality or the Partnership), collectively, and any successors thereto and assigns
thereof.
(d) In the case of a Partnership Opportunity, Cadence
shall have such duties as would exist in the absence of this Section 6.5.
21
6.6. RELATED TRANSACTIONS/INTERCOMPANY AGREEMENTS. In any action
by or in the right of the Partnership against Cadence or any of its officers,
directors, employees or agents in which the fairness of any agreement or
transaction to which any such Person is a party or in which any such Person may
have a financial interest, shall be an issue: (i) the burden of proof on the
issue of fairness shall be on the Person seeking to establish unfairness; and
(ii) fairness shall be deemed to have been established in any of the following
circumstances:
(a) the conditions set forth in Section 144 of the DGCL or any
successor provision, as in effect from time to time, are
satisfied;
(b) the agreement or transaction is effected in accordance with
guidelines approved by the General Partner or a majority of
the Disinterested Directors; or
(c) the terms of the transaction or agreement are not materially
less favorable to the Partnership than those made available
by Cadence to unaffiliated Persons under similar
circumstances.
The provisions of this Section 6.6 shall not be construed to limit or
restrict any defenses that would be available to Cadence or any of its officers,
directors, employees or agents in the absence of this provision.
To the extent that Cadence or any of its officers, directors,
employees or agents or any Covered Person has duties (including fiduciary
duties) and liabilities relating thereto to the Partnership or to any other
Covered Person under applicable law, neither Cadence, nor any such officer,
director, employee, agent or Covered Person acting under this Agreement, shall
be liable to the Partnership or to any other Covered Person for its good faith
reliance on the provisions of this Agreement. To the extent that they restrict
the duties and liabilities of Cadence or any of its officers, directors,
employees or agents or any Covered Person otherwise existing under applicable
law, the provisions of this Agreement shall replace such other duties and
liabilities.
6.7. CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner has
filed the Certificate with the Secretary of State prior to the effectiveness of
this Agreement. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file or cause to be filed amendments to and restatements of the Certificate and
shall do all the things to maintain the Partnership as a limited partnership (or
other entity in which the Limited Partners have limited liability) under the
laws of the State of Delaware and each other state, the District of Columbia or
other jurisdiction in which the Partnership may elect to do business or own
property. The General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner. The General Partner shall use all reasonable efforts to cause
to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or other entity in which the Limited
Partners have limited liability) in the State of Delaware and any other state,
the District of Columbia or other jurisdiction in which the Partnership may
elect to do business or own property.
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6.8. TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partners,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof.
6.9. REIMBURSEMENT OF GENERAL PARTNER EXPENSES.
(a) GENERAL PARTNER EXPENSES. The General Partner
shall be reimbursed on a quarterly basis, or on a more frequent basis as the
General Partner may reasonably determine, for all expenses it incurs relating to
the ownership and operation of, or for the benefit of, the Partnership
(including expenses related to the operations of the General Partner, the status
of the General Partner as a public company, and the management and
administration of any Subsidiaries of the General Partner or the Partnership,
such as auditing expenses and filing fees).
(b) REIMBURSEMENT TREATED AS A DISTRIBUTION. If and to
the extent any reimbursement made pursuant to Section 6.9(a) is determined for
federal income tax purposes not to constitute a payment of expenses of the
Partnership, the General Partner shall take such actions as it deems appropriate
(including causing the Partnership to make allocations of items of gross income
or deduction) to cause the economic and tax results to be as similar as possible
to the results that would have occurred if such amounts were treated as expenses
of the Partnership.
6.10. LIABILITY OF THE GENERAL PARTNER.
(a) GENERAL. Notwithstanding anything to the contrary
set forth in this Agreement, neither the General Partner, nor any of its
Affiliates, and no officer, director, stockholder, member, partner, employee or
agent of the General Partner or its Affiliates (each a "COVERED PERSON"), shall
be personally liable to the Partnership or any Partner, or any Person claiming
by or through the Partnership or any Partner, for any losses sustained,
liabilities incurred or benefits not derived as a result of errors in judgment
or mistakes of fact or law or of any other act or omission relating to the
conduct of the business of the Partnership; PROVIDED, HOWEVER, that nothing
contained herein shall protect any Covered Person against any liability to the
Partnership or any Partner to which such Covered Person would otherwise be
subject by reason of (i) any act or omission of such Covered Person that
involves actual fraud or willful misconduct or (ii) any transaction from which
such Covered Person derived an improper personal benefit.
