10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED
	September 30, 2001
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 0-25864

AVANT! CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization) 94-3133226
(I.R.S. Employer Identification No.)

46871 Bayside Parkway
Fremont, California 94538
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (510) 413-8000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes [x] No [  ]

The number of shares outstanding of the registrant’s common stock as of November 9, 2001 was 37,802,110.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. FINANCIAL STATEMENTS
		Consolidated Balance Sheets
		Consolidated Statements of Earnings
		Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
	ITEM 2A. RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK, DERIVATIVES AND FINANCIAL INSTRUMENTS
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Employment Agreement - Noriko Ando
Employment Agreement - John Hsu
Severance Agreement
Distribution Agreement - Avant! Japan Corp.
Distribution Agreement - Avanticorp Hong Kong
Promissary Note

AVANT! CORPORATION
FORM 10-Q
September 30, 2001
INDEX

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000
	Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2001 and 2000
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2A	Risk Factors That May Affect Future Results
Item 3.	Quantitative and Qualitative Disclosure About Market Risk, Derivatives and Financial Instruments
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits and Reports on Form 8-K
Signature Page
Exhibit Index

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PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

AVANT! CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)

			September 30, 2001			December 31, 2000
Assets
Current assets:
	Cash and cash equivalents		$	56,738		$	106,545
	Investments			5,657			143,871
	Restricted investments			33,744			37,800
	Accounts receivable, net of allowances of $10,883 and $16,133, respectively			43,644			76,572
	Due from affiliates			—			812
	Deferred income taxes			33,874			34,036
	Prepaid expenses and other current assets			10,475			11,853
		Total current assets		184,132			411,489
Equipment, furniture and fixtures, net				24,100			26,821
Deferred income taxes				24,884			25,994
Goodwill and other intangibles, net				23,069			35,124
Investment and joint ventures				89,106			49,144
Other assets				45,878			13,318
		Total assets	$	391,169		$	561,890
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable		$	9,568		$	9,982
	Accrued compensation			21,115			27,909
	Accrued income taxes			42,456			33,165
	Other accrued liabilities			26,208			19,056
	Note payable to affiliate			7,911			—
	Accrued litigation			25,400			47,500
	Deferred revenue			85,846			70,459
		Total current liabilities		218,504			208,071
Other noncurrent liabilities				11,427			7,918
		Total liabilities	$	229,931		$	215,989
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued and outstanding				—			—
Common stock, $.0001 par value; 70,000,000 shares authorized, 37,797,000 and 37,576,000 shares outstanding at September 30, 2001 and December 31, 2000, respectively			$	4		$	4
Additional paid-in capital				284,467			276,219
Stock-based deferred compensation				(3,136	)		(2,770	)
Retained earnings				(47,032	)		138,430
Accumulated other comprehensive income (loss)				(209	)		327
Treasury stock, at cost; 4,457,000 and 4,100,000 common shares at September 30, 2001 and December 31, 2000, respectively				(72,856	)		(66,309	)
		Total stockholders’ equity		161,238			345,901
		Total liabilities and stockholders’ equity	$	391,169		$	561,890

See accompanying notes to condensed consolidated financial statements.

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AVANT! CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)

				Three Months Ended					Nine Months Ended
				September 30,			September 30,		September 30,			September 30,
				2001			2000		2001			2000
Revenue:
		Software		$	59,500		$	55,046	$	175,002		$	165,644
		Services			41,312			35,462		117,518			99,834
			Total revenue		100,812			90,508		292,520			265,478
		Costs and expenses:
		Costs of software			1,040			1,480		4,117			4,083
		Costs of services			5,812			4,631		18,211			15,296
		Selling and marketing			23,545			28,922		76,178			76,554
		Research and development			20,567			19,108		65,052			62,403
		General and administrative			15,280			9,864		36,265			28,038
		Litigation settlement and other related costs			—			—		236,537			—
		Merger and in-process research and development expenses			—			—		—			(343	)
			Total operating expenses		66,244			64,005		436,360			186,031
			Earnings (loss) from operations		34,568			26,503		(143,840	)		79,447
		Equity income (loss) from investments and joint ventures, net			(7,306	)		4,103		(15,390	)		14,042
		Interest income and other, net			143			1,632		4,431			2,700
			Earnings (loss) before income taxes		27,405			32,238		(154,799	)		96,189
		Income taxes			10,277			12,089		30,662			36,424
			Net earnings (loss)	$	17,128		$	20,149	$	(185,461	)	$	59,765
Earnings (loss) per share:
	Basic:			$	0.45		$	0.51	$	(4.94	)	$	1.54
	Diluted:			$	0.45		$	0.50	$	(4.94	)	$	1.49
Weighted average shares outstanding:
	Basic:				37,674			39,867		37,516			38,910
	Diluted:				37,827			40,703		37,516			40,028

See accompanying notes to condensed consolidated financial statements.

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AVANT! CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

					Nine Months Ended
					September 30, 2001			September 30, 2000
Cash flows from operating activities:
	Net (loss) earnings				$	(185,461	)	$	59,765
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
		Depreciation and amortization				20,909			20,258
		Acquired in-process research and development				—			940
		Merger accruals				—			(2,165	)
		Equity loss (income) from investments and joint ventures				15,390			(14,042	)
		Loss on disposal of assets				—			275
		Deferred income taxes				1,272			5,035
		Stock based compensation expense				1,825			567
		Tax benefit (expense) related to stock options				1,570			(782	)
		Deferred rent (expense) benefit				(608	)		1,277
		Provision for doubtful accounts				3,125			1,408
		Changes in operating assets and liabilities, net of effects from acquisitions:
			Accounts receivable			29,803			(19,290	)
			Due from affiliates			812			2,852
			Prepaid expenses and other assets			1,955			(7,162	)
			Accounts payable			(414	)		(405	)
			Accrued compensation			(6,794	)		13,561
			Accrued income taxes			9,291			(843	)
			Other accrued liabilities			11,268			(5,732	)
			Accrued litigation			(22,100	)		—
			Deferred revenue			15,387			13,732
				Net cash (used ) provided by operating activities		(102,770	)		69,249
Cash flows from investing activities:
	Purchases of short-term investments					(202,556	)		(178,401	)
	Maturities and sales of short-term investments					344,290			167,596
	Investments and joint ventures					(8,102	)		—
	Investment in SMIC					(55,000	)		—
	Investment in ALi bonds					(30,000	)		—
	Distribution from venture capital investment					2,500			—
	Purchases of equipment, furniture, fixtures and other assets					(4,019	)		(5,384	)
	Purchase of acquired entities					—			(22,014	)
				Net cash provided (used) by investing activities		47,113			(38,203	)
Cash flows from financing activities:
		Repurchase of common stock				(6,547	)		(33,164	)
		Proceeds from note payable to affiliate				7,911			—
		Issuance of common stock under employee stock purchase plan				1,664			32,846
		Exercise of stock options				2,823			4,018
				Net cash provided by financing activities		5,851			3,700
Net increase (decrease) in cash and cash equivalents						(49,807	)		34,746
Cash and cash equivalents, beginning of period						106,545			79,766
Cash and cash equivalents, end of period					$	56,738		$	114,512
Cash paid during the period for:
	Interest				$	2,025		$	138
	Income taxes				$	16,719		$	30,015

See accompanying notes to condensed consolidated financial statements.

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AVANT! CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of Avant! Corporation and its subsidiaries (“Avant!” or the “Company”). All significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results, that may be expected for a full year. The information included in this Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission (SEC).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain financial statement items have been reclassified to conform to the current period’s presentation.

2. COMPREHENSIVE INCOME

The following table sets forth the calculation of comprehensive income as required by Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income”. Comprehensive income has no impact on the Company’s net earnings, balance sheet, or stockholders’ equity. The components of comprehensive income, net of tax, were comprised of the following (in thousands):

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2001			2000		2001			2000
Net earnings (loss)	$	17,128		$	20,149	$	(185,461	)	$	59,765
Unrealized (losses) gains on investments, net		(424	)		737		(536	)		1,986
Total comprehensive income (loss)	$	16,704		$	20,886	$	(185,997	)	$	61,751

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3. EARNINGS PER SHARE

Basic earnings per share are computed using the weighted-average number of common shares outstanding. Diluted earnings per share are computed using the weighted-average number of common and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of employee stock options using the treasury stock method. Common stock equivalents for the nine months ended September 30, 2001 have been excluded from the calculation of diluted loss per share, as they are antidilutive.

The following table sets forth the computation of basic and diluted earnings per share:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2001		2000		2001			2000
		(in thousands, except per share amounts)
Net earnings (loss)		$	17,128	$	20,149	$	(185,461	)	$	59,765
Weighted average number of common shares outstanding			37,674		39,867		37,516			38,910
Common Stock Equivalents:
	Stock options and awards		153		836		—			1,118
Total weighted average number of common and common equivalent shares outstanding			37,827		40,703		37,516			40,028
Basic earnings (loss) per share		$	0.45	$	0.51	$	(4.94	)	$	1.54
Diluted earnings (loss) per share		$	0.45	$	0.50	$	(4.94	)	$	1.49

4. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 133, “Accounting For Derivative Instruments and Hedging Activities”. SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. The adoption of these statements did not have a significant impact on the Company’s financial condition or results of operations.

In July 2001, the FASB issued SFAS No. 141, “Business Combinations” (“SFAS 141”) and No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed for impairment annually or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives. The Company is currently evaluating the effect that adoption of the provisions of SFAS 142 will have on its results of operations and financial position.

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 supersedes SFAS 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, “Reporting Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”. SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The Company is in the process of evaluating the effect of SFAS 144 on its financial statements.

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5. INVESTMENTS AND JOINT VENTURES

The Company’s investments and joint ventures consisted of the following (in thousands):

		September 30, 2001		December 31, 2000
Investment in Forefront		$	17,980	$	34,416
Investment in SMIC			62,500		7,500
Other			8,626		7,228
	Total investments and joint ventures	$	89,106	$	49,144

The Company invested an additional $55 million in the first quarter of 2001 in Semiconductor Manufacturing International Corporation (“SMIC”), a development stage company in the process of establishing a semiconductor fabrication facility in China. The Company was scheduled to make further investments of $12.5 million on December 15, 2001 and $25.0 million on June 15, 2002. In October 2001, the Company terminated its investment in SMIC. Pursuant to the agreement terminating the Company’s investment, the entire $62.5 million invested by the Company will be reimbursed and the Company is relieved of any obligation to invest additional funds in SMIC. The Company received $33 million of its SMIC investment on October 3, 2001. Under the agreement, the remaining $29.5 million will be paid by November 30, 2001.

The Company has joint venture agreements with Maingate Electronics, KK (“Maingate”) of Japan and Davan Tech Co. Ltd, (“Davan Tech”) of Korea for the purpose of consolidating distribution in the respective countries. In January 2001, Maingate repurchased 20% of its outstanding shares from the Company which had the effect of reducing the Company’s ownership in Maingate to 18.8% from 35%. The Company’s Chairman of the Board of Directors owns 50% of Maingate. An executive of the Company owns 2.5% of Maingate and the remaining 28.7% is owned by a private investment fund whose owners include other current directors and executives of the Company. The Company recorded a loss on the sale of Maingate shares of $1.1 million in the first quarter of 2001.

In August 2001, the Company obtained a $7.9 million working capital loan, bearing interest at 2%, from Maingate. The outstanding principal and accrued interest on this loan was repaid in October 2001.

The following table presents the sources of related party revenues for Maingate and Davan Tech (in thousands):

	For Three Months Ended				For Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2001		2000		2001		2000
Software Revenue	$	6,190	$	7,619	$	16,970	$	14,995
Services Revenue		3,576		4,335		9,119		12,326
Total Revenue	$	9,766	$	11,954	$	26,088	$	27,321

The Company recognizes revenue from Maingate in the quarter following Maingate’s receipt of cash from its customers. Revenue from Davan Tech is recognized when the Company receives cash from Davan Tech.

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6. OTHER ASSETS

Included in other assets are zero coupon convertible bonds in the amount of $30 million issued by Acer Laboratories Inc. (“ALi”). ALi (incorporated as a company limited by shares in Taiwan) is a leading manufacturer of integrated circuits for the personal computer and embedded PC market. The bonds mature in February 2004 and are redeemable at maturity for an amount equal to 107% of the original principal amount.

7. SEGMENT INFORMATION

The Company’s chief operating decision-maker is considered to be the Company’s President. The President reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region for purposes of making operating decisions and assessing financial performance. The consolidated financial information reviewed by the President is identical to the information presented in the accompanying consolidated statements of operations. The Company operates in a single operating segment: electronic design automation software and services.

Revenue and asset information regarding operations in different geographic regions are as follows (in thousands):

		North America		Europe		Asia		Consolidated
Revenues:
	Three months ended September 30, 2001	$	68,065	$	12,604	$	20,143	$	100,812
	Three months ended September 30, 2000		58,459		10,677		21,372		90,508
	Nine months ended September 30, 2001	$	189,442	$	42,219	$	60,859	$	292,520
	Nine months ended September 30, 2000		181,336		26,703		57,439		265,478
Identifiable assets
	As of September 30, 2001	$	210,667	$	136,229	$	44,273	$	391,169
	As of December 31, 2000		420,827		77,543		63,520		561,890
Long-lived assets:
	As of September 30, 2001	$	17,282	$	1,581	$	5,237	$	24,100
	As of December 31, 2000		20,898		1,546		4,377		26,821

During the three and nine months ended September 30, 2001, revenues from one customer amounted to approximately 11% of the Company’s revenues. This customer’s revenues were primarily in North America.

8. COMMITMENTS AND CONTINGENCIES

Each of the Company's long-term distribution agreements with its distributors, Maingate and Davan Tech, provides that the distributor may terminate its agreement with the Company upon the occurrence of certain events, including the insolvency of the Company or a material change of control of the Company. Upon termination of the agreement, the distributor is entitled to a termination payment equal to the average monthly product income for the remaining term of the contract. The Maingate and Davan Tech agreements expire on October 1, 2008 and December 31, 2007, respectively. As of September 30, 2001, the Company estimated that the termination payment under the Maingate agreement would be approximately $113 million, and the termination payment under the Davan Tech agreement would be approximately $24 million.

As of September 30, 2001, (i) the Company owned 18.8% of Maingate and Gerald C. Hsu, Noriko Ando and the Eigen Fund owned 50%, 2.5% and 28.7% of Maingate, respectively; (ii) Eigen Fund, which is a private fund whose owners include, a director of the Company, certain employees and other parties; and (iii) the Company and Mr. Hsu own 19.4% and 8.2% of Davan Tech, respectively.

The Company has employment and/or severance agreements with several of its executives and key employees, including Gerald C. Hsu, Paul Lo, Noriko Ando, John Hsu and Moriyuki Chimura. These agreements have provisions relating to a voluntary resignation or involuntary termination of employment that occurs within six months after a change of control event, which includes, under the terms of certain employment agreements, if Gerald C. Hsu ceases to be the Chairman and Chief Executive Officer of the Company. In the case of a termination of employment after such a change of control, the employee will receive a cash termination payment based on a multiple of the employee's base salary in effect at that time. In addition, certain agreements provide for acceleration of all unvested stock options and an additional payment in consideration of covenants not to compete. If all such termination payments were payable as of September 30, 2001, the aggregate cash payout under employment/or severance agreements to the executives and employees would be approximately $34 million. In addition, the Company has loaned Mr. Chimura $300,000 pursuant to a promissory note, dated June 5, 1998. This note bears interest at an annual rate of 3% and provides that the outstanding principal and accrued interest under the note will be forgiven in the event Mr. Hsu is no longer the President and Chief Executive Officer of the Company.

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9. LITIGATION SETTLEMENTS AND LEGAL PROCEEDINGS

CADENCE LITIGATION

On December 6, 1995, Cadence Design Systems, Inc. (“Cadence”) filed an action against Avant! and certain of its officers in the United States District Court for the Northern District of California alleging copyright infringement, unfair competition, misappropriation of trade secrets, conspiracy, breach of contract, inducing breach of contract and false advertising. The complaint alleges that some of Avant!’s employees formerly employed by Cadence misappropriated and improperly copied Cadence’s source code for important functions of Avant!’s place and route products, and that Avant! competed unfairly against Cadence by making false statements about Cadence and its products. The action also alleges that Avant! induced individuals, who have been named as defendants, to breach their employment and confidentiality agreements with Cadence.

In addition to seeking actual and punitive damages, which Cadence has not fully quantified, Cadence sought to enjoin the sale of Avant!’s ArcCell and Aquarius place and route products. On December 19, 1997, the District Court entered a preliminary injunction against continued sales or licensing of any product or work copied or derived from Cadence’s Design Framework II (“DFII”), specifically including, but not limited to, the ArcCell products. The preliminary injunction also bars Avant! from possessing or using any copies of any portion of the source code or object code for ArcCell or any other product, to the extent it had been copied or derived from DFII. (Avant! had ceased licensing its ArcCell products in mid-1996). On December 7, 1998, the District Court also entered a preliminary injunction against Avant! prohibiting Avant! from directly or indirectly marketing, selling, leasing, licensing, copying or transferring the Aquarius, Aquarius XO and Aquarius BV products. Pending the outcome of the trial of Cadence’s action, the injunction further prohibits Avant! from marketing, selling, leasing, licensing, copying or transferring any translation code for any Aquarius product that infringes any protected right of Cadence and prohibits Avant! from possessing or using any copies of any portion of the source code or object code for the Aquarius products to the extent that it has been copied or derived from DFII. Avant! ceased licensing the Aquarius products in February 1999. Nevertheless, the preliminary injunctions could seriously harm Avant!’s business, financial condition and results of operations going forward.

On January 16, 1996, Avant! filed an answer to the complaint denying wrongdoing. On the same day, the Company filed a counterclaim against Cadence and its then-CEO, Joseph Costello, alleging antitrust violations, racketeering, false advertising, defamation, trade libel, unfair competition, unfair trade practices, negligent and intentional interference with prospective economic advantage, and intentional interference with contractual relations. The counterclaim alleges, among other things, that Cadence’s lawsuit is part of a scheme to harm Avant! competitively, because of Avant!’s success in the marketplace. Avant! filed its amended counterclaim on January 29, 1998. Pursuant to a stipulated court order, Cadence and the other counterclaim defendants have not responded to the amended counterclaim, and Avant!’s counterclaim is currently stayed.

In April 1999, Avant! and Cadence filed cross-motions for summary adjudication as to whether a 1994 written release agreement between the two companies extinguished all Cadence claims regarding Avant!’s continued use of intellectual property claimed by Cadence in any Avant! place and route product in existence when the release was signed by the parties. On September 8, 1999, the District Court granted Avant!’s motion in part and ruled that Cadence’s trade secret claim regarding use of DFII source code was barred by the release. The District Court also ruled that the release did not bar Cadence’s copyright infringement claims regarding Avant!’s alleged use of DFII source code. Subject to appeal, Avant! believes that this ruling makes it likely that Cadence will prevail on its copyright infringement claims regarding Avant!’s use of DFII source code in the ArcCell products. While the ruling also increases the likelihood that Cadence will prevail on the same claims as they might apply to the Aquarius products, Avant! believes that it possesses additional meritorious defenses with respect to Aquarius that are not available with respect to ArcCell. On October 15, 1999, the District Court issued an amended order certifying its September 8, 1999, order for interlocutory appeal to the United States Circuit Court of Appeals for the Ninth Circuit. Cadence and Avant! petitioned for leave to file an interlocutory appeal, and the Circuit Court granted their petitions on December 20, 1999. Proceedings in the District Court have been stayed pending the Circuit Court’s decision on appeal, and no trial date has been set. Briefing before the Circuit Court has been completed, and oral argument was held on May 15, 2001. On June 11, 2001, the Circuit Court certified to the California Supreme Court the question of when under California statutory law a claim for trade secret infringement arises. On October 31, 2001, the California Supreme Court accepted the certified question.

Avant! believes it has defenses to all of Cadence’s claims and intends to defend itself vigorously. Should Cadence ultimately succeed in the prosecution of its claims, however, Avant! could be permanently enjoined from using and marketing any place and route products held to incorporate DFII source code, and it may be required to pay substantial monetary damages to Cadence. In addition, Avant! could be enjoined preliminarily from selling its current Apollo place and route products. It is possible that Avant!’s

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relationships with its customers will be seriously harmed in the future as a result of the Cadence litigation. Accordingly, an adverse judgment, if entered on any Cadence claim, could seriously harm Avant!’s business, financial position and results of operations and cause Avant!’s stock price to decline substantially. However, as of September 30, 2001, no adjustments have been made to the Company’s financial statements relative to the ultimate outcome of this uncertainty.

CRIMINAL INDICTMENT

On December 16, 1998, after a grand jury investigation, the Santa Clara County District Attorney’s office filed a criminal indictment alleging felony level offenses related to the allegations of misappropriation of trade secrets set forth in Cadence’s lawsuit. This criminal action was brought against, among others, Avant! and the following current or former employees and/or directors of Avant!: Gerald C. Hsu, then President, Chief Executive Officer and Chairman of the Board of D; Y. Z. Liao, Stephen Wuu, Leigh Huang, Eric Cheng and Mike Tsai. One former defendant was dismissed from the action, and the District Attorney appealed the dismissal order.

The 1998 indictment charged the defendants listed above with conspiring to commit trade secret theft, inducing the theft of a trade secret, conspiracy to commit fraudulent practices in connection with the offer or sale of a security and fraudulent practices in connection with the offer or sale of a security. On April 28, 2000, the Santa Clara Superior Court dismissed all charges in the 1998 indictment against the Company and all of the current and former executives charged in the case. The District Attorney appealed the dismissal of the 1998 indictment and indicated an intent to seek another indictment. The District Attorney dismissed the appeal in favor of the indictment described below.

On August 10, 2000, a Santa Clara County grand jury returned an indictment against the same current or former employees and/or directors of Avant! as the 1998 indictment. This indictment charged defendants with conspiracy to commit trade secret theft, conspiracy to withhold and conceal stolen property, conspiracy to commit securities fraud, theft of trade secrets, withholding or concealing stolen property, making an unauthorized copy of an article containing a trade secret, and committing a fraudulent practice in connection with the offer or sale of a security. Trial proceedings began May 14, 2001.

On May 22, 2001, Avant! entered pleas of no contest to conspiracy to misappropriate trade secrets, two counts of trade secret misappropriation, and a violation of California corporate securities law. As part of the plea agreement, Avant! agreed to pay a fine of $27.0 million and to pay restitution in an amount to be determined by the Court. On July 25, 2001, the court fixed the total restitution amount to be paid to Cadence at $195.4 million, any unpaid portion of which accrues interest at the statutory rate of 10% beginning July 25, 2001. The Company recognized the resulting expense of $222.4 million in the second quarter of 2001.

During the third quarter of 2001, Avant! paid the $27.0 million fine and made restitution payments to Cadence totaling $170.0 million. Avant! made a final payment of $26.5 million to Cadence on October 3, 2001, to conclude payment of the restitution owed to Cadence. The payments above included $1.1 million of interest.

In addition to the plea by Avant!, the individual defendants resolved the charges against them in the following manner:

     — Gerald Hsu pleaded no contest to conspiracy to misappropriate trade secrets, failure to return stolen property, and a violation of California corporate securities law and agreed to pay a $2.7 million fine. Mr. Hsu’s fine was paid on May 22, 2001. The securities charge is a misdemeanor, and the other charges were reduced to misdemeanors at sentencing on July 25, 2001. On July 25, 2001, Mr. Hsu resigned his positions as Avant!’s President and Chief Executive Officer. Mr. Hsu continues as the Chairman of the Company’s Board of Directors and as an employee of the Company in the newly created position of chief strategist, providing strategic direction for the Company.

     — Leigh Huang, Y.Z. Liao, and Eric Cho pleaded no contest to trade secret conspiracy and a violation of California corporate securities law. Huang, Liao and Cho agreed to pay fines of $0.1 million, $2.7 million, and $0.1 million, respectively, of which $0.2 million was paid in September 2001 and the remaining $2.7 million was paid in October 2001. Huang was sentenced to three years probation. Liao and Cho were each sentenced to three years probation and one year in county jail. Effective July 25, 2001, Liao resigned his position at Avant!. Huang and Cho are former Avant! employees.

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     — Stephen Wuu pleaded no contest to trade secret misappropriation and a violation of California corporate securities law. Wuu agreed to pay a $2.7 million fine which was paid by October 23, 2001. On July 25, 2001, Wuu was sentenced to 2 years in prison and three years probation. Effective July 25, 2001, Wuu resigned his position at Avant!.

     — Eric Cheng pleaded no contest to trade secret misappropriation. Cheng agreed to pay a $27,000 fine and was sentenced to three years probation and 364 days in county jail. Effective July 25, 2001, Cheng resigned his position at Avant!.

     — All charges were dismissed against former Avant! executive Mike Tsai.

As part of the settlement, the Company agreed to reimburse all of the current and former Avant! employees named above for the fines assessed against them, and indemnify them against the taxability of the reimbursement. The Company recognized the resulting expense of $14.1 million in the second quarter of 2001.

SILVACO LITIGATION

In March 1993, Meta Software Inc. (“Meta”), which Avant! acquired in October 1996, filed a complaint in the Superior Court of California for Santa Clara County against Silvaco Data Systems, Inc. seeking monetary damages and injunctive relief. In August 1995, Silvaco filed a cross-complaint against Meta and Shawn Hailey, then the President and Chief Executive Officer of Meta, alleging that Meta owed Silvaco royalties and license fees pursuant to a product development and marketing program and unpaid commissions related to Silvaco’s sale of Meta’s products and services under such program. In November 1997, a judgment in the aggregate amount of $31.4 million was entered against Avant!. Avant! filed appeals on its own behalf and on behalf of Mr. Hailey. In order to appeal the judgment, Avant! was required to post a bond, which has been collateralized with a $23.6 million letter of credit. Due to the uncertainty of the ultimate outcome of this issue, no losses have been accrued in the Company’s financial statements as of September 30, 2001.

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On June 21, 2001, the California Court of Appeal for the Sixth Appellate District reversed the judgment. The Court of Appeal decision gave Silvaco the option of amending its cross-complaint, in which case defaults that had been previously entered against Meta and Hailey, and that were the principal bases for the $31.4 million award, would be vacated, or holding a new default prove-up hearing on Silvaco’s causes of action for intentional interference with business relationships and defamation and retrial as to the amount of award on Silvaco’s cause of action for unfair business practices. On July 27, 2001, Silvaco petitioned the California Supreme Court for review of the Court of Appeal decision reversing the trial court judgment. On September 19, 2001, the California Supreme Court denied review of the Court of Appeal decision, and the Court of Appeal remitted the case to the trial court on September 21, 2001. Silvaco has indicated that it intends to proceed by default prove-up, rather than amend its complaint, and a default prove-up is scheduled for December 7, 2001. A trial setting conference regarding Avant!’s claims against Silvaco and Silvaco’s remaining claim is scheduled for February 6, 2002. If Silvaco opts to proceed to a new default prove-up hearing and retrial, or if Silvaco decides to file an amended cross-complaint, Avant! could be required to pay substantial monetary damages to Silvaco. Payment of the damages previously awarded, or damages that may be awarded in the future, would seriously harm Avant!’s business, financial condition and results of operations, and could cause the price of its stock to decline substantially.

SHAREHOLDER DERIVATIVE ACTIONS Since July, 24, 2001, three shareholder derivative complaints, purportedly brought on behalf and for the benefit of the Company, have been filed in state court against the Company’s Board of Directors. The first suit was filed by Timothy Scott in the Superior Court of Alameda County on July 24, 2001. The second suit was filed by Louisiana School Employees’ Retirement System in the Delaware Court of Chancery, New Castle County, on August 31, 2001. The third suit was filed by Donald Peterson in the Delaware Court of Chancery, New Castle County, on October 11, 2001. The complaints allege breach of fiduciary duty, gross mismanagement, abuse of control, and waste of corporate assets by the current directors of the Company in matters related to compensation and the Cadence litigation and criminal indictment. The complaint seeks unspecified damages, equitable relief, attorneys’ fees and costs. Avant! may have obligations to indemnify some or all of the defendants. The defendants have not yet responded to the complaints. Due to the uncertainty of the ultimate outcome of this issue, no losses have been accrued in the Company’s financial statements as of September 30, 2001.

SEQUENCE LITIGATION

On August 9, 2001, Sequence Design, Inc. (Sequence) filed an action against Avant! Corporation, in the United States District Court for the Northern District of California. The complaint alleges that Avant!’s Star-RCXT product infringes patent 5,901,063 owned by Sequence. The complaint seeks monetary and injunctive relief. Avant! has answered the complaint and counterclaimed for declaratory relief, for violations of the Sherman Antitrust Act and for statutory unfair competition in violation of California Business and Professions Code section 17200. Avant! believes it has defenses to Sequence’s claim and intends to defend itself vigorously. Should Sequence’s claim succeed, however, Avant! could be permanently enjoined from using and marketing any products held to incorporate the inventions claimed in the patent at issue, and it may be required to pay monetary damages to Sequence. Accordingly, an adverse judgment could seriously harm Avant!’s business, financial position and results of operations. Due to the uncertainty of the ultimate outcome of this issue, no losses have been accrued in the Company’s financial statements as of September 30, 2001.

SILICON VALLEY RESEARCH LITIGATION

On August 10, 2001, Silicon Valley Research, Inc. (SVR) filed an action against Avant! Corporation in the United States District Court for the Northern District of California. The complaint purports to state claims for statutory unfair competition, receipt, sale and concealment of stolen property, interference with prospective economic advantage, conspiracy, false advertising, violation of the Lanham Act and violation of 18 U.S.C.A. § 1962 (R.I.C.O.). In the complaint, SVR alleges that Avant!’s use of Cadence trade secrets damaged SVR. The complaint seeks an accounting, the imposition of a constructive trust, and actual and exemplary damages. Avant! has moved to dismiss the claims for statutory unfair competition, receipt, sale and concealment of stolen property, negligent interference with prospective economic advantage, conspiracy, and violation of 18 U.S.C.A. § 1962 (R.I.C.O.). Avant! has filed an answer in response to the remaining claims. Avant! believes it has defenses to SVR’s claims and intends to defend itself vigorously. Should SVR’s claims succeed, however, Avant! could be required to pay monetary damages to SVR. Accordingly, an adverse

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judgment could seriously harm Avant!’s business, financial position and results of operations. Due to the uncertainty of the ultimate outcome of this issue no losses have been accrued in the Company’s financial statements as of September 30, 2001.

DYNASTY CAPITAL SERVICES ARBITRATION

On October 18, 2001, Dynasty Capital Services LLC submitted a Notice of Submission of Dispute against Avant! to the American Arbitration Association. The Notice purports to include claims for breach of written contract, breach of covenant of good faith and fair dealing, fraud in the inducement, negligent misrepresentation, promissory estoppels, declaratory relief and constructive trust all related to Avant!’s repudiation of a Strategic Advisory Agreement between Avant! Corporation and Dynasty Capital Services LLC. Avant! has not yet responded to the notice. Avant! believes it has defenses to Dynasty’s claims and intends to defend itself vigorously. Should Dynasty’s claims succeed, however, Avant! could be required to pay monetary damages to Dynasty. Accordingly, an adverse award could seriously harm Avant!’s business, financial position and results of operations. Due to the uncertainty of the ultimate outcome of this issue, no losses have been accrued in the Company’s financial statements as of September 30, 2001.

The pending litigation and any future litigation against the Company and the Company’s employees, regardless of the outcome, are expected to result in substantial costs and expenses to the Company. The Company’s legal expenses for all litigation matters were $11.8 million and $4.6 million for the nine months ended September 30, 2001 and 2000 respectively. The Company currently expects continued substantial legal costs in the future as a result of its current litigation issues. Thus, current litigation issues could seriously harm the Company’s business, financial condition and results of operations.

In addition, from time to time, the Company is subject to legal proceedings and claims in the ordinary course of business which, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Aside from the matters described above, the Company does not believe that it is a party to any legal proceedings or claims that it believes would materially harm its business, financial condition and results of operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying consolidated financial statements and notes included in this report. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The forward-looking statements include, without limitation, statements about the market opportunity for electronic design automation software and services, the Company’s new product development, strategy, competition, expected expense levels, and the adequacy of the Company’s available cash resources. Our actual results could differ materially from those expressed by these forward-looking statements as a result of various factors, including the risk factors described in “Risk Factors That May Affect Future Results” as discussed in Item 2A below and other risks detailed from time to time in the Company’s SEC reports. In addition, past results and trends should not be used by investors to anticipate future results and trends. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Overview

Avant! Corporation develops, markets, licenses, and supports EDA software products that assist design engineers in the physical layout, design, verification, simulation, timing and analysis of advanced integrated circuits, or ICs. These automated design software products enable IC design engineers to reduce overall design time, and therefore time to market for the products utilizing the IC, while optimizing the speed, size, cost and power consumption of the IC. The Company’s products are used by IC designers in the semiconductor, computer, and consumer electronics, multimedia and telecommunications industries to automate a significant portion of the IC design process. The Company also offers physical design, parasitic extraction, verification, flow development and library development services, as well as product maintenance and customer support services.

A majority of the Company’s revenue is derived from fees for licenses of the Company’s software products. Licensing fees accounted for 59.0% and 60.8% of total revenue for the three months ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, licensing fees accounted for 59.8% and 62.4% of total revenue, respectively. The Company also generates services revenue consisting primarily of fees for maintenance and customer support, which represented 41.0% and 39.2% of total revenue for the three months ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, services revenue accounted for 40.2% and 37.6% of total revenue. Most of the Company’s revenues were generated by licenses and services provided in the United States. In the third quarter of 2001 and 2000, revenue from non-U.S. sources was 32.5% and 35.4%, respectively. For the nine months ended September 30, 2001 and 2000, revenue from non-U.S. sources was 35.2% and 31.7%, respectively.

The Company’s growth strategy includes acquisitions of key technology and product lines. During the past three fiscal years, the Company has completed six acquisitions. Three of these acquisitions were accounted for as poolings of interests, and the Company’s consolidated financial statements have been restated to reflect the effect of the mergers with Chrysalis Symbolic Design Inc., Xynetix Design Systems, Inc. and Technology Modeling Associates. The Analogy Inc., ACEO Technology Inc. and interHDL Inc. acquisitions were accounted for under the purchase method. Accordingly, the Company’s consolidated financial statements do not include the results of operations, financial position or cash flows of these companies prior to their acquisitions.

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In 1998, the Company invested $10 million in Forefront Venture Partners L.P. (“Forefront”), a venture capital limited partnership that invests in technology start-up companies. The Company holds a limited partnership interest representing 53.9% of the equity of the partnership. The partnership is controlled and managed by a general partnership, a principal of which, Kenneth Tai, is a member of the Company’s Board of Directors. The Company has no voting control of Forefront. The Company accounts for this investment using the equity method of accounting. The investment in Forefront resulted in an equity loss to the Company of $7.1 million and $13.9 million for the three and nine months ended September 30, 2001 primarily as a result of the impact of market conditions on the investment portfolio of Forefront. In the second quarter of 2001, the Company received a cash distribution of $2.5 million from Forefront. The Company believes that, due to the nature of venture capital investing, its investment in Forefront will be subject to significant fluctuations, which will result in the Company recording significant income or losses in the future.

In March 2001, the Company reached agreement with counsel for the plaintiff classes in two securities class actions for a voluntary resolution of the cases. Under that agreement, the Company paid a total of $47.5 million in exchange for dismissal of the actions and a release of claims by members of the classes. The District Court entered an order on June 22, 2001, that gave final approval to the settlement and dismissed the litigation with prejudice. The Company paid the full settlement amount of $47.5 million in April 2001. The Company recognized the expense in the fourth quarter of 2000.

On May 22, 2001, Avant! entered pleas of no contest to conspiracy to misappropriate trade secrets, two counts of trade secret misappropriation, and a violation of California corporate securities law. As part of the plea agreement, Avant! agreed to pay a fine of $27.0 million, which was paid on August 20, 2001, and to pay restitution to Cadence in an amount to be determined by the Court. On July 25, 2001, the court fixed the total restitution amount to be paid to Cadence at $195.4 million, any unpaid portion of which would accrue interest at the statutory rate of 10% beginning July 25, 2001. The Company recognized the resulting expense of $222.4 million in the second quarter of 2001. The Company completed payment to Cadence of $196.5 million for the full restitution amount, including interest, on October 3, 2001.

In addition to the plea by Avant!, Gerald Hsu, Chairman of the Board, pleaded no contest to conspiracy to misappropriate trade secrets, failure to return stolen property, and violation of the California corporate securities law and agreed to pay a $2.7 million fine which was paid on May 22, 2001. On July 25, 2001, Mr. Hsu resigned his positions as Avant!’s President and Chief Executive Officer. Mr. Hsu continues as the Chairman of the Company’s Board of Directors and as an employee of the Company in the newly created position of chief strategist, providing strategic direction for the Company.

Five former employees of the Company resolved the charges against them in the above mentioned settlement. The five individuals were fined a total of $5.6 million of which $0.2 million was paid in September 2001, and the remaining $5.4 million was paid in October     , 2001.

As part of the settlement, the Company agreed to reimburse certain current and former Avant! employees for the fines assessed against them, and indemnify them against the taxability of the reimbursement. The Company recognized the resulting expense of $14.1 million in the second quarter of 2001.

