MEMORANDUM

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Conrad Ashby, Responsible Partner
FROM: Aaron Liu, Lead Associate; Monica Reyes, Working Associate
DATE: November 3, 2025
RE: Review of Original Enterprise License Agreement (MDS-ELA-2023-00487) between Optiwave Semiconductor Corp. and Meridian Design Systems, Inc.
MATTER NO.: 1014-00006
CLIENT: Optiwave Semiconductor Corp.
I. Executive Summary
The purpose of this memorandum is to provide an internal review and analysis of the existing Enterprise License Agreement, Agreement No. MDS-ELA-2023-00487, dated February 1, 2023 (the "Original ELA"), between Optiwave Semiconductor Corp. ("OWS" or the "Client") and Meridian Design Systems, Inc. ("Meridian" or "MDS"). This analysis is intended to identify key provisions of the Original ELA, assess terms that are favorable and unfavorable to OWS, and flag provisions that should be targeted for renegotiation in connection with the proposed five-year renewal and expansion of the commercial relationship between the parties.
The Original ELA is a three-year enterprise license agreement with a total contract value ("TCV") of $27.6 million ($9.2 million per year), covering 190 total licensed seats across three Meridian product modules: Meridian Marlowe Asset Management™, Meridian SignalForge™, and Meridian VerifyPro™. The agreement provides OWS with mission-critical electronic design automation ("EDA") software tools that are integral to OWS's core semiconductor design operations.
The Original ELA expires on January 31, 2026. OWS seeks to negotiate and execute a successor renewal ELA (proposed Agreement No. MDS-ELA-2026-01192) by January 15, 2026, with an effective date of February 1, 2026. The renewal is proposed as a five-year term with a significantly expanded scope, including the addition of two new product modules and a substantial increase in licensed seat count.
In the course of this review, we have identified twelve key provision areas warranting attention. This memorandum flags several significant concerns — particularly the audit-rights provision (which is overly burdensome to OWS), the limited IP indemnification (which is subject to the general aggregate liability cap), the liability cap structure (which lacks critical carve-outs), and the auto-renewal and termination mechanics (which could leave OWS without license coverage if renewal negotiations extend beyond the current expiration date). We also note the absence of a source code escrow arrangement, which presents a material business-continuity risk for OWS given its dependence on Meridian's toolchain.
This memorandum recommends priority items for the redline of Meridian's proposed renewal ELA, which is to be delivered to Meridian's outside counsel, Bexley Weir & Daly LLP, by the November 15, 2025 target date established by the Client.
II. Background
A. The Parties
Licensee — Optiwave Semiconductor Corp. OWS is a Delaware corporation headquartered at 4850 Great America Parkway, Suite 300, Santa Clara, California 95054. OWS is a fabless semiconductor design company specializing in the development of high-speed optical transceiver integrated circuits and silicon photonics chiplets for data-center interconnect applications. Founded in 2017, OWS has grown to approximately 340 employees, of which approximately 185 are design engineers who use EDA tools on a daily basis as part of their core responsibilities. OWS is a portfolio company of Ridgeline Capital Partners, LP, which acquired a 78% equity stake in OWS in August 2022 at an enterprise value of approximately $412 million. For fiscal year 2024, OWS reported revenue of $287.4 million and EBITDA of $51.7 million. OWS's current total annual EDA spend across all vendors is approximately $18.6 million, of which the Meridian license under the Original ELA represents $9.2 million per year — approximately 49.5% of OWS's total EDA expenditure. This concentration of spend with a single vendor underscores both the strategic importance of the Meridian relationship and the negotiating leverage that OWS may be able to exercise.
Licensor — Meridian Design Systems, Inc. Meridian is a Delaware corporation headquartered at 2700 Orchard Parkway, San Jose, California 95134 (EIN: 77-0584213). Meridian is a major EDA software vendor, publicly traded on Nasdaq, with approximately 4,800 employees globally. For fiscal year 2024, Meridian reported revenue of approximately $3.1 billion. Meridian offers a comprehensive suite of EDA tools covering digital and analog IC design, verification, signal integrity, and, more recently, silicon photonics design kit integration and cloud-based compute services.
OWS Key Contacts: Douglas Tran, General Counsel; Priya Venkatesh, Vice President of Engineering Operations.
Meridian Key Contacts: Garrett Hollis, Senior Director, Strategic Accounts; Samantha Ng, Vice President, Legal — Commercial.
B. Engagement Context
Calderwood & Harkness LLP's engagement in this matter was opened on October 28, 2025, following OWS's receipt of Meridian's initial renewal quote on October 15, 2025. Meridian's renewal proposal contemplates a five-year term with a TCV of $71.5 million ($14.3 million per year), representing a 55.4% increase over the current annual spend of $9.2 million. While the renewal proposal includes additional seats and product modules, the magnitude of the proposed price increase significantly exceeds what OWS's management team and Ridgeline Capital Partners' operating group consider commercially reasonable.
OWS's target annual spend for the renewal is $11.8 million per year, yielding a five-year TCV of $59.0 million. This target reflects OWS's willingness to accept a meaningful increase over the current annual spend to account for the expanded scope of the license, while constraining the increase to a level consistent with OWS's budgetary framework and EBITDA targets. The delta between Meridian's initial proposal and OWS's target is $12.5 million over the five-year term ($2.5 million per year), representing a substantial but negotiable gap.
In addition to the pricing negotiation, OWS seeks to expand the scope of the license in the renewal to include two additional Meridian product modules — Meridian AnalogEdge™ (an analog and mixed-signal design suite) and Meridian PhotonX™ (a silicon photonics design kit integration platform) — and to increase the total licensed seat count from 190 to 280 (a 47.4% increase), reflecting anticipated headcount growth in OWS's engineering organization and the need for additional concurrent-use capacity to support expanded design programs.