(b) ACTIONS OF AGENTS. The General Partner may
exercise any of the powers granted to it by this Agreement and perform any of
the duties imposed upon it hereunder either directly or by or through its
agents. Neither the General Partner nor any Covered Person shall be responsible
for any misconduct or negligence on the part of any such agent appointed by the
General Partner in good faith.
(c) EFFECT OF AMENDMENT. Notwithstanding any other
provision contained herein, any amendment, modification or repeal of this
Section 6.10 shall be prospective only and shall not in any way affect the
limitations on the liability of the General Partner, any officers,
23
directors, shareholders, employees or agents of the General Partner to the
Partnership and the Partners under this Section 6.10 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
6.11. OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) RELIANCE ON DOCUMENTS. The General Partner may
rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document believed by
it in good faith to be genuine and to have been signed or presented by the
proper party or parties.
(b) RELIANCE ON ADVISORS. The General Partner may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisers selected by it, and any
act taken or omitted to be taken in reliance upon the opinion of such Persons as
to matters which the General Partner reasonably believes to be within its
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) LIMITATION ON GENERAL PARTNER'S BUSINESS
ACTIVITIES; ACQUISITIONS. Notwithstanding anything to the contrary set forth
herein or in the Certificate of Incorporation of the General Partner, as the
same may be amended, so long as any Person other than the General Partner or one
of its Subsidiaries shall own any Limited Partnership Units, the General Partner
agrees not to own any assets or conduct any activities other than the management
of the Partnership as the general partner thereof and the ownership and
management of its Partnership Interests and its interest in any Acquired
Entities with respect to which the requirements of Section 4.7(a) have been
satisfied.
6.12. RIGHTS OF LIMITED PARTNERS. No Limited Partner shall
participate in the management, control or direction of the Partnership's
operations, business or affairs, transact any business for the Partnership, or
have the right, power or authority to act for or on behalf of or to bind the
Partnership, the same being vested solely and exclusively in the General
Partner.
ARTICLE VII
TRANSFERS AND EXCHANGES OF PARTNERSHIP INTERESTS
7.1. TRANSFER RESTRICTIONS. Except as otherwise provided in
Section 7.2, no Partner shall, directly or indirectly, transfer any right, title
or interest in any of its Partnership Interest. Any attempted transfer in
violation hereof shall be void.
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7.2. PERMITTED TRANSFERS. Notwithstanding Section 7.1:
(a) The Holdings Partners may transfer their
Partnership Interest to any Person in compliance with applicable law.
(b) The Tality Partners may only transfer their
Partnership Interest to (i) any wholly owned Subsidiary of Tality or (ii) the
transferee of all or substantially all of the assets of Tality.
(c) Notwithstanding anything to the contrary in this
Agreement, no Partner may transfer all or any portion of its Partnership
Interest, and no transferee of a Partnership Interest shall be admitted as a
Partner, unless the General Partner has determined that such transfer is not
reasonably expected to cause the Partnership to become a "publicly traded
partnership" within the meaning of Code Section 7704; PROVIDED, HOWEVER, that
under no circumstances shall an exchange of Partnership Units for Tality Common
Shares pursuant to Section 7.3 be expected or deemed to cause such a result.
7.3 EXCHANGE OF PARTNERSHIP UNITS.
(a) Unless otherwise agreed by the Partnership and any
Partner in writing, each Limited Partner, other than Tality and its
Subsidiaries, shall have the right to exchange, at any time and from time to
time, each Partnership Unit owned by such Limited Partner, free and clear of any
liens and encumbrances, for one (1) fully paid and non-assessable Tality Class A
Share. The Partnership and the General Partner agree that, at all times, they
collectively shall have available for issuance sufficient Tality Class A Shares
to satisfy the exchange rights under this Section 7.3. Such Tality Class A
Shares shall consist first of any Tality Class A Share then held by the
Partnership (in which case the Partnership Unit shall be surrendered to the
Partnership) and any additional shares shall be newly issued Tality Class A
Shares (in which case the Partnership Unit shall be transferred to Tality).