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RESULTS OF OPERATIONS

REVENUE. The Company’s total revenue increased 11.4% to $100.8 million in the three months ended September 30, 2001, from $90.5 million in the three months ended September 30, 2000. In the first nine months of 2001, revenues increased 10.2% to $292.5 million from $265.5 million in 2000. Revenue from sales to affiliates, Maingate Electronics, KK (“Maingate”) and Davan Tech Co., Ltd (“Davan Tech”), were $9.8 million and $11.7 million for the quarters ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, revenues from Maingate and Davan Tech were $26.1 million and $25.3 million, respectively. The Company has an 18.8% ownership in Maingate and accounts for the investment using the equity method. The Company’s Chairman of the board owns 50% of Maingate. Another executive of the Company owns 2.5% of Maingate. The remaining 28.7% is owned by a private investment fund whose owners include other current directors and executives of the Company. The Company owns 19.4% of Davan Tech and accounts for the investment using the equity method. The Company’s Chairman of the board owns 8.2% of Davan Tech.

Software revenue increased 8.1% to $59.5 million in the three months ended September 30, 2001, from $55.0 million in the three months ended September 30, 2000. For the nine months ended September 30, 2001, software revenue increased 5.6% to $175.0 million from $165.6 million at September 30, 2000. The growth in software revenue resulted primarily from continued demand for the Company’s full range of software products.

Services revenue increased 16.5% to $41.3 million in the three months ended September 30, 2001, from $35.5 million in the three months ended September 30, 2000. Services revenue increased 17.7% to $117.5 million from $99.8 million for the nine months ended September 30, 2000. The increases were primarily due to renewal maintenance orders on perpetual license contracts.

COSTS OF SOFTWARE AND SERVICES. Costs of software consist of personnel and related costs, production costs, product packaging, documentation, and amortization of purchased technology. Costs of software decreased 29.7% to $1.0 million in the three months ended September 30, 2001, from $1.5 million in the three months ended September 30, 2000. Cost of software remained consistent at $4.1 million for the nine months ended September 30, 2001 and 2000. As a percentage of software revenue, cost of software decreased to 1.7% from 2.7% for the three months ended September 30, 2001 and 2000, respectively and decreased to 2.4% from 2.5% for the nine months ended September 30, 2001 and 2000, respectively. The decrease in costs of software for the three months ended September 30, 2001 was due mainly to reduced amortization expenses.

Costs of services consist of costs of maintenance and customer support and costs associated with providing other services. Maintenance includes activities undertaken after the product is available for general release to customers to correct errors, make routine changes and provide additional features. Customer support includes installation assistance, training classes, product support services, newsletters, on-site visits and software or data modifications. Costs of services increased 25.5% to $5.8 million in the three months ended September 30, 2001, from $4.6 million in the three months ended September 30, 2000, representing 14.1% and 13.1% of services revenue for the three months ended September 30, 2001 and 2000, respectively. Costs of services increased 19.1% to $18.2 million in the nine months ended September 30, 2001 from $15.3 million in the nine months ended September 30, 2000 representing 15.5% and 15.3% percent of services revenue for nine months ended September 30, 2001 and 2000, respectively. The increase in costs of services for the three and nine months ended September 30, 2001 was due to an increase in headcount and related compensation expenses.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased 18.6% to $23.5 million for the three months ended September 30, 2001, compared with the $28.9 million recorded during the three months ended September 30, 2000. As a percentage of total revenue, selling and marketing expenses were 23.4% and 32.0% for the three months ended September 30, 2001 and 2000, respectively. Selling and marketing expenses decreased slightly to $76.2 million for the nine months ended September 30, 2001, from $76.6 million in the nine months ended September 30, 2000. As a percentage of total revenue, selling and marketing expenses were 26.0% and 28.8% for the nine months ended September 30, 2001 and 2000, respectively. The decrease in selling and marketing expenses for the three months ended September 30, 2001, was due mainly to decreases in bad debt expense and distributor commissions.

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RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased 7.6% to $20.6 million from $19.1 million for the three months ended September 30, 2001 and 2000, respectively. As a percentage of total revenue, research and development expenses were 20.4% and 21.1% for the three months ended September 30, 2001 and 2000, respectively. Research and development expenses increased 4.2% to $65.1 million from $62.4 million for the nine months ended September 30, 2001 and 2000, respectively. As a percentage of total revenue, research and development expenses were 22.2% and 23.5% for the nine months ended September 30, 2001 and 2000, respectively. The increase in research and development expenses for the three and nine months ended September 30, 2001 was primarily due to an increase in consulting and amortization expenses and was partially offset by a decrease in personnel expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased 54.9% to $15.3 million from $9.9 million for the three months ended September 30, 2001 and 2000, respectively. As a percentage of total revenue, general and administrative expenses increased to 15.2% from 10.9% for the three months ended September 30, 2001 and 2000, respectively. General and administrative expenses increased 29.3% to $36.3 million from $28.0 million for the nine months ended September 30, 2001 and 2000, respectively. As a percentage of total revenue, general and administrative expenses increased to 12.4% from 10.6% for the nine months ended September 30, 2001 and 2000, respectively. The increase in general and administrative expenses for the three and nine months ended September 30, 2001, were primarily due to increased legal expense and increased leasehold expenses, including a $4.2 million leasehold write-off. The increase was partially offset by decreases in facilities and services costs. Legal expenses were $3.7 million for the three months ended September 30, 2001 and $11.8 million for the nine months ended September 30, 2001, compared to $2.1 million and $4.6 million in the same periods last year. The Company is expected to incur significant future legal costs as a result of its current litigation matters. See “Note 9 to the condensed consolidated financial statements” for further discussion.

LEGAL SETTLEMENT AND OTHER RELATED COSTS. As part of the plea agreement to settle the criminal action brought against the Company and current and former employees, the Company agreed to pay $222.4 million in fines and restitution. As part of the settlement, the Company agreed to reimburse all of the current and former Avant! employees for the fines assessed against them, and indemnify them against the taxability of the reimbursement. These amounts totaled $14.1 million. For the nine months ended September 30, 2001, the Company recognized $236.5 million of expense related to these matters. There were no comparable expenses for the nine months ended September 30, 2000.

EQUITY (LOSS)/INCOME FROM INVESTMENTS AND JOINT VENTURES, NET. The Company incurred an equity loss from unconsolidated subsidiaries of $7.3 million for the three months ended September 30, 2001, compared to an equity gain of $4.1 million for the same three-month period in 2000. For the nine months ended September 30, 2001, the Company incurred an equity loss from unconsolidated subsidiaries of $15.4 million compared to an equity gain of $14.0 million for the nine months ended September 30, 2000. These amounts principally represent the Company’s share of equity interest in investments in Forefront, Maingate and Davan Tech. The equity loss in the third quarter of 2001 was primarily due to recording an unrealized loss from the Company’s investment in Forefront. The Company believes that, due to the nature of venture capital investing, the value of its investment in Forefront may be subject to significant fluctuation, and may result in the Company recording significant gains or losses in the future.

INTEREST INCOME AND OTHER, NET. Interest income and other, net was $0.1 million and $1.6 million for the three months ended September 30, 2001 and 2000, respectively. For the nine months ended September 30, 2001 and 2000, interest income and other, net was $4.4 million and $2.7 million respectively. The increase in interest income and other, net for the nine months ended September 30, 2001, was due to a decrease in charitable contribution expense, partially offset by a reduction in interest income and an increase in interest expense.

INCOME TAXES. The effective tax rate for the three months ended September 30, 2001 and 2000 was constant at 37.5%. The effective tax rate excluding one-time litigation settlement costs was 37.5% for the nine months ended September 30, 2001 compared to 37.9% for the nine months ended September 30, 2000.

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NET EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE

Reported net earnings were $17.1 million and $20.1 million for the three months ended September 30, 2001 and 2000, respectively. Reported net earnings per share on a diluted basis were $.45 and $.50 for the three months ended September 30, 2001 and 2000, respectively. Reported net loss was $185.5 million and net earnings were $59.8 million for the nine months ended September 30, 2001 and 2000, respectively. Reported net loss per share on a diluted basis was $4.94 and net earnings per diluted share were $1.49 for the nine months ended September 30, 2001 and 2000, respectively.

On May 18, 2001, the Board of Directors granted approximately 2.5 million stock options to employees at $18.40 per share, the fair market value on the date of the grant. An additional grant of approximately 1.0 million stock options was made in August 2001, at a fair market value grant price of $5.90 per share. The term of the options granted were ten years with vesting requirement of 25% after one year of service and monthly thereafter, fully vesting upon completion of the fourth year of service.

During the third quarter, the Company adopted the 2001 Stock Bonus Plan (the “Plan”). Under the terms of the Plan, the Company may issue up to 5 million shares of the Company’s common stock to directors, officers, employees and consultants. The number of shares may be increased based on the terms of the Plan. During the quarter, approximately 200,000 shares were granted to employees under the Plan.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, the Company had $96.1 million of cash and cash equivalents, short-term investments, and restricted investments, compared to $288.2 million as of December 31, 2000. The Company had a working capital deficit of $34.4 million as of September 30, 2001, compared to working capital of $203.4 million as of December 31, 2000. The decrease in working capital is primarily the result of the outcome of legal settlements and the purchase of long-term investments described below.

On May 22, 2001, Avant! entered pleas of no contest to conspiracy to misappropriate trade secrets, two counts of trade secret misappropriation, and a violation of California corporate security law. As part of the plea agreement, Avant! agreed to pay a fine of $27.0 million, which was paid on August 20, 2001, and to pay restitution in an amount to be determined by the court. On July 25, 2001, the court fixed the total restitution amount to be paid to Cadence at $195.4 million, any unpaid portion of which would accrue interest at the statutory rate of 10% beginning July 25, 2001.

During the third quarter 2001, Avant! paid the $27.0 million fine and made restitution payments to Cadence totaling $170.0 million. Avant! made a final payment of $26.5 million to Cadence on October 3, 2001, to conclude payment of the restitution owed to Cadence. The payments above included $1.1 million of interest.

As part of the settlement, the Company agreed to reimburse all of the current and former Avant! employees for the fines assessed against them, and indemnify them against the taxability of the reimbursement. The total amount to be paid for the fines and indemnification of the individuals is $14.1 million. Prior to September 30, 2001, Avant! paid $2.9 million related to these fines and another $5.4 million was paid in October 2001. The remaining $5.8 million will be reimbursed in the future.

In April 2001, the Company paid $47.5 million to settle two securities class actions. Under the agreement, the District Court entered an order that gave the final approval to the settlement and dismissed the litigation with prejudice.

The Company invested an additional $55 million in Semiconductor Manufacturing International Corporation (“SMIC”) during the first quarter of 2001 for a total investment of $62.5 million. The Company was scheduled to make further investments of $12.5 million on December 15, 2001 and $25.0 million on June 15, 2002. In October 2001, the Company terminated its investment in SMIC. Pursuant to the agreement terminating the Company’s investment, the entire $62.5 million invested by the Company will be reimbursed and the Company is relieved of any obligation to invest additional funds in SMIC. The Company received $33 million of its SMIC investment on October 3, 2001. Under the agreement the remaining $29.5 million will be paid by November 30, 2001.

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The Company purchased $30 million of zero coupon convertible bonds issued by ALi in March 2001. The bonds mature on February 29, 2004 and are redeemable on that date for an amount equal to 107% of the original principal amount.

The bonds are convertible into ordinary shares of ALi at the Company’s option, subject to certain periods during which, under Taiwanese law, ALi’s stock transfer records are required to be closed. The conversion price is US$1.835 per share, subject to adjustment for subdivisions, consolidations or reclassifications of ALi’s ordinary shares. The conversion price is also subject to downward adjustment on March 30, 2002 and March 30, 2003, if the average closing price of the ordinary shares is less than the applicable conversion price on such date. If the Company were to convert the bonds at the current conversion price, the Company would receive approximately 10.4% of the outstanding shares of ALi.

The Company will have the right to cause ALi to redeem the bonds on March 30, 2003, for the principal amount of the bonds. ALi has the right to redeem the bonds, in whole or in part, for the principal amount if the closing price of ALi common shares on the trading stock market, the Republic of China Over-the-Counter Securities Exchange, in US dollars, calculated at the then prevailing exchange rate, is at least 140% of the conversion price for 30 consecutive days. ALi may exercise its right to redeem the bonds by giving notice at least 30 days, but not more than 60 days, prior to the date of redemption. Notice may not be given prior to ten days following the end of the 30-consecutive-day period described above, and not before the first anniversary of the date of the purchase of the bonds.

ALi listed the bonds on the Luxembourg Stock Exchange, and has covenanted to apply to list the ALi common shares obtainable on conversion of the bonds on the Republic of China Over-the-Counter Securities Exchange. The Company intends to hold these bonds until maturity.

In August 2001, the Company obtained a $7.9 million working capital loan, bearing interest at 2.0%, from Maingate. The outstanding principal and accrued interest on this loan was repaid in October 2001.

Net cash used in operating activities was $102.8 million for the nine months ended September 30, 2001. The net loss of $185.5 million for the nine months ended September 30, 2001 included non-cash charges for depreciation and amortization of $20.9 million and losses from investments and joint ventures of $15.4 million.

Cash flows from changes in operating assets and liabilities included decreases in accounts receivable and accrued litigation and an increase in deferred revenue. The decrease in accounts receivable of $29.8 million at September 30, 2001 resulted from strong cash collections during the first three quarters of the fiscal 2001. The Company believes that its allowance for doubtful accounts is adequate. Accrued litigation decreased $22.1 million resulting from additional accruals of $212.4 million reduced by the payments of $47.5 million for the class action lawsuit, $27 million fine imposed in connection with the Cadence criminal litigation and $170 million for the restitution payment to Cadence. Deferred revenue increased by $15.4 million to $85.8 million at September 30, 2001 primarily due to amounts invoiced and collected in the first three quarters of 2001 with respect to which the revenue will be recognized in future quarters.

Cash provided from investing activities was $47.1 million for the nine months ended September 30, 2001. In 2001, $92.3 million of cash was used for the purchase of investments and long-term assets. Cash provided by maturities and sales and purchases of short-term investments, net totaled $344.3 million. Included in the cash used for other long-term assets was an additional investment of $55 million in SMIC and a $30 million investment in Ali bonds

Net cash provided from financing activities was $5.9 million for the nine months ended September 30, 2001. In the first quarter of 2001, the Company purchased an additional 356,800 shares of its common stock for $6.5 million. For the nine months ended September 30, 2001 cash of $2.7 million was received from the exercise of stock options. In the third quarter of 2001, the Company received cash of $7.9 million as a loan from Maingate. This loan was repaid in October 2001.

In connection with various litigation matters, the Company was required to post several bonds. One of the bonds is collateralized by a $23.6 million irrevocable standby letter of credit. The Company has collateralized these instruments with short-term investments totaling $33.7 million. The collateralized investments are classified as restricted investments and must remain on deposit until the bonds are released.

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The Company believes that its existing cash balances and short-term investments, together with cash flow from operations, will be sufficient to meet its liquidity requirements through at least the end of the next twelve months, without regard to the potential consequences of any adverse judgments in any pending litigation matters.

ITEM 2A. RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

THE COMPANY HAS BEEN REQUIRED TO PAY SUBSTANTIAL AMOUNTS ON THE RECENT RESOLUTION OF CRIMINAL AND CIVIL LITIGATION, AND MIGHT BE REQUIRED TO PAY ADDITIONAL AMOUNTS UNDER PENDING AND FUTURE LAWSUITS, WHICH COULD MATERIALLY AFFECT THE COMPANY’S LIQUIDITY.

The Company and its subsidiaries are engaged in a number of material litigation matters, including a civil action brought by Cadence Design Systems, Inc. in December 1995. Recently settled litigation against the Company and certain of its employees has resulted, and the pending litigation against the Company, and any future litigation against the Company or its employees, regardless of the outcome, will continue to result in substantial costs and expenses and significant diversion of effort by management. An adverse result in any of the Company’s other litigation matters could seriously harm the Company’s business, financial condition and results of operations, and cause its stock price to decline substantially

Avant! believes it has defenses to all of Cadence’s claims and intends to defend itself vigorously. Should Cadence ultimately succeed in the prosecution of its claims, however, Avant! could be permanently enjoined from using and marketing any place and route products held to incorporate DFII source code, and it may be required to pay substantial monetary damages to Cadence. In addition, Avant! could be enjoined preliminarily from selling its current Apollo and Astro place and route products. It is possible that Avant!’s relationships with its customers will be seriously harmed in the future as a result of the Cadence litigation. Accordingly, an adverse judgment, if entered on any Cadence claim, could seriously harm Avant!’s business, financial position and results of operations and cause Avant!’s stock price to decline substantially.

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THE COMPANY’S FUTURE SUCCESS WILL DEPEND ON ITS ABILITY TO KEEP PACE WITH THE RAPIDLY EVOLVING TECHNOLOGY STANDARDS OF THE INDUSTRY.

Because the semiconductor industry has made significant technological advances recently, EDA software providers, such as the Company, that license design tools to semiconductor companies have been required to continuously develop new products and enhancements for existing products to keep pace with the evolving industry standards and rapidly changing customer requirements. The evolving nature of the EDA software industry could render the Company’s existing products and services obsolete. The Company’s success will depend, in part, on its ability to:

• Enhance its existing products and services;

• Develop and introduce new products and services on a timely and cost-effective basis that will keep pace with technological developments and evolving industry standards; and

• Address the increasingly sophisticated needs of its customers.

If the Company is unable for technical, legal, financial or other reasons to respond in a timely manner to changing market conditions or customer requirements, its business, financial condition and results of operations could be seriously harmed.

THE COMPANY MAY BE UNABLE TO GROW AND INCREASE ITS PROFITABILITY IN THE HIGHLY COMPETITIVE EDA SOFTWARE MARKET.

The EDA software market is intensely competitive and subject to rapid change. The Company currently faces competition from major EDA vendors, including Cadence Design Systems, Inc., which currently holds a dominant share of the market for EDA software, Synopsys, Inc. and Mentor Graphics Corporation. The Company may not be able to maintain a competitive position against these competitors. Each of these companies has a longer operating history, significantly greater financial, technical and marketing resources, greater name recognition and a larger installed customer base than the Company. These competitors also have established relationships with current and potential customers of the Company, and they can devote substantial resources aimed at preventing the Company from enhancing relationships with existing customers or establishing relationships with potential customers. The Company also competes against numerous smaller companies that market competing products and services.

Alliances among competitors could present particularly formidable competition to the Company. Furthermore, because there are relatively low barriers to entry in the software industry, the Company expects additional competition from other established and emerging companies. The Company also competes with the internal EDA development groups of its existing and potential customers, many of whom design and develop customized design tools for their particular needs and, therefore, may be reluctant to license products offered by independent vendors such as the Company.

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Additionally, the Company’s current or potential competitors may develop products comparable or superior to those developed by the Company or adapt more quickly than the Company to new technologies, evolving industry trends or changing customer requirements. The intense competition in the EDA software industry could result in price reductions, reduced margins or loss of market share, any of which could seriously harm the Company’s business, operating results or financial condition. The Company may not be able to continue to grow or increase its market share and profitability if it cannot compete successfully against current and future competitors. These and other competitive pressures faced by the Company could seriously harm its business, operating results and financial condition.

THE COMPANY’S PROFITABILITY DEPENDS IN LARGE PART ON THE HEALTH OF THE SEMICONDUCTOR AND ELECTRONICS INDUSTRIES.

The Company provides software tools and services to engineers in the semiconductor industry and, more generally, the electronics industry. The Company’s profitability depends on the strength of the industries in which its customers do business. Both of these industries are characterized by rapid technological change, short product life cycles, fluctuations in manufacturing capacity and pricing and gross margin pressures. Segments of these industries have undergone, and currently are undergoing, significant economic downturns characterized by decreased product demand, production over-capacity, price erosion, work slowdowns and layoffs. Because acquisitions of new licenses from the Company are largely dependent upon the commencement of new design projects, any slowdown in these industries could result in decreased demand for the Company’s products and services and seriously harm the Company’s business, financial condition and results of operations.

THE COMPANY MAY BE UNABLE TO ATTRACT AND RETAIN THE KEY MANAGEMENT AND TECHNICAL PERSONNEL THAT IT NEEDS TO SUCCEED.

The Company’s future operating results depend in significant part upon the continued service of key management and technical personnel. Several of the Company’s key personnel, including Gerald C. Hsu, have recently pleaded no contest on charges relating to the matters underlying the litigation between the Company and Cadence. Effective July 25, 2001 Mr. Hsu resigned his positions as the Company’s Chief Executive Officer and President. Mr. Hsu continues as Chairman of the Board of the Company and has accepted the newly created position of chief strategist. The Company has made several personnel changes resulting from the recent litigation outcome. Several of the Company’s key managers, including the President, are new to their positions, and it may take time for them to fully and effectively assume and undertake all the responsibilities associated with their new positions. In addition, qualified EDA engineers are scarce, and competition for these individuals is intense. Few of the Company’s employees are bound by employment or non-competition agreements, and, due to the intense competition for such personnel, as well as the uncertainty caused by the pending litigation, it is possible that the Company will fail to retain such key technical and managerial personnel. If the Company is unable to attract, hire and retain qualified personnel in the future, the development of new products and the management of the Company’s increasingly complex business would be impaired. Such a failure would seriously harm the Company’s business, operating results and financial condition.

THE COMPANY’S QUARTERLY OPERATING RESULTS ARE DIFFICULT TO PREDICT.

The Company is unable to accurately forecast its future revenues, primarily because of the volatile nature of the market in which it competes and the unpredictability of the various litigation matters to which it is a party. The Company’s revenues and operating results generally depend on the size, timing and structure of significant licenses, which factors historically have been, and are likely to continue to be, difficult to forecast. In particular, the Company has adopted a flexible pricing strategy pursuant to which it offers both perpetual and time-based software licenses to customers, depending on customer requirements and financial constraints. Because each time-based license may have a different structure and could be subject to cancellation, future revenue received under these licenses is unpredictable.

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In addition, the Company’s current and future expense levels are based largely on its operating plans and estimates of future revenues and are, to an extent, fixed. The Company may be unable to adjust spending sufficiently quickly to compensate for any unexpected revenue and/or cash shortfall. Accordingly, any significant shortfall in revenues in relation to planned expenditures would seriously harm the Company’s business, financial condition and results of operations. Such shortfalls in the Company’s revenue or operating results from levels expected by public market analysts and investors could seriously harm the trading price of its common stock. Additionally, the Company may not learn of such revenue shortfalls, earnings shortfalls or other failure to meet market expectations until late in a fiscal quarter, which could result in an even more immediate and serious harm to the trading price of its common stock.

The Company’s quarterly operating results have varied, and it is anticipated that its quarterly operating results will vary, substantially from period to period depending on various factors, many of which are outside the Company’s control. In addition to the factors discussed in the previous paragraph, other factors that could affect the Company’s quarterly operating results include:

• Increased competition;

• The ability to finance ongoing operations (see “Part II — Item 1. Legal Proceedings”);

• The length of the Company’s licensing cycle;

• The timing of new or enhanced product announcements, introductions, or delays in the introductions of new or enhanced versions of products by the Company or its competitors;

• Market acceptance of new and enhanced versions of the Company’s products;

• The mix of direct and indirect licenses;

• Changes in pricing policies by the Company or its competitors;

• Cancellation of time-based licenses or maintenance agreements;

• Changes in operating expenses, including litigation expenses;

• Economic conditions in domestic and international markets;

• Political and economic instability, including the impact of recent acts of war and terrorism;

• The Company’s ability to market its products successfully in domestic and international markets; and

• Foreign currency exchange rates.

Due to the foregoing factors, the Company cannot predict with any significant degree of certainty its quarterly revenue and operating results.

Further, the Company believes that period-to-period comparisons of its operating results are not necessarily a meaningful indication of future performance.

THE COMPANY’S STOCK PRICE IS EXTREMELY VOLATILE.

The trading price of the Company’s common stock has fluctuated significantly in the past. The high and low prices of the Company’s common stock in the last 52 weeks were approximately $27.00 and $2.62. The trading price of the Company’s common stock is likely to continue to be highly volatile and could be subject to wide price fluctuations in response to such factors as:

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• The outcome of the various litigation matters to which the Company is a party;

• Actual or anticipated fluctuations in the Company’s operating results;

• Announcements of technological innovations and new products by the Company or its competitors;

• New contractual relationships with strategic partners by the Company or its competitors;

• Proposed acquisitions by the Company or its competitors; and

• Financial results that fail to meet public market analyst expectations of performance.

In addition, the stock market in general, and the NASDAQ National Market and the market for technology companies in particular, have experienced extreme price and volume fluctuations. These broad market and industry factors may seriously harm the market price of the Company’s common stock in future periods.

THE COMPANY DEPENDS ON INTERNATIONAL LICENSES FOR A SIGNIFICANT PERCENTAGE OF ITS REVENUE.

The Company licenses its software products and provides services to customers located throughout the world. Managing global operations and international sites presents challenges associated with cultural differences and organizational alignment. Moreover, each region in the global EDA market exhibits unique characteristics that can cause purchasing patterns to vary significantly from period to period. International revenue accounted for approximately 32.5% and 35.4% of the Company’s total revenue for the three months ended September 30, 2001 and 2000, respectively and 35.2% and 31.7% for the nine months ended September 30, 2001 and 2000, respectively. The Company expects that international license and service revenue will continue to account for a significant portion of its total revenue for the foreseeable future. The Company’s international business activities are subject to a variety of potential risks, including:

• The impact of recessionary environments in foreign economies;

• Longer receivables collection periods and greater difficulty in accounts receivable collection;

• Difficulties in staffing and managing foreign operations;

• Political and economic instability;

• Unexpected changes in regulatory requirements; and

• Reduced protection of intellectual property rights in some countries.

Currency exchange fluctuations in countries in which the Company licenses its products could also seriously harm its business, financial condition and results of operations by resulting in pricing that is not competitive with products priced in local currencies. Furthermore, the Company may not be able to continue to generally price its products and services internationally in U.S. dollars because of changing sovereign restrictions on the importation and exportation of foreign currencies as well as other practical considerations. Moreover, it is possible that the Company may fail to sustain or increase revenue derived from international licensing and service or that the foregoing factors will seriously harm its future international license and service revenue, and, consequently, seriously harm its business, financial condition and results of operations.

THE COMPANY MUST SUCCESSFULLY MANAGE ITS EXPANDING OPERATIONS.

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The Company has experienced periods of rapid growth and significant expansion of its operations that have placed a significant strain upon its management systems and resources. In addition, the Company has recently hired a significant number of employees, and plans to further increase its total headcount. The Company also plans to expand the geographic scope of its customer base and operations. This expansion has resulted and will continue to result in substantial demands on its management resources. The Company’s ability to compete effectively and to manage future expansion of its operations, if any, will require it to continue to improve its financial and management controls, reporting systems and procedures on a timely basis and expand, train and manage its employee work force. The Company may not be successful in addressing such risks, and the failure to do so would seriously harm its business, financial condition and results of operations.

THE COMPANY MAY ACQUIRE OTHER COMPANIES, AND MAY BE UNABLE TO SUCCESSFULLY INTEGRATE ITS OPERATIONS AND PRODUCT LINES WITH THOSE ACQUIRED COMPANIES.

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The Company has employed a strategy of acquiring companies that provided key technology and other resources to expand the Company’s capabilities. If the Company acquires other companies in the future, it may face several of the difficulties that it encountered in integrating companies it has acquired in the past. The Company and its acquired companies each may have different systems and procedures in various operational areas that must be integrated. The Company may not be successful in completing the integration effectively, expeditiously or efficiently. The difficulties of such integration may be increased by the necessity of coordinating geographically separated divisions, integrating personnel with disparate business backgrounds and combining different corporate cultures. The integration of certain operations will require the dedication of management resources, temporarily distracting attention from the Company’s day-to-day business. The business of the combined Company may also be disrupted by employee uncertainty and lack of focus during the integration process. Accordingly, the Company may not be able to retain its entire key technical, sales and other key personnel. The Company’s failure to effectively integrate its operations with its newly acquired companies could seriously harm its business, financial condition and results of operations.

THE COMPANY MAY BEAR INCREASED EXPENSES TO PROTECT ITS PROPRIETARY RIGHTS OR DEFEND ITSELF AGAINST CLAIMS OF INFRINGEMENT, AND THE COMPANY MAY LOSE COMPETITIVE ADVANTAGES IF ITS PROPRIETARY RIGHTS ARE INADEQUATELY PROTECTED.

The Company relies on a combination of patents, trade secrets, copyrights, trademarks and contractual commitments to protect its proprietary rights in its software products. The Company generally enters into confidentiality or license agreements with its employees, distributors and customers, and limits access to and distribution of its software, documentation and other proprietary information. Despite these precautions, a third party may still copy or otherwise obtain and use the Company’s products or technology without authorization, or develop similar technology independently. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries. In particular, the current litigation with Cadence involves such infringement claims. Responding to such claims, regardless of merit, could consume valuable time, result in costly litigation, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if available, may not be available on acceptable terms. A forced license could seriously harm the Company’s business, financial condition and results of operations.

ERRORS IN THE COMPANY’S SOFTWARE PRODUCTS COULD RESULT IN LOSS OF MARKET SHARE OR FAILURE TO ACHIEVE MARKET ACCEPTANCE.

Software products as complex as those offered by the Company may contain defects or failures when introduced or when new versions are released. The Company has in the past discovered software defects in certain of its products and may experience delays, lost revenue or increased costs to correct similar defects in the future. Despite testing by the Company, errors may still be found in new products or releases after commencement of commercial shipments, resulting in loss of market share or failure to achieve market acceptance. Products that have been announced but haven’t been shipped yet may have errors. Any such occurrence could seriously harm the Company’s business, financial condition and results of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK, DERIVATIVES AND FINANCIAL INSTRUMENTS

Information relating to this item is set forth in Part I., Item 2A of this Form 10-Q under the heading “The Company depends on international licenses for a significant percentage of its revenue,” and is incorporated herein by reference.

Foreign Currency Derivative Instruments

The Company transacts business in various foreign currencies. Accordingly, the Company is subject to exposure from adverse movements in foreign currency exchange rates. The Company had no hedging contracts outstanding as of September 30, 2001.

The Company assesses the need to utilize financial instruments to hedge currency exposures on an ongoing basis. The Company does not use derivative financial instruments for speculative trading purposes, nor does the Company hedge its foreign currency exposure in a manner that entirely offsets the effects of changes in foreign exchange rates. The Company regularly reviews its hedging program and may as part of this review determine at any time to change its hedging program.

Fixed Income Investments

The Company places its investments with high credit, quality issuers and endeavors to limit the amount of its credit exposure to any one issuer. The Company’s general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk. The Company’s exposure to market risks for changes in interest rates arises from its investments in debt securities issued by U.S. government agencies and corporate debt securities. All highly liquid investments with a maturity of 90 days or less at the date of purchase are considered to be cash equivalents. The Company does not expect any material loss with respect to its investment portfolio.

The following table presents the carrying value and related weighted average annualized return rates for the Company’s investment portfolio. The carrying value approximates fair value at September 30, 2001, in thousands:

	Carrying Amount		Average Return Rate
Cash equivalents-variable rates	$	26,382		3.50	%
Investments -variable rates		38,406		3.89	%
	$	64,788		3.69	%

As of September 30, 2001, the Company had an investment portfolio of fixed income securities, excluding those classified as cash and cash equivalents, of $38.4 million. These securities, like all fixed income instruments, are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 basis points from levels as of September 30, 2001, the fair value of the portfolio would decline by approximately $0.6 million.

As of September 30, 2001, the underlying maturities of financial instruments are $49.3 million within one year and $15.5 million from 2002 to 2006.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information regarding legal proceedings provided in Part I, Item 1 “Notes to Condensed Consolidated Financial Statements”, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 2A, “Risk Factors That May Affect Future Results” is incorporated by reference in response to this item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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10.15	Employment Agreement between the Company and Noriko Ando dated October 1, 2001
10.16	Employment Agreement between the Company and John Hsu, dated October 1, 2001
10.17	Severance Agreement between the Company and Moriyuki Chimura, dated December 8, 1998, as amended on December 15, 1999.
10.18	Distribution Agreement between Avant! Japan Corporation and Maingate Electronics KK, dated October 1, 2000
10.19	Distribution Agreement between Avanticorp Hong Kong Limited and Davan Tech Co., Ltd, dated October 1, 2000
10.20	Promissory Note, dated June 5, 1998 from Mark Chimura in favor of the Company

(b)  Reports on Form 8-K

A current report on Form 8-K dated October 3, 2001 and filed with the SEC on October 4, 2001, to announce the termination of the Company’s investment in Semiconductor Manufacturing International Company, and to announce the Company completed payment in full of the restitution amount awarded to Cadence Design Systems, Inc.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AVANT! CORPORATION (Registrant)
November 14, 2001	/S/ Viraj J. Patel
	Viraj J. Patel Head of Finance and Treasurer Principal Financial Officer

November 14, 2001	/S/ Scott Spangenberg
	Scott Spangenberg Head of Corporate Accounting and Principal Accounting Officer

