PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of negotiation and the provision of legal advice. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Distribution is limited to the addressees and authorized representatives of Optiwave Semiconductor Corp. and Ridgeline Capital Partners, LP (as majority equity holder).
CALDERWOOD & HARKNESS LLP One Market Plaza, Spear Tower, 42nd Floor San Francisco, California 94105
MEMORANDUM
November 5, 2025
FROM: Conrad Ashby, Responsible Partner, and Aaron Liu, Lead Associate, Calderwood & Harkness LLP
TO: Douglas Tran, General Counsel, Optiwave Semiconductor Corp.; Priya Venkatesh, VP of Engineering Operations, Optiwave Semiconductor Corp.
RE: Negotiation Strategy — Renewal and Expansion of Enterprise License Agreement with Meridian Design Systems, Inc.
MATTER NO.: 1014-00006
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I. Executive Summary
The purpose of this memorandum is to set forth a comprehensive commercial and legal negotiation strategy for the renewal and expansion of Optiwave Semiconductor Corp.'s ("OWS" or the "Company") Enterprise License Agreement with Meridian Design Systems, Inc. ("Meridian"). The agreement at issue is the Original ELA, Agreement No. MDS-ELA-2023-00487, dated February 1, 2023 (the "Original ELA"), which governs OWS's use of Meridian's electronic design automation ("EDA") software tools across its design engineering organization.
The Original ELA expires on January 31, 2026. OWS seeks to negotiate a five-year renewal term running from February 1, 2026 through January 31, 2031, with an expanded product scope encompassing two additional Meridian tool modules and a significantly increased seat count to support OWS's growth trajectory and engineering headcount expansion. The renewal represents a critical procurement event for OWS given that Meridian tools constitute the backbone of the Company's digital, signal integrity, and formal verification design flows.
The central commercial challenge is a substantial pricing gap between Meridian's initial renewal proposal and OWS's target. Meridian's initial renewal quote, received on October 15, 2025, proposes a total contract value ("TCV") of $71.5 million ($14.3 million per year), representing a 55.4% increase over the current annual spend of $9.2 million. OWS's target is a TCV of $59.0 million ($11.8 million per year), which represents a 28.3% increase over the current annual spend — an increase that OWS views as reasonable given the 47.4% expansion in seat count and the addition of two new product modules. The pricing gap to be closed is $12.5 million over the five-year term, or $2.5 million per year.
This memorandum addresses the following topics in detail:
• Background on OWS and the current agreement structure (Section II);
• OWS's commercial objectives and target terms, including pricing, seat allocation, product scope, payment structure, and renewal mechanics (Section III);
• Leverage points and competitive dynamics that OWS should exploit in negotiations (Section IV);
• The Brindoval Foundry interoperability issue and PhotonX™ Approved EDA Platform List ("AEPL") risk, which has both commercial and compliance dimensions (Section V);
• Key legal term positions on indemnification, liability, audit rights, source code escrow, cloud services, governing law, and assignment (Section VI);
• The proposed negotiation timeline and process milestones (Section VII);
• A summary table of OWS's primary and fallback positions on each material term (Section VIII);
• Recommended next steps for the OWS team and Calderwood & Harkness (Section IX); and
• A concluding assessment (Section X).
Key dates for the negotiation process are as follows: Calderwood & Harkness ("C&H") targets delivery of the first redline of the renewal ELA to Meridian's outside counsel, Bexley Weir & Daly LLP ("BWD"), by November 15, 2025. The parties should aim to have commercial terms substantially agreed by December 15, 2025, with final execution of the Amended and Restated Enterprise License Agreement targeted for January 15, 2026 — two weeks prior to the expiration of the Original ELA.
II. Background and Current Agreement Summary
A. OWS Overview
Optiwave Semiconductor Corp. is a fabless semiconductor design company incorporated in the State of Delaware and headquartered at 4850 Great America Parkway, Suite 300, Santa Clara, California 95054. The Company was founded in 2017 and has established itself as a leading designer of high-speed optical transceiver integrated circuits and silicon photonics chiplets for data-center interconnect applications. OWS's products are integral to next-generation hyperscale data-center architectures, and the Company has secured design wins with several Tier 1 cloud service providers and data-center operators.
As of the date of this memorandum, OWS employs approximately 340 personnel, of which approximately 185 are design engineers who rely on EDA software tools on a daily basis for tasks spanning RTL design, synthesis, physical implementation, signal integrity analysis, formal verification, and, increasingly, silicon photonics design. The design engineering headcount has grown materially since the inception of the Original ELA and is projected to continue growing as OWS expands its product portfolio and enters new market segments.
OWS has been a portfolio company of Ridgeline Capital Partners, LP ("Ridgeline") since August 2022, when Ridgeline acquired a 78% equity stake in the Company in a transaction valued at $412 million enterprise value. Julian Tarkenton serves as Ridgeline's Managing Partner and Nadia Petrov serves as Operating Partner with primary responsibility for the OWS investment. Ridgeline's ownership and potential future exit plans are relevant to several aspects of the ELA negotiation, particularly the assignment and change-of-control provisions discussed in Section VI.G below.