(b) The right to exchange Partnership Units for Tality
Class A Shares pursuant to Section 7.3(b) shall be exercised by surrender to the
Partnership of any certificate or certificates representing the Partnership
Units to be exchanged at any time during normal business hours at the principal
executive offices of the Partnership, accompanied by a written notice of such
Limited Partner stating that such Limited Partner desires to exchange such
Partnership Units, or a stated number of such units less than the number
represented by any such certificate or certificates, into Tality Class A Shares,
and by instruments of transfer in form satisfactory to the General Partner and,
if the General Partner requires, the Transfer Agent of the General Partner, duly
executed by such holder or such holder's duly authorized attorney (plus, if the
Limited Partner requests that the certificate or certificates for such Tality
Class A Shares be issued in the name of someone other than such Limited Partner,
transfer tax stamps or funds therefor).
(c) The Partnership and the General Partner, as
promptly as practicable following the receipt of notice and such other items
required to effect the exchange described in
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this Section 7.3, deliver or cause to be delivered a certificate or certificates
representing the number of Tality Class A Shares issuable upon such exchange,
issued in such name or names as such Limited Partner may direct. Such exchange
shall be deemed to have been effected immediately prior to the close of business
on the date of the giving of the required written notice and surrender of any
certificate or certificates representing Partnership Units; PROVIDED, HOWEVER,
that the General Partner may delay the effective date of such exchange with
respect to no more than one (1) Partnership Unit for up to fifteen (15) days to
the extent it reasonably deems such delay necessary in order implement steps to
avoid a dissolution of the Partnership under the Act by reason of the
Partnership having only one partner. Upon the date any such exchange is made or
effected, all rights of the Limited Partner with respect to the Partnership
Units so exchanged shall cease.
(d) The exchange of Partnership Units pursuant to this
Section 7.3 shall be adjusted to the extent there has been a transaction
described in Section 4.10 with respect to Tality Common Shares and there has
been no corresponding transaction with respect to Partnership Units, such that
the exchanging Limited Partner shall receive the same number of Tality Class A
Shares it would have received in exchange for each Partnership Unit had all such
adjustments pursuant to Section 4.10 been made.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
8.1. LIMITED LIABILITY. Except as otherwise provided under the
Act, the debts, obligations and liabilities of the Partnership, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Partnership and no Limited Partner shall be obligated or
liable for any such debt, obligation or liability of the Partnership. Except as
otherwise provided by the laws of the State of Delaware, the debts, obligations
and liabilities of any Partner, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liability of such Partner and neither
the Partnership nor any other Partner shall be obligated or liable for any such
debt, obligation or liability of such Partner.
8.2. INDEMNIFICATION.
(a) The Partnership shall, to the fullest extent
permitted by law, indemnify, defend and hold harmless each Covered Person
against any and all losses, claims, damages, expenses and liabilities
(including, but not limited to, any investigation, legal and other reasonable
expenses incurred in connection with, and any amounts paid in settlement of, any
action, suit, proceeding or claim, whether civil, criminal or administrative) of
any kind or nature whatsoever that such Covered Person may at any time become
subject to or liable for by reason of the formation, operation or termination of
the Partnership, or the Covered Person's acting as a General Partner (or on
behalf of any such Person), or the authorized actions of such Covered Person in
connection with the conduct of the affairs of the Partnership or any Person in
which the Partnership has an investment (including, without limitation,
indemnification against negligence, gross negligence or breach of duty);
PROVIDED, HOWEVER, that no Covered Person shall be entitled
26
to indemnification if and to the extent that the liability otherwise to be
indemnified for results from (i) any act or omission of such Covered Person that
involves actual fraud or willful misconduct or (ii) any transaction from which
such Covered Person derived improper personal benefit.
(b) Expenses incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the Partnership in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any Covered Person to repay such amount if it
shall be ultimately determined by a court of competent jurisdiction from which
no further appeal may be taken or the time for appeal has lapsed that such
Person is not entitled to be indemnified by the Partnership pursuant to the
terms and conditions of this Section 8.2.
(c) The Partnership shall use all commercially
reasonable efforts to maintain insurance on behalf of any Person who is or was a
Covered Person or is or was serving at the request of the Partnership as an
officer, director, manager, employee or agent of another Person against any
liability asserted against and incurred by such Person in any such capacity, or
arising out of such Person's status as such, whether or not the Partnership
would have the power to indemnify such Person against such liability under this
Section 8.2.
