Psm Software Development & License Agreement

EXHIBIT 10.37


PSM SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT


This PSM Software Development and License Agreement (this "Agreement") is entered into as of March 10, 2000 (the "Effective Date"), by and between Cadence Design Systems, Inc., a Delaware corporation with offices at 555 River Oaks Parkway, San Jose, CA 95134 ("Cadence"), and Numerical Technologies Inc., a California corporation with offices at 70 West Plumeria Drive, San Jose, CA 95134-2134 ("NTI").


RECITAL
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Cadence develops and markets electronic design automation ("EDA") software tools for integrated circuit design and NTI develops and markets phase shifting software design tools for subwavelength integrated circuit technologies. Cadence and NTI desire to develop the ("PSM") design methodology ("PSM") jointly, using each company's relevant expertise, technology, and industry experience, to create an integrated design solution in the industry for creating full chip, phase shifting mask. In addition, Cadence desires to receive from NTI, and NTI desires to grant to Cadence, certain licenses to NTI's PSM software to facilitate the marketing and distribution of this solution.


In consideration of the mutual promises herein, Cadence and NTI agree as follows:


AGREEMENT


1. DEFINITIONS. As used in this Agreement:


1.1 "Agent" of Cadence or NTI means, an individual or entity who is
----- authorized to act for or in place of and to bind Cadence or NTI, as the case may be, with respect to dealings or contractual obligations with third parties .


1.2 "Affiliate" of Cadence or NTI means, respectively, any entity that
--------- controls, is controlled by, or is under common control with such party, where "control" means ownership of fifty percent (50%) or more of the outstanding voting securities of the entity in question or the power to otherwise control the voting or affairs of such entity.


1.3 "Cadence Combined Products" means the Cadence software products that
------------------------- are comprised of one or more Cadence Products and one or more NTI Product Components and may also include Developed Software.


1.4 "Cadence Developed Software" means those portions of the Developed
-------------------------- Software that are developed solely by Cadence.


1.5 "Cadence Products" means the Cadence software products listed in
---------------- Exhibit A attached hereto and any other commercially released place-and-route, --------- physical design, and physical verification family of products offered by Cadence or any of its Affiliates (other than products of Avant/1/, Mentor Graphics, or Synopsys, should Cadence or any of its Affiliates merge with, acquire, or be acquired by any of these three companies)


[***]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


primarily for the same intended uses as the products listed in Exhibit A.
---------


1.6 "Critical Error" means (i) an Error that stops, prevents or hinders
-------------- in a material and substantial way design work or production work; (ii) an Error that causes design data corruption; or (iii) any other substantial Error for which there is no reasonably acceptable work around.


1.7 "Deliverable" means a component of the Developed Software, or any
----------- other item, identified as such in the Statement of Work.


1.8 "Derivative Work" means a derivative work within the meaning of the
--------------- U.S. copyright law.


1.9 "Developed Software" means the new code (which may include, without
------------------ limitation, new features of the NTI Product Components and interfaces between the Cadence Products and the NTI Product Components) to be developed by NTI and Cadence jointly or individually as described in the Statement of Work and Specifications or elsewhere in this Agreement.


1.10 "Development Milestone" means any of the development milestones set
--------------------- forth in Exhibit B attached hereto or agreed upon by the parties for the
--------- Renewal Term pursuant to Section 14.2.


1.11 "Documentation" means the manuals and other documentation that NTI
------------- generally makes available with the NTI Product Components to end users.


1.12 "Error Corrections" means any Error corrections, patches, and bug
----------------- fixes prepared by or for NTI to any portion of the NTI Product Components or Developed Software.


1.13 "Error" means any failure of an NTI Product Component or the Developed
----- Software to conform to its specifications or the applicable Documentation or to provide consistent and accurate results.


1.14 "Initial Term" means the period beginning on the Effective Date and
------------ ending three (3) years after the Effective Date.


1.15 "Intellectual Property Rights" means (by whatever name or term known
---------------------------- or designated) copyrights, trade secrets, patents, and any other intellectual and industrial property and proprietary rights (excluding trademarks) including registrations, applications, renewals and extensions of such rights.


1.16 "NTI Developed Software" means those portions of the Developed
---------------------- Software that are developed solely by NTI.