31 EX-10.15 3 f76852ex10-15.txt EMPLOYMENT AGREEMENT - NORIKO ANDO EMPLOYMENT AGREEMENT Exhibit 10.15 This EMPLOYMENT AGREEMENT is made as of the 1st day of October, 2000 by and between and Noriko Ando (the "Employee") and Avant! Company, a Delaware corporation (the "Company"). This Agreement restates and supersedes all previous Employment Agreements or Severance Agreements between the Employee and the Company. WITNESSETH: WHEREAS, the Employee has been and is now in the employment of the Company; and WHEREAS, the Company has concluded that securing the service of the Employee will benefit it. NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements hereinafter set forth, the parties therefore agree as follows: 1. TERM OF EMPLOYMENT (A) Basic Rules. The Company hereby employs the Employee, and the Employee hereby accepts such employment with the Company from the date of this Agreement until the date when the Employee's employment terminates pursuant to subsection (b) below. The Employee shall subject to his appointment as such from time to time (the "Term") serve during the Term in the Company and its subsidiaries or affiliates. During the Term, the Employee will devote his best efforts to such employment and all of his business time and attention to the performance of his duties hereunder; provided, however, that the Employee may devote reasonable periods required for serving as a director or member of any Company, partnership, trust or other entity ("Entity") organization involving no conflict of interest with the interests of the Company or his personal affairs so long as the same does not interfere with the performance of his duties hereunder. (B) Termination of Employment. The Company may terminate the Employee's employment at any time and for any reason by giving the Employee 30 days' advance notice in writing. The Employee may resign his employment by giving the Company 30 days' advance notice in writing. The Employee's employment shall be terminated automatically in the event of his death. (C) Termination of Agreement. This Agreement shall be renewed automatically for successive periods of three (3) years unless the Company notifies the Employees) of its intention not to renew at least 1 month prior to the expiration of this agreement. This Agreement shall also be terminated when all obligations of the parties hereunder have been satisfied. (D) Compensation (Salary and Cash Bonus). The Company shall pay to the Employee, not less frequently than monthly; an annual base salary (the "Minimum Salary") as fixed from time to time by the Company during the Term of his employment hereunder. The Minimum Salary is USD $350,000 as of October 1, 2000 The Company may increase the Minimum Salary from time to time and upon each such increase the term "Minimum Salary" shall mean such increased total amount. References to the Minimum Salary in this Agreement are to the Minimum Salary, as adjusted, in the year in which the event requiring such reference occurs. In addition to the Minimum Salary, the Employee shall be entitled to receive during the Term an annual cash bonus based on the performance of the Company and the Employee. The actual amount of any such annual cash bonus to be paid to the Employee will be determined by the Company. Payment of any bonus compensation in this Section shall be made within 60 days after such determination. (E) Expenses, Benefit Plans, and Pay-time-off. The Company will reimburse the Employee for all reasonable and necessary business and entertainment expenses incurred by him in connection with the performance of his duties hereunder. The Employee shall be eligible to participate in any employee benefit programs, pension, profit sharing, stock option or similar plan or program and in any group life insurance, hospitalization, mental, dental, accident, disability or similar plan or program of the Company non-existing or establishes hereafter. In addition, so long as the Company employs the Employee, the Employee shall be entitled to receive other benefits - generally available to all employees and any other, which are now or may hereafter be placed in effect. The Employee shall be entitled to pay-time-off (the "PTO"), at such times and for such periods, as are in accordance with the policies of the Company then in effect for all employees employed by the Company, but in no event shall the Employee be entitled to fewer than 80 hours of PTO per year. The Employee shall not be required to take any PTO to which he is entitled in a given year. In the event the Employee does not take all of the PTO to which he is entitled in a given year, such PTO will be deferred and accumulated for use by the Employee in a subsequent year up to a maximum of 240 hours. 2. RIGHTS UPON CERTAIN TERMINATIONS (A) Employee's Rights. Unless otherwise defined in this section, each capitalized tern used in this Agreement shall have the meaning assigned to it in the Company's 1995 & 2000 Stock Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan"). Without limiting any other rights which the Employee or the Company may have in such event, upon any voluntary resignation or involuntary termination of the Employee's employment without Employee's written consent (including but not limited to a Constructive Termination as defined below) that occurs within six months after a Change in Control (as defined below), and subject to Section 7 below, the Company shall: (a) pay to the Employee cash termination payment equal to three (3) years (the "Termination Payment Period") of the Employee's Minimum Salary in effect on the date of termination, in addition to any other payments, benefits, or other rights to which the Employee may then be entitled. The Company shall pay the above-mentioned payment amount in this Section 2.A.a to the Employee in full on the Termination Date; (b) allow the Employee to automatically vest in full of the shares of Common Stock then subject to any option granted by the Company to the Employee and then outstanding (including but not limited to any such option drat may hereafter be granted to Employee, under the Plan or otherwise) but not otherwise vested; and all outstanding repurchase rights applicable to any Common Stock previously issued to the Employee by the Company (including any Common Stock hereafter issued which is then held by Employee) shall also terminate automatically. If any provisions of the preceding sentence regarding acceleration of options or early termination of repurchase rights shall conflict with any provision of any existing or future option agreement, stock purchase agreement or other agreement between the Employee and the Company, the provisions of the preceding sentence in this Agreement shall govern if they are more favorable to the Employee under the circumstances than the conflicting provisions in such other agreements, unless such other agreements expressly refers to the preceding sentence and states that it is intended to govern in the event of such a conflict with such sentence. (B) Change in Control. For all purposes under this Agreement, "Change in Control" shall mean the occurrence of any of the following events after the date of this Agreement: (a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; (b) The sale, transfer, exchange or other disposition of all or substantially all of the Company's assets; (c) A change in the composition of the Company's Board of Directors (the "Board") as a result of which fewer than a majority of the directors are directors who either (A) had been directors of the Company of the date 12 months prior to the date of the event that may constitute a Change in Control (the "original directors") or (B) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; (d) Any transaction as a result of which any person is the "beneficial owner" (as defined in rule 13(d)-3 under the Securities Exchange Act of 1934, as amended - the "Exchange Act"), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company's then outstanding voting securities. For purpose of this subsection (d), the terse "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary of the Company and (B) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company; or (e) In the event of Gerald C. Hsu ceases to be the Chairman and CEO of the Company. A transaction shall in no event constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. (C) Constructive Termination. For all purposes under this Agreement, "Constructive Termination" shall be deemed to have occurred, within six months after a Change in Control, that on written notice by the Employee to the Company, upon: (a) the Employee's voluntary resignation within six (6) months after a Change in Control; (b) any refusal by the Employee to relocate the Employee's principal place of employment to a location requested by the Company that is more than fifty (50) miles from the Employee's current principal place of employment; (c) a reduction by more than fifteen percent (l5%) in the Employee's level of compensation including his Minimum Salary, non-stock-related fringe benefits, and cash bonus (to the extent that any reduction in bonus is disproportionate to a reduction in the Company's earnings per share between (i) the period for which the reduced bonus is paid, and (ii) the period for which the Employee's most recent prior bonus was paid); (d) any material adverse change in the Employee's position, title, job responsibilities, or reporting lines; or any activity by the Company that constitutes constructive termination of employment under applicable law. Without limiting the events which may constitute a material adverse change in the Employee's position, title, job responsibilities, or reporting lines under this definition, such a material adverse change shall conclusively be deemed to have occurred upon any material diminution or other material adverse of Company employees reporting to the Employee at the time of a Change in Control, or in the extent or nature of the Employee's authority with respect to such function or responsibilities or the employees who perform them. For all purposes under this Agreement, all of the compensation, cash bonus and other relevant benefits provided on this Agreement shall be in no event applied to the Employee(s) who maliciously takes advantage of the bona fide goodwill of the Company - not only acquire(s) the above-mentioned compensation, bonus, and benefits but also return(s) to work for Avant! after the Change in Control with or without any cause. 3. COVENANT NOT TO COMPETE (A) Non-Competition. For the purpose of this Section 3, a company, entity, or person shall be deemed in competition with the Company, if any company, entity, or person engages in the electronic design automation (the "EDA") industry or, to the knowledge of the Employee, has definitive plans to engage in the EDA industry. The parties confirm that it is reasonably necessary for the protection of the Company that the Employee agree, and accordingly, the Employee does hereby agree that he will not, directly or indirectly, except for the benefit of the Company, at any time during his employment hereunder and thereafter during the Restricted Period, as hereinafter defined, from the date of termination of this Agreement provided the Company shall duly perform its obligations to the Employee pursuant to this Agreement: (i) Become an officer, director, partner, associate, employee, owner, agent, creditor, independent contractor, or otherwise, or be interested in or associated with any other EDA company, firm or business engaged, in any geographical area in which the Company is engaged, in making or selling one or more EDA products competitive with a product or products made or sold by Company now or during the term of this Agreement. However, after obtaining the prior approval from the Company, the Employee may devote reasonable periods required for serving as a director or member of any Company, partnership, trust or other entity ("Entity") organization involving no conflict of interest with the interests of the Company or his personal affairs so long as the same does not interfere with the performance of his duties hereunder; (ii) Solicit, cause or authorize, directly or indirectly, to be solicited for or on behalf of himself or third parties, from parties who were customers of the Company in the EDA industry at any time within six (6) months prior to the cessation of his employment hereunder, any business competitive to the business transacted by the Company with such customers in the EDA industry; (iii) Accept or cause or authorize, directly or indirectly, to be accepted for or on behalf of himself or third parties, any such business in the EDA industry from any such customers of the Company as defined in the preceding subsection; (B) Restricted Period. The tern "Restricted Period" as used in this Section 3 shall mean the Termination Payment Period of the cash termination payment as a consequence of Constructive Termination due to a Change in Control, which the Employee is entitled to receive pursuant to the provisions of Section 2 hereof. (C) Others. This Section 3 shall survive the termination of the Employees employment hereunder for the period provided in paragraph (B). The Employee further agrees that any breach or threatened breach by him of any provisions of this Section 3 shall entitle the Company, in addition to any other legal or equitable remedies available to it, to apply to any court of competent jurisdiction to enjoin such breach or threatened breach. Notwithstanding anything in this Agreement to the contrary, if the Employee violates any of the provisions of paragraph (a) hereof during the Restricted Period and fails to cease such violation and to remedy the consequences of such violation within ninety (90) days after notice from the Company specifying such violation and if the Company obtains a final judgment from a court of competent jurisdiction to the effect that the Employee has violated a provision of paragraph (a) and has failed to cease such violation and to remedy the consequences of such violation within ninety (90) days after notice from the Company, all obligations of the Company to compensate the Employee and to forgive indebtedness, if any, of the Employee to the Company shall cease, and the Company shall be entitled to recover from the Employee compensation received by the Employee and any indebtedness forgiven while such violation existed. (D) Special Non-Competition Cash Payment. The Company recognizes that a Change in Control Termination will subject the Employee to losses and damages, the amount of which might not readily be determined, and that there exist only a limited number of employment opportunities comparable in statue, compensation and opportunity to employment as an Employee of the Company. Therefore, the Employee shall not be required to seek or accept employment in mitigation of any obligations of the Company arising by reason of his Constructive Termination due to a Change in Control. In consideration of the Employee's special services and the Employee's agreement to not compete in the EDA industry during the Restricted Period after the date of termination of his employment, hereunder the Company agrees to pay the Employee a lump sum of $2 Million dollars, payable within 30 days after the termination of his employment. 4. MUTUAL RELEASES AFTER TERMINATION OF EMPLOYMENT Upon the termination of the Employee's employment, the Company and the Employee agree that in consideration for the Employee's services, the Company shall execute a general release, in form and substance, satisfactory to the Employee's counsel, that releases and forever discharges the Employee, his heirs, successors and assigns, from any and all actions, causes of actions, claims, or demands for general, special or punitive damages, attorney's fees, expenses, or other compensation, which in any way relate to or arise out of the Employee's employment with the Company or any of its subsidiaries. 5. INDEMNIFICATION To the fullest extent not inconsistent with applicable law, in the event that the Employee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, consultant, employee or agent of the Company or any of its subsidiaries, or is or was serving at the request of the Company as a director, officer, consultant, employee or agent of another Company, partnership, joint venture, trust or other enterprise, the Company shall indemnify the Employee and hold him harmless, against all expenses (including costs and attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by his in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Employee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Company, or that, with respect to any criminal action or proceeding, the Employee had reasonable cause to believe that his conduct was unlawful. The provisions of this Section 5 shall not be deemed exclusive of any other rights of indemnification to which the Employee maybe entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance. The provisions of this Section 5 shall continue in effect after the Employee has ceased to be an officer, employee or agent of the Company, shall inure to the benefit of the Employee's heirs, executors, administrators and in testate distributes and shall survive the termination of this Agreement under all circumstances. All litigation or inquiries by third parties (for example, but not limited to, those by shareholders - direct or derivative - or government agencies) arising out of or in connection with this Agreement or the Employee's performance hereunder, against either the Company or the Employee or both, shall be defended or opposed by the parties hereto, as the case may be, to support this Agreement, and the costs, fees and expenses thereof, including fees of counsel for the parties, shall be home by the Company. Notwithstanding the foregoing provisions of this Section 5, during the term of the Employee's employment hereunder and during such time he continues as an officer, the Company agrees to maintain substantially the same Officers' liability insurance in place on the date hereof and shall increase such coverage in the event the Employee determines that it is in the best interest of the Company to have such increased coverage. 6. CONFIDENTIAL INFORMATION The Employee recognizes that as an Employee of the Company he has had and will have access to secret and confidential information regarding the Company, its products, customers and plans relating to the EDA industry. The Employee acknowledges that such information is of great value to the Company, and is the sole property of the Company and that such information has been and will be acquired by his in confidence. In consideration of the obligations undertaken by the Company as set forth herein, the Employee will not, at any time, during or for a period of one year after his employment of the Company hereunder, reveal, divulge or make known, except as authorized by the Company or required on its behalf or required pursuant to legal or administrative processes, any information of a confidential nature concerning the Company's business involving the EDA industry acquired by the Employee during the course of his employment to any competitor to the Company in the EDA industry. 7. MISCELLANEOUS PROVISIONS (A) No right to Employment. Notwithstanding this Agreement, either party may terminate the Employee's employment at any time and for any reason, or for no reason upon written notice to the other party; provided, however, that any Change in Control Termination shall be subject to all of the consequences described in sections 2 and 3 above. (B) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered mail, return receipt requested and postage personally delivered or when the Employee, mailed notices shall be addressed to the Employee at the home address shown below on this Agreement or at the home address which the Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be addressed to the attention of its Secretary. (C) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of his Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (D) Whole Agreement; Modifications. No agreements, representations or understanding (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either part with respect to the subject matter hereof. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof. A modification of this Agreement shall be valid only if it is made in writing and executed by both parties hereto. (E) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law. (F) Choice of Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of California (except their provisions governing the choice of law). (G) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (H) Company's Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets, which become bound by this Agreement. (I) Employee's Successors. This Agreement and all right of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal of legal representatives, executors, heirs, distributes, devisees, and legatees. (J) No Assignment. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without imitation) bankruptcy, garnishment, attachment, or other creditor's process, and any action in violation of this paragraph shall be void. (K) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (L) Confidentiality. The Employee agrees that the Employee will not disclose the existence or the terms of this Agreement to anyone other than the Employee's spouse, tax advisor, or legal advisor. In the event the Employee breaches this confidentiality obligation, the Company may immediately terminate this Agreement. (M) Arbitration. Any controversy or claim between the Company and Employee, their representatives, heirs, successors and assigns, arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof shall be determined by arbitration conducted in San Francisco in accordance with the Rules of the American Arbitration Association then obtaining, and judgment upon any award rendered may be entered in any court having jurisdiction thereof. The decision of the arbitrators shall be final and binding upon the parties hereto. All of the Employee's costs and expenses (including attorneys, fees) arising out of or in connection with any matters submitted to arbitration pursuant to this subsection shall be paid by the Company, unless the award of the arbitrators shall explicitly find that the Employee's claim or his defense against a claim by the Company was frivolous and completely without merit, in which case the Employee shall pay the costs and expenses (including, without limitation, reasonable attorneys, fees) incurred by the Company in such connection. (N) Section Headings. The headings or titles of the sections of this Agreement are not a part of this Agreement and are not intended to aid in the construction of any provision thereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company, by its duly authorized officer, as of the day and year first above written. /s/ Noriko Ando Signature Of the Employee Noriko Ando Printed name of the Employee Oct. 1, 2000 Date of Signature 2-17-9 Tamami Asao-Ku Kawasaki City Kanagawa Japan The Employee's mailing address AVANT! CORPORATION /s/ Gerald C. Hsu Gerald C. Hsu Chairman, Chief Executive Officer, & President Oct. 1, 2000 Date of Signature EX-10.16 4 f76852ex10-16.txt EMPLOYMENT AGREEMENT - JOHN HSU EMPLOYMENT AGREEMENT Exhibit 10.16 This EMPLOYMENT AGREEMENT is made as of the 1st day of October, 2000 by and between and John Howard Hsu(the "Employee") and Avant! Company, a Delaware corporation (the "Company"). This Agreement restates and supersedes all previous Employment Agreements or Severance Agreements between the Employee and the Company. WITNESSETH: WHEREAS, the Employee has been and is now in the employment of the Company; and WHEREAS, the Company has concluded that securing the service of the Employee will benefit it. NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements hereinafter set forth, the parties therefore agree as follows: 1. TERM OF EMPLOYMENT (A) Basic Rules. The Company hereby employs the Employee, and the Employee hereby accepts such employment with the Company from the date of this Agreement until the date when the Employee's employment terminates pursuant to subsection (b) below. The Employee shall subject to his appointment as such from time to time (the "Term") serve during the Term in the Company and its subsidiaries or affiliates. During the Term, the Employee will devote his best efforts to such employment and all of his business time and attention to the performance of his duties hereunder; provided, however, that the Employee may devote reasonable periods required for serving as a director or member of any Company, partnership, trust or other entity ("Entity") organization involving no conflict of interest with the interests of the Company or his personal affairs so long as the same does not interfere with the performance of his duties hereunder. (B) Termination of Employment. The Company may terminate the Employee's employment at any time and for any reason by giving the Employee 30 days' advance notice in writing. The Employee may resign his employment by giving the Company 30 days' advance notice in writing. The Employee's employment shall be terminated automatically in the event of his death. (C) Termination of Agreement. This Agreement shall be renewed automatically for successive periods of three (3) years unless the Company notifies the Employees) of its intention not to renew at least 1 month prior to the expiration of this agreement. This Agreement shall also be terminated when all obligations of the parties hereunder have been satisfied. (D) Compensation (Salary and Cash Bonus). The Company shall pay to the Employee, not less frequently than monthly; an annual base salary (the "Minimum Salary") as fixed from time to time by the Company during the Term of his employment hereunder. The Minimum Salary is USD $300,000 as of October 1, 2000 The Company may increase the Minimum Salary from time to time and upon each such increase the term "Minimum Salary" shall mean such increased total amount. References to the Minimum Salary in this Agreement are to the Minimum Salary, as adjusted, in the year in which the event requiring such reference occurs. In addition to the Minimum Salary, the Employee shall be entitled to receive during the Term an annual cash bonus based on the performance of the Company and the Employee. The actual amount of any such annual cash bonus to be paid to the Employee will be determined by the Company. Payment of any bonus compensation in this Section shall be made within 60 days after such determination. (E) Expenses, Benefit Plans, and Pay-time-off. The Company will reimburse the Employee for all reasonable and necessary business and entertainment expenses incurred by him in connection with the performance of his duties hereunder. The Employee shall be eligible to participate in any employee benefit programs, pension, profit sharing, stock option or similar plan or program and in any group life insurance, hospitalization, mental, dental, accident, disability or similar plan or program of the Company non-existing or establishes hereafter. In addition, so long as the Company employs the Employee, the Employee shall be entitled to receive other benefits - generally available to all employees and any other, which are now or may hereafter be placed in effect. The Employee shall be entitled to pay-time-off (the "PTO"), at such times and for such periods, as are in accordance with the policies of the Company then in effect for all employees employed by the Company, but in no event shall the Employee be entitled to fewer than 80 hours of PTO per year. The Employee shall not be required to take any PTO to which he is entitled in a given year. In the event the Employee does not take all of the PTO to which he is entitled in a given year, such PTO will be deferred and accumulated for use by the Employee in a subsequent year up to a maximum of 240 hours. 2. RIGHTS UPON CERTAIN TERMINATIONS (A) Employee's Rights. Unless otherwise defined in this section, each capitalized tern used in this Agreement shall have the meaning assigned to it in the Company's 1995 & 2000 Stock Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan"). Without limiting any other rights which the Employee or the Company may have in such event, upon any voluntary resignation or involuntary termination of the Employee's employment without Employee's written consent (including but not limited to a Constructive Termination as defined below) that occurs within six months after a Change in Control (as defined below), and subject to Section 7 below, the Company shall: (a) pay to the Employee cash termination payment equal to three (3) years (the "Termination Payment Period") of the Employee's Minimum Salary in effect on the date of termination, in addition to any other payments, benefits, or other rights to which the Employee may then be entitled. The Company shall pay the above-mentioned payment amount in this Section 2.A.a to the Employee in full on the Termination Date; (b) allow the Employee to automatically vest in full of the shares of Common Stock then subject to any option granted by the Company to the Employee and then outstanding (including but not limited to any such option drat may hereafter be granted to Employee, under the Plan or otherwise) but not otherwise vested; and all outstanding repurchase rights applicable to any Common Stock previously issued to the Employee by the Company (including any Common Stock hereafter issued which is then held by Employee) shall also terminate automatically. If any provisions of the preceding sentence regarding acceleration of options or early termination of repurchase rights shall conflict with any provision of any existing or future option agreement, stock purchase agreement or other agreement between the Employee and the Company, the provisions of the preceding sentence in this Agreement shall govern if they are more favorable to the Employee under the circumstances than the conflicting provisions in such other agreements, unless such other agreements expressly refers to the preceding sentence and states that it is intended to govern in the event of such a conflict with such sentence. (B) Change in Control. For all purposes under this Agreement, "Change in Control" shall mean the occurrence of any of the following events after the date of this Agreement: (a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; (b) The sale, transfer, exchange or other disposition of all or substantially all of the Company's assets; (c) A change in the composition of the Company's Board of Directors (the "Board") as a result of which fewer than a majority of the directors are directors who either (A) had been directors of the Company of the date 12 months prior to the date of the event that may constitute a Change in Control (the "original directors") or (B) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; (d) Any transaction as a result of which any person is the "beneficial owner" (as defined in rule 13(d)-3 under the Securities Exchange Act of 1934, as amended - the "Exchange Act"), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company's then outstanding voting securities. For purpose of this subsection (d), the terse "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary of the Company and (B) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company; or (e) In the event of Gerald C. Hsu ceases to be the Chairman and CEO of the Company. A transaction shall in no event constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. (C) Constructive Termination. For all purposes under this Agreement, "Constructive Termination" shall be deemed to have occurred, within six months after a Change in Control, that on written notice by the Employee to the Company, upon: (a) the Employee's voluntary resignation within six (6) months after a Change in Control; (b) any refusal by the Employee to relocate the Employee's principal place of employment to a location requested by the Company that is more than fifty (50) miles from the Employee's current principal place of employment; (c) a reduction by more than fifteen percent (15%) in the Employee's level of compensation including his Minimum Salary, non-stock-related fringe benefits, and cash bonus (to the extent that any reduction in bonus is disproportionate to a reduction in the Company's earnings per share between (i) the period for which the reduced bonus is paid, and (ii) the period for which the Employee's most recent prior bonus was paid); (d) any material adverse change in the Employee's position, title, job responsibilities, or reporting lines; or any activity by the Company that constitutes constructive termination of employment under applicable law. Without limiting the events which may constitute a material adverse change in the Employee's position, title, job responsibilities, or reporting lines under this definition, such a material adverse change shall conclusively be deemed to have occurred upon any material diminution or other material adverse of Company employees reporting to the Employee at the time of a Change in Control, or in the extent or nature of the Employee's authority with respect to such function or responsibilities or the employees who perform them. For all purposes under this Agreement, all of the compensation, cash bonus and other relevant benefits provided on this Agreement shall be in no event applied to the Employee(s) who maliciously takes advantage of the bona fide goodwill of the Company - not only acquire(s) the above-mentioned compensation, bonus, and benefits but also return(s) to work for Avant! after the Change in Control with or without any cause. 3. COVENANT NOT TO COMPETE (A) Non-Competition. For the purpose of this Section 3, a company, entity, or person shall be deemed in competition with the Company, if any company, entity, or person engages in the electronic design automation (the "EDA") industry or, to the knowledge of the Employee, has definitive plans to engage in the EDA industry. The parties confirm that it is reasonably necessary for the protection of the Company that the Employee agree, and accordingly, the Employee does hereby agree that he will not, directly or indirectly, except for the benefit of the Company, at any time during his employment hereunder and thereafter during the Restricted Period, as hereinafter defined, from the date of termination of this Agreement provided the Company shall duly perform its obligations to the Employee pursuant to this Agreement: (i) Become an officer, director, partner, associate, employee, owner, agent, creditor, independent contractor, or otherwise, or be interested in or associated with any other EDA company, firm or business engaged, in any geographical area in which the Company is engaged, in making or selling one or more EDA products competitive with a product or products made or sold by Company now or during the term of this Agreement. However, after obtaining the prior approval from the Company, the Employee may devote reasonable periods required for serving as a director or member of any Company, partnership, trust or other entity ("Entity") organization involving no conflict of interest with the interests of the Company or his personal affairs so long as the same does not interfere with the performance of his duties hereunder; (ii) Solicit, cause or authorize, directly or indirectly, to be solicited for or on behalf of himself or third parties, from parties who were customers of the Company in the EDA industry at any time within six (6) months prior to the cessation of his employment hereunder, any business competitive to the business transacted by the Company with such customers in the EDA industry; (iii) Accept or cause or authorize, directly or indirectly, to be accepted for or on behalf of himself or third parties, any such business in the EDA industry from any such customers of the Company as defined in the preceding subsection; (B) Restricted Period. The tern "Restricted Period" as used in this Section 3 shall mean the Termination Payment Period of the cash termination payment as a consequence of Constructive Termination due to a Change in Control, which the Employee is entitled to receive pursuant to the provisions of Section 2 hereof. (C) Others. This Section 3 shall survive the termination of the Employees employment hereunder for the period provided in paragraph (B). The Employee further agrees that any breach or threatened breach by him of any provisions of this Section 3 shall entitle the Company, in addition to any other legal or equitable remedies available to it, to apply to any court of competent jurisdiction to enjoin such breach or threatened breach. Notwithstanding anything in this Agreement to the contrary, if the Employee violates any of the provisions of paragraph (a) hereof during the Restricted Period and fails to cease such violation and to remedy the consequences of such violation within ninety (90) days after notice from the Company specifying such violation and if the Company obtains a final judgment from a court of competent jurisdiction to the effect that the Employee has violated a provision of paragraph (a) and has failed to cease such violation and to remedy the consequences of such violation within ninety (90) days after notice from the Company, all obligations of the Company to compensate the Employee and to forgive indebtedness, if any, of the Employee to the Company shall cease, and the Company shall be entitled to recover from the Employee compensation received by the Employee and any indebtedness forgiven while such violation existed. (D) Special Non-Competition Cash Payment. The Company recognizes that a Change in Control Termination will subject the Employee to losses and damages, the amount of which might not readily be determined, and that there exist only a limited number of employment opportunities comparable in statue, compensation and opportunity to employment as an Employee of the Company. Therefore, the Employee shall not be required to seek or accept employment in mitigation of any obligations of the Company arising by reason of his Constructive Termination due to a Change in Control. In consideration of the Employee's special services and the Employee's agreement to not compete in the EDA industry during the Restricted Period after the date of termination of his employment, hereunder the Company agrees to pay the Employee a lump sum of USD $2 Million dollars, payable within 30 days after the termination of his employment. 4. MUTUAL RELEASES AFTER TERMINATION OF EMPLOYMENT Upon the termination of the Employee's employment, the Company and the Employee agree that in consideration for the Employee's services, the Company shall execute a general release, in form and substance, satisfactory to the Employee's counsel, that releases and forever discharges the Employee, his heirs, successors and assigns, from any and all actions, causes of actions, claims, or demands for general, special or punitive damages, attorney's fees, expenses, or other compensation, which in any way relate to or arise out of the Employee's employment with the Company or any of its subsidiaries. 5. INDEMNIFICATION To the fullest extent not inconsistent with applicable law, in the event that the Employee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, consultant, employee or agent of the Company or any of its subsidiaries, or is or was serving at the request of the Company as a director, officer, consultant, employee or agent of another Company, partnership, joint venture, trust or other enterprise, the Company shall indemnify the Employee and hold him harmless, against all expenses (including costs and attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by his in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Employee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Company, or that, with respect to any criminal action or proceeding, the Employee had reasonable cause to believe that his conduct was unlawful. The provisions of this Section 5 shall not be deemed exclusive of any other rights of indemnification to which the Employee maybe entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance. The provisions of this Section 5 shall continue in effect after the Employee has ceased to be an officer, employee or agent of the Company, shall inure to the benefit of the Employee's heirs, executors, administrators and in testate distributes and shall survive the termination of this Agreement under all circumstances. All litigation or inquiries by third parties (for example, but not limited to, those by shareholders - direct or derivative - or government agencies) arising out of or in connection with this Agreement or the Employee's performance hereunder, against either the Company or the Employee or both, shall be defended or opposed by the parties hereto, as the case may be, to support this Agreement, and the costs, fees and expenses thereof, including fees of counsel for the parties, shall be home by the Company. Notwithstanding the foregoing provisions of this Section 5, during the term of the Employee's employment hereunder and during such time he continues as an officer, the Company agrees to maintain substantially the same Officers' liability insurance in place on the date hereof and shall increase such coverage in the event the Employee determines that it is in the best interest of the Company to have such increased coverage. 6. CONFIDENTIAL INFORMATION The Employee recognizes that as an Employee of the Company he has had and will have access to secret and confidential information regarding the Company, its products, customers and plans relating to the EDA industry. The Employee acknowledges that such information is of great value to the Company, and is the sole property of the Company and that such information has been and will be acquired by his in confidence. In consideration of the obligations undertaken by the Company as set forth herein, the Employee will not, at any time, during or for a period of one year after his employment of the Company hereunder, reveal, divulge or make known, except as authorized by the Company or required on its behalf or required pursuant to legal or administrative processes, any information of a confidential nature concerning the Company's business involving the EDA industry acquired by the Employee during the course of his employment to any competitor to the Company in the EDA industry. 7. MISCELLANEOUS PROVISIONS (A) No right to Employment. Notwithstanding this Agreement, either party may terminate the Employee's employment at any time and for any reason, or for no reason upon written notice to the other party; provided, however, that any Change in Control Termination shall be subject to all of the consequences described in sections 2 and 3 above. (B) Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered mail, return receipt requested and postage personally delivered or when the Employee, mailed notices shall be addressed to the Employee at the home address shown below on this Agreement or at the home address which the Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be addressed to the attention of its Secretary. (C) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of his Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (D) Whole Agreement; Modifications. No agreements, representations or understanding (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either part with respect to the subject matter hereof. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof. A modification of this Agreement shall be valid only if it is made in writing and executed by both parties hereto. (E) Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law. (F) Choice of Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of California (except their provisions governing the choice of law). (G) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (H) Company's Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets, which become bound by this Agreement. (I) Employee's Successors. This Agreement and all right of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal of legal representatives, executors, heirs, distributes, devisees, and legatees. (J) No Assignment. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without imitation) bankruptcy, garnishment, attachment, or other creditor's process, and any action in violation of this paragraph shall be void. (K) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (L) Confidentiality. The Employee agrees that the Employee will not disclose the existence or the terms of this Agreement to anyone other than the Employee's spouse, tax advisor, or legal advisor. In the event the Employee breaches this confidentiality obligation, the Company may immediately terminate this Agreement. (M) Arbitration. Any controversy or claim between the Company and Employee, their representatives, heirs, successors and assigns, arising out of or relating to this Agreement or any breach or asserted breach hereof or questioning the validity and binding effect hereof shall be determined by arbitration conducted in San Francisco in accordance with the Rules of the American Arbitration Association then obtaining, and judgment upon any award rendered may be entered in any court having jurisdiction thereof. The decision of the arbitrators shall be final and binding upon the parties hereto. All of the Employee's costs and expenses (including attorneys, fees) arising out of or in connection with any matters submitted to arbitration pursuant to this subsection shall be paid by the Company, unless the award of the arbitrators shall explicitly find that the Employee's claim or his defense against a claim by the Company was frivolous and completely without merit, in which case the Employee shall pay the costs and expenses (including, without limitation, reasonable attorneys, fees) incurred by the Company in such connection. (N) Section Headings. The headings or titles of the sections of this Agreement are not a part of this Agreement and are not intended to aid in the construction of any provision thereof. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company, by its duly authorized officer, as of the day and year first above written. /s/ John H. Hsu Signature Of the Employee John H. Hsu Printed name of the Employee Oct. 1, 2000 Date of Signature 15F-Z. No. 43 Sec 3 Hsin-Yi Road, Taipei R.O.C The Employee's mailing address AVANT! CORPORATION /s/ Gerald C. Hsu Gerald C. Hsu Chairman, Chief Executive Officer, & President Oct. 1, 2000 Date of Signature EX-10.17 5 f76852ex10-17.txt SEVERANCE AGREEMENT Exhibit 10.17 CONFIDENTIAL SEVERANCE AGREEMENT THIS AGREEMENT is entered into as of December 8, 1998, by and between Moriyuki Chimura (the "Executive") and Avant! Corporation, a Delaware corporation (the "Company"). 1. CONSEQUENCES OF CERTAIN TERMINATIONS. Unless otherwise defined in this section, each capitalized term used in this Agreement shall have the meaning assigned to it in the Company's 1995 Stock Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan"). Without limiting any other rights which the Executive or the Company may have in such event, upon any involuntary termination of the Executive's employment (including but not limited to a Constructive Termination as defined below) that occurs within six months after a Change in Control (as defined below) (a Change in Control Termination), and subject to section 2 below, the Company shall pay to the Executive a cash termination payment equal to three (3) years of the Executive's annual base salary in effect (a) on the date of termination or (b) immediately prior to the Change in Control (whichever is greater), in addition to any other payments, benefits or other rights to which the Executive may then be entitled. For all purposes under this Agreement, "Change in Control" shall mean the occurrence of any of the following events after the date of this Agreement: (a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; (b) The sale, transfer, exchange or other disposition of all or substantially all of the Company's assets; (c) A change in the composition of the Company's Board of Directors (the "Board") as a result of which fewer than a majority of the directors are directors who either (A) had been directors of the Company on the date 24 months prior to the date of the event that may constitute a Change in Control (the "original directors") or (B) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or (d) Any transaction as a result of which any person is the "beneficial owner" (as defined in rule 13d-3 under the Securities Exchange Act of 1934, as amended) (the "Exchange Act")), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company's then outstanding voting securities. For purpose of this subsection (d), the term "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary of the Company and (B) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. A transaction shall in no event constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. For all purposes under this Agreement, "Constructive Termination" shall be deemed to have occurred, on written notice by Executive to the Company, upon: (1) any refusal by Executive to relocate the Executive's principal place of employment to a location requested by the Company that is more than 25 miles from Executive's current principal place of employment; (ii) any adverse change in Executive's compensation; (iii) any material adverse change in Executive's position, job responsibilities or reporting lines; or (iv) any activity by the Company that constitutes constructive termination of employment under applicable law. Without limiting the events which may constitute a material adverse change in the Executive's position, job responsibilities or reporting lines under this definition, such a material adverse change shall conclusively be deemed to have occurred upon any material diminution or other material adverse change in the size or business functions or responsibilities of any Company department or group of Company employees reporting to Executive at the time of a Change in Control, or in the extent or nature of Executive's authority with respect to such functions or responsibilities or the employees who perform them. 2. MISCELLANEOUS PROVISIONS (a) NO RIGHT TO EMPLOYMENT. Notwithstanding this Agreement, either party may terminate the Executive's employment at any time and for any reason, or for no reason, upon written notice to the other party; provided, however, that any Change in Control Termination shall be subject to all of the consequences described in section 1 above. (b) NOTICE. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to the Executive at the home address shown below on this Agreement or at the home address which the Executive most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be addressed to the attention of its Secretary. 2 (c) WAIVER. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (d) WHOLE AGREEMENT; MODIFICATIONS. No agreements, representations or understanding (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof. A modification of this Agreement shall be valid only if it is made in writing and executed by both parties hereto. (e) WITHHOLDING TAXES. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law. (f) CHOICE OF LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California (except their provisions governing the choice of law). (g) SEVERABILITY. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (h) COMPANY'S SUCCESSORS. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which becomes bound by this Agreement. (i) EXECUTIVE'S SUCCESSORS. This Agreement and all right of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, heirs, distributees, devisees and legatees. 3 (j) NO ASSIGNMENT. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment, or other creditor's process, and any action in violation of this paragraph shall be void. (k) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (l) CONFIDENTIALITY. The Executive agrees that the Executive will not disclose the existence or the terms of this Agreement to anyone other than the Executive's spouse, tax advisor, or legal advisor. In the event the Executive breaches this confidentiality obligation, this Agreement may be immediately terminated by the Company. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company, by the duly authorized officer, as of the day and year first above written. /s/ MARK CHIMURA --------------------------------------- Signature of Executive Mark Chimura --------------------------------------- Printed name of Executive 47945 Avalon Heights Terrace Fremont, CA 94539 --------------------------------------- Executive's Mailing Address AVANT! CORPORATION /s/ GERALD C. HSU --------------------------------------- Gerald C. Hsu Chairman, President, and Chief Executive Officer AMENDMENT TO SEVERANCE AGREEMENT THIS AMENDMENT is entered into as of December 15, 1999, by and between Moriyuki Chimura (the "Executive") and AVANT! CORPORATION, a Delaware corporation (the "Company"), for the purpose of amending the Severance Agreement dated December 8, 1998 that is presently in effect between the parties (the "Agreement"). The Agreement is hereby amended by revising the first paragraph (only) of Section 1 to read as set forth below, by inserting the language read as set forth below as "Section 2" of the Agreement, and by renumbering existing Section 2 of the Agreement to be "Section 3" of the Agreement. Except as so amended, the Agreement remains effective as in effect immediately before this amendment. The first paragraph (only) of "Section 1", as amended by this amendment, reads in full as follows: Unless otherwise defined in this section, each capitalized term used in this Agreement shall have the meaning assigned to it in the Company's 1995 Stock Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan"). Without limiting any other rights which the Executive or the Company may have in such event, upon any involuntary termination of the Executive's employment (including but not limited to a Constructive Termination, as defined below) that occurs within six months after a Change in Control (as defined below) (a "Change in Control Termination"), and subject to section 2 below: (1) the Company shall pay to the Executive a cash termination payment equal to 3 year(s) of the Executive's annual base salary in effect (i) on the date of termination or (ii) immediately prior to the Change in Control (whichever is greater), in addition to any other payments, benefits or other rights to which the Executive may then be entitled; (2) the shares of Common Stock then subject to any option granted by the Company to the Executive and then outstanding (including but not limited to any such option that may hereafter be granted to the Executive, under the Plan or otherwise) but not otherwise vested shall automatically vest and be exercisable in full; and (3) all outstanding repurchase rights applicable to any Common Stock previously issued to the Executive by the Company (including any Common Stock hereafter issued which is then held by the Executive) shall also terminate automatically. If any provision of the preceding sentence regarding acceleration of options or early termination of repurchase rights shall conflict with any provision of any existing or future option agreement, stock purchase agreement or other agreement between the Executive and the Company, the provisions of the preceding sentence shall govern if they are more favorable to the Executive under the circumstances than the conflicting provisions in such other agreement, unless such other agreement expressly refers to the preceding sentence and states that it is intended to govern in the event of such a conflict with such sentence. New "Section 2" added by this amendment reads in full as follows: 2. LIMITATION ON PAYMENTS UNDER SECTION 1. (a) APPLICATION OF LIMITATION. This section 2 shall apply only if the Executive, on an after-tax basis, would receive more value under a Change in Control Termination that is subject to section 1 after the application of this section 2 than the Executive would receive before the application of this section 2. For this purpose, "after-tax basis" shall mean a calculation taking into account all federal and state income and excise taxes imposed on the Executive, including (without limitation) the excise tax described in section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"). If this section 2 is applicable, it shall supersede any conflicting provision of this Agreement. (b) BASIC RULE. The Company shall not make any payment or property transfer to, or for the benefit of, the Executive (under this Agreement or otherwise) that would subject the Executive to the excise tax described in section 4999 of the Code. All calculations required by this section 2 shall be performed by the independent auditors retained by the Company most recently prior to the Involuntary Termination (the "Auditors"), based on information supplied by the Company and the Executive, and shall be binding on the Company and the Executive. All fees and expenses of the Auditors shall be paid by the Company. (c) REDUCTIONS. If the amount of the aggregate payments or property transfers to the Executive must be reduced under this section 2, then the Executive shall direct in which order the payments or transfers are to be reduced, but no change in the timing of any payment or transfer shall be made without the Company's consent. As a result of uncertainty in the application of section 4999 of the Code at the time of an initial determination by the Auditors hereunder, it is possible that a payment will have been made by the Company that should not have been made (an "Overpayment") or that an additional payment that will not have been made by the Company could have been made (an "Underpayment"). In the event that the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Executive that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Executive that he shall repay to the Company, together with interest at the applicable federal rate specified in section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Executive to the Company if and to the extent that such payment would not reduce the amount that is subject to an excise tax under section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to, or for the benefit of, the Executive, together with interest at the applicable federal rate specified in section 7872(f)(2) of the Code. *********************** IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company, by its duly authorized officer, as of the day and year first above written. /s/ MORIYUKI CHIMURA ---------------------------------------- Signature of Executive Moriyuki Chimura ---------------------------------------- Printed Name of Executive 47945 Avalon Heights Terrace Fremont, CA 94539 ---------------------------------------- Executive's Mailing Address ---------------------------------------- ---------------------------------------- AVANT! CORPORATION /s/ GERALD C. HSU ---------------------------------------- Gerald C. Hsu Chairman, President, and Chief Executive Officer EX-10.18 6 f76852ex10-18.txt DISTRIBUTION AGREEMENT - AVANT! JAPAN CORP. DISTRIBUTION AGREEMENT Exhibit 10.18 This Distribution Agreement (the "Agreement") is entered into as of October 1, 2000 and made between AVANT! JAPAN CORPORATION (the "Company"), with its principal place of business at Nittochi Shin-yurigaoka Building, 5F, 1-5-2 Kamiasao Asao-ku, Kawasaki-shi, Kanagawa 215-0021, Japan, and MAINGATE ELECTRONICS INC. (the "Distributor"), with its principal place of business at KAKiYA Building, 3/F, 2-7-17 Shinyokohama, Kohoku-ku, Yokohama-Shi, Kanagawa 222-0033, Japan. RECITALS: A. The Company has obtained an exclusive right to distribute certain Avant! software-based electronic design automation products, including documentation and manuals therefor. B. The Company wishes to appoint the Distributor as a sub-distributor and the Distributor wishes to acquire from the Company the right to distribute, market and support such products in the Territory (as defined below). NOW IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS In this Agreement, the following terms shall have the following meanings: "CONFIDENTIAL INFORMATION" includes information which the Company has maintained as confidential and revealed to the Distributor by clearly indicating the Company name and "Confidential" or similar proprietary marking and which may or may not be related to the Products including but not limited to: technical information such as computer programs, characterization, formulae, algorithms, process, performance, interface information, proprietary command architecture, proprietary scheme constructs, including commands, format, syntax and semantics, defects, bugs, proprietary circuit behavior information, the Company supplied data, circuit and logic elements and business information, including confidential future product information, confidential basic concepts, marketing and sales information, sales volume, pricing and accounting information. Confidential Information shall also include oral information disclosed by the Company to the Distributor pursuant to this Agreement, provided such information is summarized in writing and is clearly marked with the Company name and "Confidential" or similar proprietary marking and delivered to the Distributor within thirty (30) days of disclosure. Confidential Information does not include information which: (i) has come into the public domain without breach of the confidence by the Distributor or any other person, firm or entity; (ii) is or becomes publicly known through no wrongful act of the party to whom such information was disclosed; (iii) is received by the Distributor from a third party without restrictions on its use in favor of the Company; (iv) is independently developed by the Distributor's employee, agent or contractor without use of Confidential Information; (v) is acknowledged in writing by the Company to be non-confidential; or (vi) is required to be disclosed pursuant to any statutory requirement or court order (except that the Distributor shall give the Company prompt notice of such statutory requirement or court order such that the Company may request protection therefrom); "CUSTOMER" means a customer who has signed a Customer Agreement; "CUSTOMER AGREEMENT" means the Customer Software and Service Agreement provided by the Company from time to time; "DOCUMENTATION" means the user guides, instruction manuals, tutorials, on-screen user assistance available in the operation of the Software and other documents whether in written or machine-readable form provided by the Company from time to time for the Use of the Software; "INTELLECTUAL PROPERTY RIGHTS" means all designs patents, copyrights, inventions, enhancements, revisions, updates, adaptations, secret and confidential information, know-how, technical data, trade secrets, specifications, designs, whether or not in documentary form, functional and detailed design specifications and all other intangible property (whether or not in documentary form and whether or not registrable, patentable, copyrightable for otherwise protectable under applicable laws) relating to the Products; "M&S SERVICES" means the maintenance and support services to be provided by the Distributor pursuant to Clause 7 herein; "MINIMUM PURCHASE COMMITMENT" means the value of minimum [annual/quarterly] purchase commitment of Products and M&S Services as set out in Exhibit A; "MULTINATIONAL CUSTOMERS" shall mean customers who use the Products concurrently both within and outside the Territory, including use of the Products on a wide area network; "NET REVENUE" means the gross fee for any Product and fees for any purchased M&S Services, as set out in Exhibit B. The Net Revenue shall not include any interest or finance charges; "PRODUCTS" means the Software and Revisions together with the corresponding Documentation as may be provided by the Company from time to time; 2 "RECOMMENDED PRICE LIST" means the list setting out the Recommended Price for the Products and/or M&S Services to be charged by the Distributor to the Customers; "REVISIONS" means upgrades, error corrections and updates of the Software made generally available to Customers of the Software; "SOFTWARE" means the computer software programs as set out in Exhibit C in object code only; "SUPPLIER" means Avant! Corporation with its principal place of business at 46871 Bayside Parkway Fremont, CA 94538 U.S.A., and its subsidiaries and licensees; "TERM" means the term as set out in clause 18; "TERRITORY" means the territory as set out in Exhibit D; "TRADE MARK" means any trade mark, service mark, trade name, symbols and logos owned by the Supplier and authorized to be used by the Company; "USE" means in relation to the Software and Revisions, its loading, displaying, running, transmission or storage for the purpose of processing the instructions contained in the Software and Revisions. 2. APPOINTMENT 2.1 Subject to the terms of this Agreement, the Company hereby grants to the Distributor and the Distributor hereby accepts an exclusive right for Products set out in Exhibit C to: (i) market and distribute the Products to Customers solely for use in the Territory; (ii) install the Products for Customers; and (iii) provide M&S Services to Customers. No source code for the Software to be distributed by this Agreement will be deemed as included by inference or otherwise. 2.2 Subject to applicable terms and conditions, including fees, to be agreed on a case by case basis, the Company hereby grants and/or shall use its reasonable commercial effort to procure any relevant third party to grant, the Distributor a non-exclusive right outside the Territory for the Term of this Agreement to distribute the Products directly to Customers with prior approval by the Company. For purpose of this Clause, Customers shall be Multinational Customers of the Distributor. 3 2.3 A Customer within the Territory, who desires to have the right to use the input/output ("I/O") format files of the Products in order to develop and distribute an interfacing product between the Product(s) and third parties' software programs solely for use within the Customer's internal design flow, may submit a request to the Distributor. The Distributor will forward such request to the Company. The Company has the sole discretion in deciding whether or not to grant such right and terms and conditions attached to such right if granted. 2.4 The Company reserves the right to change, modify or discontinue any Product at any time provided that the Distributor is given ninety (90) days prior written notice. Any Revisions, enhancement or improvement of a Product that is generally made available by the Supplier through the Company, that is substantially similar to such Products and that is marketed under the same product number and nomenclature as such Product shall be added to Exhibit C as a new Product. The Company reserves the right to charge for Revisions. In addition to the foregoing, any products developed by the Supplier other than the substantially similar products referenced above, shall be considered as a new product and the Company shall decide whether the Distributor is authorized to distribute this new product. The Distributor shall have the right and freedom to distribute any non-competitive software products or services; provided, however, that if any such new product is competitive with any non-Company products that the Distributor is distributing, the Distributor shall have thirty (30) days to decide whether to distribute the Company's new product, or the non-Company product the Distributor is then currently distributing. 2.5 All rights not expressly granted are hereby reserved by the Company. 3. RESTRICTIONS ON THE APPOINTMENT 3.1 The Distributor may only distribute the Products to persons and entities located and taking delivery within the Territory (except for Multinational Customers as provided in Clause 2.2 above). 3.2 The Distributor shall not tamper with the packaging of the Products and shall only distribute the Products as packaged by the Company. 4. USE OF PRODUCTS BY DISTRIBUTOR 4.1 The Distributor may Use reasonable number packages of the Products, free of charge, for demonstration, internal training, testing, providing M&S Services. 4.2 Except as provided in Clause 4.1, the Distributor may not Use the Products for its own internal use without prior written permission of the Company. 4.3 Except as provided in Clause 4.1 and 4.2, the Distributor is prohibited to Use the Products. 4 5. USE BY CUSTOMER 5.1 Prior to the delivery of the Products to a Customer, such Customer shall execute an appropriate Customer Agreement for the Products. 5.2 The Distributor shall obligate each Customer, by execution of the Customer Agreement, not to: (i) create or attempt to create by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information available to it; and (ii) modify, amend, add to or in any way alter any Product supplied to it under the Customer Agreement. 6. RESPONSIBILITIES OF DISTRIBUTOR 6.1 The Distributor shall meet the Minimum Purchase Commitment as specified in Exhibit A hereto. (i) If the Distributor exceeds its Minimum Purchase Commitment to the Company by at least 50% via large volume purchase or Corporate Partnership (i.e. minimum US$1M per order), the Company shall consider granting additional discount amount for Products to the Distributor; if the Distributor exceeds its annual purchase commitment by at least 50% in small volume purchase, no additional discount for Products will be considered. (ii) If the Distributor fails to meet the Minimum Purchase Commitment for two (2) consecutive years from January 1, 2001, the Company may terminate this Agreement without consequences on either party by giving one (1) month prior written notice to the Distributor. The decision to exercise this right of termination will be solely at the discretion of the Company. 6.2 The Distributor shall continuously maintain adequate resources and equipment and a fully dedicated team of experienced and competent sales, marketing and technical employees to fulfill the obligations of the Distributor hereunder. The Distributor shall comply with all certification requirements of its technical staff as requested by the Company. 6.3 The Distributor shall provide M&S Services to Customers pursuant to Clause 7 below. 6.4 The Distributor shall comply with all local laws and regulations and conduct business at all times in an honest and straightforward manner and make its best effort to achieve high customer satisfaction. 5 6.5 The Distributor may not appoint any sub-distributor or sub-contract any third party to perform its obligations under this Agreement without the prior written approval of the Company. 7. M&S SERVICES 7.1 During the Term of the Agreement, the Distributor shall: (i) use reasonable commercial effort during regular local business hours, Monday through Friday, to provide direct technical support service to Customers by telephone and/or electronic mail to answer questions of Customers regarding the installation and Use of the Products; (ii) provide Customers with Revisions; (iii) provide training by personnel certified by the Company for any Customers regarding the installation and Use of the Products; and (iv) promptly replace any corrupted or damaged Product. 7.2 The Distributor shall charge the Customer applicable fees for the M&S Services provided. The Distributor shall pay the Net Revenue to the Company for the M&S Services performed pursuant to Clause 9 below. 7.3 The Distributor shall only provide M&S Services and training to Customers by qualified or certified staff as required by the Company. 7.4 The Company shall coordinate between the Supplier and the Distributor with reasonable assistance in its provision of M&S Services on an "AS AVAILABLE" basis. The Company reserves the right to charge for the support it agrees to provide to the Distributor and the Distributor may reject such offer. 7.5 The Company shall provide the Distributor with Revisions, and reserves the right to charge for the Revisions. The Distributor shall be responsible to distribute the Revisions to Customers that are receiving M&S Services. 8. ORDERING AND DELIVERY OF THE PRODUCTS 8.1 The Distributor shall furnish its order sheet for the purchase of the Products to the Company. Such order shall be binding upon the parties hereto unless the Company otherwise notifies the Distributor in writing within seven (7) days after the Company's receipt of such order. In the event of any discrepancy between the provisions of this Agreement and any order, unless expressly approved in writing signed by both parties, the provisions of this Agreement shall prevail. 8.2 During the term of this Agreement, subject to the other terms and conditions of this Agreement, the Company will use its reasonable efforts to deliver (by full or partial shipment) the Products within fourteen (14) days from receipt of 6 written orders, which are accepted by the Company at its main office, or at the Distributor specified shipment dates insofar as practical and consistent with the Company's then current lead-time schedule, shipping schedule, access to supplies on acceptable terms and allocation of available products and capacity among the Company customers. 8.3 The Company shall be entitled to select the carrier and the method of shipment of all Products hereunder and the Distributor shall be responsible for all domestic transportation charges and insurance premiums. Risk of loss shall pass to the Distributor upon delivery of the Products to the Distributor. 8.4 The Company shall accept returns of defective media of Products. 8.5 The Company reserves the right to amend the list of Software and change, modify or discontinue any Products at any time upon giving the Distributor thirty (30) days prior written notice provided that the Company shall fulfill all purchase orders for discontinued Products accepted prior to the date of notification. 8.6 The Distributor shall submit the necessary documents for Purchase Order instructed by the Company. 9. BILLING AND SETTLEMENT PROCEDURES 9.1 For each unit of Product distributed or M&S Services provided, the Distributor shall pay the Net Revenue. The Company shall issue invoice(s) to the Distributor for the total Net Revenue payable. Payment shall be made by the Distributor in Japanese Yen within thirty (30) days after such Net Revenue has been collected by the Distributor from Customers. Notwithstanding above, the Company has the right to issue invoice(s) for the total Net Revenue payable to the Distributor after one hundred and fifty (150) days even though the revenue has not been collected from Customers. Such payment shall be made by the Distributor within thirty (30) days after invoice(s) has been issued. Late payments shall accrue interest at the rate of 1% per month or the maximum rate of interest allowed by law whichever is less. The Company has the right to change the billing condition to the Distributor mentioned the above upon giving the Distributor thirty (30) days advance notice in writing. 9.2 The Distributor shall be responsible for rendering bills to and collecting the revenue from Customers for the distribution of the Products and M&S Services and shall be fully responsible for any payment delinquencies or non-payment by Customers. 9.3 The discounts set forth in Exhibit B shall be reviewed every year by the parties hereto. Notwithstanding the above, the Company reserves the right to revise the said discounts, the Net Revenue and the Recommended Price List at any time upon giving the Distributor thirty (30) days advance notice in writing; provided that in no event should the discounts be less than twenty (20)% of the Recommended Price in the Recommended Price List for Products; nor should 7 the discounts be less than fifteen (15)% for M&S Services. New price changes will apply to all orders made after such notice period. 9.4 The Distributor shall be responsible for paying all charges, including without limitation domestic transportation charges, insurance premiums, consumption taxes, service taxes and all other taxes, duties and government assessments and relating to the distribution of Products and the supply of M&S Services in the Territory. 10. CONFIDENTIAL INFORMATION 10.1 Upon execution of this Agreement, the Company may disclose to the Distributor Confidential Information for which the Distributor has a need to know under this Agreement. Without obtaining the Company's prior written consent, the Distributor shall not copy or duplicate any Confidential Information by any means or technique. Except as specifically provided in this Agreement, the Distributor shall not acquire any right, title or interest in or to any Confidential Information or any files, lists, records, documents, drawings, specifications, equipment, or other tangible things that incorporate or refer to all or a portion of the Confidential Information. 10.2 Unless with the prior written consent of the Company, the Distributor shall not disclose or facilitate disclosure of such Confidential Information to any person, firm or entity except its employees. The Distributor shall take all steps necessary or appropriate to protect the Confidential Information against unauthorized disclosure and misappropriation, including, without limitation, causing all persons, firms and entities with access to any Confidential Information to enter into a confidentiality agreement in a form acceptable to the Company. The Distributor shall use the standard of care generally appropriate for the industry (but not less than reasonable care) in order to avoid unauthorized disclosure or misappropriation of such Confidential Information. 10.3 The Distributor shall not use any Confidential Information for any purposes or activities other than those expressly provided in this Agreement or any other written agreement entered into by and between the parties. 10.4 The Distributor understands and agrees that the Confidential Information constitutes valuable business assets of the Company and/or the Supplier, the unauthorized use or disclosure of which may irreparably damage the Company and/or the Supplier. In the event of threatened or breach violation of a confidentiality obligation, the Company shall be entitled to an injunction restraining the Distributor from breaching this Agreement. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened violation, including recovery of direct and consequential damages from the Distributor. 8 11. INTELLECTUAL PROPERTY RIGHTS 11.1 The Distributor acknowledges that the Supplier is the exclusive owner and the Company is the authorized licensee of the Intellectual Property Rights. The Distributor shall not at any time do or cause to be done, and shall exercise its best efforts to ensure that none of its representatives does or causes to be done, any act impairing or tending to impair any part of any right, title or interest of the Company or the Supplier or to any Intellectual Property Rights provided. With the exception of the rights expressly granted under this Agreement, the Distributor shall not acquire any right, title or interest to or in the Intellectual Property Rights, or any invention, improvement or development based thereon. The Distributor further agrees that the Company and the Supplier shall have any and all right, title, interest in and to any suggested modifications, design changes or improvements of the Products, without payment of additional consideration thereof, either to the Distributor, or its employees agents or customers. 11.2 The Distributor shall at all times conduct business only in its own name and shall not use any Intellectual Property Rights as part of its business name. 11.3 The Distributor agrees that, as a condition of the rights granted under this Agreement and except as otherwise expressly and unambiguously authorized hereunder, it shall not: (i) create or attempt to create, by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information made available to it; (ii) modify, amend, add to or in any way alter any Product supplied to it under this Agreement; (iii) remove any product identification or notices of any confidential or copyright restrictions from the Products or any support material; (iv) list or otherwise display or copy the object code of any Product; (v) copy the Products, develop any derivative works thereof or include any portion thereof in any other software program; or (vi) destroy completely any proprietary information or Confidential Information contained therein prior to disposing of any media or apparatus. 11.4 The Distributor agrees that it shall not use the Intellectual Property Rights except in conjunction with the M&S Services, and in accordance with any guidelines as may be issued by the Company from time to time and the terms of this Agreement. The foregoing notwithstanding, the Distributor may use the Intellectual Property Rights to market and distribute the Products as set forth in this Agreement. The Company reserves the right to require the Distributor to submit to the Company for prior approval any advertising and sales literature of 9 the Distributor that refers to the Products, or otherwise includes any Intellectual Property Rights. The Distributor shall make all modifications to the advertising and sales literature deemed necessary by the Company. 11.5 The Distributor's right to use the Intellectual Property Rights pursuant to Clause 11.4 shall cease upon termination of this Agreement. 11.6 (i) The Distributor agrees that it shall immediately notify the Company of any claims or objections, or indications of claims or objections, that use of the Intellectual Property Rights by the Distributor may or will infringe the proprietary rights of a third party. (ii) The Distributor agrees that it shall immediately notify the Company of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights. Upon notification by the Distributor of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights or upon the Company or the Supplier otherwise learning of such infringement, illegal use or misuse by third parties, the Company and/or the Supplier have the right and sole discretion, but not the duty, to initiate any proceeding relating to the protection of the Intellectual Property Rights. Should the Supplier and/or the Company make such an election to initiate proceedings, the Supplier and/or the Company (as the case may be) shall bear the full burden of expenses for such proceedings and shall also take the full benefit, if any, of such proceedings. Furthermore, in the event the Supplier and/or the Company should make such an election, the Distributor shall provide all necessary assistance required by the Supplier and/or the Company. The Distributor shall be kept fully informed of the proceedings but the Supplier and/or the Company shall retain full control of the proceedings. 12. USE OF TRADE MARKS 12.1 The Distributor shall not acquire any right to or interest in any Trade Marks. The Distributor may only use the Trade Marks in carrying out its authorized activities under this Agreement free of charge, and then only provided that ownership of such Trade Marks is clearly attributed to the Company or the Supplier. 12.2 The Distributor acknowledges and agrees that the Company is the authorized user of the Trade Marks and that all goodwill arising out of use of the Trade Marks by the Distributor pursuant to this Agreement shall inure to the Company. The Distributor shall not at any time or in any way indicate ownership of or any right in the Trade Marks and shall not contest the right of the Company and/or its affiliates to the use of any of the Trade Marks. The Distributor shall not, and shall not have the right to, register, or apply for registration, anywhere in the world, directly or indirectly, any trade mark, service mark, trade name, copyright, company name or other proprietary or commercial right which is similar to the Trade Marks or take any other action that jeopardizes the Trade Mark owner's proprietary rights in the Trade Marks. 10 12.3 The Distributor shall at all times conduct business only under its own name and may not use any of the Trade Marks as part of its business name. 12.4 The Distributor shall not attach, remove or disfigure any Trade Marks on the media containing the Product (or that appear as the result of executing the Product) nor attach any additional marks to the media containing the Product except as otherwise agreed by the Company in writing. 12.5 The Distributor agrees not to alter, remove or obscure any copyright or other proprietary notices on or in the media containing the Product (or that appear as the result of executing the Product) or related documentation or materials. 12.6 The Company reserves the right to require the Distributor to submit to the Company for prior approval any and all advertising and sales literature of the Distributor that refers to the Company, to the Products, or otherwise includes any of the Trade Marks. The Distributor shall make all modifications to the materials deemed necessary by the Company to protect the goodwill associated with the Trade Marks. The Distributor shall also comply with any guidelines relating to use of the Trade Marks as may be furnished to the Distributor and revised by the Company from time to time. 12.7 The Distributor's right to use the Trade Marks shall immediately cease upon termination or expiration of this Agreement. 13. COMPANY COVENANTS AND REPRESENTATIONS The Company represents and agrees to: 13.1 provide such assistance the Distributor in its marketing programs as the Company thinks fit; 13.2 furnish the Distributor with forty (40) sets of marketing materials at no charge, and to provide additional copies at cost; 13.3 provide the Distributor with timely responses regarding plans to correct bugs and enhance the Products; 13.4 use reasonable commercial efforts to procure the Supplier to send one application engineer to the Distributor during the earlier stages of the Product release to provide the Distributor with additional support, the terms and timing of this support will be mutually agreed upon; 13.5 provide a mutually agreed upon Field Application Engineer's Qualification Program including training, performance evaluation, and correction actions; 13.6 use reasonable efforts to procure the Supplier's group of companies to send a representative to Japan to conduct face to face meetings with both the Distributor and customer to understand, evaluate and advise the Distributor; and 11 13.7 provide the Distributor with a reasonable number of demonstration or customer evaluation copies of the Product for customer purchase evaluations at no charge to the Distributor. 14. DISTRIBUTOR COVENANTS AND REPRESENTATIONS The Distributor represents and agrees: 14.1 to provide the Company with (a) two-quarter rolling forecast by the end of each calendar quarter, (b) monthly sales forecast update by the end of each month and (c) monthly distribution and account activities reports; 14.2 to use its best efforts to market and distribute the Products (including without limitation, inclusion of the Products in the Distributor's catalogs and other promotional materials) and provide M&S Services (including installation, training and other customer support) on a continuing basis and to comply with good business practices and all laws and regulations relevant to this Agreement or the subject matter hereof; 14.3 to keep the Company informed as to any problems encountered with the Products and any resolutions arrived at for those problems, to participate in management reviews, and communicate promptly to the Company any and all modifications, design changes or improvements of the Products suggested by any Customer, employee or agent; 14.4 not to incur any liability on behalf of the Company or in any way pledge or purport to pledge the Company's credit or purport to make any contract binding upon the Company; 14.5 to immediately bring to the attention of the Company any information received by the Distributor which is likely to be of interest, use or benefit to the Company in relation to the marketing and/or support of the Products; 14.6 to keep full, proper and up to date books of accounts and records showing clearly all inquiries, transactions, proceedings and Customer calls relating to the Products and will allow a duly authorized representative of the Company to have access to the said books and records and take such copies thereof as such representatives may require; 14.7 that neither this Agreement (or any term hereof) nor the performance of or exercise of rights under this Agreement is restricted by, or contrary to, in conflict with any prior obligations of the Distributor to any third parties; and 14.8 to provide Company Operations VP with written account activity report in English (including account situation, activity planning and change, technical support, customer requests, travel plans etc.) at the end of each month; 14.9 to arrange face-to-face meeting between major account executives (Division General Manager level or above, i.e., above Director level) with the Company and/or the Supplier's President and CEO minimum once each quarter; 12 14.10 to qualify all Distributor Application Engineers through Field Application Engineers Qualification Program provided by the Company; 14.11 to communicate with the Company through the defined official communication channels, to Company Operations VP when necessary; 14.12 to attend the Company and/or the Supplier's annual Sales Meeting at the Company and/or the Supplier's designated location at the Distributor's expense. The Distributor shall make strong efforts to visit the Company and/or the Supplier group of companies' marketing and/or R&D facilities on a regular basis to maintain good communications; 14.13 that neither this Agreement (or any term hereof) nor the performance of or exercise of the rights under this Agreement, is restricted by, contrary to, in conflict with, ineffective under, or affects the Company and the Supplier's proprietary rights (or the duration thereof) under, or will require any termination payment or compulsory licensing under, any law or regulation of Japan. The Distributor shall make any filings required under Japanese laws and regulations; and 14.14 to commit the following personnel for the promotion of the Company in Japan: (i) full time senior sales manager who also functions as the overall vendor project manager, (ii) full time sales representatives, (iii) full time application engineers, and (iv) full time administrative supporting staff. 15. LIMITED WARRANTY AND DISCLAIMER 15.1 The Company warrants that the program media of each Product will materially conform to the current Documentation for three (3) months after it is delivered to a Customer, provided the Products are maintained to the Company's maintenance recommendation in a manner specified by the Company. The Company shall replace any defective media within such period, provided the Distributor bears the cost of freight and insurance to the point of repair. The Company will bear the cost of freight and insurance for the return of the Products to the Distributor. 15.2 The Distributor will handle and be responsible for all warranty returns from its Customers. 15.3 The Company does not warrant that it will be able to correct all programming errors or other problems encountered by the Distributor and the Customers. If the Company cannot, or determines that it is not practical to repair or replace the returned Product, the Net Revenue paid by the Distributor shall be refunded. 15.4 THE COMPANY AND THE SUPPLIERS MAKE NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND HEREBY DISCLAIM ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE, COURSE OF DEALING, USAGE OR ERROR FREE OPERATION. 13 15.5 The above warranty does not extend to any Product that (i) is modified or altered, (ii) is operated in a manner other than that specified by the Company, (iii) has its serial number removed or altered (iv) is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment) or (v) is not maintained to the Company's maintenance specifications. The Distributor's sole remedy with respect to any warranty or defect is as stated above. The Distributor is fully responsible for satisfaction of its Customers and will be responsible for all claims, damages, settlements, expenses and attorney's fees incurred by the Company with respect to the Distributor's claims or representations regarding the Products beyond the Company's above warranty obligations to the Distributor. 16. INDEMNIFICATION 16.1 The Company shall hold the Distributor harmless from any third party claims for damages and settlements, including reasonable attorneys' fees and expenses related thereto, resulting from infringement by the Products of any United States or Japanese patent or any United States or Japanese copyrights, provided the Company is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance by the Distributor and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise; the Company will not be responsible for any settlement it does not approve in writing. Notwithstanding the foregoing, the Company is not liable to any claims of infringement of a patent or copyright in which the Distributor or any affiliate of the Distributor has an interest or license. 16.2 If all or any part of the Products is, or in the opinion of the Company, may become, the subject of a claim or suit of infringement, the Company may: (i) modify the Products to render them non-infringing; or (ii) replace the Products with the Company's other products at equivalent value with the written request from the Distributor. THE FOREGOING IS THE EXCLUSIVE REMEDY FOR DISTRIBUTOR AND IS IN LIEU OF ANY WARRANTIES OF NON-INFRINGEMENT, WHICH ARE HEREBY DISCLAIMED. 16.3 The foregoing obligation of the Company does not apply with respect to Products or portions or components thereof: (i) not supplied by the Company; (ii) made in whole or in part in accordance to the specifications of the Distributor or Customer if the alleged infringement is caused by such specifications; 14 (iii) which are modified (other than by the Company) after shipment by the Company, if the alleged infringement relates to such modification; (iv) combined with other products, processes or materials where the alleged infringement relates to such combination; (v) where the Distributor and/or Customers continue allegedly infringing activity after being notified thereof or after being informed of modifications that would have avoided the alleged infringement, (vi) where the use of the Product is incident to an infringement not resulting primarily from the Product, or (vii) where the Product is used in an application or environment for which such Product was not designed, or where the use is not strictly in accordance with the pertinent directions. 16.4 The Distributor shall hold the Company harmless from and shall indemnify the Company and its officers, directors, agents and employees from all damages, settlements, attorney's Fees and expenses related to a claim caused by the Distributor's act, omission, misconduct, negligence or breach of any term of this Agreement. 17. LIMITED LIABILITY EXCEPT AS PROVIDED IN CLAUSE 16 ABOVE, NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, THE COMPANY AND THE SUPPLIER WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO THE COMPANY HEREUNDER DURING THE EIGHTEEN MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE; OR (II) ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS OR LOST OR INACCURATE DATA, EVEN IF THE COMPANY OR THE SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. THE COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL. THE DISTRIBUTOR HEREBY ACKNOWLEDGES THAT THE MUTUAL COVENANTS AND AGREEMENTS SET FORTH IN THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK. 15 18. TERM AND TERMINATION 18.1 Subject to Clauses 18.2 and 18.3 below, this Agreement shall be for a term of non-cancellable eight (8) years from the date of this Agreement. Thereafter, this Agreement shall be renewed automatically for successive periods of five (5) years each unless either Party notifies the other Party of its intention not to renew at least six (6) months prior to the expiration of the then current term of this Agreement. If the Distributor fails to meet the Minimum Purchase Commitment for two (2) consecutive years from January 1, 2001, the Company may terminate this Agreement without consequences on either party by giving one (1) month prior written notice to the Distributor. In addition, the Distributor will not be held responsible to pay the unfulfilled amounts of Minimum Purchase Commitment as outlined in Exhibit A. The decision to exercise this right of termination will be solely at the discretion on the Company. 18.2 This Agreement may be terminated by a non-breaching party for cause immediately by written notice to the breaching party upon the occurrence of any of the following events: (i) if the other ceases to do business, or otherwise terminates its business operations or if there is a material change in control of the other; or (ii) if the other breaches any material provision of this Agreement and fails to cure such breach within thirty (30) days of written notice describing the breach; (iii) if the other shall fail to promptly secure or renew any business license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement of any such business license, registration, permit, authorization or approval is revoked or suspended and not reinstated within thirty (30) days; or (iv) if the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against that party. 18.3 This Agreement may be terminated by the Company pursuant to Clause 6.1(ii). 18.4 Clauses 10, 11, 12, 15, 16, 17, 18, 19 and 20 shall survive termination of this Agreement. 19. CONSEQUENCE OF TERMINATION 19.1 Upon termination or expiration of this Agreement for any reason whatsoever, the Distributor shall immediately: (i) discontinue any use of any Intellectual Property Rights of the Company; 16 (ii) discontinue all representations or statements from which it might be inferred that the Distributor is a distributor of the Products in the Territory or is in any way related to the Company; (iii) cease to promote, solicit orders for or procure orders for Products (but will not act in any way to damage the reputation of the Company or any Product) or M&S Services; (iv) provide the Company with details of all Customers so that the Company may enter into direct contractual relationship with them regarding the distribution of and support Products in the Territory with the intent that the Company shall assume all maintenance and support obligations for the Products to Customers in the Territory; (v) return to the Company at the Distributor's expense, all catalogues and literature of the Company then in possession of the Distributor; and (vi) return to the Company at the Distributor's expense, all copies in whatever media of Confidential Information in the Distributor's possession, power, custody or control or at the Company's election, certify the destruction of the same by an officer of the Distributor. 19.2 Unless expressly provided otherwise herein, each party understands that the rights of termination hereunder are absolute. Neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other (or for any compensation to the other) arising from or incident to any termination of this Agreement by such party which complies with the terms of the Agreement whether or not such party is aware of such damage, loss or expenses. 19.3 Upon termination of this Agreement according to clause 18 for other than Distributor's breach, the Company shall continue to fulfill, subject to the terms of clause 8 above, all orders accepted by the Company prior to the date of termination. 19.4 Upon termination, the Distributor shall be entitled to compensation calculated by the following formula: total amount of income from the previous twelve (12) months immediately prior to the date of termination multiplied by the number of months remaining under the Agreement divided by twelve (12). "Income shall mean total product revenue earned by the Distributor from distributing products covered by the Agreement minus total cost of such Product paid to the Company. 20. MISCELLANEOUS 20.1 Amendment and Waiver: Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the parties. 17 20.2 Governing Law and Legal Actions: This Agreement shall be governed by and construed under the laws of Japan without regard to conflicts of laws or provision thereof and without regard to the United Nations Convention on Contracts for the International Sale of goods. Both parties consent to the non-exclusive jurisdiction of the Japanese courts and agree that process may be served in the manner provided for giving of notices or otherwise as allowed by Japanese law. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorney's fees. 20.3 Headings: Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement. 20.4 Export Laws: The Distributor agrees to comply with all applicable international and national laws that apply to the export and import of the Products, including without limitation the US Export Administration Regulations (or any successor supplement or regulations) as well as end-user, end-used country destination restrictions issued by the US Export Administration and other government. The Distributor shall demonstrate to the Company compliance with all applicable laws and regulations prior to delivery thereof by Company. 20.5 Notices: Notices under this Agreement shall be sufficient only if (x) personally delivered, (y) faxed to the fax number of a party as it may notify the other party in writing from time to time, with confirmed answer-back report, or (z) delivered by a major commercial rapid delivery courier or mailed by certified or registered mail, return receipt requested to a party at its addresses first set forth herein or as amended by notice pursuant to this subsection. If not received sooner, notice by fax shall be deemed received one (1) day after the date indicated in the answer-back report and notice by mail shall be deemed received fourteen (14) days after deposit in the mail. 20.6 Assignment: The Distributor may not assign this Agreement or the rights thereunder without the prior consent of the Company. The Company may assign this Agreement by giving notice to the Distributor. 20.7 Confidentiality: The parties will not disclose the terms of this Agreement or any Exhibit hereto to any third party without the prior written consent of the other party (except that either party may disclose such terms to potential investors, their attorney's and accountants, and government officials). 20.8 Severability: If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 20.9 Force Majeure: Neither party hereto shall be responsible for any failure to perform its obligations under this Agreement (other than any payment obligations) if such failure is caused by acts of God, war, strikes, revolutions, lack or failure of transportation facilities, laws or governmental regulations or other causes which are beyond the reasonable control of such party. 18 Obligations hereunder, however, shall in no event be executed but shall be suspended only until the cessation of any cause of such failure. In the event that such force majeure should obstruct performance of this Agreement for more than one (1) month, the parties hereto shall consult with each other to determine whether this Agreement should be modified or terminated. The party facing an event of force majeure shall use its best endeavors in order to remedy that sensation as well as to minimize its effects. A case of force majeure shall be notified to the other party by telex or telefax within five (5) days after its occurrence and shall be confirmed by a letter. The parties expressly agree that this Clause 20.9 shall not apply to the parties' payment obligations under this Agreement, which shall in no event be subject to any delay or suspension. 20.10 Relationship of Parties: The parties hereto expressly understand and agree that the Distributor is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith. 20.11 Entire Agreement: This Agreement supersedes all proposals, oral or written, all negotiations, conversations, discussions or prior agreements between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom. 20.12 Counterparts: This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. MAINGATE ELECTRONICS INC.: AVANT! JAPAN CORPORATION: By: /s/ MORIYUKI CHIMURA [SEAL] By: /s/ NORIKO ANDO [SEAL] ---------------------------- ---------------------------- Date: Oct. 1st, 2000 Date: Oct. 1st, 2000 ---------------------------- ---------------------------- Name: Moriyuki Chimura Name: Noriko Ando ---------------------------- ---------------------------- Title: President Title: Representative Director ---------------------------- ---------------------------- MainGate Electronics Inc. Avant! Japan Corporation 19 Exhibit A MINIMUM PURCHASE COMMITMENT