The timeline is compressed. The Original ELA expires on January 31, 2026, and OWS's objective is to have the renewal ELA fully negotiated and executed no later than January 15, 2026, to ensure a seamless transition with no gap in license coverage. Our team's immediate deliverable is the preparation of a comprehensive redline of Meridian's proposed renewal agreement, to be transmitted to Meridian's outside counsel at Bexley Weir & Daly LLP by November 15, 2025.
III. Summary of Key Terms of the Original ELA
This section provides a detailed review of the material provisions of the Original ELA, organized by subject matter. Where applicable, we have included observations and preliminary recommendations for the renewal negotiation.
A. Term and Effective Date
The Original ELA has an effective date of February 1, 2023, and a contractual term of three (3) years, resulting in an expiration date of January 31, 2026. The agreement is structured as a fixed-term license, with the annual license fee payable in advance on each anniversary of the effective date.
It is important to note that the Original ELA contains an auto-renewal provision (discussed in greater detail in Section III.K below) pursuant to which the agreement would automatically extend for successive one-year periods unless either party provides written notice of non-renewal at least ninety (90) days prior to the expiration of the then-current term. Under this timeline, OWS was required to deliver its non-renewal notice to Meridian no later than November 2, 2025. We have confirmed with Douglas Tran that OWS delivered timely written non-renewal notice to Meridian by certified mail and electronic transmission on October 22, 2025 — eleven days before the deadline. This timely notice preserves the January 31, 2026 expiration date and ensures OWS's ability to negotiate a replacement agreement on materially different terms, rather than being locked into a one-year extension under the existing pricing and scope.
B. Licensed Products
Three Meridian software modules are licensed under the Original ELA:
1.  Meridian Marlowe Asset Management™ — A comprehensive digital IC design suite encompassing place-and-route functionality, logic synthesis, static timing analysis, and physical design verification. Marlowe Asset Management™ is OWS's primary design platform and is used by the majority of OWS's design engineers across all active tapeout programs.
2.  Meridian SignalForge™ — A signal integrity analysis toolset used for high-speed I/O characterization, electromagnetic simulation, power integrity analysis, and interconnect modeling. SignalForge™ is particularly critical to OWS's optical transceiver design programs, where signal integrity at data rates exceeding 100 Gbps per lane is a first-order design constraint.
3.  Meridian VerifyPro™ — A formal verification platform supporting equivalence checking, model checking, and assertion-based verification. VerifyPro™ is used in conjunction with OWS's simulation-based verification flows to achieve coverage closure on complex digital designs.
The Original ELA does not include licenses for Meridian AnalogEdge™ (an analog and mixed-signal design suite) or Meridian PhotonX™ (a silicon photonics design kit integration platform). Both of these modules are products that OWS now seeks to add in the renewal agreement. AnalogEdge™ will support OWS's growing mixed-signal design capabilities, including transimpedance amplifier (TIA) and driver circuit design. PhotonX™ will support the integration of silicon photonics components in OWS's next-generation co-packaged optics chiplets, contingent upon Brindoval Foundry Services Ltd.'s photonics process qualification (discussed in Section V below).
C. License Grant and Scope of Use
The Original ELA grants OWS a non-exclusive, non-transferable, non-sublicensable license to use the licensed products solely for OWS's internal business purposes in connection with the design, verification, and signoff of integrated circuits. The license is limited to the specific product modules, version families, and seat counts identified in the agreement and the applicable order forms.
The agreement imposes the following restrictions on OWS's use of the licensed software:
(a) No reverse engineering, decompilation, or disassembly of the licensed software, except to the extent such activities are expressly permitted by applicable law (including, without limitation, applicable provisions of the California Uniform Trade Secrets Act and the Digital Millennium Copyright Act) notwithstanding contractual restrictions to the contrary.
(b) No use by third parties, contractors, or affiliates of OWS unless expressly authorized by a separate written agreement or amendment to the Original ELA. This restriction is broadly drafted and does not include carve-outs for foundry-partner personnel, outsourced design services, or collaborative design environments.
(c) No benchmarking or competitive analysis. OWS is prohibited from publishing or disclosing the results of any benchmark tests or competitive analyses of the licensed software without Meridian's prior written consent.
Observation: The scope-of-use clause is relatively standard for enterprise EDA licenses of this type, but it may require updating in the renewal if OWS intends to permit use of the licensed tools by Brindoval Foundry Services Ltd. personnel or other foundry-partner engineers in collaborative design environments. OWS's engineering team has indicated that its next-generation co-packaged optics program will involve tight collaboration with Brindoval's design enablement team, including shared access to certain EDA tool environments. Under the current scope-of-use restrictions, such shared access would not be permitted without a separate written amendment. We recommend clarifying the scope of use in the renewal to expressly permit foundry-partner interoperability workflows, subject to appropriate confidentiality protections and Meridian's reasonable approval of qualifying foundry partners.
D. Seat Allocation
The Original ELA provides for the following seat allocation:
Named-user seats are assigned to individually identified OWS employees and cannot be shared among multiple users. Reassignment of named-user seats to different individuals is permitted but may not occur more frequently than once per calendar quarter, which limits OWS's flexibility to reallocate licenses in response to personnel changes, project reassignments, or organizational restructuring.
Floating seats (also referred to as concurrent-use seats) may be used by any authorized OWS user, but the total number of simultaneous active sessions is limited to forty (40) at any given time. Floating seats are managed through Meridian's FlexLicense™ server infrastructure, which tracks and enforces concurrent-use limits in real time.
The current 190-seat allocation serves OWS's approximately 185 design engineers, leaving minimal headroom — only five unused seats. OWS's engineering operations team has reported frequent instances of floating-seat contention during peak usage periods, particularly during tapeout crunch cycles when demand for verification and signoff tools spikes. The proposed expansion to 280 seats in the renewal (comprising 220 named-user seats and 60 floating seats) reflects OWS's anticipated headcount growth, the addition of two new product modules that will require dedicated seat allocations, and the need for additional concurrent-use capacity to reduce contention and improve engineering productivity.