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1.17 "NTI Product Components" means the NTI product components that are
---------------------- listed in Exhibit C attached hereto (including any Derivative Works thereof
--------- developed pursuant to the Statement of Work and Specifications) and all Updates thereto.


1.18 "NTI Trademarks" means the NTI trade names, trademarks, and logos set
-------------- forth in Exhibit D attached hereto.
---------


1.19 "Production Release Milestone" means any of the Cadence production
---------------------------- release milestones set forth in Exhibit E attached hereto.
---------


1.20 "Renewal Term" means the period beginning on the expiration of the
------------ Initial Term and ending two (2) years after the expiration of the Initial Term.


1.21 "Source Code Materials" means, with respect to a software program, the
--------------------- human-readable source code for such software program that can be compiled into machine-executable object code, annotated source code listings, flow charts, decision tables, schematics, design details, instructions, and other related technical documentation necessary to understand the design, structure, and implementation of the software program such that a third party programmer reasonably skilled in the programming language used for such source code could maintain, support, and modify the software program without further assistance or references to other materials.


1.22 "Specifications" means the technical specifications for the Developed
-------------- Software set forth in Exhibit B, as such specifications may be revised pursuant
--------- to Section 2.5.


1.23 "Statement of Work" means the description of the work to be done by
----------------- the parties in connection with their joint development of the Developed Software set forth in Exhibit B, as such description may be revised pursuant to
--------- Section 2.5.


1.24 "Update" means any new release or version of the NTI Product
------ Components or Cadence Products, as the case may be, that is designated by a different version number (e.g., 2.0 instead of 1.0, or 2.1 instead of 2.0) and, with respect to the NTI Product Components, any new software product that (i) uses the same methodology as the NTI Product Components and (ii) is designed primarily for the same intended uses as the NTI Product Components. Moreover, for the purpose of clarification and avoidance of doubt, to the extent that NTI or Cadence integrates the source code for the NTI Product Components or Cadence Products or portions thereof, with additional source code to make new NTI or Cadence products (other than the NTI Product Components or Cadence Products), such additional source code shall not constitute Updates but any improvements to the source code for the NTI Product Components or Cadence Products shall constitute Updates. Also, any source code created by or for NTI in the course of creating customized interfaces between the NTI Product Components and third party products as permitted under this Agreement will not constitute Updates.


2. DEVELOPMENT AND DELIVERY OF NTI LICENSED TECHNOLOGY.


2.1 In General. NTI and Cadence shall work together to jointly develop
---------- the Developed Software. NTI and Cadence shall use all commercially reasonable efforts to develop the


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Developed Software in accordance with the schedule set forth in the Statement of Work, the Specifications, and the Development Milestones. Any failure to conform to the schedule set forth in the Statement of Work shall not be deemed to be a material breach of this Agreement upon which a party may exercise termination rights under Section 14.3 (Termination for Breach), unless a party fails to use all commercially reasonable efforts to meet such schedule.


2.2 Project Managers. Each party shall appoint a project manager to act
---------------- as liaison with the other party with respect to the development of the Developed Software. Project managers shall participate in review meetings as set forth in the Statement of Work or otherwise by mutual agreement. The project managers shall have primary responsibility for coordinating all major decisions related to joint development of the Developed Software. Each party may replace its project manager from time to time as it deems necessary or appropriate upon written notice to the other party.


2.3 Engineering Resources; Access to Facilities. NTI and Cadence shall
------------------------------------------- each devote sufficient engineering resources to fulfill its respective obligations under Section 2.1. Each party shall provide the other party with access to its facilities as reasonably necessary in the course of development of the Developed Software. Each party will cause its employees and contractors to comply with the other party's workplace safety and security rules and policies when they are on the other party's premises.


2.4 Software Tools and Technology. Each party will have a nonexclusive,
----------------------------- royalty-free license until the termination of this Agreement or until development of the Developed Software is complete, whichever occurs first, to use, reproduce, and modify the other party's software products and tools (in object code form and, as mutually agreed by the parties in each instance, in source code form) and other technology as may be reasonably necessary solely for the purpose of fulfilling its specific development obligations under the Statement of Work. Each party's use of the other party's software products and tools and other technology will be subject to the confidentiality provisions in Section 12.