- ----------------------------------------------------------------------------------------------------- Minimum Purchase Period[Q/YR] Commitment Cumulative Revenue - ----------------------------------------------------------------------------------------------------- Product Purchase Q4 2000, (yen)2,000 Million (yen)2,000 Million ending Dec 31, 2000 ((yen)2.0 Billion) ((yen)2.0 Billion) - ----------------------------------------------------------------------------------------------------- Maintenance Purchase Q4 2000, (yen)300 Million (yen)2,300 Million ending Dec 31, 2000 ((yen)2.3 Billion) - -----------------------------------------------------------------------------------------------------

Note: The amount of Minimum Purchase Commitment from year 2001 will be discussed by the Company and the Distributor and determined by the Company in the beginning of each year. For purposes of determining whether the Distributor has met its purchase commitment pursuant to this Exhibit A, purchase shall equal the Japanese yen amount generated by the Distributor from distributing the Products under this Agreement and the Product lease under October 1, 2000 Product Lease Agreement between the Distributor and the Company. 20 Exhibit B DISCOUNTS AND NET REVENUE Products Discount to the 35.0% of the selling price; the Distributor Distributor's cost shall be 65.0% of the selling price for all Products stated in Exhibit C. Annual Maintenance discount 35.0% of the maintenance charge; the to the Distributor Distributor's annual maintenance cost shall be 65.0% of the maintenance charge for all the Products stated in Exhibit C. The maintenance charge is twelve (12)% of the product list price. Note: (i) The Company shall retain the right to change or modify the list price for Products and Maintenance. The parties agree that the cost of Products and/or maintenance may fluctuate from time to time. Accordingly, the parties agree to negotiate in good faith an appropriate increase or decrease to such fees. For Products ordered by the Distributor for its own inventory, the Distributor shall have the right to convert those Products to the Company's other products at equivalent amount of credit. (ii) The Company shall instruct the Distributor the discount of selling price. The Company shall retain the right to approve or disapprove such discount. 21 Exhibit C PRODUCTS All Products produced or acquired by the Company and the Supplier as of the date of this Agreement less those Products to be distributed by third parties, which are agreed upon between the Company and the Distributor. Non-exclusive condition Products set out below can be distributed only when they are bundled with other products. Star-Hspice family and options Star-MTB family and options Polaris family and options Nova family and options Design VERIFYer family and options Note: As exceptional conditions, the Company appoints as a non-exclusive condition for the distribution of Star-MS family and options. 22 Exhibit D TERRITORY Entire country of Japan 23 EX-10.19 7 f76852ex10-19.txt DISTRIBUTION AGREEMENT - AVANTICORP HONG KONG DISTRIBUTION AGREEMENT Exhibit 10.19 This Distribution Agreement (the "Agreement") is entered as of October 1, 2000 and made between AVANTICORP. HONG KONG LIMITED (the "Company"), with its principal place of business at Room 1006, Bank of American Tower, 12 Harcourt Road, Hong Kong, and DAVANTECH CO. (the "Distributor"), with its principal place of business at 7th, Duam, #174-6, Seokchon-Dong, Songpa-ku, Korea, 138-190: RECITALS: A. The Company has obtained an exclusive license in the distribution (via sub-licensing) of certain Avant! software-based electronic design automation products, including documentation and manuals therefor. B. The Company wishes to appoint the Distributor as an exclusive distributor and Distributor wishes to acquire from the Company the right to distribute, market and support such products in the Territory (as defined below). NOW IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS In this Agreement, the following terms shall have the following meanings: "CONFIDENTIAL INFORMATION" includes information which the Company has maintained as confidential and revealed to the Distributor and which may or may not be related to the Products including but not limited to: technical information such as computer programs, characterization, formulae, algorithms, process, performance, interface information, proprietary command architecture, proprietary scheme constructs, including commands, format, syntax and semantics, defects, bugs, proprietary circuit behavior information, the Company supplied data, circuit and logic elements and business information, including confidential future product information, confidential basic concepts, marketing and sales information, sales volume, pricing and accounting information. Confidential Information shall also include oral information disclosed by the Company to the Distributor pursuant to this Agreement, provided such information is summarized in writing and is clearly marked with the Company's name and "Confidential" or similar proprietary marking and delivered to the Distributor within thirty (30) days of disclosure. Confidential Information does not include information which: (i) has come into the public domain without breach of the confidence by the Distributor or any other person, firm or entity; (ii) is or becomes publicly known through no wrongful act of the party to whom such information was disclosed; (iii) is received by the Distributor from a third party without restrictions on its use in favor of the Company or a licensor of the Company; 1 (iv) is independently developed by the Distributor's employee, agent or contractor without use of Confidential Information; (v) is acknowledged in writing by the Company to be non-confidential; or (vi) is required to be disclosed pursuant to any statutory requirement or court order (except that the Distributor shall give the Company prompt notice of such statutory requirement or court order such that the Company may request protection therefrom). "DOCUMENTATION" means the user guides, instruction manuals, tutorials, on-screen user assistance available in the operation of the Software and other documents whether in written or machine-readable form issued by the Company from time to time for the Use of the Software; "END USER" means a customer who has signed an End User License Agreement; "END USER LICENSE AGREEMENT" means the End User Software and Service License Agreement provided by the Company from time to time; "INTELLECTUAL PROPERTY RIGHTS" means all designs patents, copyrights, inventions, enhancements, revisions, updates, adaptations, secret and confidential information, know-how, technical data, trade secrets, specifications, designs, whether or not in documentary form, functional and detailed design specifications and all other intangible property (whether or not in documentary form and whether or not registrable, patentable, copyrightable for otherwise protectable under applicable laws) relating to the Products; "M&S SERVICES" means the maintenance and support services to be provided by the Distributor pursuant to Clause 7 herein; "MINIMUM PURCHASE COMMITMENT" means the value of minimum [quarterly/annual] licensing commitment of Products and M&S Services as set out in Attachment A; "MULTINATIONAL CUSTOMERS" shall mean customers who use the Products concurrently both within and outside the Territory, including use of the Products on a wide area network; "NET LICENSING REVENUE" means the gross fee for any Product and fees for any purchased M&S Services recognised by the Distributor under US GAAP, less any direct costs (including but not limited to discounts to Distributors as set out in Exhibit B, warehousing allowances, insurance and transportation charges, taxes, rebates, cancellations and returns). The Net Licensing Revenue shall not include any interest or finance charges; "PRODUCTS" means the Software together with the corresponding Documentation; 2 "RECOMMENDED PRICE LIST" means the list setting out the Recommended Price for the Products and M&S Services to be charged by the Distributor to the End Users; "REVISIONS" means upgrades, error corrections and updates of the Software in object code form made generally available to End Users of the Software. "SOFTWARE" means the computer software programs in object code form only as set out in Attachment C; "TERM" means the term as set out in clause 18; "TERRITORY" means the territory as set out in Attachment D; "TRADE MARK" means any trade mark, service mark, trade name, symbols and logos owned or authorized to be used by the Company; "USE" means in relation to the Software, its loading, displaying, running, transmission or storage for the purpose of processing the instructions contained in the Software. 2. APPOINTMENT 2.1 Subject to the terms of this Agreement, the Company hereby grants to the Distributor and the Distributor hereby accepts an exclusive right to: (i) market and distribute the Products to End Users (by way of sub-license) solely for use in the Territory; (ii) install the Products for End Users; and (iii) provide M&S Services to End Users. No source code for the software will be deemed as included, by inference or otherwise, in the License granted by this Agreement. The Company shall not appoint any person or entity other than the Distributor as its distributor, representative or agent, excluding OEM's or VAR's for the distribution of Products in the Territory. 2.2 (i) Subject to applicable terms and conditions, including fees, to be agreed on a case by case basis, the Distributor hereby grants the Company (or its other distributors as the case may be) a non-exclusive right within the Territory for the Term of this Agreement to: (a) distribute the Products directly to End Users; and (b) grant such End Users the right to use the Products. For purpose of this Clause, End Users shall be Multinational Customers of the Company or its other distributors (as the case may be). 3 (ii) Where the Multinational Customer is an End User of the Distributor subject to applicable terms and conditions, including fees, to be agreed on a case by case basis, the Company hereby grants, and/or shall use reasonable commercial effort to procure any relevant third party to grant, the Distributor a non-exclusive right outside the Territory for the Term of this Agreement to (a) distribute the Products directly to such Multinational Customers; and (b) grant such Multinational Customer the right to use the Products. 2.3 An End User within the Territory, who desires to have the right to use the input/output, ("I/O") format files of the Products in order to develop and distribute an interfacing product between the Product(s) and third parties' software programs solely for use within End User's internal design flow, may submit a request to the Distributor. The Distributor will forward such request to the Company. The Company has the sole discretion in deciding whether or not to grant such right and terms and conditions attached to such right if granted. 2.4 The Company reserves the right to change, modify or discontinue any of the Products at any time provided that the Distributor is given ninety (90) days prior written notice. Any Revision, enhancement or improvement of a Product that is generally made available by the Company, that is substantially similar to such Products and that is marketed under the same product number and nomenclature as such Product shall be added to Attachment C as a new Product. In addition to the foregoing, any products developed by the Company other than the substantially similar products referenced above, shall be considered as a new product and the Company shall decide whether the Distributor is authorized to distribute this new product; provided, however, that if any such new product is competitive with any non-Company products that Distributor is distributing, Distributor shall have thirty (30) days to decide whether to distribute Company's new product, or the non-Company product Distributor is then currently distributing. If Distributor decides to distribute the non-Company product, then Distributor, for the remainder of the term of this Agreement, will be a non-exclusive Distributor of the Products and Company shall, at its discretion, appoint other distributors, representatives or agents for the distribution of Products in the Territory. The Distributor shall have the right and freedom to distribute any non-competitive software products or services. 2.5 All rights not expressly granted are hereby reserved by the Company. 3. RESTRICTIONS ON THE APPOINTMENT 3.1 The Distributor may only distribute the Products to persons and entities located and taking delivery within the Territory (except for Multinational Customers pursuant to Clause 2.2 above). 4 3.2 The Distributor shall not tamper with the packaging of the Products and shall only sub-license the Products as packaged by the Company. 4. LICENSE TO DISTRIBUTOR 4.1 This Agreement shall operate as a limited and non-transferable License for the Distributor to Use [ten (10)] copies of the Products for demonstration, internal training, testing, providing M&S Services. The Distributor may make a single copy of each Product for archival purposes. 4.2 Except as provided in Clause 4.1, Distributor may not use the Products for its own internal use without prior written permission of the Company. 5. LICENSE TO END USER 5.1 The Distributor shall ensure that each customer has executed an appropriate End User License Agreement for the Products as provided by the Company. Any changes to the End User License shall require prior written consent from the Company. 5.2 The Distributor shall obligate each End User, by execution of the End User License Agreement, not to: (i) create or attempt to create by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information available to it; (ii) modify, amend, add to or in any way alter any Product supplied to it under the End User License Agreement; and (iii) make any copy of the Products without the prior consent of the Distributor (except one copy thereof for archival purpose). 6. RESPONSIBILITIES OF DISTRIBUTOR 6.1 The Distributor shall meet its Minimum Purchase Commitment to the Company during the Term of this Agreement. 6.2 The Distributor shall continuously maintain adequate resources and equipment and a fully dedicated team of experienced and competent sales, marketing and technical employees to fulfill the obligations of the Distributor hereunder. The Distributor shall comply with all certification requirements of its technical staff as requested by the Company. 6.3 The Distributor shall provide M&S Services to End Users pursuant to Clause 7 below. 6.4 The Distributor shall conduct business at all times in an honest and straightforward manner and make its best effort to achieve high customer satisfaction. 5 6.5 The Distributor may not appoint any sub-distributor or sub-contract any third party to perform its obligations under this Agreement without the prior written approval of the Company. 7. M&S SERVICES 7.1 During the Term of the Agreement, the Distributor shall: (i) provide End Users with upgrades, error corrections and Revisions of the Products as and when they become available from the Company; (ii) provide training for any End Users regarding the installation and Use of the Products; and (iii) promptly replace any corrupted or damaged Product. 7.2 The Distributor shall charge the End User a fee for the performance of the M&S Services according to the Recommended Price List. The Distributor shall pay to the Company for the M&S Services pursuant to Clause 9. 7.3 The Distributor shall only provide M&S Services and training to End Users by qualified or certified staff as required by the Company. 7.4 The Company shall provide reasonable assistance to the Distributor in its provision of M&S Services on an "AS AVAILABLE" basis. The Company reserves the right to charge for the support it agrees to provide to the Distributor and the Distributor may reject such offer. It is expected that the Distributors shall use its best efforts to familiarize itself with the Products and such that the assistance to be provided by the Company will be minimal. 7.5 The Company shall provide the Distributor with Revisions, and reserves the right to charge for the Revisions. The Distributor shall be responsible to distribute the Revisions to End Users that are receiving M&S Services. 8. ORDERING AND DELIVERY OF THE PRODUCTS 8.1 Distributor shall furnish its order sheet for the purchase of the Products to Company. Such order shall be binding upon the parties hereto unless Company otherwise notifies Distributor in writing within seven (7) days after the Company's receipt of such order. In the event of any discrepancy between the provisions of this Agreement and any order, unless expressly approved in writing signed by both parties, the provisions of this Agreement shall prevail. 8.2 Products are delivered F.O.B. Korea from the Company's applicable warehouse or place of production to Distributor. During the term of this Agreement, subject to the other terms and conditions of this Agreement, Company will use its reasonable efforts to deliver (by full or partial shipment) the Products within three (3) days from receipt of written orders, which are accepted by Company at its main office, or at Distributor specified shipment dates insofar as practical 6 and consistent with Company's then current lead-time schedule, shipping schedule, access to supplies on acceptable terms and allocation of available products and capacity among Company customers. 8.3 The Company shall be entitled to select the carrier and the method of shipment of all Products hereunder and the Distributor shall be responsible for all shipping costs and insurance premiums. Risk of loss shall pass to the Distributor upon delivery of the Products to the carrier. 8.4 The Company shall accept unlimited returns of defective media of Products. 9. BILLING AND SETTLEMENT PROCEDURES 9.1 (a) For each unit of Products or M&S Services distributed in the Territory, the Distributor shall pay to the Company the Net Licensing Revenue. The Company shall issue invoice(s) to the Distributor for the total Net Licensing Revenue payable. Payment shall be made by the Distributor in US dollars within ninety (90) days after the Net Licensing Revenue has become "recognized revenue" to the Distributor in accordance with United States generally accepted accounting principles. For special cases and upon mutual agreement, the parties may extend the credit period from the said ninety (90) days to one hundred and eighty (180) days. The payment amount and the discount are based on a fixed exchange rate that is specified in Attachment B. (b) In the event that the exchange rate exceeds +/- five percent (5%) the effect of such excess shall be borne equally by Company and Distributor. By way of example, if the fixed exchange rate is 105 won to 1 dollar the Distributor shall make payment based on an exchange rate of 110 won to one (1) dollar, (10/2 = 5; 5 + 105 = 110). By way of further example, of the fixed exchange rate is 105 won to one (1) dollar and the exchange rate on the date the customer pays the Distributor is between 99 to 111 won to one (1) dollar the Distributor will make payment based on an exchange rate of 105 won to one (1) dollar. Company and Distributor shall review the fixed exchange rate annually and mutually agree on a fixed exchange rate for the following year. If the parties do not review the fixed exchange rate or do not agree on a new fixed exchange rate, then the fixed exchange rate for the prior year will remain in effect. 9.2 If the Distributor exceeds its Minimum Purchase Commitment to the Company by at least 50% via large volume purchase or Corporate Partnership (i.e. minimum US$1M per order), the Company shall consider to grant additional discount amount for Products to Distributor, if the Distributor exceeds its Minimum Purchase Commitment by at least 50% via aggregate of small volume purchases, no additional discount for Products will be considered. 9.3 The discounts set forth in Attachment B shall be reviewed every year by the parties hereto. Notwithstanding the above, the Company reserves the right to revise the said discounts, the Net Licensing Revenue and the Recommended 7 Price List at any time upon giving the Distributor thirty (30) days advance notice in writing; provided that in no event should the discounts be less than 20% off the Recommended Price in the Recommended Price List; Provided further that for M&S Services, the parties shall negotiate in good faith an appropriate increase or decrease in price. New Price changes will apply to all orders made after such notice period. 9.4 The Distributor shall be responsible for paying all charges, including without limitation transportation charges and insurance premiums, and all local import duties, value added taxes, service taxes and all other taxes, duties and government assessments relating to the distribution of Products and the supply of M&S Services in the Territory. 9.5 All payments required to be made to the Company hereunder shall be made without any withholding tax unless such withholding is required by any applicable law. If the Distributor is required by law to make such withholding from any such payment, the relevant sum payable by the Distributor shall be increased to the extent necessary to ensure that, after the making of such withholding, the Company receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such withholding been made or required to be made. 10. CONFIDENTIAL INFORMATION 10.1 Upon execution of this Agreement, the Company may disclose to the Distributor Confidential Information for which the Distributor has a need to know under this Agreement. Without obtaining the Company's prior written consent, the Distributor shall not copy or duplicate any Confidential Information by any means or technique. Except as specifically provided in this Agreement, the Distributor shall not acquire any right, title or interest in or to any Confidential Information or any files, lists, records, documents, drawings, specifications, equipment, or other tangible things that incorporate or refer to all or a portion of the Confidential Information. 10.2 Unless with the prior written consent of the Company the Distributor shall not disclose or facilitate disclosure of such Confidential Information to any person, firm or entity except its employees, agents or consultants who have a need-to-know. The Distributor shall take all steps necessary or appropriate to protect the Confidential Information against unauthorized disclosure and misappropriation, including, without limitation, causing all persons, firms and entities with access to any Confidential Information to enter into a confidentiality agreement in a form acceptable to the Company. The Distributor shall use the standard of care generally appropriate for the industry (but no less than reasonable care) in order to avoid unauthorized disclosure or misappropriation of such Confidential Information. 10.3 The Distributor shall refrain from using or exploiting any and all Confidential Information for any purposes or activities other than those expressly provided 8 in this Agreement or any other written agreement entered into by and between the parties 10.4 The Distributor understands and agrees that the Confidential Information constitutes valuable business assets of the Company and/or its licensor, the unauthorized use or disclosure of which may irreparably damage the Company and/or its licensor. In the event of breach of confidence or threatened violation of its obligations under this Clause 10 by the Distributor, the Company shall be entitled to an injunction restraining the Distributor from breaching this Agreement. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened violation, including recovery of direct and consequential damages from the Distributor. 11. INTELLECTUAL PROPERTY RIGHTS 11.1 The Distributor acknowledges that the Company is the exclusive owner or authorized licensee of the Intellectual Property Rights. The Distributor shall not at any time do or cause to be done, and shall exercise its best efforts to ensure that none of its representatives does or causes to be done, any act impairing or tending to impair any part of any right, title or interest of the Company or its licensor in or to any Intellectual Property Rights provided, however, that any challenge of the validity of any item or part of the Intellectual Property Rights in a legal proceeding shall not be considered to be an act tending to impair said right, title or interest. With the exception of the rights expressly licensed under this Agreement, the Distributor shall not acquire any right, title or interest to or in the Intellectual Property Rights, or any invention, improvement or development based thereon. The Distributor further agrees that the Company shall have any and all right title and interest in and to any suggested modifications, design changes or improvements of the Products, without payment of any additional consideration therefore either to the Distributor, or its employees, agents or customers. 11.2 The Distributor shall at all times conduct business only in its own name and shall not use any Intellectual Property Rights as part of its business name. 11.3 The Distributor agrees that, as a condition of the rights granted under this Agreement and except as otherwise expressly and unambiguously authorized hereunder, it shall not: (i) create or attempt to create, by reverse engineering or otherwise, the source code or internal structure of the Products or any part thereof from the object code or from the information made available to it; (ii) modify, amend, add to or in any way alter any Product supplied to it under this Agreement; (iii) remove any product identification or notices of any confidential or copyright restrictions from the Products or any Documentation; 9 (iv) list or otherwise display or copy the object code of any Product; or (v) copy the Products, develop any derivative works thereof or include any portion thereof in any other software program; (vi) prior to disposing of any media or apparatus, to destroy completely any proprietary information or Confidential Information contained therein. 11.4 The Distributor agrees that it shall not use the Intellectual Property Rights except in conjunction with the marketing and distribution of the Products and the supply of the M&S Services, and in accordance with any guidelines as may be issued by the Company from time to time and the terms of this Agreement. The Company reserves the right to require the Distributor to submit to the Company for prior approval any and all advertising and sales literature of the Distributor that refers to the Products, or otherwise includes any Intellectual Property Rights. The Distributor shall make all modifications to the advertising and sales literature deemed necessary by the Company. 11.5 The Distributor's right to use the Intellectual Property Rights pursuant to Clause 11.4 shall cease upon termination of this Agreement. 11.6 (i) The Distributor agrees that it shall immediately notify the Company of any claims or objections, or indications of claims or objections, that use of the Intellectual Property Rights by the Distributor may or will infringe the proprietary rights of a third party. (ii) The Distributor agrees that it shall immediately notify the Company of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights. Upon notification by the Distributor of any infringement, illegal use or misuse by third parties of the Intellectual Property Rights or upon the Company otherwise learning of such infringement, illegal use or misuse by third parties, the Company has the right and sole discretion, but not the duty, to initiate any proceeding relating to the protection of the Intellectual Property Rights. Should the Company make such an election to initiate proceedings, the Company shall bear the full burden of expenses for such proceedings and shall also take the full benefit, if any, of such proceedings. Furthermore, in the event the Company should make such an election, the Distributor shall provide all necessary assistance required by the Company. The Distributor shall be kept fully informed of the proceedings but the Company shall retain full control of the proceedings. 12. USE OF TRADE MARKS 12.1 The Distributor shall not acquire any right to or interest in any Trade Marks. The Distributor may only use the Trade Marks in carrying out its licensed activities under this Agreement, and then only provided that ownership of such Trade Marks is clearly attributed to the Company or its licensor(s). 10 12.2 The Distributor acknowledges and agrees that the Company is the owner and/or licensee of the Trade Marks and that all goodwill arising out of use of the Trade Marks by the Distributor pursuant to this Agreement shall inure to the Company. The Distributor shall not at any time or in any way indicate ownership of or any right in the Trade Marks and shall not contest the right of the Company and/or its affiliates to the use of any of the Trade Marks. The Distributor shall not, and shall not have the right to, register, or apply for registration, anywhere in the world, directly or indirectly, any trade mark, service mark, trade name, copyright, company name or other proprietary or commercial right which is confusingly similar to the Trade Marks or take any other action that jeopardizes the Company's proprietary rights in the Trade Marks. 12.3 The Distributor shall at all times conduct business only under its own name and may not use any of the Trade Marks as part of its business name. 12.4 The Distributor shall not attach, remove or disfigure any Trade Marks on the media containing the Product (or that appear as the result of executing the Product) nor attach any additional marks to the media containing the Product except as otherwise agreed by the Company in writing. 12.5 The Distributor agrees not to alter, remove or obscure any copyright or other proprietary notices on or in the media containing the Product (or that appear as the result of executing the Product) or related documentation or materials. 12.6 The Company reserves the right to require the Distributor to submit to the Company for prior approval any and all advertising and sales literature of the Distributor that refers to the Company, to the Products, or otherwise includes any of the Trade Marks. The Distributor shall make all modifications to the materials deemed necessary by the Company to protect the goodwill associated with the Trade Marks. The Distributor shall also comply with any guidelines relating to use of the Trade marks as may be furnished to the Distributor and revised by the Company from time to time. 12.7 The Distributor's right to use the Trade Marks shall immediately cease upon termination or expiration of this Agreement. 13. COMPANY COVENANTS AND REPRESENTATIONS The Company represents and agrees to: 13.1 provide such assistance the Distributor in its marketing programs as the Company thinks fit; 13.2 fulfill orders accepted by the Company for the Products in accordance with this Agreement; 13.3 notify the Distributor as soon as practicable regarding the release of new or revised Products; 11 13.4 furnish the Distributor with forty (40) sets of marketing materials at no charge, and to provide additional copies at cost; 13.5 provide Distributor with timely responses regarding plans to correct bugs and enhance the products; 13.6 send one Company application engineer to Distributor during the earlier stages of the Product release for at least one week to provide Distributor with additional support; the terms and timing of this support will be mutually agreed upon; 13.7 provide a mutually agreed upon Field Application Engineer's Qualification Program including training, performance evaluation, and correction actions; 13.8 visit Korea at least once each quarter and conduct face to face meetings with both the Distributor and customer to understand, evaluate and advise the Distributor; and 13.9 provide the Distributor with a reasonable number of demonstration or customer evaluation copies of the Product for customer purchase evaluations at no charge to the Distributor. 14. DISTRIBUTOR COVENANTS AND REPRESENTATIONS The Distributor represents and agrees: 14.1 to provide the Company with (a) two-quarter rolling forecast by the end of each calendar quarter, (b) monthly sales forecast update by the end of each month and (c) weekly sales prospects when possible; 14.2 to use its best efforts to market and distribute the Products (including without limitation, inclusion of the Products in the Distributor's catalogs and other promotional materials) and provide M&S Services (including installation, training and other customer support) on a continuing basis and to comply with good business practices and all laws and regulations relevant to this Agreement or the subject matter hereof; 14.3 to keep the Company informed as to any problems encountered with the Products and any resolutions arrived at for those problems, to participate in management reviews, and to communicate promptly to the Company any and all modifications, design changes or improvements of the Products suggested by any End User, employee or agent; 14.4 not to incur any liability on behalf of the Company or in any way pledge or purport to pledge the Company's credit or purport to make any contract binding upon the Company; 14.5 immediately bring to the attention of the Company any information received by the Distributor which is likely to be of interest, use or benefit to the Company in relation to the marketing and/or support of the Products; 12 14.6 to keep full, proper and up to date books of accounts and records showing clearly all inquiries, transactions, proceedings and End User calls relating to the Products and will allow a duly authorised representative of the Company to have access to the said books and records and take such copies thereof as such representatives may require; 14.7 that neither this Agreement (or any term hereof) nor the performance of or exercise of rights under this Agreement is restricted by, or contrary to, in conflict with any prior obligations of the Distributor to any third parties; 14.8 to provide Company Operations VP with written account activity report (including account situation, activity planning and change, technical support, customer requests, travel plans etc.) at the end of each month; 14.9 to arrange face-to-face meeting between major account executives (Division General Manager level or above, i.e., above Director level) with Company President and CEO minimum once each quarter; 14.10 to qualify all Distributor Application Engineers through Field Application Engineers Qualification Program developed by Company; 14.11 to communicate with the Company through the defined official communication channels to Company Operations VP when necessary; 14.12 to attend Company's annual Sale Meeting at the Company's designated location at the Distributor's expense. The Distributor shall make strong efforts to visit the Company in US on a regular basis to maintain good communication; and 14.13 that neither this Agreement (or any term hereof) nor the performance of or exercise of the rights under this Agreement, is restricted by, contrary to, in conflict with, ineffective under, or affects the Company's proprietary rights (or the duration thereof) under, or will required any termination payment or compulsory licensing under, any law or regulation of Korea. The Distributor shall making any filings required under Korean laws and regulations. 15. WARRANTY 15.1 The Company warrants that the program media of each Product will materially conform to the then current Documentation for three (3) months after it is delivered to an End User, provided the Products are maintained to the Company's maintenance recommendation and in a manner specified by the Company. The Company shall replace any defective media within such period, provided the Distributor bears the cost of freight and insurance to the point of repair. The company will bear the cost of freight and insurance for the return of the Products to the Distributor. 13 15.2 The Distributor will handle and be responsible for all warranty returns from its End Users. The Company will bear the costs of freight and insurance for the return of goods to Distributor. 15.3 The Company does not warrant that it will be able to correct all programming errors or other problems encountered by the Distributor and the End Users. If Company cannot, or determines that it is not practical to repair or replace the returned Product, the price therefor paid by Distributor shall be refunded. 15.3 THE COMPANY AND ITS SUPPLIERS MAKE NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND HEREBY DISCLAIM ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE, COURSE OF DEALING, USAGE OR ERROR FREE OPERATION. 15.4 The above warranty does not extend to any Product that is modified, or altered, is not maintained to the Company's maintenance recommendations, is operated in a manner other than that specified by the Company, has its serial number removed or altered or is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment). The Distributor's sole remedy with respect to any warranty or defect is as stated above. The Distributor is fully responsible for satisfaction of its customers and will be responsible for all claims, damages, settlements, expenses and attorney's fees incurred by the Company with respect to the Distributor's claims or representations regarding the Products beyond Company's above warranty obligations to the Distributor. 16. INDEMNIFICATION 16.1 The Company shall hold the Distributor harmless from any third party claims for damages and settlements, including reasonable attorneys' fees and expenses related thereto, resulting from infringement by the Products of any United States or Korea patent or any United States or Korea copyrights, provided the Company is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance by the Distributor and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise; the Company will not be responsible for any settlement it does not approve in writing. Notwithstanding the foregoing, the Company is not liable to any claims of infringement of a patent or copyright in which Distributor or any affiliate of Distributor has an interest or license. 16.2 If all or any part of the Products is, or in the opinion of the Company, may become, the subject of a claim or suit of infringement, the Company may: (i) secure the right of the Distributor, or End Users to continue Using the Products; (ii) modify the Products to render them non-infringing; or 14 (iii) reimburse the Distributor the Net Licensing Revenue paid to the Company for such infringing Products. THE FOREGOING IS THE EXCLUSIVE REMEDY FOR DISTRIBUTOR AND IS IN LIEU OF ANY WARRANTIES OF NON-INFRINGEMENT, WHICH ARE HEREBY DISCLAIMED. 16.3 The foregoing obligation of the Company does not apply with respect to Products or portions or components thereof: (i) not supplied by the Company; (ii) made in whole or in part in accordance to the specifications of the Distributor or End User if the alleged infringement is caused by such specifications; (iii) which are modified (other than by the Company) after shipment by the Company, if the alleged infringement relates to such modification; (iv) combined with other products, processes or materials where the alleged infringement relates to such combination; (v) where the Distributor and/or End Users continue allegedly infringing activity after being notified thereof or after being informed of modifications that would have avoided the alleged infringement; (vi) where the use of the Product is incident to an infringement not resulting primarily from the Product; or (vii) where the Product is used in an application or environment for which such Product was not designed, or where the use is not strictly in accordance with the pertinent directions. 16.4 The Distributor shall hold the Company harmless from and shall indemnify the Company and its officers, directors, agents and employees from all damages, settlements, attorney's Fees and expenses related to a claim caused by the Distributor's act, omission, misconduct, negligence or breach of any term of this Agreement. 17. LIMITED LIABILITY EXCEPT AS PROVIDED IN CLAUSE 16 ABOVE, NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, THE COMPANY AND ITS SUPPLIER WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO THE COMPANY HEREUNDER DURING THE EIGHTEEN 15 MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE; OR (II) ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST PROFITS OR LOST OR INACCURATE DATA, EVEN IF THE COMPANY OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. THE COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO MATTERS BEYOND ITS REASONABLE CONTROL. THE DISTRIBUTOR HEREBY ACKNOWLEDGES THAT THE MUTUAL COVENANTS AND AGREEMENTS SET FORTH IN THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK. 18. TERM AND TERMINATION 18.1 Subject to Clause 18.2 below, this Agreement shall be for a non-cancelable term up to 31 December, 2007. Thereafter, this Agreement shall be renewed automatically for successive periods of five (5) years unless either Party notifies the other Party of its intention not to renew at least six (6) months prior to the expiration of the then current term of this Agreement. 18.2 This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events: (i) if the other ceases to do business, or otherwise terminates its business operations or if there is a material change in control of the other; or (ii) if the other breaches any material provision of this Agreement and fails to cure such breach within 30 days of written notice describing the breach; or (iii) if the other shall fail to promptly secure or renew any license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement of any such license, registration, permit, authorization or approval is revoked or suspended and not reinstated within thirty (30) days; or (iv) if the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against that party. 18.3 Clauses 10, 11, 12, 15, 16, 17, 18, 19 and 20 shall survive termination of this Agreement. 19. CONSEQUENCE OF TERMINATION 16 19.1 Upon termination or expiration of this Agreement for any reason whatsoever, the Distributor shall immediately: (i) discontinue any use of any Intellectual Property Rights of the Company; (ii) discontinue all representations or statements from which it might be inferred that the Distributor is a distributor of the Products in the Territory or is in any way related to the Company; (iii) cease to promote, solicit orders for or procure orders for Products (but will not act in any way to damage the reputation of the Company or any Product) or M&S Services; (iv) provide the Company with details of all End Users so that the Company may enter into direct contractual relationship with them regarding the distribution and support of Products in the Territory with the intent that the Company shall assume all maintenance and support obligations for the Products to customers in the Territory; (v) return to the Company at the Distributor's expense, all catalogues and literature of the Company then in possession of the Distributor; and (vi) return to the Company at the Distributor's expense, all copies in whatever media of Confidential Information in the Distributor's possession, power, custody or control or at the Company's election, certify the destruction of the same by an officer of the Distributor. 19.2 Unless expressly provided otherwise herein, each party understands that the rights of termination hereunder are absolute. Neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other (or for any compensation to the other) arising from or incident to any termination of this Agreement by such party which complies with the terms of the Agreement whether or not such party is aware of such damage, loss or expenses. 19.3 Upon termination, Distributor shall be entitled to compensation to be calculated by the following formula: total amount of Income from the previous twelve (12) months immediately prior to the date of termination multiplied by the number of months remaining under the Agreement divided by twelve (12). "Income" shall mean total product revenue earned by the Distributor from distributing products covered by the Agreement minus total cost of such Product paid to the Company. 20. MISCELLANEOUS 20.1 Amendment and Waiver: Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular 17 instance and either retroactively or prospectively) only with the written consent of the parties. 20.2 Governing Law and Legal Actions: This Agreement shall be governed by and construed under the laws of the State of California and the United States without regard to conflicts of laws or provisions thereof and without regard to the United Nations Convention on Contracts for the International Sale of goods. Unless waived by Company in writing for the particular instance (which Company may do at its option), the sole jurisdiction and venue for actions related to the subject matter hereof shall be the U.S. federal courts having within their jurisdiction the location of Company's principal place of business. Both parties consent to the jurisdiction of such courts and agree that process may be served in the manner provided for giving of notices or otherwise as allowed by California State or federal law. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorneys' fees. 20.3 Headings: Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement. 20.4 Export Laws: The Distributor agrees with all applicable international and national laws that apply to the export and import of the Products, including the Department of Commerce and the US Export Administration Regulations (or any successor supplement or regulations) as well as end-user, end-used country destination restrictions issued by the US Export Administration and other government. The Distributor shall demonstrate to the Company compliance with all applicable laws and regulations prior to delivery thereof by Company. 20.5 Notices: Notices under this Agreement shall be sufficient only if (x) personally delivered, (y) faxed to the fax number of a party as it may notify the other party in writing from time to time, with confirmed answer-back report, or (z) delivered by a major commercial rapid delivery courier or mailed by certified or registered mail, return receipt requested to a party at its addresses first set forth herein or as amended by notice pursuant to this subsection. If not received sooner, notice by fax shall be deemed received one (1) day after the date indicated in the answer-back report and notice by mail shall be deemed received fourteen (14) days after deposit in the mail. 20.6 This Agreement and the rights hereunder are not transferable or assignable without prior written consent of the parties hereto, except for rights to payment and except to a person or entity who acquires all or substantially all of the assets or business of a party, whether by sale, merger or otherwise; any such assignee shall agree to abide by the terms and conditions of this Agreement. 20.7 Confidentiality: The parties will not disclose the terms of this Agreement or any attachment hereto to any third party without the prior written consent of the other party (except that either party may disclose such terms to potential investors, their attorney's and accountants, and government officials). 18 20.8 Severability: If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 20.9 Force Majeure: Neither party hereto shall be responsible for any failure to perform its obligations under this Agreement (other than any payment obligations) if such failure is caused by acts of God, war, strikes, revolutions, lack or failure of transportation facilities, laws or governmental regulations or other causes which are beyond the reasonable control of such party. Obligations hereunder, however, shall in no event be executed but shall be suspended only until the cessation of any cause of such failure. In the event that such force majeure should obstruct performance of this Agreement for more than one (1) month, the parties hereto shall consult with each other to determine whether this Agreement should be modified or terminated. The party facing an event of force majeure shall use its best endeavors in order to remedy that sensation as well as to minimize its effects. A case of force majeure shall be notified to the other party by telex or telefax within five (5) days after its occurrence and shall be confirmed by a letter. 20.10 Relationship of Parties: The parties hereto expressly understand and agree that Distributor is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith. 20.11 Entire Agreement: This Agreement supersedes all proposals, oral or written, all negotiations, conversations, discussions or prior agreements between or among parties relating to the subject matter of this Agreement and all past dealing or industry custom. 20.12 Counterparts: This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. COMPANY: DISTRIBUTOR: By: /s/ JOHN HSU By: /s/ SANCHO PARK ----------------------- ------------------------ Date: Oct. 13, 2000 Date: 10/23/2000 Name: John Hsu Name: Sancho Park Title: President Title: Executive Director 19 Attachment A MINIMUM PURCHASE COMMITMENT - -------------------------------------------------------------------------------- MINIMUM PURCHASE COMMITMENT PERIOD [Q/YR] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [PLEASE INSERT. NOT STATED IN ORIGINAL CONTRACT] 20 Attachment B DISCOUNTS AND NET LICENSING REVENUE Products The discounts for the Products shall be 45% off the Recommended Price for the relevant Product as set out in the Recommended Price List. M&S Services The discounts for the M&S Services shall be 35% off the Recommended Price for the relevant M&S Services as set out in the Recommended Price List. FIXED EXCHANGE RATE The fixed exchange rate for the purpose of Clause 9.1 of this Agreement shall be 1,050 won to 1 US dollar. 21 Attachment C PRODUCTS All Products produced or acquired by the Company as of the date of this Agreement less those products to be distributed by third parties, which are agreed upon between the Company and the Distributor. 22 Attachment D TERRITORY The Territory includes the entire Republic of Korea 23 EX-10.20 8 f76852ex10-20.txt PROMISSARY NOTE PROMISSORY NOTE Exhibit 10.20 AMOUNT: $300,000.00 DATE: JUNE 5, 1998 I, Mark Chimura (the "Promisor"), an Avant! Corporation employee SS# ###-##-#### in consideration for the receipt of three hundred thousand U.S. Dollars (US $300,000) (the "Principal") from Avant! Corporation (the "Payee", "Promisee", or "Avant!") which is now acknowledged, hereby promises to pay to Avant! at 46871 Bayside Parkway, Fremont, CA 94538 (or such other address that Avant! may designate) on or before June 6, 2003 (the "Due Date") the sum of the Principal, three hundred thousand U.S. Dollars (US $300,000), plus any and all accrued and unpaid interest with the annual interest rate being three percent (3%) which starts accruing on June 6, 1998 (the "Initial Date") and which will compound annually. I understand that all payments on this Note shall be applied first in the payment of accrued interest and any remainder toward the reduction of the principal. Interest payments will be due and payable monthly. I reserve the right to prepay this Note, in whole or in part, prior to the due date with no prepayment penalty. If any of the following events occur, I will be waived permanently from paying any unpaid principal loan amount and any accrued and unpaid interest: 1) If Gerald C. Hsu is no longer president and CEO of Avant! Corporation; or 2) If I die or become permanently disabled. If none of the previous events occur, in the event that I decided to leave the employ of Avant! Corporation I agree that any unpaid principal loan amount plus any accrued and unpaid interest shall become immediately due and payable to Avant! and that I shall pay such sum to Avant! without demand or notice. Additionally, I understand that if any of the following events of default occur, this Note and any other obligation that I have to Avant! shall become due immediately, without demand or notice: 1) If I fail to pay the principal and any accrued interest in full on or before the Due Date; 2) If I file bankruptcy proceedings as a Debtor; 3) If I file for an application for appointment of a receiver; 4) If I make a general assignment for the benefit of My creditors; 5) If I become insolvent; or 6) If I have made a misrepresentation to Avant! for the purpose of obtaining or extending credit. If any payment obligation under this Note is not paid when due, I promise to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process. I understand that the non-renewal or extension of this Note, delay in enforcing any right of Avant! under this Note, or the assignment by Avant! of this Note shall not affect the liability I have with Avant! or its successor under this Note. I waive my rights for the presentment for payment, protest, and notice of pretest and nonpayment of this Note. If any one or more of the provisions of the Note are determined to be unenforceable, in whole or in part, for any reason, I agree that the remaining provisions shall remain fully operative. I agree that this Note shall be construed in accordance with the laws of the State of California. O.K. Mark Chimura /s/ GERALD C. HSU 14010 Jerries Drive 6/9/98 Saratoga, CA 95070 Signature of Promisor /s/ MARK CHIMURA -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.15

EMPLOYMENT AGREEMENT                                        Exhibit 10.15

             This EMPLOYMENT AGREEMENT is made as of the 1st day of October,
2000 by and between and Noriko Ando (the "Employee") and Avant! Company, a
Delaware corporation (the "Company"). This Agreement restates and supersedes all
previous Employment Agreements or Severance Agreements between the Employee and
the Company.