Under the Original ELA, the effective per-seat annual cost is approximately $48,421 ($9.2 million ÷ 190 seats). OWS's target for the renewal is an effective per-seat annual cost of approximately $42,143 ($11.8 million ÷ 280 seats), representing a 13.0% reduction in per-seat cost that reflects the volume discount OWS expects to achieve in connection with the 47.4% increase in total seat count.
E. Fees and Payment Terms
The financial terms of the Original ELA are summarized as follows:
The Original ELA does not contain a volume-discount provision. Pricing is flat across the three-year term with no true-up mechanism, no mid-term escalation clause, and no adjustment for changes in the number of licensed seats. While the absence of an escalation clause has been favorable to OWS during the current term (as it has insulated OWS from price increases during the three-year period), the flat structure also means that OWS has not received the benefit of any volume-based pricing concessions despite being one of Meridian's larger mid-market accounts.
Observation for Renegotiation: OWS should seek to establish a volume-discount structure in the renewal that reflects the significant increase in the scale of the commercial relationship. Our target is a discount of at least 15% off Meridian's published list price for all licensed modules, applied uniformly across the expanded seat count. Additionally, we recommend negotiating annual fee escalation caps tied to a verifiable index — either the Consumer Price Index for All Urban Consumers (CPI-U) as published by the U.S. Bureau of Labor Statistics, or a fixed annual percentage cap (e.g., 3% per annum), whichever is lower — to protect OWS against mid-term price increases during the five-year renewal term. This is particularly important given the length of the proposed renewal term and the current inflationary environment.
F. Maintenance, Support, and Updates
The Original ELA provides that Meridian will furnish standard maintenance and support during the license term at no additional charge beyond the annual license fees. The scope of included maintenance and support encompasses bug fixes, security patches, and minor version updates (i.e., incremental point releases within the same major version family). Major version upgrades (e.g., an upgrade from Marlowe Asset Management™ 5.x to Marlowe Asset Management™ 6.x) are included in the license so long as OWS remains current on its annual license fee payments, which OWS has been throughout the current term.
Support is provided on a tiered-severity basis as follows:
Support is delivered through Meridian's online customer portal (MDS Support Central™) and a dedicated account team assigned to OWS. OWS's engineering operations team has reported generally satisfactory support experiences during the current term, with Severity-1 response times consistently within the contractual 4-hour window. However, Severity-2 resolution times have occasionally been protracted, particularly for issues involving interoperability between Meridian tools and third-party process design kits.
Observation: The Original ELA does not address cloud-hosted compute services. Meridian has recently launched Meridian CloudVerify™, a cloud-based verification and simulation offload platform that enables customers to burst compute-intensive verification workloads to Meridian's cloud infrastructure. If OWS adds CloudVerify™ in the renewal (which OWS's engineering team has expressed interest in), separate service-level agreement ("SLA"), uptime, and data-security terms will be required. These terms should be documented in a standalone Data Security and Cloud Services Rider, which we intend to prepare and attach as an exhibit to the renewal redline.
G. Intellectual Property Ownership
The Original ELA contains standard intellectual property ownership provisions reflecting the customary allocation in enterprise EDA license agreements.
Licensor IP. Meridian retains all right, title, and interest in and to the licensed software, including all underlying source code, object code, algorithms, data structures, user interfaces, documentation, and all patents, copyrights, trade secrets, trademarks, and other intellectual property rights embodied therein. The license granted to OWS does not convey any ownership interest in or to the licensed software. OWS acknowledges that the licensed software constitutes proprietary trade secrets of Meridian.
Licensee IP. OWS retains all right, title, and interest in and to its own design data, IC layouts, netlists, simulation results, verification databases, and all other outputs created by OWS personnel using the licensed tools (collectively, "OWS Design IP"). Meridian expressly disclaims any right to access, use, copy, modify, or claim any ownership interest in OWS Design IP. This provision is critical to OWS and must be preserved without modification in the renewal.
Residuals Clause. The Original ELA contains a "residuals" clause (Section 7.4) permitting Meridian personnel to retain and use the general knowledge, skills, experience, and know-how developed or acquired in the course of providing support and services to OWS, provided that such retention and use does not involve the disclosure, copying, or misappropriation of OWS's confidential information. The clause states that nothing in the agreement shall prevent Meridian's employees from using their unaided memories to develop, use, market, or sell products or services, provided that no trade secrets or confidential information of OWS are disclosed.
Observation: The residuals clause warrants close scrutiny. While residuals clauses are not uncommon in technology agreements, they can create significant ambiguity in the EDA context. Meridian's support engineers who work closely with OWS may gain insight into OWS's proprietary design methodologies, custom tool flows, optimization techniques, and competitive strategies. A broadly drafted residuals clause could permit Meridian to leverage those insights — whether in support of Meridian's own product development or in providing services to OWS's competitors — so long as Meridian's personnel do not specifically copy or disclose identified items of OWS confidential information. We recommend that the renewal either narrow the residuals clause substantially (e.g., by excluding insights related to OWS's specific design architectures, process technology choices, and competitive strategies) or eliminate the clause entirely. At minimum, the clause should include an express prohibition on Meridian's use of residual knowledge to develop tools or features specifically tailored to compete with OWS's products.
H. IP Indemnification
Section 9.1 of the Original ELA provides that Meridian will defend, indemnify, and hold harmless OWS from and against any third-party claims, actions, suits, or proceedings alleging that OWS's authorized use of the licensed software, as contemplated by the agreement, infringes any United States patent, copyright, or trade secret. This indemnification obligation extends to damages, settlements, costs, and reasonable attorneys' fees awarded against or incurred by OWS in connection with such claims.
Exceptions and Carve-Outs. Meridian's IP indemnification obligation is subject to the following exceptions:
(1) Claims arising from modifications to the licensed software made by or on behalf of OWS, where the infringement would not have occurred but for such modifications;
(2) Claims arising from the combination of the licensed software with non-Meridian products, technology, data, or materials (unless such combination was specifically contemplated by or described in the applicable Meridian documentation);
(3) Claims arising from OWS's continued use of the licensed software after Meridian has provided or made available a non-infringing replacement or modification that OWS has failed to implement within a reasonable time; and
(4) Claims arising from OWS's use of a version of the licensed software other than the then-current generally available release, where the infringement would have been avoided by OWS's use of the current release.