2.5 Change Requests. The parties recognize and acknowledge that the
--------------- Statement of Work or the Specifications (or both) may need to be revised as the work described therein continues. The parties shall cooperate and work in good faith to adapt any such revisions as needed in accordance with the procedure set forth in this Section 2.5. Nothing in this Section 2.5 is intended to require NTI to accept any revisions to the Statement of Work or the Specifications if such revisions would require NTI to devote substantially greater resources or incur substantially greater costs than those required under the original Statement of Work or Specifications.


(a) Request Procedure. If either party requests a change to the
----------------- Statement of Work or Specifications, it shall submit such request in writing to the other party's project manager. The other party shall respond to the request within five (5) business days, either approving, disapproving, or proposing an alternative to the requested change. If the responding party disapproves of the change, it shall set forth the reasons for its disapproval. The requesting party shall then reply, again within five (5) business days.


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(b) Escalation Procedure. If the parties are unable to agree upon
------------------- all aspects of the requested change within the earlier of fifteen (15) business days after the original request for change or the exchange of two sets of requests and responses, then the parties shall, in order to reach agreement, implement the escalation procedure set forth below.


(i) Within five (5) business days after the most recent response under Section 2.5(a), the requesting party shall again submit a written request to the other party. Such a request, however, must be the joint work of the project manager and at least two other people: one business person and one technical person. Likewise, the responding party shall respond to such change request only after a consultation among the project manager and at least two other people: one business person and one technical person. Such response shall be made within five (5) business days.


(ii) If the parties do not agree after following the procedure set forth in Section 2.5(b)(i), then the requesting party shall arrange, again within five (5) business days after the latest response, a meeting or conference call, which shall be held at a mutually convenient time but in no event more than ten (10) business days from the completion of the procedure in Section 2.5(b)(i). The project manager and at least one technical and one business person of each party shall participate.


(iii) If the parties do not agree after following the procedure set forth in Section 2.5(b)(ii), then the requesting party shall arrange, within ten (10) business days after the meeting or conference call in Section 2.5(b)(ii), a face-to-face meeting, which shall be held at a mutually convenient time and location, but in no event later than twenty (20) business days from the completion of the procedure in Section 2.5(b)(ii). A Senior Executive Officer of each party, in addition to its project manager and business and technical people, shall attend such a meeting.


(iv) In addition to the escalation procedures set forth above, the parties remain free to negotiate, and may come to agreement independently from the escalation procedures.


2.6 Deliverables. Each party shall deliver to the other party the
------------ Deliverables for which it is responsible under the Statement of Work, in the format and manner specified in the Statement of Work (or, if none is specified, in a mutually acceptable format and manner).


2.7 Testing and Acceptance. Upon delivery of a Deliverable by one party
--------------------- to the other in accordance with the Statement of Work, the parties will jointly test such Deliverable for conformance to the Specifications and for the absence of Critical Errors. If the results of such testing indicate, to the reasonable satisfaction of both parties, that the Deliverable conforms to the Specifications in all material respects and contains no Critical Errors, such Deliverable will be deemed accepted by the party not obligated to deliver such Deliverable and any Milestone based upon acceptance of such Deliverable will be deemed to have been met.


2.8 Further Developments. The parties' project managers will meet
-------------------- periodically to discuss further improvements to the Developed Software. In addition, either party may suggest additional development efforts to be undertaken regarding the Developed Software. In such


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instances, the parties will discuss in good faith applicable development schedules, technology contributions, allocation of expenses, ownership, and rights of use. However, neither party will be bound by any such discussions unless the parties agree in writing to amend this Agreement or to enter into a new agreement regarding such additional development work.


3. LICENSE GRANTS.


3.1 Software License to Cadence. NTI hereby grants to Cadence the
--------------------------- following nonexclusive (subject to Section 4), worldwide licenses, under all of NTI's Intellectual Property Rights in and to the NTI Product Components:


(a) to use, reproduce, perform and display the NTI Product Components (in object code form only) for Cadence's internal purposes including integration work (with Cadence Products only), testing, support, and demonstrations;


(b) to use, reproduce, perform and display the NTI Product Components with the Cadence Products (in object code form only) for the purpose of providing Cadence design and methodology services to Cadence customers, provided that Cadence may not provide optical proximity correction design services using the NTI Product Components alone for Cadence customers not using the Cadence Products for the product design at issue.