WITNESSETH:

             WHEREAS, the Employee has been and is now in the employment of the
Company; and

             WHEREAS, the Company has concluded that securing the service of the
Employee will benefit it.

             NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements hereinafter set forth, the parties therefore agree as
follows:

1.  TERM OF EMPLOYMENT

(A) Basic Rules. The Company hereby employs the Employee, and the Employee
hereby accepts such employment with the Company from the date of this Agreement
until the date when the Employee's employment terminates pursuant to subsection
(b) below. The Employee shall subject to his appointment as such from time to
time (the "Term") serve during the Term in the Company and its subsidiaries or
affiliates. During the Term, the Employee will devote his best efforts to such
employment and all of his business time and attention to the performance of his
duties hereunder; provided, however, that the Employee may devote reasonable
periods required for serving as a director or member of any Company,
partnership, trust or other entity ("Entity") organization involving no conflict
of interest with the interests of the Company or his personal affairs so long as
the same does not interfere with the performance of his duties hereunder.

(B) Termination of Employment. The Company may terminate the Employee's
employment at any time and for any reason by giving the Employee 30 days'
advance notice in writing. The Employee may resign his employment by giving the
Company 30 days' advance notice in writing. The Employee's employment shall be
terminated automatically in the event of his death.

(C) Termination of Agreement. This Agreement shall be renewed automatically for
successive periods of three (3) years unless the Company notifies the Employees)
of its intention not to renew at least 1 month prior to the expiration of this
agreement. This Agreement shall also be terminated when all obligations of the
parties hereunder have been satisfied.

(D) Compensation (Salary and Cash Bonus). The Company shall pay to the Employee,
not less frequently than monthly; an annual base salary (the "Minimum Salary")
as fixed from time to time by the Company during the Term of his employment
hereunder. The Minimum Salary is USD $350,000 as of October 1, 2000 The Company
may increase the Minimum Salary from time to time and upon each such increase
the term "Minimum Salary" shall mean such increased total amount. References to
the Minimum Salary in this Agreement are to the Minimum Salary, as adjusted, in
the year in which the event requiring such reference occurs. In addition to the
Minimum Salary, the Employee shall be entitled to receive during the Term an
annual cash bonus based on the performance of the Company and the Employee. The
actual amount of any such annual cash bonus to be paid to the Employee will be
determined by the Company. Payment of any bonus compensation in this Section
shall be made within 60 days after such determination.



(E) Expenses, Benefit Plans, and Pay-time-off. The Company will reimburse the
Employee for all reasonable and necessary business and entertainment expenses
incurred by him in connection with the performance of his duties hereunder. The
Employee shall be eligible to participate in any employee benefit programs,
pension, profit sharing, stock option or similar plan or program and in any
group life insurance, hospitalization, mental, dental, accident, disability or
similar plan or program of the Company non-existing or establishes hereafter. In
addition, so long as the Company employs the Employee, the Employee shall be
entitled to receive other benefits - generally available to all employees and
any other, which are now or may hereafter be placed in effect.

The Employee shall be entitled to pay-time-off (the "PTO"), at such times and
for such periods, as are in accordance with the policies of the Company then in
effect for all employees employed by the Company, but in no event shall the
Employee be entitled to fewer than 80 hours of PTO per year. The Employee shall
not be required to take any PTO to which he is entitled in a given year. In the
event the Employee does not take all of the PTO to which he is entitled in a
given year, such PTO will be deferred and accumulated for use by the Employee in
a subsequent year up to a maximum of 240 hours.

2.  RIGHTS UPON CERTAIN TERMINATIONS

(A) Employee's Rights. Unless otherwise defined in this section, each
capitalized tern used in this Agreement shall have the meaning assigned to it in
the Company's 1995 & 2000 Stock Option/Stock Issuance Plan in effect on the date
of this Agreement (the "Plan"). Without limiting any other rights which the
Employee or the Company may have in such event, upon any voluntary resignation
or involuntary termination of the Employee's employment without Employee's
written consent (including but not limited to a Constructive Termination as
defined below) that occurs within six months after a Change in Control (as
defined below), and subject to Section 7 below, the Company shall:

                (a) pay to the Employee cash termination payment equal to three
        (3) years (the "Termination Payment Period") of the Employee's Minimum
        Salary in effect on the date of termination, in addition to any other
        payments, benefits, or other rights to which the Employee may then be
        entitled. The Company shall pay the above-mentioned payment amount in
        this Section 2.A.a to the Employee in full on the Termination Date;

                (b) allow the Employee to automatically vest in full of the
        shares of Common Stock then subject to any option granted by the Company
        to the Employee and then outstanding (including but not limited to any
        such option drat may hereafter be granted to Employee, under the Plan or
        otherwise) but not otherwise vested; and all outstanding repurchase
        rights applicable to any Common Stock previously issued to the Employee
        by the Company (including any Common Stock hereafter issued which is
        then held by Employee) shall also terminate automatically. If any
        provisions of the preceding sentence regarding acceleration of options
        or early termination of repurchase rights shall conflict with any
        provision of any existing or future option agreement, stock purchase
        agreement or other agreement between the Employee and the Company, the
        provisions of the preceding sentence in this Agreement shall govern if
        they are more favorable to the Employee under the circumstances than the
        conflicting provisions in such other agreements, unless such other
        agreements expressly refers to the preceding sentence and states that it
        is intended to govern in the event of such a conflict with such
        sentence.

(B) Change in Control. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following events after the date
of this Agreement:

                (a) The consummation of a merger or consolidation of the Company
        with or



        into another entity or any other corporate reorganization, if more than
        50% of the combined voting power of the continuing or surviving entity's
        securities outstanding immediately after such merger, consolidation or
        other reorganization is owned by persons who were not stockholders of
        the Company immediately prior to such merger, consolidation or other
        reorganization;

                (b) The sale, transfer, exchange or other disposition of all or
        substantially all of the Company's assets;

                (c) A change in the composition of the Company's Board of
        Directors (the "Board") as a result of which fewer than a majority of
        the directors are directors who either (A) had been directors of the
        Company of the date 12 months prior to the date of the event that may
        constitute a Change in Control (the "original directors") or (B) were
        elected, or nominated for election, to the Board with the affirmative
        votes of at least a majority of the aggregate of the original directors
        who were still in office at the time of the election or nomination and
        the directors whose election or nomination was previously so approved;

                (d) Any transaction as a result of which any person is the
        "beneficial owner" (as defined in rule 13(d)-3 under the Securities
        Exchange Act of 1934, as amended - the "Exchange Act"), directly or
        indirectly, of securities of the Company representing at least 50% of
        the total voting power represented by the Company's then outstanding
        voting securities. For purpose of this subsection (d), the terse
        "person" shall have the same meaning as when used in sections 13(d) and
        14(d) of the Exchange Act but shall exclude (A) a trustee or other
        fiduciary holding securities under an employee benefit plan of the
        Company or of a parent or subsidiary of the Company and (B) a
        corporation owned directly or indirectly by the stockholders of the
        Company in substantially the same proportions as their ownership of the
        common stock of the Company; or

                (e) In the event of Gerald C. Hsu ceases to be the Chairman and
        CEO of the Company.

A transaction shall in no event constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.

(C) Constructive Termination. For all purposes under this Agreement,
"Constructive Termination" shall be deemed to have occurred, within six months
after a Change in Control, that on written notice by the Employee to the
Company, upon:

                (a) the Employee's voluntary resignation within six (6) months
        after a Change in Control;

                (b) any refusal by the Employee to relocate the Employee's
        principal place of employment to a location requested by the Company
        that is more than fifty (50) miles from the Employee's current principal
        place of employment;

                (c) a reduction by more than fifteen percent (l5%) in the
        Employee's level of compensation including his Minimum Salary,
        non-stock-related fringe benefits, and cash bonus (to the extent that
        any reduction in bonus is disproportionate to a reduction in the
        Company's earnings per share between (i) the period for which the
        reduced bonus is paid, and (ii) the period for which the Employee's most
        recent prior bonus was paid);



                (d) any material adverse change in the Employee's position,
        title, job responsibilities, or reporting lines; or any activity by the
        Company that constitutes constructive termination of employment under
        applicable law. Without limiting the events which may constitute a
        material adverse change in the Employee's position, title, job
        responsibilities, or reporting lines under this definition, such a
        material adverse change shall conclusively be deemed to have occurred
        upon any material diminution or other material adverse of Company
        employees reporting to the Employee at the time of a Change in Control,
        or in the extent or nature of the Employee's authority with respect to
        such function or responsibilities or the employees who perform them.

For all purposes under this Agreement, all of the compensation, cash bonus and
other relevant benefits provided on this Agreement shall be in no event applied
to the Employee(s) who maliciously takes advantage of the bona fide goodwill of
the Company - not only acquire(s) the above-mentioned compensation, bonus, and
benefits but also return(s) to work for Avant! after the Change in Control with
or without any cause.

3.  COVENANT NOT TO COMPETE

(A) Non-Competition. For the purpose of this Section 3, a company, entity, or
person shall be deemed in competition with the Company, if any company, entity,
or person engages in the electronic design automation (the "EDA") industry or,
to the knowledge of the Employee, has definitive plans to engage in the EDA
industry. The parties confirm that it is reasonably necessary for the protection
of the Company that the Employee agree, and accordingly, the Employee does
hereby agree that he will not, directly or indirectly, except for the benefit of
the Company, at any time during his employment hereunder and thereafter during
the Restricted Period, as hereinafter defined, from the date of termination of
this Agreement provided the Company shall duly perform its obligations to the
Employee pursuant to this Agreement:

                (i) Become an officer, director, partner, associate, employee,
        owner, agent, creditor, independent contractor, or otherwise, or be
        interested in or associated with any other EDA company, firm or business
        engaged, in any geographical area in which the Company is engaged, in
        making or selling one or more EDA products competitive with a product or
        products made or sold by Company now or during the term of this
        Agreement. However, after obtaining the prior approval from the Company,
        the Employee may devote reasonable periods required for serving as a
        director or member of any Company, partnership, trust or other entity
        ("Entity") organization involving no conflict of interest with the
        interests of the Company or his personal affairs so long as the same
        does not interfere with the performance of his duties hereunder;

                (ii) Solicit, cause or authorize, directly or indirectly, to be
        solicited for or on behalf of himself or third parties, from parties who
        were customers of the Company in the EDA industry at any time within six
        (6) months prior to the cessation of his employment hereunder, any
        business competitive to the business transacted by the Company with such
        customers in the EDA industry;

                (iii) Accept or cause or authorize, directly or indirectly, to
        be accepted for or on behalf of himself or third parties, any such
        business in the EDA industry from any such customers of the Company as
        defined in the preceding subsection;

(B) Restricted Period. The tern "Restricted Period" as used in this Section 3
shall mean the Termination Payment Period of the cash termination payment as a



consequence of Constructive Termination due to a Change in Control, which the
Employee is entitled to receive pursuant to the provisions of Section 2 hereof.

(C) Others. This Section 3 shall survive the termination of the Employees
employment hereunder for the period provided in paragraph (B).

The Employee further agrees that any breach or threatened breach by him of any
provisions of this Section 3 shall entitle the Company, in addition to any other
legal or equitable remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach.

Notwithstanding anything in this Agreement to the contrary, if the Employee
violates any of the provisions of paragraph (a) hereof during the Restricted
Period and fails to cease such violation and to remedy the consequences of such
violation within ninety (90) days after notice from the Company specifying such
violation and if the Company obtains a final judgment from a court of competent
jurisdiction to the effect that the Employee has violated a provision of
paragraph (a) and has failed to cease such violation and to remedy the
consequences of such violation within ninety (90) days after notice from the
Company, all obligations of the Company to compensate the Employee and to
forgive indebtedness, if any, of the Employee to the Company shall cease, and
the Company shall be entitled to recover from the Employee compensation received
by the Employee and any indebtedness forgiven while such violation existed.

(D) Special Non-Competition Cash Payment. The Company recognizes that a Change
in Control Termination will subject the Employee to losses and damages, the
amount of which might not readily be determined, and that there exist only a
limited number of employment opportunities comparable in statue, compensation
and opportunity to employment as an Employee of the Company. Therefore, the
Employee shall not be required to seek or accept employment in mitigation of any
obligations of the Company arising by reason of his Constructive Termination due
to a Change in Control. In consideration of the Employee's special services and
the Employee's agreement to not compete in the EDA industry during the
Restricted Period after the date of termination of his employment, hereunder the
Company agrees to pay the Employee a lump sum of $2 Million dollars, payable
within 30 days after the termination of his employment.

4.  MUTUAL RELEASES AFTER TERMINATION OF EMPLOYMENT

Upon the termination of the Employee's employment, the Company and the Employee
agree that in consideration for the Employee's services, the Company shall
execute a general release, in form and substance, satisfactory to the Employee's
counsel, that releases and forever discharges the Employee, his heirs,
successors and assigns, from any and all actions, causes of actions, claims, or
demands for general, special or punitive damages, attorney's fees, expenses, or
other compensation, which in any way relate to or arise out of the Employee's
employment with the Company or any of its subsidiaries.

5.  INDEMNIFICATION

To the fullest extent not inconsistent with applicable law, in the event that
the Employee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, consultant, employee or agent of the Company or any of its
subsidiaries, or is or was serving at the request of the Company as a director,
officer, consultant, employee or agent of another Company, partnership, joint
venture, trust or other enterprise, the Company shall indemnify the Employee and
hold him harmless, against all expenses (including costs and attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by his in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,




conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Employee did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interest of the Company, or that, with respect to any criminal action or
proceeding, the Employee had reasonable cause to believe that his conduct was
unlawful. The provisions of this Section 5 shall not be deemed exclusive of any
other rights of indemnification to which the Employee maybe entitled or which
may be granted to him, and it shall be in addition to any rights of
indemnification to which he may be entitled under any policy of insurance. The
provisions of this Section 5 shall continue in effect after the Employee has
ceased to be an officer, employee or agent of the Company, shall inure to the
benefit of the Employee's heirs, executors, administrators and in testate
distributes and shall survive the termination of this Agreement under all
circumstances.

        All litigation or inquiries by third parties (for example, but not
        limited to, those by shareholders - direct or derivative - or government
        agencies) arising out of or in connection with this Agreement or the
        Employee's performance hereunder, against either the Company or the
        Employee or both, shall be defended or opposed by the parties hereto, as
        the case may be, to support this Agreement, and the costs, fees and
        expenses thereof, including fees of counsel for the parties, shall be
        home by the Company.

        Notwithstanding the foregoing provisions of this Section 5, during the
        term of the Employee's employment hereunder and during such time he
        continues as an officer, the Company agrees to maintain substantially
        the same Officers' liability insurance in place on the date hereof and
        shall increase such coverage in the event the Employee determines that
        it is in the best interest of the Company to have such increased
        coverage.

6.  CONFIDENTIAL INFORMATION

The Employee recognizes that as an Employee of the Company he has had and will
have access to secret and confidential information regarding the Company, its
products, customers and plans relating to the EDA industry. The Employee
acknowledges that such information is of great value to the Company, and is the
sole property of the Company and that such information has been and will be
acquired by his in confidence. In consideration of the obligations undertaken by
the Company as set forth herein, the Employee will not, at any time, during or
for a period of one year after his employment of the Company hereunder, reveal,
divulge or make known, except as authorized by the Company or required on its
behalf or required pursuant to legal or administrative processes, any
information of a confidential nature concerning the Company's business involving
the EDA industry acquired by the Employee during the course of his employment to
any competitor to the Company in the EDA industry.

7.  MISCELLANEOUS PROVISIONS

(A) No right to Employment. Notwithstanding this Agreement, either party may
terminate the Employee's employment at any time and for any reason, or for no
reason upon written notice to the other party; provided, however, that any
Change in Control Termination shall be subject to all of the consequences
described in sections 2 and 3 above.

(B) Notice. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered mail, return receipt requested and
postage personally delivered or when the Employee, mailed notices shall be

addressed to the Employee at the home address shown below on this Agreement or
at the home address which the Employee most recently communicated to the Company
in writing. In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be addressed to the attention of
its Secretary.

(C) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of his Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

(D) Whole Agreement; Modifications. No agreements, representations or
understanding (whether oral or written and whether express or implied) which are
not expressly set forth in this Agreement have been made or entered into by
either part with respect to the subject matter hereof. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof. A modification of this Agreement shall be valid only if it is made in
writing and executed by both parties hereto.

(E) Withholding Taxes. All payments made under this Agreement shall be subject
to reduction to reflect taxes or other charges required to be withheld by law.

(F) Choice of Law. The validity, interpretation, construction, and performance
of this Agreement shall be governed by the laws of the State of California
(except their provisions governing the choice of law).

(G) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

(H) Company's Successors. This Agreement shall be binding upon any successor
(whether direct or indirect and whether by purchase lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets, which become bound by this Agreement.

(I) Employee's Successors. This Agreement and all right of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal of legal representatives, executors, heirs, distributes, devisees, and
legatees.

(J) No Assignment. The rights of any person to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by voluntary
or involuntary assignment or by operation of law, including (without imitation)
bankruptcy, garnishment, attachment, or other creditor's process, and any action
in violation of this paragraph shall be void.

(K) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(L) Confidentiality. The Employee agrees that the Employee will not disclose the
existence or the terms of this Agreement to anyone other than the Employee's
spouse, tax advisor, or legal advisor. In the event the Employee breaches this
confidentiality obligation, the Company may immediately terminate this
Agreement.

(M) Arbitration. Any controversy or claim between the Company and Employee,
their representatives, heirs, successors and assigns, arising out of or relating
to this Agreement or any breach or asserted breach hereof or questioning the
validity and binding effect hereof shall be determined by arbitration conducted
in San Francisco in accordance with the Rules of the American Arbitration
Association then obtaining, and judgment upon any award rendered may be entered
in any court having jurisdiction thereof. The decision of the arbitrators shall
be final and binding upon the parties hereto. All of the Employee's costs and
expenses (including attorneys, fees) arising out of or in connection with any
matters submitted to arbitration pursuant to this subsection shall be paid by




the Company, unless the award of the arbitrators shall explicitly find that the
Employee's claim or his defense against a claim by the Company was frivolous and
completely without merit, in which case the Employee shall pay the costs and
expenses (including, without limitation, reasonable attorneys, fees) incurred by
the Company in such connection.

(N) Section Headings. The headings or titles of the sections of this Agreement
are not a part of this Agreement and are not intended to aid in the construction
of any provision thereof.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company, by its duly authorized officer, as of the day and year first
above written.

      /s/ Noriko Ando
      Signature Of the Employee

      Noriko Ando
      Printed name of the Employee

      Oct. 1, 2000
      Date of Signature

      2-17-9 Tamami Asao-Ku
      Kawasaki City Kanagawa Japan

      The Employee's mailing address

      AVANT! CORPORATION





      /s/ Gerald C. Hsu
      Gerald C. Hsu
      Chairman, Chief Executive Officer, & President

      Oct. 1, 2000

      Date of Signature

EX-10.16

EMPLOYMENT AGREEMENT                                     Exhibit 10.16

             This EMPLOYMENT AGREEMENT is made as of the 1st day of October,
2000 by and between and John Howard Hsu(the "Employee") and Avant! Company, a
Delaware corporation (the "Company"). This Agreement restates and supersedes all
previous Employment Agreements or Severance Agreements between the Employee and
the Company.

WITNESSETH:

             WHEREAS, the Employee has been and is now in the employment of the
Company; and

             WHEREAS, the Company has concluded that securing the service of the
Employee will benefit it.

             NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements hereinafter set forth, the parties therefore agree as
follows:

1.  TERM OF EMPLOYMENT

(A) Basic Rules. The Company hereby employs the Employee, and the Employee
hereby accepts such employment with the Company from the date of this Agreement
until the date when the Employee's employment terminates pursuant to subsection
(b) below. The Employee shall subject to his appointment as such from time to
time (the "Term") serve during the Term in the Company and its subsidiaries or
affiliates. During the Term, the Employee will devote his best efforts to such
employment and all of his business time and attention to the performance of his
duties hereunder; provided, however, that the Employee may devote reasonable
periods required for serving as a director or member of any Company,
partnership, trust or other entity ("Entity") organization involving no conflict
of interest with the interests of the Company or his personal affairs so long as
the same does not interfere with the performance of his duties hereunder.

(B) Termination of Employment. The Company may terminate the Employee's
employment at any time and for any reason by giving the Employee 30 days'
advance notice in writing. The Employee may resign his employment by giving the
Company 30 days' advance notice in writing. The Employee's employment shall be
terminated automatically in the event of his death.

(C) Termination of Agreement. This Agreement shall be renewed automatically for
successive periods of three (3) years unless the Company notifies the Employees)
of its intention not to renew at least 1 month prior to the expiration of this
agreement. This Agreement shall also be terminated when all obligations of the
parties hereunder have been satisfied.

(D) Compensation (Salary and Cash Bonus). The Company shall pay to the Employee,
not less frequently than monthly; an annual base salary (the "Minimum Salary")
as fixed from time to time by the Company during the Term of his employment
hereunder. The Minimum Salary is USD $300,000 as of October 1, 2000 The Company
may increase the Minimum Salary from time to time and upon each such increase
the term "Minimum Salary" shall mean such increased total amount. References to
the Minimum Salary in this Agreement are to the Minimum Salary, as adjusted, in
the year in which the event requiring such reference occurs. In addition to the
Minimum Salary, the Employee shall be entitled to receive during the Term an
annual cash bonus based on the performance of the Company and the Employee. The
actual amount of any such annual cash bonus to be paid to the Employee will be
determined by the Company. Payment of any bonus compensation in this Section
shall be made within 60 days after such determination.



(E) Expenses, Benefit Plans, and Pay-time-off. The Company will reimburse the
Employee for all reasonable and necessary business and entertainment expenses
incurred by him in connection with the performance of his duties hereunder. The
Employee shall be eligible to participate in any employee benefit programs,
pension, profit sharing, stock option or similar plan or program and in any
group life insurance, hospitalization, mental, dental, accident, disability or
similar plan or program of the Company non-existing or establishes hereafter. In
addition, so long as the Company employs the Employee, the Employee shall be
entitled to receive other benefits - generally available to all employees and
any other, which are now or may hereafter be placed in effect.

The Employee shall be entitled to pay-time-off (the "PTO"), at such times and
for such periods, as are in accordance with the policies of the Company then in
effect for all employees employed by the Company, but in no event shall the
Employee be entitled to fewer than 80 hours of PTO per year. The Employee shall
not be required to take any PTO to which he is entitled in a given year. In the
event the Employee does not take all of the PTO to which he is entitled in a
given year, such PTO will be deferred and accumulated for use by the Employee in
a subsequent year up to a maximum of 240 hours.

2.  RIGHTS UPON CERTAIN TERMINATIONS

(A) Employee's Rights. Unless otherwise defined in this section, each
capitalized tern used in this Agreement shall have the meaning assigned to it in
the Company's 1995 & 2000 Stock Option/Stock Issuance Plan in effect on the date
of this Agreement (the "Plan"). Without limiting any other rights which the
Employee or the Company may have in such event, upon any voluntary resignation
or involuntary termination of the Employee's employment without Employee's
written consent (including but not limited to a Constructive Termination as
defined below) that occurs within six months after a Change in Control (as
defined below), and subject to Section 7 below, the Company shall:

                (a) pay to the Employee cash termination payment equal to three
        (3) years (the "Termination Payment Period") of the Employee's Minimum
        Salary in effect on the date of termination, in addition to any other
        payments, benefits, or other rights to which the Employee may then be
        entitled. The Company shall pay the above-mentioned payment amount in
        this Section 2.A.a to the Employee in full on the Termination Date;

                (b) allow the Employee to automatically vest in full of the
        shares of Common Stock then subject to any option granted by the Company
        to the Employee and then outstanding (including but not limited to any
        such option drat may hereafter be granted to Employee, under the Plan or
        otherwise) but not otherwise vested; and all outstanding repurchase
        rights applicable to any Common Stock previously issued to the Employee
        by the Company (including any Common Stock hereafter issued which is
        then held by Employee) shall also terminate automatically. If any
        provisions of the preceding sentence regarding acceleration of options
        or early termination of repurchase rights shall conflict with any
        provision of any existing or future option agreement, stock purchase
        agreement or other agreement between the Employee and the Company, the
        provisions of the preceding sentence in this Agreement shall govern if
        they are more favorable to the Employee under the circumstances than the
        conflicting provisions in such other agreements, unless such other
        agreements expressly refers to the preceding sentence and states that it
        is intended to govern in the event of such a conflict with such
        sentence.

(B) Change in Control. For all purposes under this Agreement, "Change in
Control" shall mean the occurrence of any of the following events after the date
of this Agreement:

                (a) The consummation of a merger or consolidation of the Company
        with or



        into another entity or any other corporate reorganization, if more than
        50% of the combined voting power of the continuing or surviving entity's
        securities outstanding immediately after such merger, consolidation or
        other reorganization is owned by persons who were not stockholders of
        the Company immediately prior to such merger, consolidation or other
        reorganization;

                (b) The sale, transfer, exchange or other disposition of all or
        substantially all of the Company's assets;

                (c) A change in the composition of the Company's Board of
        Directors (the "Board") as a result of which fewer than a majority of
        the directors are directors who either (A) had been directors of the
        Company of the date 12 months prior to the date of the event that may
        constitute a Change in Control (the "original directors") or (B) were
        elected, or nominated for election, to the Board with the affirmative
        votes of at least a majority of the aggregate of the original directors
        who were still in office at the time of the election or nomination and
        the directors whose election or nomination was previously so approved;

                (d) Any transaction as a result of which any person is the
        "beneficial owner" (as defined in rule 13(d)-3 under the Securities
        Exchange Act of 1934, as amended - the "Exchange Act"), directly or
        indirectly, of securities of the Company representing at least 50% of
        the total voting power represented by the Company's then outstanding
        voting securities. For purpose of this subsection (d), the terse
        "person" shall have the same meaning as when used in sections 13(d) and
        14(d) of the Exchange Act but shall exclude (A) a trustee or other
        fiduciary holding securities under an employee benefit plan of the
        Company or of a parent or subsidiary of the Company and (B) a
        corporation owned directly or indirectly by the stockholders of the
        Company in substantially the same proportions as their ownership of the
        common stock of the Company; or

                (e) In the event of Gerald C. Hsu ceases to be the Chairman and
        CEO of the Company.

A transaction shall in no event constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.

(C) Constructive Termination. For all purposes under this Agreement,
"Constructive Termination" shall be deemed to have occurred, within six months
after a Change in Control, that on written notice by the Employee to the
Company, upon:

                (a) the Employee's voluntary resignation within six (6) months
        after a Change in Control;

                (b) any refusal by the Employee to relocate the Employee's
        principal place of employment to a location requested by the Company
        that is more than fifty (50) miles from the Employee's current principal
        place of employment;

                (c) a reduction by more than fifteen percent (15%) in the
        Employee's level of compensation including his Minimum Salary,
        non-stock-related fringe benefits, and cash bonus (to the extent that
        any reduction in bonus is disproportionate to a reduction in the
        Company's earnings per share between (i) the period for which the
        reduced bonus is paid, and (ii) the period for which the Employee's most
        recent prior bonus was paid);




                (d) any material adverse change in the Employee's position,
        title, job responsibilities, or reporting lines; or any activity by the
        Company that constitutes constructive termination of employment under
        applicable law. Without limiting the events which may constitute a
        material adverse change in the Employee's position, title, job
        responsibilities, or reporting lines under this definition, such a
        material adverse change shall conclusively be deemed to have occurred
        upon any material diminution or other material adverse of Company
        employees reporting to the Employee at the time of a Change in Control,
        or in the extent or nature of the Employee's authority with respect to
        such function or responsibilities or the employees who perform them.

For all purposes under this Agreement, all of the compensation, cash bonus and
other relevant benefits provided on this Agreement shall be in no event applied
to the Employee(s) who maliciously takes advantage of the bona fide goodwill of
the Company - not only acquire(s) the above-mentioned compensation, bonus, and
benefits but also return(s) to work for Avant! after the Change in Control with
or without any cause.

3.  COVENANT NOT TO COMPETE

(A) Non-Competition. For the purpose of this Section 3, a company, entity, or
person shall be deemed in competition with the Company, if any company, entity,
or person engages in the electronic design automation (the "EDA") industry or,
to the knowledge of the Employee, has definitive plans to engage in the EDA
industry. The parties confirm that it is reasonably necessary for the protection
of the Company that the Employee agree, and accordingly, the Employee does
hereby agree that he will not, directly or indirectly, except for the benefit of
the Company, at any time during his employment hereunder and thereafter during
the Restricted Period, as hereinafter defined, from the date of termination of
this Agreement provided the Company shall duly perform its obligations to the
Employee pursuant to this Agreement:

                (i) Become an officer, director, partner, associate, employee,
        owner, agent, creditor, independent contractor, or otherwise, or be
        interested in or associated with any other EDA company, firm or business
        engaged, in any geographical area in which the Company is engaged, in
        making or selling one or more EDA products competitive with a product or
        products made or sold by Company now or during the term of this
        Agreement. However, after obtaining the prior approval from the Company,
        the Employee may devote reasonable periods required for serving as a
        director or member of any Company, partnership, trust or other entity
        ("Entity") organization involving no conflict of interest with the
        interests of the Company or his personal affairs so long as the same
        does not interfere with the performance of his duties hereunder;

                (ii) Solicit, cause or authorize, directly or indirectly, to be
        solicited for or on behalf of himself or third parties, from parties who
        were customers of the Company in the EDA industry at any time within six
        (6) months prior to the cessation of his employment hereunder, any
        business competitive to the business transacted by the Company with such
        customers in the EDA industry;

                (iii) Accept or cause or authorize, directly or indirectly, to
        be accepted for or on behalf of himself or third parties, any such
        business in the EDA industry from any such customers of the Company as
        defined in the preceding subsection;

(B) Restricted Period. The tern "Restricted Period" as used in this Section 3
shall mean the Termination Payment Period of the cash termination payment as a



consequence of Constructive Termination due to a Change in Control, which the
Employee is entitled to receive pursuant to the provisions of Section 2 hereof.

(C) Others. This Section 3 shall survive the termination of the Employees
employment hereunder for the period provided in paragraph (B).

The Employee further agrees that any breach or threatened breach by him of any
provisions of this Section 3 shall entitle the Company, in addition to any other
legal or equitable remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach.

Notwithstanding anything in this Agreement to the contrary, if the Employee
violates any of the provisions of paragraph (a) hereof during the Restricted
Period and fails to cease such violation and to remedy the consequences of such
violation within ninety (90) days after notice from the Company specifying such
violation and if the Company obtains a final judgment from a court of competent
jurisdiction to the effect that the Employee has violated a provision of
paragraph (a) and has failed to cease such violation and to remedy the
consequences of such violation within ninety (90) days after notice from the
Company, all obligations of the Company to compensate the Employee and to
forgive indebtedness, if any, of the Employee to the Company shall cease, and
the Company shall be entitled to recover from the Employee compensation received
by the Employee and any indebtedness forgiven while such violation existed.

(D) Special Non-Competition Cash Payment. The Company recognizes that a Change
in Control Termination will subject the Employee to losses and damages, the
amount of which might not readily be determined, and that there exist only a
limited number of employment opportunities comparable in statue, compensation
and opportunity to employment as an Employee of the Company. Therefore, the
Employee shall not be required to seek or accept employment in mitigation of any
obligations of the Company arising by reason of his Constructive Termination due
to a Change in Control. In consideration of the Employee's special services and
the Employee's agreement to not compete in the EDA industry during the
Restricted Period after the date of termination of his employment, hereunder the
Company agrees to pay the Employee a lump sum of USD $2 Million dollars, payable
within 30 days after the termination of his employment.

4.  MUTUAL RELEASES AFTER TERMINATION OF EMPLOYMENT

Upon the termination of the Employee's employment, the Company and the Employee
agree that in consideration for the Employee's services, the Company shall
execute a general release, in form and substance, satisfactory to the Employee's
counsel, that releases and forever discharges the Employee, his heirs,
successors and assigns, from any and all actions, causes of actions, claims, or
demands for general, special or punitive damages, attorney's fees, expenses, or
other compensation, which in any way relate to or arise out of the Employee's
employment with the Company or any of its subsidiaries.

5.  INDEMNIFICATION

To the fullest extent not inconsistent with applicable law, in the event that
the Employee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, consultant, employee or agent of the Company or any of its
subsidiaries, or is or was serving at the request of the Company as a director,
officer, consultant, employee or agent of another Company, partnership, joint
venture, trust or other enterprise, the Company shall indemnify the Employee and
hold him harmless, against all expenses (including costs and attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by his in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,

conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Employee did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interest of the Company, or that, with respect to any criminal action or
proceeding, the Employee had reasonable cause to believe that his conduct was
unlawful. The provisions of this Section 5 shall not be deemed exclusive of any
other rights of indemnification to which the Employee maybe entitled or which
may be granted to him, and it shall be in addition to any rights of
indemnification to which he may be entitled under any policy of insurance. The
provisions of this Section 5 shall continue in effect after the Employee has
ceased to be an officer, employee or agent of the Company, shall inure to the
benefit of the Employee's heirs, executors, administrators and in testate
distributes and shall survive the termination of this Agreement under all
circumstances.

        All litigation or inquiries by third parties (for example, but not
        limited to, those by shareholders - direct or derivative - or government
        agencies) arising out of or in connection with this Agreement or the
        Employee's performance hereunder, against either the Company or the
        Employee or both, shall be defended or opposed by the parties hereto, as
        the case may be, to support this Agreement, and the costs, fees and
        expenses thereof, including fees of counsel for the parties, shall be
        home by the Company.

        Notwithstanding the foregoing provisions of this Section 5, during the
        term of the Employee's employment hereunder and during such time he
        continues as an officer, the Company agrees to maintain substantially
        the same Officers' liability insurance in place on the date hereof and
        shall increase such coverage in the event the Employee determines that
        it is in the best interest of the Company to have such increased
        coverage.

6.  CONFIDENTIAL INFORMATION

The Employee recognizes that as an Employee of the Company he has had and will
have access to secret and confidential information regarding the Company, its
products, customers and plans relating to the EDA industry. The Employee
acknowledges that such information is of great value to the Company, and is the
sole property of the Company and that such information has been and will be
acquired by his in confidence. In consideration of the obligations undertaken by
the Company as set forth herein, the Employee will not, at any time, during or
for a period of one year after his employment of the Company hereunder, reveal,
divulge or make known, except as authorized by the Company or required on its
behalf or required pursuant to legal or administrative processes, any
information of a confidential nature concerning the Company's business involving
the EDA industry acquired by the Employee during the course of his employment to
any competitor to the Company in the EDA industry.

7.  MISCELLANEOUS PROVISIONS

(A) No right to Employment. Notwithstanding this Agreement, either party may
terminate the Employee's employment at any time and for any reason, or for no
reason upon written notice to the other party; provided, however, that any
Change in Control Termination shall be subject to all of the consequences
described in sections 2 and 3 above.