Cap on IP Indemnification. Under the Original ELA, Meridian's IP indemnification obligation is subject to the same aggregate liability cap that applies to all claims under the agreement. As discussed in Section III.I below, the aggregate liability cap limits each party's total liability to the amount of fees paid or payable by OWS in the twelve-month period immediately preceding the event giving rise to the claim — i.e., one times (1×) annual fees, which under the current agreement amounts to $9.2 million. This means that Meridian's IP indemnification obligation, which is intended to protect OWS from third-party infringement claims arising from OWS's authorized use of Meridian's own software, is capped at the same $9.2 million limit.
Observation: The capped IP indemnification is a significant concern and a high-priority item for the renewal negotiation. In the EDA industry, intellectual property infringement claims — particularly patent infringement claims — can involve substantial damages that may far exceed the value of the license fees. OWS's authorized use of Meridian's tools should not expose OWS to uncapped liability for third-party infringement claims while Meridian's own indemnification obligation is capped at a fraction of the potential exposure. This allocation of risk is fundamentally unfair: OWS has no visibility into Meridian's IP clearance practices, no ability to evaluate whether the licensed software infringes third-party rights, and no practical ability to mitigate infringement risk. OWS should seek uncapped IP indemnification in the renewal, consistent with market practice for enterprise EDA agreements of this size. At minimum, the IP indemnification obligation should be excluded from the general aggregate liability cap and either uncapped or subject to a substantially higher separate cap (e.g., 5× annual fees).
Additionally, the combination-use exception (exception (2) above) is particularly problematic given OWS's use of Meridian tools in combination with Brindoval Foundry Services Ltd.'s process design kits ("PDKs"). This issue is discussed further in Section V below.
Remedial Measures. Section 9.3 of the Original ELA provides that if an infringement claim is made or, in Meridian's reasonable judgment, is likely to be made, Meridian may, at its option and expense, take one of the following remedial actions:
(a) Procure for OWS the right to continue using the allegedly infringing software;
(b) Replace or modify the allegedly infringing software so that it becomes non-infringing while maintaining substantially equivalent functionality; or
(c) If neither (a) nor (b) is commercially practicable, terminate the license for the infringing product and refund to OWS a pro-rata portion of any prepaid license fees corresponding to the remaining unused portion of the then-current license term.
The remedial-measures provision is structured to give Meridian sole discretion over which remedy to pursue, including the option to terminate the license and issue a refund. While this structure is common in EDA agreements, OWS should seek to add a requirement in the renewal that Meridian must first attempt remedies (a) and (b) before resorting to termination under option (c), and that any replacement or modification under option (b) must maintain not only substantially equivalent functionality but also interoperability with OWS's existing design flows and third-party tools.
I. Limitation of Liability
Aggregate Liability Cap. Section 10.1 of the Original ELA limits each party's total aggregate liability under the agreement (whether arising in contract, tort, strict liability, or any other theory) to the amount of fees paid or payable by OWS in the twelve-month period immediately preceding the event giving rise to the claim. Under the current fee structure, this cap is $9.2 million — equal to one times (1×) the annual license fees.
Exclusion of Consequential Damages. Section 10.2 provides that neither party shall be liable to the other for any indirect, incidental, special, consequential, or punitive damages, including but not limited to damages for lost profits, lost revenue, lost data, loss of use, business interruption, or cost of procurement of substitute goods or services, regardless of the theory of liability and regardless of whether such party has been advised of the possibility of such damages. This exclusion applies even if the limited remedies provided in the agreement fail of their essential purpose.
Carve-Outs from the Aggregate Liability Cap. The Original ELA includes the following limited carve-outs from the aggregate liability cap:
Observation: The carve-out structure in the Original ELA has several notable gaps that should be addressed in the renewal:
(1) IP indemnification is not carved out. As discussed in Section III.H above, Meridian's IP indemnification obligation is subject to the general aggregate liability cap. OWS should insist on uncapped liability for IP indemnification in the renewal, or at minimum a separate and significantly higher cap.
(2) Data breach and data security obligations are not carved out. If cloud-hosted components such as Meridian CloudVerify™ are added to the renewal, Meridian will be processing and storing OWS's confidential design data in its cloud infrastructure. A data breach involving OWS Design IP could result in catastrophic competitive harm. Meridian's liability for data breaches and failures of its data security obligations should be uncapped or subject to a separate elevated cap.
(3) The "willful misconduct" standard is ambiguous. The uncapped carve-out for "gross negligence or willful misconduct" uses a formulation that Meridian may argue sets a higher standard than ordinary willful breach of the agreement. Under California law, "willful misconduct" typically requires intentional wrongful conduct with knowledge that the conduct is wrongful, whereas a willful breach of contract merely requires an intentional decision not to perform a contractual obligation. OWS should insist that the carve-out be clarified to expressly include willful breach of the agreement, or that a separate carve-out for willful breach be added.
(4) The general aggregate cap should be increased. A 1× annual fees cap is at the lower end of market practice for enterprise EDA agreements of this scale. OWS should seek to increase the general aggregate cap to at least 2× annual fees. Under OWS's target annual spend of $11.8 million, a 2× cap would provide aggregate liability coverage of $23.6 million, which more appropriately reflects the scale of the commercial relationship and the potential for significant damages in the event of a material breach.
J. Audit Rights
Section 12.1 of the Original ELA grants Meridian the right to conduct software compliance audits to verify OWS's compliance with the licensed seat count, permitted use restrictions, and other terms of the agreement.
Current Provision. Under the Original ELA, Meridian may conduct up to two (2) software compliance audits per calendar year. Each audit requires not less than fifteen (15) calendar days' prior written notice to OWS. Audits are to be conducted during normal business hours at OWS's facilities. The audit may be performed by Meridian's designated internal auditor or by a nationally recognized independent accounting firm selected by Meridian. Meridian bears the cost of the audit unless the audit reveals a material discrepancy, in which case OWS is required to bear the full cost of the audit.