(c) to reproduce and distribute, and to make, have made, offer for sale, import and sell, the NTI Product Components, in object code form only, solely as incorporated or bundled with the Cadence Products and not on a standalone basis; and


(d) to reproduce and distribute, and to make, have made, offer for sale, import and sell, the NTI Product Components, in object code form only, on a standalone basis only to those Cadence customers who, as of the Effective Date, already have purchased a license for at least one (1) of the Cadence Products solely for the purpose of allowing such customers to use the NTI Product Components with Cadence Products.


Such licenses shall be subject to the restrictions set forth in Section 3.3. Cadence may sublicense the rights granted in this Section 3.1 only as follows: (i) Cadence may sublicense the rights to use, reproduce and distribute the NTI Product Components incorporated or bundled with the Cadence Products to its distributors, resellers, OEM customers, VAR customer, and VAD customers; and (ii) Cadence may sublicense the rights to use and reproduce the NTI Product Components to its end-user customers, solely for the purpose of allowing such end-user customers to use the NTI Product Components with Cadence Products.


3.2 Documentation License to Cadence. NTI grants to Cadence a
-------------------------------- nonexclusive (subject to Section 4), worldwide license, under all of NTI's Intellectual Property Rights in and to the Documentation, to use, reproduce, perform, display, distribute, and to make, have made, offer for sale, import and sell the Documentation solely to the extent that the Documentation is to be used in connection with the Cadence Combined Products or the NTI Product Components on a stand-alone basis as permitted under Section 3.1(d) above. Cadence may sublicense the right to reproduce and distribute the Documentation solely to the extent that it is to be used in connection with the


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Cadence Combined Products (or the NTI Product Components on a stand-alone basis as permitted under Section 3.1(d) above) to its distributors, resellers, OEM customers, VAR customers and VAD customers.


3.3 Restrictions. Cadence shall not itself, or through any Affiliate,
------------ Agent, or third party: (a) sell, lease, license, or sublicense the NTI Product Components or the Documentation (except as expressly permitted in Section 3.1 and 3.2), (b) decompile, disassemble, reverse engineer, or otherwise attempt to derive source code from the NTI Product Components, in whole or in part, except to the extent such restriction is prohibited by applicable law; (c) modify or create Derivative Works from the NTI Product Components (except as may be expressly allowed under Sections 2.4 and 15); or (d) use the NTI Product Components to provide processing services to third parties (except as expressly permitted under Section 3.1) or otherwise use the NTI Product Components on a service bureau basis.


3.4 Copyright Notices. Cadence agrees that it will not remove any
----------------- copyright notices, proprietary markings, trademarks, or trade names from the NTI Product Components or Documentation.


3.5 Software License Terms. Cadence shall use its then-current standard
---------------------- form software license terms for marketing and licensing the NTI Product Components under this Agreement. Cadence shall include in its standard form software license terms warranty disclaimer and limitation of liability provisions for the benefit of NTI. Cadence acknowledges and agrees that the licenses granted to Cadence under this Agreement and by Cadence to its customers pursuant to such licenses do not include a license under any NTI patents to make or have made products made of silicon or other semiconductor materials and Cadence agrees to include the text message set forth below in the log file of the NTI Product Components or otherwise to implement procedures reasonably calculated to ensure that no express or implied licenses are granted to its customers to make or have made products made of silicon or other semiconductor materials. NTI agrees that Cadence may refer to NTI as a "third party" in the standard form license terms. The message to be inserted in the log file is: "Please be advised that your license to use this software does not give you a license under any patents of Numerical Technologies, Inc. to make or have made products made of silicon or other semiconductor materials."


3.6 Trademark License to Cadence. Cadence shall display NTI Trademarks
---------------------------- with any marketing, promotional, or advertising literature pertaining to the Cadence Combined Products. NTI grants to Cadence a nonexclusive, worldwide license to use the NTI Trademarks during the term of this Agreement solely in connection with the NTI Product Components as part of the Cadence Combined Products, with the Documentation and in conjunction with any other marketing, promotional, or advertising literature pertaining to the Cadence Combined Products. Cadence shall comply with any and all reasonable and customary guidelines provided by NTI in writing concerning the use of the NTI Trademarks. To enable NTI to monitor the use of the NTI Trademarks, Cadence shall provide, as requested by NTI from time to time, samples of all items and materials to which an NTI Trademark has been applied. Cadence shall obtain no rights with respect to any of the NTI Trademarks, other than the rights set forth herein. At NTI's written request, Cadence shall assign to NTI any such right, title, and interest exceeding the rights granted herein


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that it may obtain in the NTI Trademarks and the associated goodwill. All goodwill arising out of any uses of the NTI Trademarks will inure solely to the benefit of NTI.