(d) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 8.2 shall continue as to a
Person who has ceased to be a Covered Person, and shall inure to the benefit of
the heirs, executors, administrators and other legal successors of such Person.
(e) The indemnification provided by this Section 8.2
shall not be deemed exclusive of any other rights to indemnification to which
those seeking indemnification may be entitled under any agreement, determination
of Partners or otherwise.
(f) Any indemnification hereunder shall be satisfied
only out of the assets of the Partnership (including insurance and any
agreements pursuant to which the Partnership and indemnified Persons are
entitled to indemnification), and the Partners shall not, in such capacity, be
subject to personal liability by reason of these indemnification provisions.
(g) No Person shall be denied indemnification in whole
or in part under this Section 8.2 because such Person had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
8.3. CONTRIBUTION. If there shall ever be more than one General
Partner, each of such General Partners covenants for itself, its successors and
assigns that it will at any time, on demand, both during the time it is a
Partner and after its withdrawal from the Partnership (upon the sale of its
interests or otherwise), contribute its share (determined based upon the
aggregate Percentage Interest of such General Partner as of the time of such
withdrawal or demand), of any liability, judgment or cost of any kind (including
the reasonable cost of the defense of any suit or action and any sums which may
be paid in settlement thereof) which any other General Partner
27
may be required to pay or for which such other General Partner is liable in
excess of its share (determined based upon the aggregate Percentage Interest of
such General Partner as of the time of such withdrawal or demand) on account of
any matter or transaction that occurred during the time that it was a General
Partner and for which such other General Partner is entitled to indemnification
under Section 8.2 or for which the Partnership is liable (in excess of amounts
actually paid to such other General Partner), except that no such contribution
need be made to any General Partner who acted with gross negligence, willful
misconduct or a knowing violation of law and the same resulted in such
liability, judgment or cost. Each General Partner agrees to keep all former
General Partners reasonably informed with respect to any potential claim for
contribution pursuant to this Section 8.3.
ARTICLE IX
TAXES
9.1. TAX MATTERS PARTNER; TAX RETURNS.
(a) Tality shall, as long as it is a Partner, be the
"tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the
Code (the "TAX MATTERS PARTNER"). Subject to the provisions of this Section 9.1,
the Tax Matters Partner shall be entitled to take any action or decline to take
any action, all as required by applicable law. The Tax Matters Partner shall
take such action as may be necessary to cause the other Partners to become
"notice partners" within the meaning of Section 6231(a)(8) of the Code.
(b) The Tax Matters Partner shall cause to be prepared
and filed all necessary foreign, federal, state and local income tax returns for
the Partnership, including making elections on the Partnership's tax returns or
otherwise relating to tax matters. Each other Partner shall furnish to the Tax
Matters Partner all pertinent information in its possession relating to
Partnership operations that is necessary to enable the Partnership's income tax
returns to be prepared and filed.
(c) To the extent permitted by applicable law, the Tax
Matters Partner shall determine, in its reasonable discretion, whether or not to
permit the other Partners to participate in the defense of all pending tax
proceedings involving the Partnership, including, without limitation,
participation in any meeting with the Internal Revenue Service or other taxing
authority.
(d) The Partnership shall reimburse the Tax Matters
Partner for any costs and expenses incurred in connection with such Person
serving as the Tax Matters Partner, including costs and expenses incurred in the
preparation or filing of any such income tax returns and the defense of any such
tax proceedings.
9.2. PARTNERSHIP STATUS. It is the intent of the Partners that
the Partnership be treated as a partnership for federal income tax purposes and,
to the extent permitted by applicable law, for state, local and foreign
franchise and income tax purposes. Neither the Partnership nor any
28
Partner may make an election for the Partnership to be excluded from the
application of the provisions of subchapter K of Chapter 1 of Subtitle A of the
Code or any similar provisions of applicable state or local law, and no
provision of this Agreement shall be construed to sanction or approve such an
election.
9.3. FISCAL YEAR. The fiscal year of the Partnership for
financial, accounting and federal, state and local income tax purposes shall be
the year ending on the Saturday closest to December 31 or such other fiscal year
that is the same as the taxable year that is required by law for federal income
tax purposes (the "FISCAL YEAR").
ARTICLE X
BOOKS, RECORDS AND BANK ACCOUNTS
10.1. MAINTENANCE OF BOOKS. The books of account for the
Partnership shall be maintained on an accrual basis in accordance with the terms
of this Agreement.