(B) Notice. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered mail, return receipt requested and
postage personally delivered or when the Employee, mailed notices shall be
addressed to the Employee at the home address shown below on this Agreement or
at the home address which the Employee most recently communicated to the Company
in writing. In the case of the Company, mailed notices shall be



addressed to its corporate headquarters, and all notices shall be addressed to
the attention of its Secretary.

(C) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of his Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

(D) Whole Agreement; Modifications. No agreements, representations or
understanding (whether oral or written and whether express or implied) which are
not expressly set forth in this Agreement have been made or entered into by
either part with respect to the subject matter hereof. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof. A modification of this Agreement shall be valid only if it is made in
writing and executed by both parties hereto.

(E) Withholding Taxes. All payments made under this Agreement shall be subject
to reduction to reflect taxes or other charges required to be withheld by law.

(F) Choice of Law. The validity, interpretation, construction, and performance
of this Agreement shall be governed by the laws of the State of California
(except their provisions governing the choice of law).

(G) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

(H) Company's Successors. This Agreement shall be binding upon any successor
(whether direct or indirect and whether by purchase lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets, which become bound by this Agreement.

(I) Employee's Successors. This Agreement and all right of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal of legal representatives, executors, heirs, distributes, devisees, and
legatees.

(J) No Assignment. The rights of any person to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by voluntary
or involuntary assignment or by operation of law, including (without imitation)
bankruptcy, garnishment, attachment, or other creditor's process, and any action
in violation of this paragraph shall be void.

(K) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(L) Confidentiality. The Employee agrees that the Employee will not disclose the
existence or the terms of this Agreement to anyone other than the Employee's
spouse, tax advisor, or legal advisor. In the event the Employee breaches this
confidentiality obligation, the Company may immediately terminate this
Agreement.

(M) Arbitration. Any controversy or claim between the Company and Employee,
their representatives, heirs, successors and assigns, arising out of or relating
to this Agreement or any breach or asserted breach hereof or questioning the
validity and binding effect hereof shall be determined by arbitration conducted
in San Francisco in accordance with the Rules of the American Arbitration
Association then obtaining, and judgment upon any award rendered may be entered
in any court having jurisdiction thereof. The decision of the arbitrators shall
be final and binding upon the parties hereto. All of the Employee's costs and
expenses (including attorneys, fees) arising out of or in connection with any
matters submitted to arbitration pursuant to this subsection shall be paid by


the Company, unless the award of the arbitrators shall explicitly find that the
Employee's claim or his defense against a claim by the Company was frivolous and
completely without merit, in which case the Employee shall pay the costs and
expenses (including, without limitation, reasonable attorneys, fees) incurred by
the Company in such connection.

(N) Section Headings. The headings or titles of the sections of this Agreement
are not a part of this Agreement and are not intended to aid in the construction
of any provision thereof.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company, by its duly authorized officer, as of the day and year first
above written.

      /s/ John H. Hsu
      Signature Of the Employee

      John H. Hsu
      Printed name of the Employee

      Oct. 1, 2000
      Date of Signature

      15F-Z. No. 43 Sec 3
      Hsin-Yi Road, Taipei R.O.C

      The Employee's mailing address

      AVANT! CORPORATION




      /s/ Gerald C. Hsu
      Gerald C. Hsu
      Chairman, Chief Executive Officer, & President

      Oct. 1, 2000

      Date of Signature

EX-10.17

                                                                   Exhibit 10.17
                                  CONFIDENTIAL
                              SEVERANCE AGREEMENT

     THIS AGREEMENT is entered into as of December 8, 1998, by and between
Moriyuki Chimura (the "Executive") and Avant! Corporation, a Delaware
corporation (the "Company").

1. CONSEQUENCES OF CERTAIN TERMINATIONS.

Unless otherwise defined in this section, each capitalized term used in this
Agreement shall have the meaning assigned to it in the Company's 1995 Stock
Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan").
Without limiting any other rights which the Executive or the Company may have in
such event, upon any involuntary termination of the Executive's employment
(including but not limited to a Constructive Termination as defined below) that
occurs within six months after a Change in Control (as defined below) (a Change
in Control Termination), and subject to section 2 below, the Company shall pay
to the Executive a cash termination payment equal to three (3) years of the
Executive's annual base salary in effect (a) on the date of termination or (b)
immediately prior to the Change in Control (whichever is greater), in addition
to any other payments, benefits or other rights to which the Executive may then
be entitled.

For all purposes under this Agreement, "Change in Control" shall mean the
occurrence of any of the following events after the date of this Agreement:

     (a) The consummation of a merger or consolidation of the Company with or
         into another entity or any other corporate reorganization, if more than
         50% of the combined voting power of the continuing or surviving
         entity's securities outstanding immediately after such merger,
         consolidation or other reorganization is owned by persons who were not
         stockholders of the Company immediately prior to such merger,
         consolidation or other reorganization;

     (b) The sale, transfer, exchange or other disposition of all or
         substantially all of the Company's assets;

     (c) A change in the composition of the Company's Board of Directors (the
         "Board") as a result of which fewer than a majority of the directors
         are directors who either (A) had been directors of the Company on the
         date 24 months prior to the date of the event that may constitute a
         Change in Control (the "original directors") or (B) were elected, or
         nominated for election, to the Board with the affirmative votes of at
         least a majority of the aggregate of the original directors who were
         still in office at the time of the election or nomination and the
         directors whose election or nomination was previously so approved; or


     (d)  Any transaction as a result of which any person is the "beneficial
          owner" (as defined in rule 13d-3 under the Securities Exchange Act of
          1934, as amended) (the "Exchange Act")), directly or indirectly, of
          securities of the Company representing at least 50% of the total
          voting power represented by the Company's then outstanding voting
          securities. For purpose of this subsection (d), the term "person"
          shall have the same meaning as when used in sections 13(d) and 14(d)
          of the Exchange Act but shall exclude (A) a trustee or other
          fiduciary holding securities under an employee benefit plan of the
          Company or of a parent or subsidiary of the Company and (B) a
          corporation owned directly or indirectly by the stockholders of the
          Company in substantially the same proportions as their ownership of
          the common stock of the Company.

A transaction shall in no event constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.

For all purposes under this Agreement, "Constructive Termination" shall be
deemed to have occurred, on written notice by Executive to the Company, upon:
(1) any refusal by Executive to relocate the Executive's principal place of
employment to a location requested by the Company that is more than 25 miles
from Executive's current principal place of employment; (ii) any adverse change
in Executive's compensation; (iii) any material adverse change in Executive's
position, job responsibilities or reporting lines; or (iv) any activity by the
Company that constitutes constructive termination of employment under
applicable law. Without limiting the events which may constitute a material
adverse change in the Executive's position, job responsibilities or reporting
lines under this definition, such a material adverse change shall conclusively
be deemed to have occurred upon any material diminution or other material
adverse change in the size or business functions or responsibilities of any
Company department or group of Company employees reporting to Executive at the
time of a Change in Control, or in the extent or nature of Executive's
authority with respect to such functions or responsibilities or the employees
who perform them.

2.   MISCELLANEOUS PROVISIONS

     (a) NO RIGHT TO EMPLOYMENT. Notwithstanding this Agreement, either party
may terminate the Executive's employment at any time and for any reason, or for
no reason, upon written notice to the other party; provided, however, that any
Change in Control Termination shall be subject to all of the consequences
described in section 1 above.

     (b) NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid. In the case of the Executive, mailed notices
shall be addressed to the Executive at the home address shown below on this
Agreement or at the home address which the Executive most recently communicated
to the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be addressed to
the attention of its Secretary.


                                       2

(c) WAIVER. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Executive and by an authorized officer of the Company (other
than the Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.

(d) WHOLE AGREEMENT; MODIFICATIONS. No agreements, representations or
understanding (whether oral or written and whether express or implied) which are
not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof. A modification of this Agreement shall be valid only if it is made in
writing and executed by both parties hereto.

(e) WITHHOLDING TAXES. All payments made under this Agreement shall be subject
to reduction to reflect taxes or other charges required to be withheld by law.

(f) CHOICE OF LAW. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of California (except
their provisions governing the choice of law).

(g) SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

(h) COMPANY'S SUCCESSORS. This Agreement shall be binding upon any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.

(i) EXECUTIVE'S SUCCESSORS. This Agreement and all right of the Executive
hereunder shall inure to the benefit of, and be enforceable by, the Executive's
personal or legal representatives, executors, heirs, distributees, devisees and
legatees.

                                       3

(j) NO ASSIGNMENT. The rights of any person to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment, or other creditor's process,
and any action in violation of this paragraph shall be void.

(k) COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(l) CONFIDENTIALITY. The Executive agrees that the Executive will not disclose
the existence or the terms of this Agreement to anyone other than the
Executive's spouse, tax advisor, or legal advisor. In the event the Executive
breaches this confidentiality obligation, this Agreement may be immediately
terminated by the Company.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company, by the duly authorized officer, as of the day and year
first above written.


                                        /s/ MARK CHIMURA
                                        ---------------------------------------
                                        Signature of Executive

                                        Mark Chimura
                                        ---------------------------------------
                                        Printed name of Executive

                                        47945 Avalon Heights Terrace
                                        Fremont, CA 94539
                                        ---------------------------------------
                                        Executive's Mailing Address


                                        AVANT! CORPORATION

                                        /s/ GERALD C. HSU
                                        ---------------------------------------
                                        Gerald C. Hsu
                                        Chairman, President, and Chief
                                        Executive Officer



                        AMENDMENT TO SEVERANCE AGREEMENT

     THIS AMENDMENT is entered into as of December 15, 1999, by and between
Moriyuki Chimura (the "Executive") and AVANT! CORPORATION, a Delaware
corporation (the "Company"), for the purpose of amending the Severance Agreement
dated December 8, 1998 that is presently in effect between the parties (the
"Agreement"). The Agreement is hereby amended by revising the first paragraph
(only) of Section 1 to read as set forth below, by inserting the language read
as set forth below as "Section 2" of the Agreement, and by renumbering existing
Section 2 of the Agreement to be "Section 3" of the Agreement. Except as so
amended, the Agreement remains effective as in effect immediately before this
amendment.

     The first paragraph (only) of "Section 1", as amended by this amendment,
reads in full as follows:

Unless otherwise defined in this section, each capitalized term used in this
Agreement shall have the meaning assigned to it in the Company's 1995 Stock
Option/Stock Issuance Plan in effect on the date of this Agreement (the "Plan").
Without limiting any other rights which the Executive or the Company may have in
such event, upon any involuntary termination of the Executive's employment
(including but not limited to a Constructive Termination, as defined below) that
occurs within six months after a Change in Control (as defined below) (a "Change
in Control Termination"), and subject to section 2 below: (1) the Company shall
pay to the Executive a cash termination payment equal to 3 year(s) of the
Executive's annual base salary in effect (i) on the date of termination or (ii)
immediately prior to the Change in Control (whichever is greater), in addition
to any other payments, benefits or other rights to which the Executive may then
be entitled; (2) the shares of Common Stock then subject to any option granted
by the Company to the Executive and then outstanding (including but not limited
to any such option that may hereafter be granted to the Executive, under the
Plan or otherwise) but not otherwise vested shall automatically vest and be
exercisable in full; and (3) all outstanding repurchase rights applicable to any
Common Stock previously issued to the Executive by the Company (including any
Common Stock hereafter issued which is then held by the Executive) shall also
terminate automatically. If any provision of the preceding sentence regarding
acceleration of options or early termination of repurchase rights shall conflict
with any provision of any existing or future option agreement, stock purchase
agreement or other agreement between the Executive and the Company, the
provisions of the preceding sentence shall govern if they are more favorable to
the Executive under the circumstances than the conflicting provisions in such
other agreement, unless such other agreement expressly refers to the preceding
sentence and states that it is intended to govern in the event of such a
conflict with such sentence.

     New "Section 2" added by this amendment reads in full as follows:

2.   LIMITATION ON PAYMENTS UNDER SECTION 1.

     (a)  APPLICATION OF LIMITATION. This section 2 shall apply only if the
     Executive, on an after-tax basis, would receive more value under a Change
     in Control Termination that is subject to section 1 after the application
     of this section 2 than the Executive would


receive before the application of this section 2. For this purpose, "after-tax
basis" shall mean a calculation taking into account all federal and state
income and excise taxes imposed on the Executive, including (without
limitation) the excise tax described in section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"). If this section 2 is applicable, it
shall supersede any conflicting provision of this Agreement.

(b) BASIC RULE. The Company shall not make any payment or property transfer to,
or for the benefit of, the Executive (under this Agreement or otherwise) that
would subject the Executive to the excise tax described in section 4999 of the
Code. All calculations required by this section 2 shall be performed by the
independent auditors retained by the Company most recently prior to the
Involuntary Termination (the "Auditors"), based on information supplied by the
Company and the Executive, and shall be binding on the Company and the
Executive. All fees and expenses of the Auditors shall be paid by the Company.

(c)  REDUCTIONS. If the amount of the aggregate payments or property transfers
to the Executive must be reduced under this section 2, then the Executive shall
direct in which order the payments or transfers are to be reduced, but no
change in the timing of any payment or transfer shall be made without the
Company's consent. As a result of uncertainty in the application of section
4999 of the Code at the time of an initial determination by the Auditors
hereunder, it is possible that a payment will have been made by the Company
that should not have been made (an "Overpayment") or that an additional payment
that will not have been made by the Company could have been made (an
"Underpayment"). In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive that the
Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all purposes
as a loan to the Executive that he shall repay to the Company, together with
interest at the applicable federal rate specified in section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the Executive to
the Company if and to the extent that such payment would not reduce the amount
that is subject to an excise tax under section 4999 of the Code. In the event
that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to, or for
the benefit of, the Executive, together with interest at the applicable federal
rate specified in section 7872(f)(2) of the Code.


                            ***********************



     IN WITNESS WHEREOF, each of the parties has executed this Amendment, in
the case of the Company, by its duly authorized officer, as of the day and
year first above written.



                                        /s/ MORIYUKI CHIMURA
                                        ----------------------------------------
                                        Signature of Executive

                                        Moriyuki Chimura
                                        ----------------------------------------
                                        Printed Name of Executive

                                        47945 Avalon Heights Terrace
                                        Fremont, CA 94539
                                        ----------------------------------------
                                        Executive's Mailing Address

                                        ----------------------------------------

                                        ----------------------------------------



                                        AVANT! CORPORATION


                                        /s/ GERALD C. HSU
                                        ----------------------------------------
                                        Gerald C. Hsu
                                        Chairman, President, and Chief
                                        Executive Officer

EX-10.18

                            DISTRIBUTION AGREEMENT          Exhibit 10.18


This Distribution Agreement (the "Agreement") is entered into as of October 1,
2000 and made between AVANT! JAPAN CORPORATION (the "Company"), with its
principal place of business at Nittochi Shin-yurigaoka Building, 5F, 1-5-2
Kamiasao Asao-ku, Kawasaki-shi, Kanagawa 215-0021, Japan, and MAINGATE
ELECTRONICS INC. (the "Distributor"), with its principal place of business at
KAKiYA Building, 3/F, 2-7-17 Shinyokohama, Kohoku-ku, Yokohama-Shi, Kanagawa
222-0033, Japan.

RECITALS:

A.    The Company has obtained an exclusive right to distribute certain Avant!
      software-based electronic design automation products, including
      documentation and manuals therefor.

B.    The Company wishes to appoint the Distributor as a sub-distributor and the
      Distributor wishes to acquire from the Company the right to distribute,
      market and support such products in the Territory (as defined below).

NOW IT IS HEREBY AGREED AS FOLLOWS:

1.     DEFINITIONS

      In this Agreement, the following terms shall have the following meanings:

      "CONFIDENTIAL INFORMATION" includes information which the Company has
      maintained as confidential and revealed to the Distributor by clearly
      indicating the Company name and "Confidential" or similar proprietary
      marking and which may or may not be related to the Products including but
      not limited to: technical information such as computer programs,
      characterization, formulae, algorithms, process, performance, interface
      information, proprietary command architecture, proprietary scheme
      constructs, including commands, format, syntax and semantics, defects,
      bugs, proprietary circuit behavior information, the Company supplied data,
      circuit and logic elements and business information, including
      confidential future product information, confidential basic concepts,
      marketing and sales information, sales volume, pricing and accounting
      information. Confidential Information shall also include oral information
      disclosed by the Company to the Distributor pursuant to this Agreement,
      provided such information is summarized in writing and is clearly marked
      with the Company name and "Confidential" or similar proprietary marking
      and delivered to the Distributor within thirty (30) days of disclosure.

      Confidential Information does not include information which:

      (i)   has come into the public domain without breach of the confidence by
            the Distributor or any other person, firm or entity;

      (ii)  is or becomes publicly known through no wrongful act of the party to
            whom such information was disclosed;



      (iii) is received by the Distributor from a third party without
            restrictions on its use in favor of the Company;

      (iv)  is independently developed by the Distributor's employee, agent or
            contractor without use of Confidential Information;

      (v)   is acknowledged in writing by the Company to be non-confidential; or

      (vi)  is required to be disclosed pursuant to any statutory requirement or
            court order (except that the Distributor shall give the Company
            prompt notice of such statutory requirement or court order such that
            the Company may request protection therefrom);

      "CUSTOMER" means a customer who has signed a Customer Agreement;

      "CUSTOMER AGREEMENT" means the Customer Software and Service Agreement
      provided by the Company from time to time;

      "DOCUMENTATION" means the user guides, instruction manuals, tutorials,
      on-screen user assistance available in the operation of the Software and
      other documents whether in written or machine-readable form provided by
      the Company from time to time for the Use of the Software;

      "INTELLECTUAL PROPERTY RIGHTS" means all designs patents, copyrights,
      inventions, enhancements, revisions, updates, adaptations, secret and
      confidential information, know-how, technical data, trade secrets,
      specifications, designs, whether or not in documentary form, functional
      and detailed design specifications and all other intangible property
      (whether or not in documentary form and whether or not registrable,
      patentable, copyrightable for otherwise protectable under applicable laws)
      relating to the Products;

      "M&S SERVICES" means the maintenance and support services to be provided
      by the Distributor pursuant to Clause 7 herein;

      "MINIMUM PURCHASE COMMITMENT" means the value of minimum
      [annual/quarterly] purchase commitment of Products and M&S Services as set
      out in Exhibit A;

      "MULTINATIONAL CUSTOMERS" shall mean customers who use the Products
      concurrently both within and outside the Territory, including use of the
      Products on a wide area network;

      "NET REVENUE" means the gross fee for any Product and fees for any
      purchased M&S Services, as set out in Exhibit B. The Net Revenue shall not
      include any interest or finance charges;

      "PRODUCTS" means the Software and Revisions together with the
      corresponding Documentation as may be provided by the Company from time to
      time;



                                       2


      "RECOMMENDED PRICE LIST" means the list setting out the Recommended Price
      for the Products and/or M&S Services to be charged by the Distributor to
      the Customers;

      "REVISIONS" means upgrades, error corrections and updates of the Software
      made generally available to Customers of the Software;

      "SOFTWARE" means the computer software programs as set out in Exhibit C in
      object code only;

      "SUPPLIER" means Avant! Corporation with its principal place of business
      at 46871 Bayside Parkway Fremont, CA 94538 U.S.A., and its subsidiaries
      and licensees;

      "TERM" means the term as set out in clause 18;

      "TERRITORY" means the territory as set out in Exhibit D;

      "TRADE MARK" means any trade mark, service mark, trade name, symbols and
      logos owned by the Supplier and authorized to be used by the Company;

      "USE" means in relation to the Software and Revisions, its loading,
      displaying, running, transmission or storage for the purpose of processing
      the instructions contained in the Software and Revisions.

2.    APPOINTMENT

      2.1   Subject to the terms of this Agreement, the Company hereby grants to
            the Distributor and the Distributor hereby accepts an exclusive
            right for Products set out in Exhibit C to:

            (i)   market and distribute the Products to Customers solely for use
                  in the Territory;

            (ii)  install the Products for Customers; and

            (iii) provide M&S Services to Customers.

            No source code for the Software to be distributed by this Agreement
            will be deemed as included by inference or otherwise.

      2.2   Subject to applicable terms and conditions, including fees, to be
            agreed on a case by case basis, the Company hereby grants and/or
            shall use its reasonable commercial effort to procure any relevant
            third party to grant, the Distributor a non-exclusive right outside
            the Territory for the Term of this Agreement to distribute the
            Products directly to Customers with prior approval by the Company.

            For purpose of this Clause, Customers shall be Multinational
            Customers of the Distributor.



                                       3


      2.3   A Customer within the Territory, who desires to have the right to
            use the input/output ("I/O") format files of the Products in order
            to develop and distribute an interfacing product between the
            Product(s) and third parties' software programs solely for use
            within the Customer's internal design flow, may submit a request to
            the Distributor. The Distributor will forward such request to the
            Company. The Company has the sole discretion in deciding whether or
            not to grant such right and terms and conditions attached to such
            right if granted.

      2.4   The Company reserves the right to change, modify or discontinue any
            Product at any time provided that the Distributor is given ninety
            (90) days prior written notice. Any Revisions, enhancement or
            improvement of a Product that is generally made available by the
            Supplier through the Company, that is substantially similar to such
            Products and that is marketed under the same product number and
            nomenclature as such Product shall be added to Exhibit C as a new
            Product. The Company reserves the right to charge for Revisions. In
            addition to the foregoing, any products developed by the Supplier
            other than the substantially similar products referenced above,
            shall be considered as a new product and the Company shall decide
            whether the Distributor is authorized to distribute this new
            product. The Distributor shall have the right and freedom to
            distribute any non-competitive software products or services;
            provided, however, that if any such new product is competitive with
            any non-Company products that the Distributor is distributing, the
            Distributor shall have thirty (30) days to decide whether to
            distribute the Company's new product, or the non-Company product the
            Distributor is then currently distributing.

      2.5   All rights not expressly granted are hereby reserved by the Company.

3.    RESTRICTIONS ON THE APPOINTMENT

      3.1   The Distributor may only distribute the Products to persons and
            entities located and taking delivery within the Territory (except
            for Multinational Customers as provided in Clause 2.2 above).

      3.2   The Distributor shall not tamper with the packaging of the Products
            and shall only distribute the Products as packaged by the Company.

4.    USE OF PRODUCTS BY DISTRIBUTOR

      4.1   The Distributor may Use reasonable number packages of the Products,
            free of charge, for demonstration, internal training, testing,
            providing M&S Services.

      4.2   Except as provided in Clause 4.1, the Distributor may not Use the
            Products for its own internal use without prior written permission
            of the Company.

      4.3   Except as provided in Clause 4.1 and 4.2, the Distributor is
            prohibited to Use the Products.



                                       4


5.    USE BY CUSTOMER

      5.1   Prior to the delivery of the Products to a Customer, such Customer
            shall execute an appropriate Customer Agreement for the Products.

      5.2   The Distributor shall obligate each Customer, by execution of the
            Customer Agreement, not to:

            (i)   create or attempt to create by reverse engineering or
                  otherwise, the source code or internal structure of the
                  Products or any part thereof from the object code or from the
                  information available to it; and

            (ii)  modify, amend, add to or in any way alter any Product supplied
                  to it under the Customer Agreement.

6.    RESPONSIBILITIES OF DISTRIBUTOR

      6.1   The Distributor shall meet the Minimum Purchase Commitment as
            specified in Exhibit A hereto.

            (i)   If the Distributor exceeds its Minimum Purchase Commitment to
                  the Company by at least 50% via large volume purchase or
                  Corporate Partnership (i.e. minimum US$1M per order), the
                  Company shall consider granting additional discount amount for
                  Products to the Distributor; if the Distributor exceeds its
                  annual purchase commitment by at least 50% in small volume
                  purchase, no additional discount for Products will be
                  considered.

            (ii)  If the Distributor fails to meet the Minimum Purchase
                  Commitment for two (2) consecutive years from January 1, 2001,
                  the Company may terminate this Agreement without consequences
                  on either party by giving one (1) month prior written notice
                  to the Distributor. The decision to exercise this right of
                  termination will be solely at the discretion of the Company.

      6.2   The Distributor shall continuously maintain adequate resources and
            equipment and a fully dedicated team of experienced and competent
            sales, marketing and technical employees to fulfill the obligations
            of the Distributor hereunder. The Distributor shall comply with all
            certification requirements of its technical staff as requested by
            the Company.

      6.3   The Distributor shall provide M&S Services to Customers pursuant to
            Clause 7 below.

      6.4   The Distributor shall comply with all local laws and regulations and
            conduct business at all times in an honest and straightforward
            manner and make its best effort to achieve high customer
            satisfaction.



                                       5


      6.5   The Distributor may not appoint any sub-distributor or sub-contract
            any third party to perform its obligations under this Agreement
            without the prior written approval of the Company.

7.    M&S SERVICES

      7.1   During the Term of the Agreement, the Distributor shall:

            (i)   use reasonable commercial effort during regular local business
                  hours, Monday through Friday, to provide direct technical
                  support service to Customers by telephone and/or electronic
                  mail to answer questions of Customers regarding the
                  installation and Use of the Products;

            (ii)  provide Customers with Revisions;

            (iii) provide training by personnel certified by the Company for any
                  Customers regarding the installation and Use of the Products;
                  and

            (iv)  promptly replace any corrupted or damaged Product.

      7.2   The Distributor shall charge the Customer applicable fees for the
            M&S Services provided. The Distributor shall pay the Net Revenue to
            the Company for the M&S Services performed pursuant to Clause 9
            below.

      7.3   The Distributor shall only provide M&S Services and training to
            Customers by qualified or certified staff as required by the
            Company.

      7.4   The Company shall coordinate between the Supplier and the
            Distributor with reasonable assistance in its provision of M&S
            Services on an "AS AVAILABLE" basis. The Company reserves the right
            to charge for the support it agrees to provide to the Distributor
            and the Distributor may reject such offer.

      7.5   The Company shall provide the Distributor with Revisions, and
            reserves the right to charge for the Revisions. The Distributor
            shall be responsible to distribute the Revisions to Customers that
            are receiving M&S Services.

8.    ORDERING AND DELIVERY OF THE PRODUCTS

      8.1   The Distributor shall furnish its order sheet for the purchase of
            the Products to the Company. Such order shall be binding upon the
            parties hereto unless the Company otherwise notifies the Distributor
            in writing within seven (7) days after the Company's receipt of such
            order. In the event of any discrepancy between the provisions of
            this Agreement and any order, unless expressly approved in writing
            signed by both parties, the provisions of this Agreement shall
            prevail.

      8.2   During the term of this Agreement, subject to the other terms and
            conditions of this Agreement, the Company will use its reasonable
            efforts to deliver (by full or partial shipment) the Products within
            fourteen (14) days from receipt of



                                       6


            written orders, which are accepted by the Company at its main
            office, or at the Distributor specified shipment dates insofar as
            practical and consistent with the Company's then current lead-time
            schedule, shipping schedule, access to supplies on acceptable terms
            and allocation of available products and capacity among the Company
            customers.

      8.3   The Company shall be entitled to select the carrier and the method
            of shipment of all Products hereunder and the Distributor shall be
            responsible for all domestic transportation charges and insurance
            premiums. Risk of loss shall pass to the Distributor upon delivery
            of the Products to the Distributor.

      8.4   The Company shall accept returns of defective media of Products.

      8.5   The Company reserves the right to amend the list of Software and
            change, modify or discontinue any Products at any time upon giving
            the Distributor thirty (30) days prior written notice provided that
            the Company shall fulfill all purchase orders for discontinued
            Products accepted prior to the date of notification.

      8.6   The Distributor shall submit the necessary documents for Purchase
            Order instructed by the Company.

9.    BILLING AND SETTLEMENT PROCEDURES

      9.1   For each unit of Product distributed or M&S Services provided, the
            Distributor shall pay the Net Revenue. The Company shall issue
            invoice(s) to the Distributor for the total Net Revenue payable.
            Payment shall be made by the Distributor in Japanese Yen within
            thirty (30) days after such Net Revenue has been collected by the
            Distributor from Customers. Notwithstanding above, the Company has
            the right to issue invoice(s) for the total Net Revenue payable to
            the Distributor after one hundred and fifty (150) days even though
            the revenue has not been collected from Customers. Such payment
            shall be made by the Distributor within thirty (30) days after
            invoice(s) has been issued. Late payments shall accrue interest at
            the rate of 1% per month or the maximum rate of interest allowed by
            law whichever is less. The Company has the right to change the
            billing condition to the Distributor mentioned the above upon giving
            the Distributor thirty (30) days advance notice in writing.

      9.2   The Distributor shall be responsible for rendering bills to and
            collecting the revenue from Customers for the distribution of the
            Products and M&S Services and shall be fully responsible for any
            payment delinquencies or non-payment by Customers.

      9.3   The discounts set forth in Exhibit B shall be reviewed every year by
            the parties hereto. Notwithstanding the above, the Company reserves
            the right to revise the said discounts, the Net Revenue and the
            Recommended Price List at any time upon giving the Distributor
            thirty (30) days advance notice in writing; provided that in no
            event should the discounts be less than twenty (20)% of the
            Recommended Price in the Recommended Price List for Products; nor
            should



                                       7


            the discounts be less than fifteen (15)% for M&S Services. New price
            changes will apply to all orders made after such notice period.

      9.4   The Distributor shall be responsible for paying all charges,
            including without limitation domestic transportation charges,
            insurance premiums, consumption taxes, service taxes and all other
            taxes, duties and government assessments and relating to the
            distribution of Products and the supply of M&S Services in the
            Territory.

10.   CONFIDENTIAL INFORMATION

      10.1  Upon execution of this Agreement, the Company may disclose to the
            Distributor Confidential Information for which the Distributor has a
            need to know under this Agreement. Without obtaining the Company's
            prior written consent, the Distributor shall not copy or duplicate
            any Confidential Information by any means or technique. Except as
            specifically provided in this Agreement, the Distributor shall not
            acquire any right, title or interest in or to any Confidential
            Information or any files, lists, records, documents, drawings,
            specifications, equipment, or other tangible things that incorporate
            or refer to all or a portion of the Confidential Information.

      10.2  Unless with the prior written consent of the Company, the
            Distributor shall not disclose or facilitate disclosure of such
            Confidential Information to any person, firm or entity except its
            employees. The Distributor shall take all steps necessary or
            appropriate to protect the Confidential Information against
            unauthorized disclosure and misappropriation, including, without
            limitation, causing all persons, firms and entities with access to
            any Confidential Information to enter into a confidentiality
            agreement in a form acceptable to the Company. The Distributor shall
            use the standard of care generally appropriate for the industry (but
            not less than reasonable care) in order to avoid unauthorized
            disclosure or misappropriation of such Confidential Information.

      10.3  The Distributor shall not use any Confidential Information for any
            purposes or activities other than those expressly provided in this
            Agreement or any other written agreement entered into by and between
            the parties.

      10.4  The Distributor understands and agrees that the Confidential
            Information constitutes valuable business assets of the Company
            and/or the Supplier, the unauthorized use or disclosure of which may
            irreparably damage the Company and/or the Supplier. In the event of
            threatened or breach violation of a confidentiality obligation, the
            Company shall be entitled to an injunction restraining the
            Distributor from breaching this Agreement. Nothing in this Agreement
            shall be construed as prohibiting the Company from pursuing any
            other remedies available to it for such breach or threatened
            violation, including recovery of direct and consequential damages
            from the Distributor.



                                       8


11.   INTELLECTUAL PROPERTY RIGHTS

      11.1  The Distributor acknowledges that the Supplier is the exclusive
            owner and the Company is the authorized licensee of the Intellectual
            Property Rights. The Distributor shall not at any time do or cause
            to be done, and shall exercise its best efforts to ensure that none
            of its representatives does or causes to be done, any act impairing
            or tending to impair any part of any right, title or interest of the
            Company or the Supplier or to any Intellectual Property Rights
            provided. With the exception of the rights expressly granted under
            this Agreement, the Distributor shall not acquire any right, title
            or interest to or in the Intellectual Property Rights, or any
            invention, improvement or development based thereon. The Distributor
            further agrees that the Company and the Supplier shall have any and
            all right, title, interest in and to any suggested modifications,
            design changes or improvements of the Products, without payment of
            additional consideration thereof, either to the Distributor, or its
            employees agents or customers.

      11.2  The Distributor shall at all times conduct business only in its own
            name and shall not use any Intellectual Property Rights as part of
            its business name.

      11.3  The Distributor agrees that, as a condition of the rights granted
            under this Agreement and except as otherwise expressly and
            unambiguously authorized hereunder, it shall not:

            (i)   create or attempt to create, by reverse engineering or
                  otherwise, the source code or internal structure of the
                  Products or any part thereof from the object code or from the
                  information made available to it;

            (ii)  modify, amend, add to or in any way alter any Product supplied
                  to it under this Agreement;

            (iii) remove any product identification or notices of any
                  confidential or copyright restrictions from the Products or
                  any support material;

            (iv)  list or otherwise display or copy the object code of any
                  Product;

            (v)   copy the Products, develop any derivative works thereof or
                  include any portion thereof in any other software program; or

            (vi)  destroy completely any proprietary information or Confidential
                  Information contained therein prior to disposing of any media
                  or apparatus.

      11.4  The Distributor agrees that it shall not use the Intellectual
            Property Rights except in conjunction with the M&S Services, and in
            accordance with any guidelines as may be issued by the Company from
            time to time and the terms of this Agreement. The foregoing
            notwithstanding, the Distributor may use the Intellectual Property
            Rights to market and distribute the Products as set forth in this
            Agreement. The Company reserves the right to require the Distributor
            to submit to the Company for prior approval any advertising and
            sales literature of


                                       9


            the Distributor that refers to the Products, or otherwise includes
            any Intellectual Property Rights. The Distributor shall make all
            modifications to the advertising and sales literature deemed
            necessary by the Company.

      11.5  The Distributor's right to use the Intellectual Property Rights
            pursuant to Clause 11.4 shall cease upon termination of this
            Agreement.

      11.6  (i)   The Distributor agrees that it shall immediately notify the
                  Company of any claims or objections, or indications of claims
                  or objections, that use of the Intellectual Property Rights by
                  the Distributor may or will infringe the proprietary rights of
                  a third party.

            (ii)  The Distributor agrees that it shall immediately notify the
                  Company of any infringement, illegal use or misuse by third
                  parties of the Intellectual Property Rights. Upon notification
                  by the Distributor of any infringement, illegal use or misuse
                  by third parties of the Intellectual Property Rights or upon
                  the Company or the Supplier otherwise learning of such
                  infringement, illegal use or misuse by third parties, the
                  Company and/or the Supplier have the right and sole
                  discretion, but not the duty, to initiate any proceeding
                  relating to the protection of the Intellectual Property
                  Rights. Should the Supplier and/or the Company make such an
                  election to initiate proceedings, the Supplier and/or the
                  Company (as the case may be) shall bear the full burden of
                  expenses for such proceedings and shall also take the full
                  benefit, if any, of such proceedings. Furthermore, in the
                  event the Supplier and/or the Company should make such an
                  election, the Distributor shall provide all necessary
                  assistance required by the Supplier and/or the Company. The
                  Distributor shall be kept fully informed of the proceedings
                  but the Supplier and/or the Company shall retain full control
                  of the proceedings.

12.   USE OF TRADE MARKS

      12.1  The Distributor shall not acquire any right to or interest in any
            Trade Marks. The Distributor may only use the Trade Marks in
            carrying out its authorized activities under this Agreement free of
            charge, and then only provided that ownership of such Trade Marks is
            clearly attributed to the Company or the Supplier.

      12.2  The Distributor acknowledges and agrees that the Company is the
            authorized user of the Trade Marks and that all goodwill arising out
            of use of the Trade Marks by the Distributor pursuant to this
            Agreement shall inure to the Company. The Distributor shall not at
            any time or in any way indicate ownership of or any right in the
            Trade Marks and shall not contest the right of the Company and/or
            its affiliates to the use of any of the Trade Marks. The Distributor
            shall not, and shall not have the right to, register, or apply for
            registration, anywhere in the world, directly or indirectly, any
            trade mark, service mark, trade name, copyright, company name or
            other proprietary or commercial right which is similar to the Trade
            Marks or take any other action that jeopardizes the Trade Mark
            owner's proprietary rights in the Trade Marks.



                                       10


      12.3  The Distributor shall at all times conduct business only under its
            own name and may not use any of the Trade Marks as part of its
            business name.

      12.4  The Distributor shall not attach, remove or disfigure any Trade
            Marks on the media containing the Product (or that appear as the
            result of executing the Product) nor attach any additional marks to
            the media containing the Product except as otherwise agreed by the
            Company in writing.

      12.5  The Distributor agrees not to alter, remove or obscure any copyright
            or other proprietary notices on or in the media containing the
            Product (or that appear as the result of executing the Product) or
            related documentation or materials.

      12.6  The Company reserves the right to require the Distributor to submit
            to the Company for prior approval any and all advertising and sales
            literature of the Distributor that refers to the Company, to the
            Products, or otherwise includes any of the Trade Marks. The
            Distributor shall make all modifications to the materials deemed
            necessary by the Company to protect the goodwill associated with the
            Trade Marks. The Distributor shall also comply with any guidelines
            relating to use of the Trade Marks as may be furnished to the
            Distributor and revised by the Company from time to time.