OWS's financial performance has been strong. For fiscal year 2024, the Company reported revenue of $287.4 million and EBITDA of $51.7 million. The Company's total annual spend on EDA software tools across all vendors is approximately $18.6 million. Of this total, $9.2 million per year — approximately 49.5% of total EDA spend — is attributable to the Meridian license under the Original ELA. Meridian is thus OWS's single largest EDA vendor by a significant margin, and the renewal of this agreement has a material impact on the Company's operating cost structure.
B. Original ELA Key Terms
The key terms of the Original ELA are summarized below for reference:
Agreement Number: MDS-ELA-2023-00487
Effective Date: February 1, 2023
Expiration Date: January 31, 2026 (three-year initial term)
Licensed Products: The Original ELA covers three Meridian software products:
(i) Meridian Marlowe Asset Management™ — Meridian's flagship digital IC design suite, encompassing synthesis, place-and-route, timing analysis, and physical verification;
(ii) Meridian SignalForge™ — Meridian's signal integrity and power integrity analysis tool; and
(iii) Meridian VerifyPro™ — Meridian's formal verification and equivalence-checking tool.
Seat Count: The Original ELA provides for 150 named-user seats and 40 floating/concurrent-use seats, for a total of 190 licensed seats.
Total Contract Value and Annual Fees: The TCV of the Original ELA is $27.6 million over the three-year term, payable in equal annual installments of $9.2 million, due in advance on each February 1 during the term. The effective per-seat annual cost under the Original ELA is approximately $48,421 ($9.2 million ÷ 190 seats).
Audit Rights: Under the Original ELA, Meridian has the right to conduct up to two software usage audits per calendar year upon 15 calendar days' prior written notice. As discussed further in Section VI.C, OWS considers these audit provisions overly broad and disruptive and will seek more balanced terms in the renewal.
Dispute Resolution: Disputes arising under the Original ELA are subject to binding arbitration administered by JAMS in Santa Clara County, California.
Governing Law: The Original ELA is governed by the laws of the State of California.
C. Meridian's Initial Renewal Proposal (October 15, 2025)
On October 15, 2025, OWS received Meridian's initial renewal proposal for the Amended and Restated Enterprise License Agreement (proposed Agreement No. MDS-ELA-2026-01192). The key terms of Meridian's proposal are summarized below:
Proposed Term: Five years, running from February 1, 2026 through January 31, 2031.
Expanded Product Scope: In addition to the three products covered by the Original ELA (Marlowe Asset Management™, SignalForge™, and VerifyPro™), Meridian's proposal adds two new product modules:
(iv) Meridian AnalogEdge™ — Meridian's analog and mixed-signal IC design tool; and
(v) Meridian PhotonX™ — Meridian's silicon photonics design kit integration platform.
The addition of AnalogEdge™ and PhotonX™ is aligned with OWS's product roadmap and engineering needs. AnalogEdge™ supports the analog and mixed-signal design work that OWS currently performs using a competitor's tool, and PhotonX™ is directly relevant to OWS's core silicon photonics chiplet business.
Expanded Seat Count: Meridian proposes 220 named-user seats and 60 floating/concurrent-use seats, for a total of 280 licensed seats. This represents an increase of 90 seats (47.4%) over the 190 seats in the Original ELA.
Total Contract Value: Meridian proposes a TCV of $71.5 million over the five-year term, equivalent to $14.3 million per year. The effective per-seat annual cost at Meridian's proposed pricing is approximately $51,071 ($14.3 million ÷ 280 seats). This per-seat cost represents a 5.5% increase over the current per-seat cost of approximately $48,421 under the Original ELA.
Viewed on an aggregate annual basis, Meridian's proposal represents an increase of $5.1 million per year over the current annual spend ($14.3 million versus $9.2 million), or a 55.4% increase. While some increase is expected and justified by the expanded scope and seat count, the magnitude of Meridian's proposed increase exceeds what OWS views as reasonable.
Limitation of Liability: Meridian's proposal includes an aggregate liability cap equal to 1× annual fees ($14.3 million at Meridian's proposed pricing level).
The following sections of this memorandum set forth OWS's strategy for narrowing the pricing gap and securing favorable legal terms in the renewal negotiation.
III. OWS Commercial Objectives and Target Terms
A. Pricing Target
OWS's target annual fee for the renewal ELA is $11.8 million per year, yielding a TCV of $59.0 million over the proposed five-year term. At 280 total seats, this implies an effective per-seat annual cost of approximately $42,143 ($11.8 million ÷ 280 seats).
OWS's target represents a 28.3% increase over the current annual spend of $9.2 million (an incremental $2.6 million per year). OWS views this level of increase as appropriate and commercially justified given the following factors:
• The seat count is increasing by 47.4% (from 190 to 280 seats), which should generate meaningful economies of scale on a per-seat basis;
• The five-year term (versus the current three-year term) provides Meridian with enhanced revenue visibility and predictability, justifying a discount relative to shorter-term arrangements;
• Two additional product modules (AnalogEdge™ and PhotonX™) are being added, but these modules carry deployment uncertainties (particularly PhotonX™, as discussed in Section V), and OWS is in effect committing to adopt Meridian's newer, less-established products;
• OWS's growth as a customer — both in seat count and in the breadth of Meridian products deployed — makes OWS a more strategically valuable account for Meridian's platform.