10.2. ACCOUNTING PRINCIPLES. Except as otherwise expressly
provided herein, the books and records of the Partnership shall be maintained in
accordance with GAAP; PROVIDED, HOWEVER, that Capital Accounts shall be
maintained in accordance with Section 5.1.
10.3. BANK ACCOUNTS. The General Partner shall cause the
Partnership to establish, maintain and designate signatories on one or more
separate bank and investment accounts for Partnership funds in the Partnership
name with such financial institutions and firms as the General Partner may
select and designate signatories thereon. The Partnership's funds shall not be
commingled with the funds of any other Person.
10.4. TAX INFORMATION. Within one hundred eighty (180) days after
the end of each Fiscal Year, the Tax Matters Partner shall prepare and send, or
cause to be prepared and sent, to each Person who was a Partner at any time
during such Fiscal Year, copies of such information as may be required for
federal, state, local and foreign income tax reporting purposes, including
copies of Schedule K-1 or any successor schedule or form, for such Person and
such other information as a Partner may reasonably request for the purpose of
complying with applicable laws.
10.5. PUBLIC FILINGS. The Partnership shall assemble and prepare
such information and documentation with respect to the Partnership that Tality
reasonably requests in connection with the filing by Tality of all registration
statements, periodic reports and other documents required to be filed by Tality
pursuant to Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, and
shall deliver such documents to Tality a reasonable period of time in advance of
the date such documents are required to be filed.
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ARTICLE XI
ADMISSION OF PARTNERS; WITHDRAWAL; CLASSES OF PARTNERSHIP INTERESTS
11.1 SUBSTITUTION OF PARTNERS. Unless otherwise agreed in writing
by the General Partner and a transferee of a Partnership Interest (which
agreement may be a condition to the General Partner's approval of the transfer
where such approval is required hereunder), any transferee of a Partnership
Interest from a Partner, if such transfer complies with Article VII, shall be
admitted as a Partner, such admission to be effective immediately prior to such
transfer, only if such substitute Partner shall have agreed to be bound by the
terms and conditions of this Agreement by executing a counterpart hereof.
Whether or not such a counterpart is executed, such transferee shall be deemed,
by acquiring such interest in the Partnership, to have agreed to hold it subject
to the terms and conditions of this Agreement. Upon such admission, such
substitute Partner shall be a Partner for all purposes of this Agreement.
11.2 ADMISSION OF ADDITIONAL PARTNERS. Other than pursuant to
Section 11.1 in connection with a transfer, the Partnership may admit additional
Partners only upon the satisfactory completion of the following:
(a) such admission of an additional Limited Partner
shall have been approved by the General Partner;
(b) such admission of an additional or new General
Partner shall be approved by all the Limited Partners; and
(c) such additional Partner shall have agreed to be
bound by the terms and conditions of this Agreement by executing a counterpart
hereof.
11.3. WITHDRAWAL. No Partner shall have any right to withdraw or
resign from the Partnership, except in connection with a transfer of such
Partner's entire interest in the Partnership permitted by Section 7.2, in which
case such transferring Partner shall cease to be a Partner of the Partnership.
11.4 CLASSES OF PARTNERSHIP INTERESTS.
(a) The General Partner may cause the Partnership
issue a class of Partnership Interests (including pursuant to Section 4.7(a)) in
exchange for a Capital Contribution to a new or existing Partner having rights,
preferences and privileges senior to the rights, preferences and privileges of
the other Partners ("PREFERRED INTERESTS"); PROVIDED, HOWEVER, that no Preferred
Interest may be issued by the Partnership (other than in connection with the
issuance by Tality of preferred equity pursuant to Section 4.7(a)) without the
advance written consent of the Holdings Partners, which consent may be given or
withheld in their sole and absolute discretion. Except as provided in connection
with the issuance of a Partnership Interest pursuant to Section 4.7(a), no
Partnership Interest shall be treated as a Preferred Interest unless the
issuance and specific
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terms of such Preferred Interest are set forth in writing by the Partnership and
the Partner owning such Preferred Interest.
(b) Except as agreed upon in writing by the General
Partner and the Partner to whom a Preferred Interest is issued, references in
this Agreement to Partnership Units shall be deemed to exclude references to
Preferred Interests, and any Partner that owns both Partnership Units and
Preferred Interests shall, unless so agreed, be treated (other than for income
tax purposes or otherwise as required by law) as a separate Partner with respect
to each class of Partnership Interests owned.