For purposes of the audit provision, a "material discrepancy" is defined as use of the licensed software by OWS that exceeds the licensed seat count by more than five percent (5%). If an audit reveals overuse, OWS is required to pay for the additional seats at Meridian's then-current list price — without any volume discount — plus a ten percent (10%) surcharge on the fees attributable to the overuse.
Observation: The current audit provision is overly burdensome to OWS and should be modified substantially in the renewal. Specific concerns include:
Frequency. Two audits per calendar year is excessive for an enterprise licensee of OWS's size and sophistication. The frequency of audits imposes a significant operational burden on OWS's IT and engineering operations teams, who must coordinate access, prepare documentation, and dedicate staff time to supporting the audit process. One audit per calendar year (and no more than one audit during any rolling twelve-month period) is sufficient to protect Meridian's legitimate compliance interests and is consistent with the audit frequency we have observed in comparable enterprise EDA agreements.
Notice Period. Fifteen calendar days is an inadequate notice period, particularly given the sensitivity of OWS's design environment and the need to coordinate access with OWS's IT security team and facilities management. OWS should seek a minimum of thirty (30) business days' prior written notice — not calendar days — which is more reflective of the practical lead time required to prepare for a compliance audit without disrupting ongoing design operations.
Surcharge. The ten percent (10%) surcharge on overuse fees is punitive in nature and does not reflect a reasonable estimate of Meridian's actual damages from overuse. OWS's position should be to eliminate the surcharge entirely, or at minimum reduce it to a reasonable level (e.g., 5%) and apply it only to overuse exceeding a higher materiality threshold (e.g., 10% above licensed seat count rather than 5%).
Auditor Selection. The Original ELA gives Meridian sole discretion to select the auditor, which creates a potential conflict of interest, particularly if Meridian engages a firm that has a financial incentive to identify overuse (e.g., a firm compensated based on the value of overuse discovered). OWS should require either that the auditor be mutually agreed upon by both parties or that the audit be conducted by a nationally recognized independent accounting firm selected from a pre-approved list.
Audit Scope. The Original ELA does not clearly limit the scope of the audit to what is reasonably necessary to verify compliance with the seat count and use restrictions. OWS should insist that the audit scope be expressly limited to verification of the number and type of licensed seats in use and the identity of authorized users. The audit should not extend to examination of OWS's financial records, design data, source code, netlists, or other confidential or proprietary information beyond what is strictly necessary to verify license compliance.
K. Term, Renewal, and Termination
Auto-Renewal. As noted in Section III.A above, the Original ELA contains an auto-renewal mechanism pursuant to which the agreement automatically renews for successive one (1)-year periods unless either party provides written notice of non-renewal at least ninety (90) days prior to the expiration of the then-current term. The 90-day notice requirement, measured from the January 31, 2026 expiration date, established a non-renewal notice deadline of November 2, 2025. OWS has confirmed that it delivered its written non-renewal notice to Meridian on October 22, 2025, well within the required window. This preserves OWS's ability to allow the Original ELA to expire on its terms and to negotiate a new agreement on materially different terms.
Termination for Cause. Either party may terminate the Original ELA upon thirty (30) days' written notice to the other party if the other party commits a material breach of the agreement and fails to cure such breach within the thirty-day notice and cure period. The agreement does not define "material breach" or provide illustrative examples, which introduces some ambiguity. We recommend that the renewal include a definition of material breach or, at minimum, identify specific events that constitute material breach (e.g., failure to pay fees, unauthorized use exceeding the licensed scope, breach of confidentiality obligations).
Termination for Insolvency. Either party may terminate the Original ELA immediately upon written notice if the other party (a) becomes insolvent, (b) makes a general assignment for the benefit of creditors, (c) files a voluntary petition in bankruptcy or has an involuntary petition in bankruptcy filed against it that is not dismissed within sixty (60) days, or (d) has a receiver, trustee, or similar officer appointed for a substantial part of its assets.
Effect of Termination or Expiration. Upon termination or expiration of the Original ELA, the following post-termination obligations apply:
(a) All licenses granted under the agreement terminate immediately;
(b) OWS must cease all use of the licensed software within thirty (30) days following the effective date of termination or expiration;
(c) OWS must certify in writing the destruction or return of all copies of the licensed software, including backup copies and any copies stored on OWS's servers or workstations, within forty-five (45) days following termination or expiration;
(d) Meridian must return or destroy all OWS confidential information in its possession or control within forty-five (45) days following termination or expiration; and
(e) Certain provisions of the agreement survive termination or expiration, including the confidentiality obligations (for a period of three years post-termination), the intellectual property ownership provisions, the limitation of liability provisions, and the dispute resolution provisions.
Observation: The thirty-day post-expiration wind-down period for ceasing use of the licensed software is critically short given the essential role that Meridian's EDA tools play in OWS's day-to-day design operations. If the renewal negotiation extends beyond January 31, 2026, OWS would face a gap in license coverage during which its 185 design engineers would be unable to use the tools they depend on for all active design programs. Even a brief gap in EDA tool access could cause substantial harm to OWS's tapeout schedules, customer commitments, and revenue targets.
We recommend two approaches to mitigate this risk:
First, OWS should negotiate a transition provision in the renewal ELA (or as a standalone bridge amendment to the Original ELA) providing for a transition period of at least ninety (90) days following expiration of the Original ELA, during which OWS may continue to use the licensed tools at the then-current fee rate (prorated on a monthly or daily basis) while the parties negotiate in good faith toward the execution of the renewal agreement. This transition right should be mutual in the sense that both parties are obligated to continue performing their respective obligations during the transition period.
Second, the renewal ELA itself should include a similar transition provision to protect OWS in the event that the renewal expires at the end of its five-year term without a successor agreement in place.