OWS should seek a volume discount of at least 15% off Meridian's published list prices for all five licensed modules. This discount level is consistent with what we understand to be available to large enterprise EDA customers making multi-year commitments of comparable scale.
The pricing gap to be closed between Meridian's initial proposal and OWS's target is $12.5 million over the five-year term ($71.5 million minus $59.0 million), or $2.5 million per year ($14.3 million minus $11.8 million). As discussed in Section VIII, OWS has identified a fallback position of up to $12.5 million per year ($62.5 million TCV) if necessary to secure agreement on other critical terms, provided that a volume discount of at least 15% off list pricing is maintained.
B. Seat Allocation
OWS accepts the total seat count of 280 seats (220 named-user seats and 60 floating/concurrent-use seats) as proposed in Meridian's renewal quote. This seat count is consistent with OWS's projected engineering headcount and usage requirements. While OWS currently has approximately 185 design engineers, the 280-seat total provides necessary headroom for anticipated growth, shared use by verification and test engineers, and peak-period demands during tape-out cycles.
OWS should negotiate the following seat-related flexibilities:
Seat Conversion Flexibility. OWS should seek the right to convert between named-user seats and floating/concurrent-use seats within the total allocation of 280 seats, at no incremental cost, upon reasonable prior written notice to Meridian (e.g., 30 days). This flexibility is important because OWS's ratio of named-user to floating seats may shift over time as the Company's engineering workflows evolve. Restricting OWS to a fixed allocation of 220/60 for the full five-year term is unnecessarily rigid.
Burst Overage Provisions. OWS should request a "burst" or temporary overage provision permitting OWS to exceed the licensed seat count by up to 10% (i.e., up to 28 additional seats) for a period of up to 30 consecutive days per calendar year, without incurring additional license fees or being deemed in breach of the agreement. This provision is critical to accommodate tape-out peak periods, during which engineering teams across multiple projects may require simultaneous access to Meridian tools at levels that temporarily exceed the steady-state allocation. If Meridian resists a 10% burst allowance, OWS's fallback position is a 5% burst allowance (up to 14 additional seats).
C. Product Scope
The renewal ELA should encompass all five of the following Meridian software products:
(i) Meridian Marlowe Asset Management™ (digital IC design suite);
(ii) Meridian SignalForge™ (signal integrity and power integrity analysis);
(iii) Meridian VerifyPro™ (formal verification and equivalence checking);
(iv) Meridian AnalogEdge™ (analog and mixed-signal IC design); and
(v) Meridian PhotonX™ (silicon photonics design kit integration platform).
In addition to these five on-premises tool licenses, OWS requires access to Meridian CloudVerify™, Meridian's cloud-hosted verification compute platform. CloudVerify™ enables OWS to run large-scale formal verification and simulation workloads in Meridian's cloud environment, providing elastic compute capacity that OWS cannot cost-effectively replicate on-premises. The CloudVerify™ service should be covered by a separate service level agreement ("SLA") and data security provisions, as discussed in detail in Section VI.E below.
OWS should also negotiate a "most-favored-customer" clause or price-protection commitment in the renewal ELA. Under this provision, if Meridian offers materially better per-seat pricing to a similarly situated fabless semiconductor design company of comparable scale (measured by seat count and TCV), OWS would have the right to request a corresponding pricing adjustment. The clause should define "materially better" with reasonable specificity — for example, a per-seat discount exceeding 5% below the per-seat pricing in OWS's agreement — and should require Meridian to notify OWS within a defined period (e.g., 30 days) if such pricing is offered. We acknowledge that Meridian may resist a broad MFN clause; at minimum, OWS should seek a commitment that Meridian will not offer pricing to a directly competitive fabless customer of comparable size that undercuts OWS's per-seat rates by more than a defined threshold.
D. Payment Structure
OWS proposes to maintain the current payment structure of annual payments in advance, with each annual installment due on February 1 of each year during the renewal term. This structure is familiar to both parties, aligns with OWS's budgeting cycle, and avoids the administrative complexity of quarterly or monthly invoicing.
However, given the uncertainties surrounding the deployment of PhotonX™ and the Brindoval AEPL qualification issue (discussed in Section V below), OWS should explore whether Meridian will accept one of the following alternative structures:
Option 1 — Stepped Pricing. Under this approach, annual fees would be lower in Years 1 and 2 of the renewal term, ramping to the full run-rate in Years 3 through 5. This structure reflects the reality that OWS will not derive full value from the expanded product suite until PhotonX™ is deployed and fully operational. For illustration, if the target annual run-rate is $11.8 million, a stepped structure might provide for $10.5 million in Year 1, $11.0 million in Year 2, and $12.17 million in each of Years 3 through 5, yielding the same $59.0 million TCV over the five-year term.
Option 2 — Flat Annual Fee with PhotonX™ Abatement. Under this approach, OWS would commit to a flat annual fee of $11.8 million, but a defined portion attributable to PhotonX™ licensing would be subject to a fee-abatement mechanism until Brindoval AEPL qualification for PhotonX™ is achieved. This approach is further addressed in Section V below.
Both structures serve OWS's interest in aligning payment obligations with the value actually received from the licensed products. We recommend presenting Option 2 as the primary proposal, as it is more directly tied to the specific risk factor (PhotonX™ AEPL status) and is therefore easier to justify on its merits.