4. EXCLUSIVITY.


4.1 Limits on NTI's Activities. During the Initial Term of this Agreement
-------------------------- and any Renewal Term hereunder, subject to Section 4.2:


(a) NTI shall not, directly or through any of its Affiliates or Agents, license, distribute, or otherwise provide any of the NTI Product Components or Developed Software to Avant!, Mentor Graphics, or Synopsys without the express prior written consent of Cadence, which Cadence may grant or withhold in its sole discretion.


(b) NTI shall not, directly or through any of its Affiliates or Agents, develop, or assist any third party in developing, or otherwise participate in the development of, interfaces between, or an integrated solution consisting of (in whole or in part), any of the NTI Product Components or Developed Software and any Avant!, Mentor Graphics, or Synopsys product;


(c) NTI shall not, directly or through any of its Affiliates or Agents, participate in, or assist any third party with, any marketing or sales activities with Avant!, Mentor Graphics, or Synopsys or the marketing or distribution of interfaces between, or an integrated solution consisting of (in whole or in part), any of the NTI Product Components or Developed Software any Avant!, Mentor Graphics, or Synopsys product;


(d) NTI shall not assist any end user in integrating the NTI Product Components or Developed Software with any Avant!, Mentor Graphics, or Synopsys product (however, it is understood and agreed that it will not be considered a breach of this Section 4.1 by NTI if Avant!, Mentor Graphics, or Synopsys gains access to the NTI Product Components or Developed Software through doing integration work at a customer's facilities); and


(e) NTI shall include in all agreements with third parties in which the third party is licensed to redistribute the NTI Product Components or Developed Software (including OEM, reseller, and distribution agreements) a provision that the third party's license to redistribute the NTI Product Components or Developed Software will automatically terminate (subject to reasonable sell-off terms that allow the licensee, for up to ninety (90) days after the date of termination, to fulfill customer orders accepted before the date of termination) if (i) Avant!, Mentor Graphics, or Synopsys enters into an agreement to merge with, acquire the material assets of, or acquire thirty percent (30%) or more of the outstanding capital stock of, or purchase all or substantially all of the assets of a specific business unit of, the third party that is utilizing the NTI Product Components or Developed Software, (ii) the third party enters into an agreement to acquire the material assets of, or to merge with or acquire thirty percent (30%) or more of the outstanding capital stock, of Avant!, Mentor Graphics, or Synopsys and the resulting combined entity distributes an EDA product (other than the Cadence Combined Products) that incorporates any of the NTI Product Components or Developed Software, or (iii) such third party distributes or licenses the NTI Components or Developed Software or any product incorporating the NTI Components or Developed Software to Avant!, Mentor Graphics, or Synopsys.


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4.2 Permitted NTI Activities. Subject to Section 4.1, NTI shall have the
------------------------ right to license, distribute, OEM, and sell the NTI Product Components and Developed Software to any third party other than Avant!, Mentor Graphics, or Synopsys. Consistent with the foregoing, NTI agrees that it will prohibit any third party who has the right to distribute NTI Components or Developed Software from licensing or transmitting the NTI Components or Developed Software (or both), either on a stand-alone basis or as incorporated into any products, to Avant!, Mentor Graphics, or Synopsys. Notwithstanding Section 4.1, if Cadence fails to meet the Production Release Milestones, NTI shall have the unrestricted right to enter into OEM or distribution license agreements with Synopsys for any or all of the NTI Product Components. NTI shall notify Cadence in writing (a) if NTI believes that Cadence has failed to meet any of the Production Release Milestones, and (b) within two (2) business days after entering into such an agreement with Synopsys. If, in response to any notice from NTI under clause (a) above, Cadence notifies NTI in writing (within ten (10) days after receipt of NTI's notice) that ...