(c) It is the intention of the Partners that the
Partnership Interests represented by the Partnership Units constitute the
residual equity of the Partnership after taking into account the rights,
preferences and privileges of any outstanding Preferred Interests.
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
12.1. DISSOLUTION. The Partnership shall be dissolved and its
affairs shall be wound up upon the first to occur of any of the following:
(a) the expiration of the Partnership's term pursuant
to Section 2.4;
(b) the written consent of Tality and the Holdings
Partners (if any);
(c) the entry of a decree of judicial dissolution
under the Act;
(d) the sale or other disposition of all, or
substantially all, the assets of the Partnership (excluding a lease, mortgage,
pledge, grant of security interest or other encumbrance);
(e) an event of withdrawal of a General Partner has
occurred under the Act; PROVIDED, HOWEVER, that the Partnership shall not be
dissolved or required to be wound upon an event of withdrawal of a General
Partner if (i) at the time of such event of withdrawal, there is at least one
(1) other General Partner of the Partnership who carries on the business of the
Partnership (any remaining General Partner being hereby authorized to and shall
carry on the business of the Partnership), or (ii) within ninety (90) days after
the occurrence of such event of withdrawal, remaining Partners owning more than
75% of the outstanding Partnership Units (other than Partnership Units owned by
such withdrawing General Partner) agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date of the event of
withdrawal, of one (1) or more additional General Partners of the Partnership;
or
(f) at any time there are no Limited Partners, unless
the Partnership is continued in accordance with the Act.
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12.2. LIQUIDATION AND TERMINATION.
(a) On dissolution of the Partnership, the General
Partner shall act as Liquidator or may appoint one or more other Persons as
Liquidator. The Liquidator shall proceed diligently to wind up the affairs of
the Partnership and make final distributions as provided herein and in the
Act by the end of the taxable year of the Partnership in which its
liquidation (as such term is defined in Treas. Reg. Sections
1.704-1(b)(2)(ii)(g)) occurs or, if later, within ninety (90) Business Days
after the date of such liquidation. The costs of liquidation shall be borne
as a Partnership expense. Until final distribution, the Liquidator shall
continue to operate the Partnership properties with all of the power and
authority of the Partners and the General Partner. The steps to be
accomplished by the Liquidator are as follows:
(i) as promptly as possible after
dissolution and again after final liquidation, the Liquidator shall
cause a proper accounting to be made by an accounting firm of the
Partnership's assets, liabilities and operations through the last day
of the calendar month in which the dissolution shall occur or the
final liquidation shall be completed, as applicable;
(ii) the Liquidator shall have full power and
authority to sell, assign and encumber any or all of the Partnership's
assets and to wind up and liquidate the affairs of the Partnership in
an orderly and business-like manner; and
(iii) all proceeds from liquidation shall be
distributed in the following order of priority:
(A) first, to the satisfaction of
the debts and liabilities of the Partnership both to
Partners, to the extent otherwise permitted by law, and to
persons other than Partners (but, in the case of nonrecourse
debts and liabilities, only to the extent required under the
applicable credit and security agreement) and expenses of
liquidation (whether by payment or the making of reasonable
provision for payment thereof, including the setting up of
such reserves as the Liquidator may reasonably deem
necessary for any liability of the Partnership);
(B) second, pro rata to the
Partners in accordance with the positive balances in their
Capital Accounts (as determined after taking into account
the adjustments required under Treas. Reg. Sections
1.704-1(b)(2)(ii)(b)(2)), provided that the terms of any
Preferred Interests shall be taken into account in
determining whether proceeds are distributed first to the
holders of Preferred Interests prior to holders of other
Partnership Interests; and
(C) last, to the Partners in accordance with
their respective Percentage Interests.
(b) Notwithstanding the provisions of this Section
12.2 which require the liquidation of the assets of the Partnership, but subject
to the order of priorities set forth above, if
32
upon or following dissolution of the Partnership the Liquidator determines that
an immediate sale of part or all of the Partnership's assets would be
impractical or would cause undue loss to the Partners, the Liquidator may, in
its reasonable discretion, defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Partnership (other
than those to Partners as creditors).