E. Renewal and Termination Mechanics
The following provisions regarding renewal and termination should be priorities in the negotiation:
Termination for Convenience. OWS should seek the right to terminate the renewal ELA for convenience upon 180 days' prior written notice at any time after the end of Year 3 of the renewal term (i.e., at any time after January 31, 2029). If OWS exercises this right, the termination fee should be limited to the lesser of (a) 50% of the remaining annual fees that would have been payable for the unexpired portion of the term, or (b) one year's annual fees (i.e., $11.8 million at OWS's target pricing). This termination right provides OWS with an important exit valve if its business circumstances change materially — for example, if OWS undergoes a strategic transaction, shifts its design flow to a different EDA platform, or experiences a significant downturn in its business. The three-year lockup period before the termination right becomes exercisable provides Meridian with substantial revenue certainty. OWS's fallback position is a termination for convenience right exercisable after Year 4 (i.e., after January 31, 2030), with the same capped termination fee.
No Auto-Renewal. OWS's strong preference is that the renewal ELA not include an automatic renewal provision. The agreement should expire at the end of the five-year term unless the parties affirmatively agree in writing to renew no later than 180 days before the expiration date. Auto-renewal clauses in enterprise software agreements are disfavored by OWS and Ridgeline as a matter of procurement policy, as they can lead to inadvertent extensions at unfavorable pricing.
Right of First Negotiation. OWS should insist on a right of first negotiation for any post-term renewal of the ELA. This provision should require Meridian to negotiate exclusively with OWS for a period of 90 days before offering the applicable license capacity to any other customer or before declining to renew. While this provision does not guarantee OWS favorable pricing, it provides a structured process for renewal discussions and prevents Meridian from using the threat of non-renewal as a pressure tactic.
IV. Leverage Points and Competitive Dynamics
A. Competitive Alternatives
OWS's negotiating leverage is enhanced by the fact that Meridian, while OWS's largest EDA vendor, is not OWS's sole EDA provider. OWS's current total annual EDA spend of $18.6 million is allocated across multiple vendors, with the Meridian portion representing approximately 49.5% of the total. The remaining approximately $9.4 million per year is spent with at least one other major EDA vendor for complementary portions of OWS's design flow. This existing multi-vendor posture gives OWS a credible basis to assert that it has alternatives available and is not captive to Meridian's platform.
In the renewal negotiation, OWS should convey — directly or through carefully calibrated messaging — that it has received or is in the process of soliciting competitive proposals from alternative EDA vendors for the AnalogEdge™ and PhotonX™ use cases. Because these two modules are new additions to OWS's Meridian toolset (i.e., OWS is not currently licensed for them under the Original ELA), the switching-cost barrier is lower for these products than for the three incumbent tools. A partial migration scenario in which OWS adopts alternative vendors for analog/mixed-signal and silicon photonics design while maintaining Meridian for the digital IC, signal integrity, and formal verification flow is a plausible and credible alternative. OWS's negotiation team should be prepared to discuss this scenario in general terms without making explicit threats.
We note, however, that this leverage must be deployed with care. Switching costs in the EDA industry are well understood by all participants. Migrating an established design flow from one EDA vendor to another entails significant retraining costs, design library migration, process design kit ("PDK") recertification, and potential schedule delays on active tape-out programs. A full rip-and-replace of OWS's Meridian toolset is not a realistic near-term option, and Meridian's negotiation team will likely recognize this. For this reason, the competitive alternative messaging should be focused on the new modules and on the possibility of a gradual, multi-year diversification strategy — not on an imminent wholesale platform switch.
The fact that OWS is proposing to increase its seat count by 47.4% (from 190 to 280 seats) and to extend the term from three years to five years should be presented as significant incremental value to Meridian. This growth in the commercial relationship — worth tens of millions of dollars in committed revenue — justifies a substantial volume discount and should be a central theme in OWS's pricing discussions.
B. OWS's Strategic Importance to Meridian
Beyond the direct commercial value of OWS's license fees, OWS occupies a strategically important position for Meridian in the emerging silicon photonics market. Meridian's PhotonX™ product is relatively new to market and has not yet achieved the level of customer adoption that Meridian's more mature tools enjoy. Meridian needs marquee customers — particularly customers with active, high-volume silicon photonics design programs — to validate its photonics design flow and establish PhotonX™ as an industry-standard tool.
OWS is precisely such a customer. OWS's core business is the design of optical transceiver ICs and silicon photonics chiplets for data-center interconnects, and its adoption of PhotonX™ would represent a high-profile endorsement of Meridian's photonics capabilities. OWS's use case — designing production-grade silicon photonics components for deployment by leading hyperscale cloud operators — is exactly the type of reference customer story that Meridian's sales organization needs to drive broader market adoption.
OWS should make clear in negotiations that its willingness to adopt PhotonX™ and serve as a reference account carries significant commercial value to Meridian — value that should be reflected in pricing concessions and favorable contract terms. Conversely, OWS should signal that if Meridian's pricing is not competitive, OWS may defer or decline the adoption of PhotonX™ in favor of alternative approaches, which would deprive Meridian of a key reference account in a strategically important product category.