No Termination for Convenience. The Original ELA does not include a termination-for-convenience right for either party, which is standard for multi-year enterprise EDA agreements where both parties have made significant commitments — Meridian in the form of volume-based pricing concessions and OWS in the form of a multi-year spend commitment. However, in the context of a five-year renewal term (as compared to the three-year term of the Original ELA), OWS should consider whether to seek the inclusion of a termination-for-convenience right exercisable by OWS after the third anniversary of the renewal effective date, subject to a reasonable early-termination fee (e.g., a declining percentage of the remaining TCV). This would provide OWS with an exit option in the event of a significant change in OWS's business circumstances, technology direction, or competitive EDA landscape.
L. Confidentiality.  The Original ELA includes mutual confidentiality obligations that apply to information exchanged by the parties in connection with the agreement. Each party agrees to maintain the confidentiality of the other party's confidential information using the same degree of care it uses to protect its own confidential information, but in no event less than reasonable care.
Standard exceptions apply: the confidentiality obligations do not extend to information that (a) is or becomes publicly available through no fault of the receiving party; (b) was known to the receiving party prior to disclosure by the disclosing party, as demonstrated by the receiving party's written records; (c) is independently developed by the receiving party without reference to or use of the disclosing party's confidential information; (d) is received by the receiving party from a third party without restriction on disclosure and without breach of any obligation of confidentiality owed to the disclosing party; or (e) is required to be disclosed pursuant to a court order, subpoena, or other legal compulsion, provided the receiving party gives the disclosing party prompt written notice and cooperates with the disclosing party's efforts to obtain a protective order.
OWS's design data — including but not limited to netlists, IC layouts, simulation results, verification databases, and design specifications — constitutes OWS confidential information and is subject to Meridian's confidentiality obligations. Similarly, Meridian's pricing terms, product roadmap information, technical specifications, and internal business strategies constitute Meridian confidential information and are subject to OWS's confidentiality obligations.
The confidentiality obligations survive termination or expiration of the agreement for a period of three (3) years.
Observation: The confidentiality provision is generally adequate for the current scope of the agreement, but it should be updated in the renewal to address the data-security implications of cloud-hosted services. If OWS adds Meridian CloudVerify™ to the renewal, OWS's confidential design data will be processed, transmitted, and stored in Meridian's cloud infrastructure. This presents data-security risks that are not addressed by a traditional confidentiality clause. The renewal should include supplemental data-security provisions — ideally in a standalone Data Security and Cloud Services Rider — addressing encryption standards (AES-256 at rest, TLS 1.3 in transit), data localization requirements (U.S.-only data centers), data segregation, access controls, incident notification obligations (72-hour notification), annual penetration testing, and SOC 2 Type II compliance. We note that Meridian's most recent SOC 2 Type II report is dated June 30, 2025, and should be reviewed as part of our diligence.
M. Dispute Resolution
Governing Law. The Original ELA is governed by the laws of the State of California, without regard to its conflict-of-laws principles. This choice of law is appropriate given that both parties are headquartered in the San Francisco Bay Area and the agreement was negotiated and executed in California.
Dispute Resolution Mechanism. The Original ELA requires that all disputes, controversies, and claims arising out of or relating to the agreement be resolved through binding arbitration administered by JAMS (Judicial Arbitration and Mediation Services) in Santa Clara County, California. The arbitration structure is scaled based on the amount in controversy:
•  For disputes involving amounts less than $5 million, a single arbitrator is appointed.
•  For disputes involving amounts of $5 million or more, a three-arbitrator panel is convened.
The arbitration is conducted in accordance with the JAMS Comprehensive Arbitration Rules and Procedures then in effect. Each party bears its own attorneys' fees and costs, and arbitrator fees and expenses are shared equally between the parties.
Notwithstanding the binding arbitration requirement, either party retains the right to seek provisional or preliminary injunctive relief from any court of competent jurisdiction, without waiving the right to arbitration of the underlying dispute. This carve-out is important, as it preserves OWS's ability to seek emergency relief (e.g., a temporary restraining order to prevent misappropriation of OWS Design IP) in situations where arbitration would be too slow.
Observation: The binding arbitration clause presents both advantages and disadvantages for OWS. On the positive side, arbitration offers confidentiality benefits that are particularly valuable given the proprietary nature of OWS's design IP, Meridian's pricing terms, and the competitive sensitivities of the parties' relationship. Arbitration also tends to result in faster resolution than civil litigation. On the negative side, arbitration limits OWS's ability to pursue discovery-intensive claims, may constrain the available range of remedies, and generally provides limited rights of appeal (under the Federal Arbitration Act, judicial review of arbitral awards is extremely narrow). We recommend that the team evaluate whether to retain the binding arbitration clause in the renewal or to shift to litigation in the state or federal courts of California, depending on OWS's risk assessment and its relative preference for confidentiality versus procedural flexibility. If arbitration is retained, we should consider updating the reference to the applicable JAMS rules and revisiting the fee-allocation provisions (e.g., to provide that the prevailing party is entitled to recover its reasonable attorneys' fees).
N. Assignment.  Section 14.1 of the Original ELA provides that neither party may assign the agreement, in whole or in part, without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed. However, the agreement includes an exception permitting either party to assign the agreement without the other party's consent (a) to an affiliate of the assigning party or (b) in connection with a merger, consolidation, acquisition, or sale of all or substantially all of the assigning party's assets, provided that the assignee assumes all of the assigning party's obligations under the agreement.
Observation: The assignment-without-consent exception for M&A transactions is favorable to OWS given Ridgeline Capital Partners' 78% equity stake in OWS and the likelihood of a future exit event (whether by sale, IPO, or secondary transaction). However, OWS should confirm that this provision would clearly permit assignment of the Original ELA (and, more importantly, the renewal ELA) in the event of a sale by Ridgeline to a third-party acquirer, without triggering Meridian consent requirements, renegotiation rights, or price-adjustment mechanisms. The provision as currently drafted should cover this scenario, but we recommend adding explicit language in the renewal addressing change-of-control scenarios to eliminate any ambiguity. Specifically, the renewal should confirm that a change in the ownership or control of OWS — whether by sale of equity interests, merger, or otherwise — does not constitute an "assignment" requiring Meridian's consent and does not give rise to any right on Meridian's part to terminate or renegotiate the agreement.