12.3. DISTRIBUTION IN KIND. If the Liquidator shall determine that
all or a portion of the Partnership's assets should be distributed in kind to
the Partners, the Liquidator, on behalf of the Partnership, shall obtain an
independent appraisal of the fair market value of each such asset as of a date
reasonably close to the date of liquidation. Any unrealized appreciation or
depreciation with respect to such assets shall be allocated among the Partners'
Capital Accounts (in accordance with Article V, assuming that the assets of the
Partnership were sold for such appraised fair market value) and distribution of
any such assets in kind to a Partner shall be considered a distribution of an
amount equal to the assets' appraised fair market value for purposes of Section
12.2.
12.4. DEFICIT CAPITAL ACCOUNTS. Notwithstanding any other
provision hereof to the contrary, to the extent that a deficit, if any, exists
in the Capital Account of any Partner, such deficit shall not be an asset of the
Partnership and such Partner shall not be obligated to contribute such amount to
the Partnership to bring the balance of such Partner's Capital Account to zero.
12.5. CANCELLATION OF FILINGS. Upon completion of the distribution
of Partnership assets as provided herein, the Liquidator and, if the Liquidator
so directs, the General Partner, shall file a certificate of cancellation with
the Secretary of State, cancel any other filings made pursuant to Sections 2.1
and 6.7 as may be necessary and take such other actions as may be necessary to
terminate the Partnership.
ARTICLE XIII
GENERAL PROVISIONS
13.1. REPRESENTATIONS AND WARRANTIES OF PARTNERS. Each Partner
hereby represents and warrants to the Partnership and each other Partner that:
(a) such Partner is duly organized, validly existing
and in good standing under the law of the jurisdiction of its organization and
is duly qualified and in good standing in the jurisdiction of its principal
place of business (if not organized therein);
(b) such Partner has full corporate, or other
applicable power and authority to execute and agree to this Agreement and to
perform its obligations hereunder and all necessary actions by the board of
directors, shareholders, members or other Persons necessary for the due
authorization, execution, delivery and performance of this Agreement by that
Partner have been duly taken;
33
(c) such Partner has duly executed and delivered this
Agreement;
(d) such Partner's authorization, execution, delivery
and performance of this Agreement do not conflict with any other agreement or
arrangement to which that Partner is a party or by which it is bound or with any
law or regulation to which that Partner is subject;
(e) such Partner has such knowledge and experience in
business and financial matters and is capable of evaluating the merits and risks
of an investment in the Partnership and making an informed investment decision
with respect thereto;
(f) such Partner is able to bear the economic and
financial risk of an investment in the Partnership for an indefinite period of
time;
(g) such Partner is acquiring its Partnership
Interests for its own account, for investment only and not with a view to a sale
or distribution thereof in violation of any securities laws;
(h) such Partner has received, or has had access to,
all information which it considers necessary or advisable to that Partner's
decision concerning its acquisition of the Partnership Interest; and
(i) this Agreement constitutes a valid and binding
agreement of such Partner, enforceable against such Partner in accordance with
its terms, subject to general equitable principles and except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application relating
to creditors' rights.
13.2. OFFSET. Whenever the Partnership is to pay any sum to a
Partner, any amounts that such Partner owes the Partnership may be deducted from
that sum before payment.
13.3. NOTICES. All notices and other communications (collectively,
"NOTICES") provided for or permitted to be given under this Agreement shall be
in writing and shall be given by depositing the Notice in the United States
mail, addressed to the Person to be notified, postage paid and registered or
certified with return receipt requested, or by such Notice being delivered in
person or by facsimile communication to such party. Unless otherwise expressly
set forth herein, notices given or served pursuant hereto shall be effective
upon receipt by the Person to be notified. All Notices to be sent to a Partner
shall be sent to or made at, and all payments hereunder shall be made at the
address of such Partners set forth on EXHIBIT A, or such other address as that
Partner or any additional Partner may specify by Notice to the Partnership.
13.4. ENTIRE AGREEMENT; WAIVERS AND MODIFICATIONS.
(a) This Agreement constitutes the entire agreement of
the Partners relating to the Partnership and supersedes any and all prior
contracts, understandings, negotiations and agreements with respect to the
Partnership and the subject matter hereof, whether oral or written.