Additionally, OWS should note — where appropriate — the broader Ridgeline Capital Partners relationship. Ridgeline's portfolio includes other technology companies, some of which may become Meridian customers in the future. While this should not be overplayed, a brief mention of the broader portfolio relationship may reinforce Meridian's incentive to offer OWS favorable terms.
C. Timing Leverage
The Original ELA expires on January 31, 2026, and if the parties fail to reach agreement on renewal terms before that date, OWS would face a gap in its EDA tool coverage. This creates time pressure that Meridian may seek to exploit. To mitigate this risk, we recommend that OWS proactively request that Meridian agree to a short-term bridge extension of the Original ELA at current rates and terms for a period of up to 90 days (through April 30, 2026) while renewal negotiations continue. Securing this bridge extension early in the negotiation process would eliminate Meridian's ability to use the January 31 deadline as leverage and would allow OWS to negotiate from a position of patience rather than urgency.
At the same time, OWS's willingness to commit to a five-year term — as opposed to seeking a shorter renewal period — is itself a valuable concession to Meridian. A five-year commitment provides Meridian with significant revenue predictability and a long-term customer lock-in. OWS should emphasize the value of this commitment and ensure that it is priced accordingly, with meaningful per-year and per-seat discounts relative to shorter-term arrangements.
V. Brindoval Foundry Interoperability — PhotonX™ AEPL Risk
A significant commercial and compliance risk associated with the renewal involves the interoperability of Meridian's PhotonX™ product with the process design kits supplied by OWS's primary foundry partner, Brindoval Foundry Services Ltd. ("Brindoval").
Under the terms of OWS's PDK License Agreement with Brindoval (Agreement No. CFS-PDK-2023-US-0034, dated March 15, 2023), Section 4.7 requires that all third-party EDA tools that interface with Brindoval PDKs must be listed on Brindoval's Approved EDA Platform List (the "AEPL"). The use of EDA tools that are not on the AEPL to process or interact with Brindoval PDK data constitutes a breach of Section 4.7.
The current AEPL status of the five Meridian products at issue is as follows:
• Meridian Marlowe Asset Management™: On the AEPL (confirmed August 2025)
• Meridian SignalForge™: On the AEPL (confirmed August 2025)
• Meridian VerifyPro™: AEPL status not directly implicated (VerifyPro™ operates on design netlists and does not directly interface with PDK data in a manner that triggers Section 4.7)
• Meridian AnalogEdge™: Added to the AEPL effective September 22, 2025
• Meridian PhotonX™: NOT on the AEPL as of the date of this memorandum
Based on discussions between OWS's engineering team and Henry Kuo, Director of Customer Design Enablement at Brindoval's U.S. subsidiary, Brindoval's qualification of PhotonX™ for inclusion on the AEPL is expected to be completed in Q1 2026. However, this timeline is not guaranteed, and Brindoval has not provided a written commitment to any specific qualification date.
The compliance implications are clear: deployment of PhotonX™ for any design work involving Brindoval PDKs before PhotonX™ is added to the AEPL would constitute a breach of Section 4.7 of the Brindoval PDK License Agreement. Such a breach could expose OWS to remedies under the Brindoval agreement, potentially including termination of PDK access — a consequence that would be catastrophic for OWS's manufacturing pipeline.
To manage this risk, we recommend the following contractual safeguards in the renewal ELA:
(1) Conditional Activation Clause. The renewal ELA should include a provision specifying that the license fee attributable to PhotonX™ commences only upon the earlier of (a) the date on which Brindoval formally confirms PhotonX™'s inclusion on the AEPL, or (b) a date certain to be negotiated (we recommend July 1, 2026, to allow a reasonable period beyond the expected Q1 2026 qualification timeline). Prior to the activation date, OWS would have access to PhotonX™ for evaluation and testing purposes only — not for production design work involving Brindoval PDKs.
(2) Fee-Abatement or Pro-Rata Refund Mechanism. If AEPL qualification for PhotonX™ is delayed beyond Q2 2026 (i.e., beyond June 30, 2026), OWS should be entitled to a pro-rata abatement or refund of the portion of license fees attributable to PhotonX™ for the period of delay. This mechanism ensures that OWS does not bear the financial burden of paying for a tool that it cannot lawfully use in its primary design flow.
(3) Meridian Representation and Efforts Covenant. Meridian should represent in the renewal ELA that it is actively pursuing Brindoval AEPL qualification for PhotonX™ and should covenant that it will use commercially reasonable efforts to obtain such qualification. While Meridian cannot control Brindoval's internal qualification process, this provision creates a contractual obligation for Meridian to cooperate, provide necessary technical information to Brindoval, and prioritize the qualification process.
(4) OWS Internal Compliance Measures. Independent of the contractual provisions above, OWS must implement internal controls to ensure that no PhotonX™ usage involving Brindoval PDK data occurs prior to receipt of written confirmation from Henry Kuo (or another authorized Brindoval representative) that PhotonX™ has been added to the AEPL. This is a compliance matter that should be communicated to OWS's engineering leadership and IT administration team. We recommend that OWS's IT systems be configured to restrict PhotonX™ access to non-Brindoval design environments until AEPL qualification is confirmed.
The PhotonX™ AEPL issue also has pricing implications, as it provides additional justification for the stepped pricing or fee-abatement structures discussed in Section III.D above. OWS should present this issue to Meridian as a shared problem — Meridian benefits from OWS's adoption of PhotonX™, and Meridian should therefore bear a proportionate share of the risk associated with the AEPL qualification dependency.