O. Miscellaneous Provisions
The Original ELA contains the following standard miscellaneous provisions:
Entire Agreement. The agreement, together with all exhibits, schedules, and order forms, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, and agreements, whether written or oral. Amendments to the agreement require a written instrument signed by authorized representatives of both parties.
Force Majeure. Neither party is liable for failure to perform its obligations (other than payment obligations) to the extent such failure is caused by events beyond the party's reasonable control, including natural disasters, war, terrorism, strikes, governmental actions, epidemics, or failures of internet connectivity or third-party telecommunications infrastructure.
Notices. All notices and other communications required or permitted under the agreement must be in writing and delivered to the following addresses:
To OWS: 4850 Great America Parkway, Suite 300, Santa Clara, CA 95054, Attention: General Counsel
To Meridian: 2700 Orchard Parkway, San Jose, CA 95134, Attention: VP, Legal — Commercial
Severability; Waiver; Counterparts. The agreement includes standard severability (if any provision is held unenforceable, the remaining provisions remain in effect), waiver (no waiver of any right is effective unless in writing, and no waiver constitutes a waiver of any subsequent right), and counterparts (the agreement may be executed in counterparts, each of which is deemed an original) provisions.
IV. Provisions Targeted for Renegotiation — Priority Ranking
Based on our review of the Original ELA and our discussions with OWS's legal and engineering teams, we have identified the following provisions as targets for renegotiation in the renewal. We have organized these items into three tiers based on their relative priority to OWS.
A. High Priority
The following items represent OWS's most critical negotiation objectives and should be the focus of our initial redline:
1. Pricing and Fee Structure. OWS's top priority is to reduce the annual license fees from Meridian's proposed $14.3 million per year to OWS's target of $11.8 million per year. The renewal redline should propose a volume-discount structure providing at least 15% off Meridian's list price for all licensed modules, reflecting the significant 47.4% increase in total seat count (from 190 to 280 seats). The target effective per-seat annual cost is approximately $42,143 per seat per year, compared to the approximately $48,421 per-seat cost under the Original ELA and the approximately $51,071 per-seat cost implied by Meridian's initial renewal proposal ($14.3M ÷ 280 seats). Additionally, the renewal should include annual fee escalation caps tied to CPI-U or a fixed percentage of 3% per annum, whichever is lower, to protect OWS against mid-term price increases during the five-year term.
2. IP Indemnification. OWS should seek uncapped IP indemnification — removing Meridian's IP indemnification obligation from the general aggregate liability cap. The carve-outs to the indemnification obligation should be narrowed, particularly the combination-use exception, which must be revised to exclude combinations of the licensed software with products and technologies that are contemplated by the parties, reflected in Meridian's documentation or interoperability certifications, or approved on the Brindoval AEPL. This is essential given OWS's need to use Meridian tools in combination with Brindoval PDKs and other third-party design kits as part of its standard design workflows.
3. Limitation of Liability. The general aggregate liability cap should be increased from 1× to 2× annual fees. The following additional carve-outs from the aggregate cap should be added: (a) IP indemnification obligations (uncapped); (b) data breach and data security obligations (uncapped, or subject to a separate elevated cap of at least 3× annual fees); and (c) willful misconduct and willful breach (uncapped, with clarification that "willful misconduct" includes willful breach of the agreement). These changes are necessary to ensure that the liability framework appropriately reflects the scale and risk profile of the expanded commercial relationship.
4. Audit Rights. The audit provision should be revised to: (a) reduce the maximum audit frequency from two per calendar year to one per calendar year (and no more than one audit during any rolling twelve-month period); (b) increase the required notice period from fifteen (15) calendar days to thirty (30) business days; (c) eliminate or reduce the 10% surcharge for overuse (or, at minimum, apply the surcharge only to overuse exceeding 10% of the licensed seat count rather than 5%); (d) provide OWS the right to approve or reject the auditor selected by Meridian, or require that the auditor be a mutually agreed independent firm; and (e) expressly limit the scope of the audit to verification of seat count and licensed product usage, excluding access to OWS's financial records, design data, or other confidential information beyond what is reasonably necessary to verify compliance.
5. Source Code Escrow. The Original ELA does not include a source code escrow arrangement, which represents a material business-continuity gap. Given OWS's critical dependence on Meridian's EDA tools — which constitute nearly half of OWS's total annual EDA spend — a technology escrow arrangement is essential to protect OWS in the event of Meridian insolvency, sustained material breach, or discontinuation of a licensed product line. OWS requires a three-party source code escrow agreement with Iron Vault Escrow Services, Inc. as the neutral escrow agent, pursuant to which Meridian would deposit the source code, build tools, documentation, and related materials for all licensed products into escrow. The escrow release conditions should include (a) Meridian's insolvency or bankruptcy, (b) Meridian's material breach of the renewal ELA that remains uncured for ninety (90) days, and (c) Meridian's public announcement of the discontinuation or end-of-life of any licensed product during the term of the renewal. We intend to prepare a draft Source Code Escrow Agreement for inclusion as an exhibit to the renewal redline.
B. Medium Priority
The following items are important to OWS and should be addressed in the initial redline, but may be subject to some flexibility in negotiation:
6. Seat Expansion Mechanics. The renewal should accommodate the addition of 90 seats (expanding the total from 190 to 280, with 220 named-user seats and 60 floating seats). In addition to the day-one seat expansion, OWS should negotiate a mechanism for future mid-term seat additions at pre-negotiated rates during the five-year term. This mechanism should specify the per-seat pricing for incremental seats (ideally at the same volume-discounted rate applied to the initial 280 seats), the process for ordering additional seats (e.g., by purchase order referencing the renewal ELA), and any minimum increment requirements. OWS should also seek to relax the quarterly reassignment restriction on named-user seats to permit reassignment on a monthly basis.