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(b) This Agreement may be amended or modified from
time to time only by a written instrument executed by each of the Partners;
PROVIDED, HOWEVER, that the General Partner may amend EXHIBIT A from time to
time to reflect the admission or withdrawal of Partners, the issuance,
redemption or transfer of Partnership Units, changes in Percentage Interests, or
changes in the names or addresses of Partners, in each case pursuant to
transactions otherwise permitted by the terms of this Agreement; and PROVIDED
FURTHER, that the General Partner may amend this Agreement from time to time to
make ministerial changes that are not materially adverse, in the good faith
judgment of the General Partner, to the interests of any Partner.
(c) Any waiver or consent, express, implied or deemed,
in whatever form, to or of any breach or default by any Person in the
performance by that Person of its obligations with respect to the Partnership or
any action inconsistent with this Agreement is not a waiver of or consent to any
other breach or default in the performance by that Person of the same or any
other obligations of that Person with respect to the Partnership or any other
such action. Failure on the part of a Person to complain of any act of any
Person or to declare any Person in default with respect to the Partnership,
irrespective of how long that failure continues, does not constitute a waiver by
that Person of its rights with respect to that default until the applicable
statute-of-limitations period has run. All waivers and consents hereunder shall
be in writing and shall be delivered to the other Partners in the manner set
forth in Section 13.3.
13.5. NO THIRD-PARTY BENEFICIARIES. Except as expressly provided
otherwise herein, nothing in this Agreement shall provide any benefit to any
third party or entitle any third party to any claim, cause of action, remedy or
right of any kind, it being the intent of the parties that this Agreement shall
not be construed as a third-party beneficiary contract.
13.6. GOVERNING LAW. This Agreement is governed by and shall be
construed in accordance with the law of the State of Delaware, excluding any
conflict-of-laws rule or principle that might refer the governance or
construction of this agreement to the law of another jurisdiction.
13.7. FURTHER ASSURANCES. In connection with this Agreement and
the transactions contemplated hereby, each Partner shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
13.8. WAIVER OF CERTAIN RIGHTS. To the fullest extent permitted by
law, each Partner irrevocably waives any right (but not any power) it might have
to maintain any action for dissolution of the Partnership or for partition of
the property of the Partnership. If any Partner maintains any action for such
dissolution or partition, such Partner shall, to the fullest extent permitted by
law, be liable to the Partnership and the other Partners for all monetary
damages suffered by them as a result thereof (including, indirect, incidental
and consequential damages).
13.9. SEVERABILITY. The provisions of this Agreement are
severable. The invalidity, in whole or in part, of any provision of this
Agreement shall not affect the validity or enforceability of any other of its
provisions. If one or more provisions hereof shall be so declared invalid or
35
unenforceable, the remaining provisions shall remain in full force and effect
and shall be construed in the broadest possible manner to effectuate the
purposes hereof. The Partners further agree to replace such void or
unenforceable provisions with provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provisions.
13.10. SUCCESSORS AND ASSIGNS. Subject to the limitations and
restrictions set forth in this Agreement, this Agreement shall be binding on and
inure to the benefit of the successors and assigns of the Partnership Interests
of the parties hereto.
13.11. SPECIFIC PERFORMANCE. Without intending to limit the
remedies available to any party, each party hereto acknowledges that a breach of
any of the covenants contained in this Agreement may result in irreparable
injury to the other party for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of such a breach or threat thereof, each party hereto shall be
entitled to obtain a temporary restraining order and a preliminary or permanent
injunction restraining or requiring actions prohibited or required by this
Agreement or such other relief as may be requested to enforce specifically any
of the covenants of this Agreement.
13.12. INTERPRETATION OF AGREEMENT. The table of contents of and
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
13.13. MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts with the same effect as if each of the signing parties had
signed the same document. All counterparts shall be construed together and
constitute the same instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
GENERAL PARTNER:
TALITY CORPORATION
/s/Xxxxx X. Xxxx
By:----------------------------
Name: Xxxxx X. Xxxx
Title: Senior Vice President,
Chief Financial Officer
LIMITED PARTNERS:
CADENCE HOLDINGS, INC.
/s/X.X. Xxxxx XxXxxxxxx
By:-----------------------------
Name: X.X. Xxxxx XxXxxxxxx
Title: Secretary
TALITY CORPORATION
/s/Xxxxx X. Xxxx
By:---------------------------------
Name: Xxxxx X. Xxxx
Title: Senior Vice President,
Chief Financial Officer
37