VI. Key Legal Term Positions
This section sets forth OWS's positions on the principal legal terms to be negotiated in the renewal ELA. For each issue, we describe OWS's primary position, Meridian's expected position, our recommendation, and OWS's fallback position if the primary position cannot be achieved.
A. IP Indemnification
OWS Primary Position. OWS should seek uncapped intellectual property indemnification from Meridian for any third-party claims alleging that OWS's authorized use of the licensed Meridian tools infringes or misappropriates any third-party intellectual property rights, including patents, copyrights, trade secrets, and other proprietary rights.
Meridian's Expected Position. Based on our review of the Original ELA and standard Meridian commercial terms, we anticipate that Meridian will seek to make its IP indemnification obligation subject to the general aggregate liability cap (proposed by Meridian at 1× annual fees, or $14.3 million at Meridian's proposed pricing). This is a position that we view as commercially unreasonable and out of step with market norms for enterprise EDA licensing.
Recommendation. OWS should firmly insist on uncapped IP indemnification as a non-negotiable term. This position is supported by the following considerations:
• IP indemnification is market-standard for enterprise EDA licenses. The licensee in an EDA arrangement has no ability to independently assess or control the IP clearance of the underlying software. OWS relies entirely on Meridian's representations that the software does not infringe third-party rights. It would be inequitable for Meridian to cap its indemnity obligation for risks that are entirely within Meridian's control.
• The potential magnitude of IP infringement liability — including defense costs, settlements, and damages awards — can far exceed the value of the license fees. A liability cap of $14.3 million (or even $23.6 million at 2× annual fees) may be wholly inadequate to cover a significant patent infringement judgment.
• OWS's design engineers rely on Meridian tools as the foundation of their design flow. If OWS were forced to cease using a Meridian tool due to an IP infringement injunction, the business disruption would be severe and potentially existential. The indemnification obligation should reflect the magnitude of this dependency.
Scope of Indemnity Coverage. OWS should seek broad indemnity coverage encompassing the following: (a) defense costs, including reasonable attorneys' fees and expert witness fees; (b) amounts paid in settlement of any covered claim, provided that OWS consents to any settlement (such consent not to be unreasonably withheld, conditioned, or delayed); and (c) damages, including compensatory damages, awarded by a court of competent jurisdiction or an arbitral tribunal.
Exclusions. The IP indemnity should include narrowly drafted exclusions limited to the following circumstances:
(i) Modifications made by OWS to the Meridian tools without Meridian's prior written authorization, to the extent that the infringement arises from such unauthorized modification;
(ii) Use of the Meridian tools in combination with non-Meridian products, to the extent that the infringement arises from the combination (and would not have arisen from the Meridian tool used alone); and
(iii) Use of the Meridian tools in violation of the terms of the ELA.
Fallback Position. If Meridian categorically refuses uncapped IP indemnification, OWS should accept a separate sub-cap for IP indemnity at no less than 3× annual fees (i.e., approximately $35.4 million at OWS's target pricing, or approximately $42.9 million at Meridian's proposed pricing). This sub-cap must be clearly carved out from the general limitation of liability, so that an IP indemnity payment does not reduce the amount available under the general cap for other types of claims. This fallback position should be deployed only if it becomes clear that uncapped IP indemnity is a true deal-breaker for Meridian.
A more detailed analysis of IP indemnification market practices and benchmarking data is being prepared by Monica Reyes in a separate IP Indemnification Analysis Memo, which will be circulated to the OWS team upon completion.
B. Limitation of Liability
Meridian's Position. Meridian's initial renewal proposal includes an aggregate limitation of liability equal to 1× the annual fees paid or payable under the agreement ($14.3 million at Meridian's proposed pricing).
OWS Primary Position. OWS should seek a general aggregate liability cap equal to 2× the annual fees paid or payable in the twelve-month period preceding the event giving rise to the claim. This rolling twelve-month formulation ensures that the cap reflects the actual value of the agreement at the time a claim arises, rather than being fixed at the initial-year fee level.
Carve-outs. Equally important to the level of the general cap are the carve-outs — i.e., categories of liability that should be excluded from (and not subject to) the general cap. OWS's position is that the following categories of liability should be uncapped (i.e., not subject to the general limitation of liability):
(i) IP indemnification obligations (as discussed in Section VI.A);
(ii) Breaches of data security or confidentiality obligations, including liability arising from a data breach involving OWS's confidential information or design data;
(iii) Willful misconduct or gross negligence by either party; and
(iv) Breaches of the source code escrow provisions (discussed in Section VI.D below).
The liability cap should be mutual — i.e., it should apply equally to both parties' aggregate liability under the agreement.
Fallback Position. If Meridian insists on a 1× annual fees general cap, OWS may accept a general cap at 1.5× annual fees, provided that the carve-outs described above remain uncapped. If Meridian pushes back on the carve-outs themselves, OWS's secondary fallback is to accept a structure in which IP indemnity and willful misconduct remain uncapped, while data breach liability is subject to a separate sub-cap of 3× annual fees.