7. Product Expansion. The renewal should add licenses for two new Meridian product modules: Meridian AnalogEdge™ (analog and mixed-signal design suite) and Meridian PhotonX™ (silicon photonics design kit integration platform). For AnalogEdge™, which is already on the Brindoval AEPL as of September 22, 2025, activation should be immediate upon the renewal effective date. For PhotonX™, which is not yet on the Brindoval AEPL (qualification expected Q1 2026), the renewal should include a conditional activation clause pursuant to which OWS's obligation to pay license fees for PhotonX™ commences only upon the earlier of (a) the date PhotonX™ is added to the Brindoval AEPL or (b) a date certain to be agreed (e.g., June 30, 2026). This approach avoids requiring OWS to pay for a module that it cannot yet use in its primary foundry-partner design flows.
8. Cloud Services and SLA. If OWS adds Meridian CloudVerify™ to the renewal, the agreement must include comprehensive cloud services terms. We recommend documenting these in a standalone Data Security and Cloud Services Rider, to include: (a) a 99.5% monthly uptime SLA with tiered service credits for downtime (e.g., 5% credit for uptime between 99.0% and 99.5%; 10% credit for uptime between 98.0% and 99.0%; 25% credit for uptime below 98.0%); (b) SOC 2 Type II compliance, with Meridian providing its most recent report annually and promptly notifying OWS of any material findings; (c) data encryption requirements (AES-256 at rest, TLS 1.3 in transit); (d) data localization requirements (all OWS data to be processed and stored in data centers located within the continental United States); (e) a 72-hour incident notification obligation for any actual or reasonably suspected security breach involving OWS data; and (f) annual third-party penetration testing of Meridian's cloud infrastructure, with results shared with OWS.
9. Transition Period. As discussed in Section III.K above, OWS should negotiate a transition provision providing for continued use of the licensed tools for at least ninety (90) days following the expiration or termination of the renewal ELA, at the then-current fee rate (prorated monthly or daily), while the parties negotiate in good faith toward a successor agreement. This provision should also address the immediate concern of gap coverage if the current renewal negotiations extend beyond the January 31, 2026 expiration date of the Original ELA.
C. Lower Priority (But Recommended)
The following items are desirable but may be deprioritized if necessary to reach agreement on the higher-priority items:
10. Dispute Resolution. As discussed in Section III.M above, the binding arbitration clause should be evaluated in the context of OWS's overall risk profile and preferences. If arbitration is retained, we should consider updating the reference to the applicable JAMS rules (to reflect the most current version), revisiting the fee-allocation provisions (to include a prevailing-party attorneys' fees provision), and potentially adding a pre-arbitration mediation step. If OWS prefers to shift to litigation, the renewal should specify exclusive jurisdiction and venue in the state or federal courts of Santa Clara County, California.
11. Assignment and Change of Control. As discussed in Section III.N above, the assignment provision should be clarified to confirm that transactions involving Ridgeline Capital Partners (whether a sale of Ridgeline's equity stake in OWS, a sale of OWS to a third party, or a recapitalization) do not trigger Meridian consent requirements. The renewal should include express language providing that a change in the direct or indirect ownership or control of OWS does not constitute an "assignment" for purposes of the agreement and does not give rise to any termination, renegotiation, or price-adjustment right on Meridian's part.
12. Residuals Clause. As discussed in Section III.G above, the residuals clause should be narrowed to exclude insights related to OWS's specific design architectures, process technology choices, and competitive strategies, or eliminated entirely. At minimum, the clause should include an express prohibition on Meridian's use of residual knowledge to benefit OWS's direct competitors.
13. Confidentiality. The mutual confidentiality provisions should be updated to address cloud-hosted data security and aligned with the proposed Data Security and Cloud Services Rider discussed in item 8 above. The survival period should be reviewed in light of the extended five-year renewal term; OWS may wish to extend the post-termination confidentiality survival period from three years to five years, consistent with the extended term.
14. Termination for Convenience. OWS should consider whether to seek the inclusion of a termination-for-convenience right exercisable by OWS upon twelve (12) months' prior written notice given at any time after the third anniversary of the renewal effective date (i.e., after February 1, 2029). Such a right would be subject to an early-termination fee structured as a declining percentage of the remaining TCV (e.g., 50% of remaining fees if terminated in year 4; 25% of remaining fees if terminated in year 5). While Meridian is likely to resist this provision, it provides OWS with an important exit option in the event of a significant strategic shift, a change in EDA vendor landscape, or an unforeseen downturn in OWS's business.
V. Interplay with Brindoval PDK License Agreement
A critical consideration in the renewal negotiation is the interplay between the Meridian ELA and OWS's existing relationship with Brindoval Foundry Services Ltd. ("Brindoval"), OWS's primary foundry partner for silicon photonics and advanced packaging technologies.
OWS is party to a PDK License Agreement with Brindoval (Reference No. CFS-PDK-2023-US-0034), dated March 15, 2023, which governs OWS's use of Brindoval's proprietary process design kits for its manufacturing processes. Section 4.7 of the Brindoval PDK License Agreement requires that all third-party EDA tools interfacing with Brindoval PDKs must be listed on the Brindoval Approved EDA Platform List (the "AEPL"). Use of non-approved EDA tools with Brindoval PDKs is a breach of the PDK License Agreement and may result in loss of design qualification and manufacturing slot priority.
The current AEPL status of the Meridian products relevant to the renewal is as follows:
The pending AEPL qualification of PhotonX™ is the basis for our recommendation in Section IV.B.7 above that the renewal include a conditional activation clause for PhotonX™ tied to the AEPL qualification timeline.
Of particular concern is the interplay between the IP indemnification combination-use carve-out in the Original ELA and OWS's use of Meridian tools in combination with Brindoval PDKs. As noted in Section III.H above, exception (2) to Meridian's IP indemnification obligation excludes claims arising from the combination of the licensed software with non-Meridian products or technology, "unless such combination was contemplated by the documentation." In practice, OWS uses Meridian Marlowe Asset Management™ and SignalForge™ in close integration with Brindoval PDKs — the P