C. Audit Rights
Current Regime Under the Original ELA. Under the Original ELA, Meridian may conduct up to two software usage audits per calendar year upon only 15 calendar days' prior written notice. OWS has found these provisions to be overly burdensome and disruptive to its engineering operations. EDA software audits can be invasive, requiring access to OWS's internal systems, license servers, and usage logs. The short notice period and the possibility of two audits per year create an ongoing operational distraction that OWS wishes to limit in the renewal.
OWS Primary Position. OWS proposes the following audit regime for the renewal ELA:
• Frequency: Meridian may conduct a maximum of one (1) audit per calendar year, with no more than one audit during any rolling twelve-month period.
• Notice: Meridian must provide at least thirty (30) business days' prior written notice before commencing an audit.
• Timing and Location: Audits must be conducted only during normal business hours (9:00 a.m. to 5:00 p.m. Pacific Time, Monday through Friday, excluding OWS-observed holidays) at OWS's principal place of business in Santa Clara, California.
• Scope: The audit scope must be limited to verification of OWS's compliance with the seat count and product usage limitations set forth in the ELA. Meridian may not use the audit right as a pretext for a broad IT security review, source code audit, or other investigation beyond the scope of license compliance.
• Auditor: Audits must be conducted by an independent third-party auditor (not by Meridian employees or contractors) selected by Meridian and subject to OWS's prior reasonable approval, which approval shall not be unreasonably withheld or delayed.
• Cost Allocation: Audit costs (including the fees and expenses of the third-party auditor) shall be borne by Meridian, unless the audit reveals a material underpayment — defined as an underpayment exceeding 5% of the annual fees for the relevant period, or usage exceeding the licensed seat count by more than 10% — in which case OWS shall reimburse Meridian for the reasonable costs of the audit.
• Confidentiality: The results of any audit shall be treated as confidential information of OWS and shall be subject to the confidentiality obligations set forth in the ELA. The third-party auditor shall execute a confidentiality agreement in form and substance reasonably satisfactory to OWS before commencing the audit.
Fallback Position. OWS's primary fallback is to accept one audit per calendar year with a twenty (20) business days' prior written notice requirement if Meridian resists the 30-business-day notice period. All other protections (scope limitation, independent auditor, cost allocation, confidentiality) should be maintained.
D. Source Code Escrow
OWS requires that the renewal ELA include a three-party technology escrow arrangement to protect OWS's access to the licensed software in the event of certain adverse circumstances affecting Meridian. The proposed escrow agent is Iron Vault Escrow Services, Inc., located at 1700 Lincoln Street, Suite 2100, Denver, Colorado 80203. Iron Vault is a recognized technology escrow provider with experience in enterprise software escrow arrangements.
Deposit Materials. The escrow deposit shall include the following materials for each of the five licensed products (Marlowe Asset Management™, SignalForge™, VerifyPro™, AnalogEdge™, and PhotonX™):
(a) Complete source code for the current production release of each licensed product;
(b) Build instructions sufficient to enable a reasonably skilled software engineer to compile and build executable versions of each licensed product from the deposited source code;
(c) Technical documentation, including architecture documents, API specifications, and dependency lists; and
(d) Any third-party components or libraries required to compile, build, or run the licensed products, or, if such components cannot be deposited due to third-party licensing restrictions, clear identification of such components and instructions for obtaining them.
Release Trigger Events. The escrow deposits shall be released to OWS upon the occurrence of any of the following trigger events:
(i) Insolvency of Meridian, including (A) the filing of a voluntary or involuntary petition in bankruptcy under Title 11 of the United States Code, (B) the making of a general assignment for the benefit of creditors, (C) the appointment of a receiver, trustee, or custodian for a material portion of Meridian's assets, or (D) the commencement of any analogous insolvency proceeding under the laws of any jurisdiction;
(ii) Material breach by Meridian of its obligations under the ELA that remains uncured after expiration of the applicable notice and cure period (as set forth in the ELA); or
(iii) discontinuation by Meridian of any licensed product line without providing a commercially reasonable successor product that provides substantially equivalent functionality.
Verification. OWS should have the right to engage an independent technical agent, at OWS's expense, to verify the completeness and buildability of the escrow deposits at least once per calendar year. This verification process ensures that the deposited materials remain current and functional, rather than becoming stale and unusable over time. Meridian should be required to update the escrow deposits within 60 days following each major release of any licensed product.
Escrow Fees. In accordance with market practice for beneficiary-initiated escrow arrangements, escrow agent fees shall be borne by OWS.
Separate Escrow Agreement. The detailed terms of the escrow arrangement will be set forth in a separate Source Code Escrow Agreement among OWS, Meridian, and Iron Vault Escrow Services, to be drafted by Calderwood & Harkness and attached as an exhibit to (or referenced in) the renewal ELA.
E. Cloud Services / SLA / Data Security
Meridian's CloudVerify™ cloud-hosted verification compute platform is a critical component of OWS's expanded design infrastructure under the renewal. Because CloudVerify™ involves the processing of OWS's proprietary design data in Meridian's cloud environment, the renewal ELA must include robust SLA and data security provisions.
Availability SLA. OWS requires a minimum availability commitment of 99.5% for the CloudVerify™ service, measured on a monthly basis. Scheduled maintenance windows (to be agreed by the parties, and limited to no more than 8 hours per calendar month during non-business hours) shall be excluded from the availability calculation.
Service Credits. If CloudVerify™ availability falls below the 99.5% threshold in any calendar month, OWS should be entitled to the following tiered service credits, calculated as a percentage of the monthly CloudVerify™ fees:
In addition, if CloudVerify™ availability falls below 95.0% for two or more consecutive calendar months, OWS should have the right to terminate the CloudVerify™ component of the ELA (and receive a pro-rata refund of prepaid fees for the terminated component) without penalty and without affecting OWS's continued rights under the remainder of the ELA.
SOC 2 Type II Compliance. Meridian must maintain a current SOC 2 Type II certification covering the CloudVerify™ infrastructure and operations. Meridian's most recent SOC 2 Type II report is dated June 30, 2025, and was provided to OWS during the initial due diligence phase. Meridian should be contractually required to provide an updated SOC 2 Type II report to OWS on an annual basis, no later than 30 days following the report's completion. Any material deficiencies identified in the SOC 2 report must be remediated by Meridian within a commercially reasonable timeframe.
Data Security Requirements. The renewal ELA (or a separate Data Security and Cloud Services Rider) should include the following minimum data security requirements for the CloudVerify™ service:
• Encryption at Rest: All OWS design data stored in the CloudVerify™ environment must be encrypted using AES-256 (or equivalent) encryption.
• Encryption in Transit: All data transmitted between OWS's facilities and the CloudVerify™ environment must be encrypted using TLS 1.3 (or later) protocols.
• Data Localization: All OWS design data processed or stored in connection with the CloudVerify™ service must be located within the United States. Meridian may not transfer OWS data to any facility or server located outside the United States without OWS's prior written consent.
• Incident Notification: In the event of a security incident involving unauthorized access to, or breach of, OWS design data, Meridian must notify OWS within 72 hours of Meridian's becoming aware of the incident. The notification must include a description of the incident, the categories and approximate volume of data affected, the measures taken or proposed to be taken to address the incident, and the identity of a Meridian contact person from whom additional information may be obtained.
• Penetration Testing: Meridian must conduct annual penetration testing of the CloudVerify™ infrastructure using a qualified independent security firm. A summary of the penetration testing results (with critical and high-severity findings) must be made available to OWS upon request.
A separate Data Security and Cloud Services Rider will be drafted by Calderwood & Harkness and attached as an exhibit to the renewal ELA. This rider will contain the detailed security, privacy, and SLA provisions applicable to the CloudVerify™ service.
F. Governing Law and Dispute Resolution
Governing Law. OWS is comfortable continuing with California law (specifically, the laws of the State of California, without regard to its conflict-of-laws principles) as the governing law of the renewal ELA. California law is familiar to both parties, consistent with the Original ELA, and appropriate given that both OWS and Meridian maintain significant operations in California.
Dispute Resolution. OWS is also comfortable retaining binding arbitration administered by JAMS in Santa Clara County, California, consistent with the dispute resolution mechanism in the Original ELA. Arbitration provides confidentiality (important for disputes involving proprietary design data and pricing terms) and finality.
Recommended Enhancement — Equitable Relief Carve-Out. We recommend adding a carve-out to the arbitration clause that permits either party to seek injunctive or other equitable relief in a court of competent jurisdiction — without first submitting to arbitration — for claims involving (a) actual or threatened infringement of intellectual property rights, or (b) actual or threatened breach of confidentiality obligations. This carve-out is market-standard and reflects the reality that certain types of harm (particularly IP misappropriation or data breaches) require immediate judicial intervention that cannot wait for the initiation and completion of an arbitration proceeding.
G. Assignment and Change of Control
The assignment and change-of-control provisions in the renewal ELA are of particular importance to OWS given Ridgeline Capital Partners' majority ownership and the possibility of a future exit transaction (whether by sale, IPO, or secondary).
OWS Position — Resist Meridian Change-of-Control Rights. OWS should resist any provision that would allow Meridian to terminate the ELA, modify its terms, or trigger a renegotiation upon a change of control of OWS. Such provisions are increasingly common in enterprise software agreements but are fundamentally adverse to the interests of private equity-backed companies and their sponsors. A change-of-control termination right would give Meridian a windfall right to renegotiate pricing at the most inopportune time for OWS — i.e., in the context of a sale transaction — and would diminish the value of the ELA as an asset in any potential acquisition of OWS.
OWS Assignment Rights. OWS should seek the right to assign the ELA:
(a) To any affiliate of OWS (including any entity controlled by, controlling, or under common control with OWS) without Meridian's consent;
(b) To any successor entity resulting from a merger, consolidation, or reorganization of OWS without Meridian's consent; and
(c) To any acquirer of all or substantially all of OWS's assets or equity, with Meridian's consent not to be unreasonably withheld, conditioned, or delayed.
Meridian Assignment Rights. OWS should accept a provision permitting Meridian to assign the ELA freely to any successor entity in the event of a merger, sale, or transfer of all or substantially all of Meridian's EDA business, provided that such successor expressly assumes all of Meridian's obligations under the ELA. OWS should ensure that the assumption obligation is drafted broadly to cover all executory obligations, including maintenance and support commitments, source code escrow obligations, and indemnification obligations.
VII. Negotiation Timeline and Process