      12.7  The Distributor's right to use the Trade Marks shall immediately
            cease upon termination or expiration of this Agreement.

13.   COMPANY COVENANTS AND REPRESENTATIONS

      The Company represents and agrees to:

      13.1  provide such assistance the Distributor in its marketing programs as
            the Company thinks fit;

      13.2  furnish the Distributor with forty (40) sets of marketing materials
            at no charge, and to provide additional copies at cost;

      13.3  provide the Distributor with timely responses regarding plans to
            correct bugs and enhance the Products;

      13.4  use reasonable commercial efforts to procure the Supplier to send
            one application engineer to the Distributor during the earlier
            stages of the Product release to provide the Distributor with
            additional support, the terms and timing of this support will be
            mutually agreed upon;

      13.5  provide a mutually agreed upon Field Application Engineer's
            Qualification Program including training, performance evaluation,
            and correction actions;

      13.6  use reasonable efforts to procure the Supplier's group of companies
            to send a representative to Japan to conduct face to face meetings
            with both the Distributor and customer to understand, evaluate and
            advise the Distributor; and



                                       11


      13.7  provide the Distributor with a reasonable number of demonstration or
            customer evaluation copies of the Product for customer purchase
            evaluations at no charge to the Distributor.

14.   DISTRIBUTOR COVENANTS AND REPRESENTATIONS

      The Distributor represents and agrees:

      14.1  to provide the Company with (a) two-quarter rolling forecast by the
            end of each calendar quarter, (b) monthly sales forecast update by
            the end of each month and (c) monthly distribution and account
            activities reports;

      14.2  to use its best efforts to market and distribute the Products
            (including without limitation, inclusion of the Products in the
            Distributor's catalogs and other promotional materials) and provide
            M&S Services (including installation, training and other customer
            support) on a continuing basis and to comply with good business
            practices and all laws and regulations relevant to this Agreement or
            the subject matter hereof;

      14.3  to keep the Company informed as to any problems encountered with the
            Products and any resolutions arrived at for those problems, to
            participate in management reviews, and communicate promptly to the
            Company any and all modifications, design changes or improvements of
            the Products suggested by any Customer, employee or agent;

      14.4  not to incur any liability on behalf of the Company or in any way
            pledge or purport to pledge the Company's credit or purport to make
            any contract binding upon the Company;

      14.5  to immediately bring to the attention of the Company any information
            received by the Distributor which is likely to be of interest, use
            or benefit to the Company in relation to the marketing and/or
            support of the Products;

      14.6  to keep full, proper and up to date books of accounts and records
            showing clearly all inquiries, transactions, proceedings and
            Customer calls relating to the Products and will allow a duly
            authorized representative of the Company to have access to the said
            books and records and take such copies thereof as such
            representatives may require;

      14.7  that neither this Agreement (or any term hereof) nor the performance
            of or exercise of rights under this Agreement is restricted by, or
            contrary to, in conflict with any prior obligations of the
            Distributor to any third parties; and

      14.8  to provide Company Operations VP with written account activity
            report in English (including account situation, activity planning
            and change, technical support, customer requests, travel plans etc.)
            at the end of each month;

      14.9  to arrange face-to-face meeting between major account executives
            (Division General Manager level or above, i.e., above Director
            level) with the Company and/or the Supplier's President and CEO
            minimum once each quarter;



                                       12


      14.10 to qualify all Distributor Application Engineers through Field
            Application Engineers Qualification Program provided by the Company;

      14.11 to communicate with the Company through the defined official
            communication channels, to Company Operations VP when necessary;

      14.12 to attend the Company and/or the Supplier's annual Sales Meeting at
            the Company and/or the Supplier's designated location at the
            Distributor's expense. The Distributor shall make strong efforts to
            visit the Company and/or the Supplier group of companies' marketing
            and/or R&D facilities on a regular basis to maintain good
            communications;

      14.13 that neither this Agreement (or any term hereof) nor the performance
            of or exercise of the rights under this Agreement, is restricted by,
            contrary to, in conflict with, ineffective under, or affects the
            Company and the Supplier's proprietary rights (or the duration
            thereof) under, or will require any termination payment or
            compulsory licensing under, any law or regulation of Japan. The
            Distributor shall make any filings required under Japanese laws and
            regulations; and

      14.14 to commit the following personnel for the promotion of the Company
            in Japan: (i) full time senior sales manager who also functions as
            the overall vendor project manager, (ii) full time sales
            representatives, (iii) full time application engineers, and (iv)
            full time administrative supporting staff.

15.   LIMITED WARRANTY AND DISCLAIMER

      15.1  The Company warrants that the program media of each Product will
            materially conform to the current Documentation for three (3) months
            after it is delivered to a Customer, provided the Products are
            maintained to the Company's maintenance recommendation in a manner
            specified by the Company. The Company shall replace any defective
            media within such period, provided the Distributor bears the cost of
            freight and insurance to the point of repair. The Company will bear
            the cost of freight and insurance for the return of the Products to
            the Distributor.

      15.2  The Distributor will handle and be responsible for all warranty
            returns from its Customers.

      15.3  The Company does not warrant that it will be able to correct all
            programming errors or other problems encountered by the Distributor
            and the Customers. If the Company cannot, or determines that it is
            not practical to repair or replace the returned Product, the Net
            Revenue paid by the Distributor shall be refunded.

      15.4  THE COMPANY AND THE SUPPLIERS MAKE NO OTHER WARRANTIES WITH RESPECT
            TO THE PRODUCTS OR ANY SERVICES AND HEREBY DISCLAIM ALL OTHER
            WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
            PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE, COURSE OF DEALING,
            USAGE OR ERROR FREE OPERATION.



                                       13


      15.5  The above warranty does not extend to any Product that (i) is
            modified or altered, (ii) is operated in a manner other than that
            specified by the Company, (iii) has its serial number removed or
            altered (iv) is treated with abuse, negligence or other improper
            treatment (including, without limitation, use outside the
            recommended environment) or (v) is not maintained to the Company's
            maintenance specifications. The Distributor's sole remedy with
            respect to any warranty or defect is as stated above. The
            Distributor is fully responsible for satisfaction of its Customers
            and will be responsible for all claims, damages, settlements,
            expenses and attorney's fees incurred by the Company with respect to
            the Distributor's claims or representations regarding the Products
            beyond the Company's above warranty obligations to the Distributor.

16.   INDEMNIFICATION

      16.1  The Company shall hold the Distributor harmless from any third party
            claims for damages and settlements, including reasonable attorneys'
            fees and expenses related thereto, resulting from infringement by
            the Products of any United States or Japanese patent or any United
            States or Japanese copyrights, provided the Company is promptly
            notified of any and all threats, claims and proceedings related
            thereto and given reasonable assistance by the Distributor and the
            opportunity to assume sole control over the defense and all
            negotiations for a settlement or compromise; the Company will not be
            responsible for any settlement it does not approve in writing.
            Notwithstanding the foregoing, the Company is not liable to any
            claims of infringement of a patent or copyright in which the
            Distributor or any affiliate of the Distributor has an interest or
            license.

      16.2  If all or any part of the Products is, or in the opinion of the
            Company, may become, the subject of a claim or suit of infringement,
            the Company may:

            (i)   modify the Products to render them non-infringing; or

            (ii)  replace the Products with the Company's other products at
                  equivalent value with the written request from the
                  Distributor.

            THE FOREGOING IS THE EXCLUSIVE REMEDY FOR DISTRIBUTOR AND IS IN LIEU
            OF ANY WARRANTIES OF NON-INFRINGEMENT, WHICH ARE HEREBY DISCLAIMED.

      16.3  The foregoing obligation of the Company does not apply with respect
            to Products or portions or components thereof:

            (i)   not supplied by the Company;

            (ii)  made in whole or in part in accordance to the specifications
                  of the Distributor or Customer if the alleged infringement is
                  caused by such specifications;



                                       14


            (iii) which are modified (other than by the Company) after shipment
                  by the Company, if the alleged infringement relates to such
                  modification;

            (iv)  combined with other products, processes or materials where the
                  alleged infringement relates to such combination;

            (v)   where the Distributor and/or Customers continue allegedly
                  infringing activity after being notified thereof or after
                  being informed of modifications that would have avoided the
                  alleged infringement,

            (vi)  where the use of the Product is incident to an infringement
                  not resulting primarily from the Product, or

            (vii) where the Product is used in an application or environment for
                  which such Product was not designed, or where the use is not
                  strictly in accordance with the pertinent directions.

      16.4  The Distributor shall hold the Company harmless from and shall
            indemnify the Company and its officers, directors, agents and
            employees from all damages, settlements, attorney's Fees and
            expenses related to a claim caused by the Distributor's act,
            omission, misconduct, negligence or breach of any term of this
            Agreement.

17.   LIMITED LIABILITY

      EXCEPT AS PROVIDED IN CLAUSE 16 ABOVE, NOTWITHSTANDING ANYTHING ELSE IN
      THIS AGREEMENT OR OTHERWISE, THE COMPANY AND THE SUPPLIER WILL NOT BE
      LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
      CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
      FOR

      (I)   ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO THE
            COMPANY HEREUNDER DURING THE EIGHTEEN MONTH PERIOD PRIOR TO THE DATE
            THE CAUSE OF ACTION AROSE; OR

      (II)  ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST
            PROFITS OR LOST OR INACCURATE DATA, EVEN IF THE COMPANY OR THE
            SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; OR

      (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. THE
            COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO
            MATTERS BEYOND ITS REASONABLE CONTROL.

      THE DISTRIBUTOR HEREBY ACKNOWLEDGES THAT THE MUTUAL COVENANTS AND
      AGREEMENTS SET FORTH IN THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK.



                                       15


18.   TERM AND TERMINATION

      18.1  Subject to Clauses 18.2 and 18.3 below, this Agreement shall be for
            a term of non-cancellable eight (8) years from the date of this
            Agreement. Thereafter, this Agreement shall be renewed automatically
            for successive periods of five (5) years each unless either Party
            notifies the other Party of its intention not to renew at least six
            (6) months prior to the expiration of the then current term of this
            Agreement. If the Distributor fails to meet the Minimum Purchase
            Commitment for two (2) consecutive years from January 1, 2001, the
            Company may terminate this Agreement without consequences on either
            party by giving one (1) month prior written notice to the
            Distributor. In addition, the Distributor will not be held
            responsible to pay the unfulfilled amounts of Minimum Purchase
            Commitment as outlined in Exhibit A. The decision to exercise this
            right of termination will be solely at the discretion on the
            Company.

      18.2  This Agreement may be terminated by a non-breaching party for cause
            immediately by written notice to the breaching party upon the
            occurrence of any of the following events:

            (i)   if the other ceases to do business, or otherwise terminates
                  its business operations or if there is a material change in
                  control of the other; or

            (ii)  if the other breaches any material provision of this Agreement
                  and fails to cure such breach within thirty (30) days of
                  written notice describing the breach;

            (iii) if the other shall fail to promptly secure or renew any
                  business license, registration, permit, authorization or
                  approval for the conduct of its business in the manner
                  contemplated by this Agreement of any such business license,
                  registration, permit, authorization or approval is revoked or
                  suspended and not reinstated within thirty (30) days; or

            (iv)  if the other becomes insolvent or seeks protection under any
                  bankruptcy, receivership, trust deed, creditors arrangement,
                  composition or comparable proceeding, or if any such
                  proceeding is instituted against that party.

      18.3  This Agreement may be terminated by the Company pursuant to Clause
            6.1(ii).

      18.4  Clauses 10, 11, 12, 15, 16, 17, 18, 19 and 20 shall survive
            termination of this Agreement.

19.   CONSEQUENCE OF TERMINATION

      19.1  Upon termination or expiration of this Agreement for any reason
            whatsoever, the Distributor shall immediately:

            (i)   discontinue any use of any Intellectual Property Rights of the
                  Company;



                                       16


            (ii)  discontinue all representations or statements from which it
                  might be inferred that the Distributor is a distributor of the
                  Products in the Territory or is in any way related to the
                  Company;

            (iii) cease to promote, solicit orders for or procure orders for
                  Products (but will not act in any way to damage the reputation
                  of the Company or any Product) or M&S Services;

            (iv)  provide the Company with details of all Customers so that the
                  Company may enter into direct contractual relationship with
                  them regarding the distribution of and support Products in the
                  Territory with the intent that the Company shall assume all
                  maintenance and support obligations for the Products to
                  Customers in the Territory;

            (v)   return to the Company at the Distributor's expense, all
                  catalogues and literature of the Company then in possession of
                  the Distributor; and

            (vi)  return to the Company at the Distributor's expense, all copies
                  in whatever media of Confidential Information in the
                  Distributor's possession, power, custody or control or at the
                  Company's election, certify the destruction of the same by an
                  officer of the Distributor.

      19.2  Unless expressly provided otherwise herein, each party understands
            that the rights of termination hereunder are absolute. Neither party
            shall incur any liability whatsoever for any damage, loss or
            expenses of any kind suffered or incurred by the other (or for any
            compensation to the other) arising from or incident to any
            termination of this Agreement by such party which complies with the
            terms of the Agreement whether or not such party is aware of such
            damage, loss or expenses.

      19.3  Upon termination of this Agreement according to clause 18 for other
            than Distributor's breach, the Company shall continue to fulfill,
            subject to the terms of clause 8 above, all orders accepted by the
            Company prior to the date of termination.

      19.4  Upon termination, the Distributor shall be entitled to compensation
            calculated by the following formula: total amount of income from the
            previous twelve (12) months immediately prior to the date of
            termination multiplied by the number of months remaining under the
            Agreement divided by twelve (12). "Income shall mean total product
            revenue earned by the Distributor from distributing products covered
            by the Agreement minus total cost of such Product paid to the
            Company.

20.   MISCELLANEOUS

      20.1  Amendment and Waiver: Except as otherwise expressly provided herein,
            any provision of this Agreement may be amended and the observance of
            any provision of this Agreement may be waived (either generally or
            any particular instance and either retroactively or prospectively)
            only with the written consent of the parties.



                                       17


      20.2  Governing Law and Legal Actions: This Agreement shall be governed by
            and construed under the laws of Japan without regard to conflicts of
            laws or provision thereof and without regard to the United Nations
            Convention on Contracts for the International Sale of goods. Both
            parties consent to the non-exclusive jurisdiction of the Japanese
            courts and agree that process may be served in the manner provided
            for giving of notices or otherwise as allowed by Japanese law. In
            any action or proceeding to enforce rights under this Agreement, the
            prevailing party shall be entitled to recover costs and attorney's
            fees.

      20.3  Headings: Headings and captions are for convenience only and are not
            to be used in the interpretation of this Agreement.

      20.4  Export Laws: The Distributor agrees to comply with all applicable
            international and national laws that apply to the export and import
            of the Products, including without limitation the US Export
            Administration Regulations (or any successor supplement or
            regulations) as well as end-user, end-used country destination
            restrictions issued by the US Export Administration and other
            government. The Distributor shall demonstrate to the Company
            compliance with all applicable laws and regulations prior to
            delivery thereof by Company.

      20.5  Notices: Notices under this Agreement shall be sufficient only if
            (x) personally delivered, (y) faxed to the fax number of a party as
            it may notify the other party in writing from time to time, with
            confirmed answer-back report, or (z) delivered by a major commercial
            rapid delivery courier or mailed by certified or registered mail,
            return receipt requested to a party at its addresses first set forth
            herein or as amended by notice pursuant to this subsection. If not
            received sooner, notice by fax shall be deemed received one (1) day
            after the date indicated in the answer-back report and notice by
            mail shall be deemed received fourteen (14) days after deposit in
            the mail.

      20.6  Assignment: The Distributor may not assign this Agreement or the
            rights thereunder without the prior consent of the Company. The
            Company may assign this Agreement by giving notice to the
            Distributor.

      20.7  Confidentiality: The parties will not disclose the terms of this
            Agreement or any Exhibit hereto to any third party without the prior
            written consent of the other party (except that either party may
            disclose such terms to potential investors, their attorney's and
            accountants, and government officials).

      20.8  Severability: If any provision of this Agreement is held by a court
            of competent jurisdiction to be illegal, invalid or unenforceable,
            that provision shall be limited or eliminated to the minimum extent
            necessary so that this Agreement shall otherwise remain in full
            force and effect and enforceable.

      20.9  Force Majeure: Neither party hereto shall be responsible for any
            failure to perform its obligations under this Agreement (other than
            any payment obligations) if such failure is caused by acts of God,
            war, strikes, revolutions, lack or failure of transportation
            facilities, laws or governmental regulations or other causes which
            are beyond the reasonable control of such party.



                                       18


            Obligations hereunder, however, shall in no event be executed but
            shall be suspended only until the cessation of any cause of such
            failure. In the event that such force majeure should obstruct
            performance of this Agreement for more than one (1) month, the
            parties hereto shall consult with each other to determine whether
            this Agreement should be modified or terminated. The party facing an
            event of force majeure shall use its best endeavors in order to
            remedy that sensation as well as to minimize its effects. A case of
            force majeure shall be notified to the other party by telex or
            telefax within five (5) days after its occurrence and shall be
            confirmed by a letter. The parties expressly agree that this Clause
            20.9 shall not apply to the parties' payment obligations under this
            Agreement, which shall in no event be subject to any delay or
            suspension.

      20.10 Relationship of Parties: The parties hereto expressly understand and
            agree that the Distributor is an independent contractor in the
            performance of each and every part of this Agreement, is solely
            responsible for all of its employees and agents and its labor costs
            and expenses arising in connection therewith.

      20.11 Entire Agreement: This Agreement supersedes all proposals, oral or
            written, all negotiations, conversations, discussions or prior
            agreements between or among parties relating to the subject matter
            of this Agreement and all past dealing or industry custom.

      20.12 Counterparts: This Agreement may be executed in counterparts, each
            of which shall be deemed an original, but both of which together
            shall constitute one and the same instrument.

MAINGATE ELECTRONICS INC.:                   AVANT! JAPAN CORPORATION:


By:    /s/ MORIYUKI CHIMURA [SEAL]           By:    /s/ NORIKO ANDO [SEAL]
       ----------------------------                 ----------------------------

Date:  Oct. 1st, 2000                        Date:  Oct. 1st, 2000
       ----------------------------                 ----------------------------

Name:  Moriyuki Chimura                      Name:  Noriko Ando
       ----------------------------                 ----------------------------

Title: President                             Title: Representative Director
       ----------------------------                 ----------------------------
       MainGate Electronics Inc.                    Avant! Japan Corporation



                                       19


                                   Exhibit A


                          MINIMUM PURCHASE COMMITMENT




- -----------------------------------------------------------------------------------------------------
                                                           Minimum Purchase
                                   Period[Q/YR]               Commitment           Cumulative Revenue
- -----------------------------------------------------------------------------------------------------
                                                                          
Product Purchase                     Q4 2000,             (yen)2,000 Million       (yen)2,000 Million
                               ending Dec 31, 2000        ((yen)2.0 Billion)       ((yen)2.0 Billion)
- -----------------------------------------------------------------------------------------------------
Maintenance Purchase                 Q4 2000,              (yen)300 Million        (yen)2,300 Million
                               ending Dec 31, 2000                                 ((yen)2.3 Billion)
- -----------------------------------------------------------------------------------------------------


Note:   The amount of Minimum Purchase Commitment from year 2001 will be
        discussed by the Company and the Distributor and determined by the
        Company in the beginning of each year.

        For purposes of determining whether the Distributor has met its purchase
        commitment pursuant to this Exhibit A, purchase shall equal the Japanese
        yen amount generated by the Distributor from distributing the Products
        under this Agreement and the Product lease under October 1, 2000 Product
        Lease Agreement between the Distributor and the Company.



                                       20


                                    Exhibit B

                            DISCOUNTS AND NET REVENUE



Products Discount to the                35.0% of the selling price; the
Distributor                             Distributor's cost shall be 65.0% of the
                                        selling price for all Products stated in
                                        Exhibit C.

Annual Maintenance discount             35.0% of the maintenance charge; the
to the Distributor                      Distributor's annual maintenance cost
                                        shall be 65.0% of the maintenance charge
                                        for all the Products stated in Exhibit
                                        C.

                                        The maintenance charge is twelve (12)%
                                        of the product list price.

Note:   (i)     The Company shall retain the right to change or modify the list
                price for Products and Maintenance. The parties agree that the
                cost of Products and/or maintenance may fluctuate from time to
                time. Accordingly, the parties agree to negotiate in good faith
                an appropriate increase or decrease to such fees. For Products
                ordered by the Distributor for its own inventory, the
                Distributor shall have the right to convert those Products to
                the Company's other products at equivalent amount of credit.

        (ii)    The Company shall instruct the Distributor the discount of
                selling price. The Company shall retain the right to approve or
                disapprove such discount.



                                       21


                                    Exhibit C

                                    PRODUCTS



All Products produced or acquired by the Company and the Supplier as of the date
of this Agreement less those Products to be distributed by third parties, which
are agreed upon between the Company and the Distributor.

Non-exclusive condition Products set out below can be distributed only when they
are bundled with other products.

                         Star-Hspice family and options
                           Star-MTB family and options
                           Polaris family and options
                             Nova family and options
                       Design VERIFYer family and options

Note: As exceptional conditions, the Company appoints as a non-exclusive
condition for the distribution of Star-MS family and options.



                                       22


                                    Exhibit D

                                    TERRITORY


                            Entire country of Japan



                                       23

EX-10.19

                             DISTRIBUTION AGREEMENT           Exhibit 10.19

This Distribution Agreement (the "Agreement") is entered as of October 1, 2000
and made between AVANTICORP. HONG KONG LIMITED (the "Company"), with its
principal place of business at Room 1006, Bank of American Tower, 12 Harcourt
Road, Hong Kong, and DAVANTECH CO. (the "Distributor"), with its principal
place of business at 7th, Duam, #174-6, Seokchon-Dong, Songpa-ku, Korea,
138-190:

RECITALS:

A.   The Company has obtained an exclusive license in the distribution (via
     sub-licensing) of certain Avant! software-based electronic design
     automation products, including documentation and manuals therefor.

B.   The Company wishes to appoint the Distributor as an exclusive distributor
     and Distributor wishes to acquire from the Company the right to distribute,
     market and support such products in the Territory (as defined below).

NOW IT IS HEREBY AGREED AS FOLLOWS:

1.   DEFINITIONS

     In this Agreement, the following terms shall have the following meanings:

     "CONFIDENTIAL INFORMATION" includes information which the Company has
     maintained as confidential and revealed to the Distributor and which may or
     may not be related to the Products including but not limited to: technical
     information such as computer programs, characterization, formulae,
     algorithms, process, performance, interface information, proprietary
     command architecture, proprietary scheme constructs, including commands,
     format, syntax and semantics, defects, bugs, proprietary circuit behavior
     information, the Company supplied data, circuit and logic elements and
     business information, including confidential future product information,
     confidential basic concepts, marketing and sales information, sales volume,
     pricing and accounting information. Confidential Information shall also
     include oral information disclosed by the Company to the Distributor
     pursuant to this Agreement, provided such information is summarized in
     writing and is clearly marked with the Company's name and "Confidential" or
     similar proprietary marking and delivered to the Distributor within thirty
     (30) days of disclosure.

     Confidential Information does not include information which:

     (i)   has come into the public domain without breach of the confidence by
           the Distributor or any other person, firm or entity;

     (ii)  is or becomes publicly known through no wrongful act of the party to
           whom such information was disclosed;

     (iii) is received by the Distributor from a third party without
           restrictions on its use in favor of the Company or a licensor of the
           Company;


                                       1

(iv)   is independently developed by the Distributor's employee, agent or
       contractor without use of Confidential Information;

(v)    is acknowledged in writing by the Company to be non-confidential; or

(vi)   is required to be disclosed pursuant to any statutory requirement or
       court order (except that the Distributor shall give the Company prompt
       notice of such statutory requirement or court order such that the Company
       may request protection therefrom).

"DOCUMENTATION" means the user guides, instruction manuals, tutorials, on-screen
user assistance available in the operation of the Software and other documents
whether in written or machine-readable form issued by the Company from time to
time for the Use of the Software;

"END USER" means a customer who has signed an End User License Agreement;

"END USER LICENSE AGREEMENT" means the End User Software and Service License
Agreement provided by the Company from time to time;

"INTELLECTUAL PROPERTY RIGHTS" means all designs patents, copyrights,
inventions, enhancements, revisions, updates, adaptations, secret and
confidential information, know-how, technical data, trade secrets,
specifications, designs, whether or not in documentary form, functional and
detailed design specifications and all other intangible property (whether or not
in documentary form and whether or not registrable, patentable, copyrightable
for otherwise protectable under applicable laws) relating to the Products;

"M&S SERVICES" means the maintenance and support services to be provided by the
Distributor pursuant to Clause 7 herein;

"MINIMUM PURCHASE COMMITMENT" means the value of minimum [quarterly/annual]
licensing commitment of Products and M&S Services as set out in Attachment A;

"MULTINATIONAL CUSTOMERS" shall mean customers who use the Products concurrently
both within and outside the Territory, including use of the Products on a wide
area network;

"NET LICENSING REVENUE" means the gross fee for any Product and fees for any
purchased M&S Services recognised by the Distributor under US GAAP, less any
direct costs (including but not limited to discounts to Distributors as set out
in Exhibit B, warehousing allowances, insurance and transportation charges,
taxes, rebates, cancellations and returns). The Net Licensing Revenue shall not
include any interest or finance charges;

"PRODUCTS" means the Software together with the corresponding Documentation;


                                       2

     "RECOMMENDED PRICE LIST" means the list setting out the Recommended Price
     for the Products and M&S Services to be charged by the Distributor to the
     End Users;

     "REVISIONS" means upgrades, error corrections and updates of the Software
     in object code form made generally available to End Users of the Software.

     "SOFTWARE" means the computer software programs in object code form only
     as set out in Attachment C;

     "TERM" means the term as set out in clause 18;

     "TERRITORY" means the territory as set out in Attachment D;

     "TRADE MARK" means any trade mark, service mark, trade name, symbols and
     logos owned or authorized to be used by the Company;

     "USE" means in relation to the Software, its loading, displaying, running,
     transmission or storage for the purpose of processing the instructions
     contained in the Software.

2.   APPOINTMENT

     2.1  Subject to the terms of this Agreement, the Company hereby grants to
          the Distributor and the Distributor hereby accepts an exclusive right
          to:

          (i)   market and distribute the Products to End Users (by way of
                sub-license) solely for use in the Territory;

          (ii)  install the Products for End Users; and

          (iii) provide M&S Services to End Users.

          No source code for the software will be deemed as included, by
          inference or otherwise, in the License granted by this Agreement.

          The Company shall not appoint any person or entity other than the
          Distributor as its distributor, representative or agent, excluding
          OEM's or VAR's for the distribution of Products in the Territory.

     2.2  (i)  Subject to applicable terms and conditions, including fees, to
               be agreed on a case by case basis, the Distributor hereby grants
               the Company (or its other distributors as the case may be) a
               non-exclusive right within the Territory for the Term of this
               Agreement to:

               (a)  distribute the Products directly to End Users; and

               (b)  grant such End Users the right to use the Products.

               For purpose of this Clause, End Users shall be Multinational
               Customers of the Company or its other distributors (as the case
               may be).


                                       3



          (ii) Where the Multinational Customer is an End User of the
               Distributor subject to applicable terms and conditions, including
               fees, to be agreed on a case by case basis, the Company hereby
               grants, and/or shall use reasonable commercial effort to procure
               any relevant third party to grant, the Distributor a
               non-exclusive right outside the Territory for the Term of this
               Agreement to

               (a)  distribute the Products directly to such Multinational
                    Customers; and

               (b)  grant such Multinational Customer the right to use the
                    Products.

     2.3  An End User within the Territory, who desires to have the right to use
          the input/output, ("I/O") format files of the Products in order to
          develop and distribute an interfacing product between the Product(s)
          and third parties' software programs solely for use within End User's
          internal design flow, may submit a request to the Distributor. The
          Distributor will forward such request to the Company. The Company has
          the sole discretion in deciding whether or not to grant such right and
          terms and conditions attached to such right if granted.

     2.4  The Company reserves the right to change, modify or discontinue any of
          the Products at any time provided that the Distributor is given ninety
          (90) days prior written notice. Any Revision, enhancement or
          improvement of a Product that is generally made available by the
          Company, that is substantially similar to such Products and that is
          marketed under the same product number and nomenclature as such
          Product shall be added to Attachment C as a new Product. In addition
          to the foregoing, any products developed by the Company other than the
          substantially similar products referenced above, shall be considered
          as a new product and the Company shall decide whether the Distributor
          is authorized to distribute this new product; provided, however, that
          if any such new product is competitive with any non-Company products
          that Distributor is distributing, Distributor shall have thirty (30)
          days to decide whether to distribute Company's new product, or the
          non-Company product Distributor is then currently distributing. If
          Distributor decides to distribute the non-Company product, then
          Distributor, for the remainder of the term of this Agreement, will be
          a non-exclusive Distributor of the Products and Company shall, at its
          discretion, appoint other distributors, representatives or agents for
          the distribution of Products in the Territory. The Distributor shall
          have the right and freedom to distribute any non-competitive software
          products or services.

     2.5  All rights not expressly granted are hereby reserved by the Company.

3.   RESTRICTIONS ON THE APPOINTMENT

     3.1  The Distributor may only distribute the Products to persons and
          entities located and taking delivery within the Territory (except for
          Multinational Customers pursuant to Clause 2.2 above).


                                       4


     3.2  The Distributor shall not tamper with the packaging of the Products
          and shall only sub-license the Products as packaged by the Company.

4.   LICENSE TO DISTRIBUTOR

     4.1  This Agreement shall operate as a limited and non-transferable
          License for the Distributor to Use [ten (10)] copies of the Products
          for demonstration, internal training, testing, providing M&S
          Services. The Distributor may make a single copy of each Product for
          archival purposes.

     4.2  Except as provided in Clause 4.1, Distributor may not use the
          Products for its own internal use without prior written permission of
          the Company.

5.   LICENSE TO END USER

     5.1  The Distributor shall ensure that each customer has executed an
          appropriate End User License Agreement for the Products as provided
          by the Company. Any changes to the End User License shall require
          prior written consent from the Company.

     5.2  The Distributor shall obligate each End User, by execution of the End
          User License Agreement, not to:

          (i)     create or attempt to create by reverse engineering or
                  otherwise, the source code or internal structure of the
                  Products or any part thereof from the object code or from the
                  information available to it;

          (ii)    modify, amend, add to or in any way alter any Product supplied
                  to it under the End User License Agreement; and

          (iii)   make any copy of the Products without the prior consent of the
                  Distributor (except one copy thereof for archival purpose).

6.   RESPONSIBILITIES OF DISTRIBUTOR

     6.1  The Distributor shall meet its Minimum Purchase Commitment to the
          Company during the Term of this Agreement.

     6.2  The Distributor shall continuously maintain adequate resources and
          equipment and a fully dedicated team of experienced and competent
          sales, marketing and technical employees to fulfill the obligations
          of the Distributor hereunder. The Distributor shall comply with all
          certification requirements of its technical staff as requested by the
          Company.

     6.3  The Distributor shall provide M&S Services to End Users pursuant to
          Clause 7 below.

     6.4  The Distributor shall conduct business at all times in an honest and
          straightforward manner and make its best effort to achieve high
          customer satisfaction.


                                       5

     6.5  The Distributor may not appoint any sub-distributor or sub-contract
          any third party to perform its obligations under this Agreement
          without the prior written approval of the Company.

7. M&S SERVICES

     7.1  During the Term of the Agreement, the Distributor shall:


          (i)   provide End Users with upgrades, error corrections and Revisions
                of the Products as and when they become available from the
                Company;

          (ii)  provide training for any End Users regarding the installation
                and Use of the Products; and

          (iii) promptly replace any corrupted or damaged Product.

     7.2  The Distributor shall charge the End User a fee for the performance of
          the M&S Services according to the Recommended Price List. The
          Distributor shall pay to the Company for the M&S Services pursuant to
          Clause 9.

     7.3  The Distributor shall only provide M&S Services and training to End
          Users by qualified or certified staff as required by the Company.

     7.4  The Company shall provide reasonable assistance to the Distributor in
          its provision of M&S Services on an "AS AVAILABLE" basis. The Company
          reserves the right to charge for the support it agrees to provide to
          the Distributor and the Distributor may reject such offer. It is
          expected that the Distributors shall use its best efforts to
          familiarize itself with the Products and such that the assistance to
          be provided by the Company will be minimal.

     7.5  The Company shall provide the Distributor with Revisions, and reserves
          the right to charge for the Revisions. The Distributor shall be
          responsible to distribute the Revisions to End Users that are
          receiving M&S Services.

8. ORDERING AND DELIVERY OF THE PRODUCTS

     8.1  Distributor shall furnish its order sheet for the purchase of the
          Products to Company. Such order shall be binding upon the parties
          hereto unless Company otherwise notifies Distributor in writing within
          seven (7) days after the Company's receipt of such order. In the event
          of any discrepancy between the provisions of this Agreement and any
          order, unless expressly approved in writing signed by both parties,
          the provisions of this Agreement shall prevail.

     8.2  Products are delivered F.O.B. Korea from the Company's applicable
          warehouse or place of production to Distributor. During the term of
          this Agreement, subject to the other terms and conditions of this
          Agreement, Company will use its reasonable efforts to deliver (by full
          or partial shipment) the Products within three (3) days from receipt
          of written orders, which are accepted by Company at its main office,
          or at Distributor specified shipment dates insofar as practical


                                       6

          and consistent with Company's then current lead-time schedule,
          shipping schedule, access to supplies on acceptable terms and
          allocation of available products and capacity among Company customers.

     8.3  The Company shall be entitled to select the carrier and the method of
          shipment of all Products hereunder and the Distributor shall be
          responsible for all shipping costs and insurance premiums. Risk of
          loss shall pass to the Distributor upon delivery of the Products to
          the carrier.

     8.4  The Company shall accept unlimited returns of defective media of
          Products.

9.   BILLING AND SETTLEMENT PROCEDURES

     9.1  (a)  For each unit of Products or M&S Services distributed in the
               Territory, the Distributor shall pay to the Company the Net
               Licensing Revenue. The Company shall issue invoice(s) to the
               Distributor for the total Net Licensing Revenue payable. Payment
               shall be made by the Distributor in US dollars within ninety (90)
               days after the Net Licensing Revenue has become "recognized
               revenue" to the Distributor in accordance with United States
               generally accepted accounting principles. For special cases and
               upon mutual agreement, the parties may extend the credit period
               from the said ninety (90) days to one hundred and eighty (180)
               days. The payment amount and the discount are based on a fixed
               exchange rate that is specified in Attachment B.

          (b)  In the event that the exchange rate exceeds +/- five percent (5%)
               the effect of such excess shall be borne equally by Company and
               Distributor. By way of example, if the fixed exchange rate is 105
               won to 1 dollar the Distributor shall make payment based on an
               exchange rate of 110 won to one (1) dollar, (10/2 = 5; 5 + 105 =
               110). By way of further example, of the fixed exchange rate is
               105 won to one (1) dollar and the exchange rate on the date the
               customer pays the Distributor is between 99 to 111 won to one (1)
               dollar the Distributor will make payment based on an exchange
               rate of 105 won to one (1) dollar. Company and Distributor shall
               review the fixed exchange rate annually and mutually agree on a
               fixed exchange rate for the following year. If the parties do not
               review the fixed exchange rate or do not agree on a new fixed
               exchange rate, then the fixed exchange rate for the prior year
               will remain in effect.

     9.2  If the Distributor exceeds its Minimum Purchase Commitment to the
          Company by at least 50% via large volume purchase or Corporate
          Partnership (i.e. minimum US$1M per order), the Company shall consider
          to grant additional discount amount for Products to Distributor, if
          the Distributor exceeds its Minimum Purchase Commitment by at least
          50% via aggregate of small volume purchases, no additional discount
          for Products will be considered.

     9.3  The discounts set forth in Attachment B shall be reviewed every year
          by the parties hereto. Notwithstanding the above, the Company reserves
          the right to revise the said discounts, the Net Licensing Revenue and
          the Recommended


                                       7

          Price List at any time upon giving the Distributor thirty (30) days
          advance notice in writing; provided that in no event should the
          discounts be less than 20% off the Recommended Price in the
          Recommended Price List; Provided further that for M&S Services, the
          parties shall negotiate in good faith an appropriate increase or
          decrease in price. New Price changes will apply to all orders made
          after such notice period.

     9.4  The Distributor shall be responsible for paying all charges,
          including without limitation transportation charges and insurance
          premiums, and all local import duties, value added taxes, service
          taxes and all other taxes, duties and government assessments relating
          to the distribution of Products and the supply of M&S Services in the
          Territory.

     9.5  All payments required to be made to the Company hereunder shall be
          made without any withholding tax unless such withholding is required
          by any applicable law. If the Distributor is required by law to make
          such withholding from any such payment, the relevant sum payable by
          the Distributor shall be increased to the extent necessary to ensure
          that, after the making of such withholding, the Company receives and
          retains (free from any liability in respect of any such deduction or
          withholding) a net sum equal to the sum which it would have received
          and so retained had no such withholding been made or required to be
          made.

10.  CONFIDENTIAL INFORMATION

     10.1 Upon execution of this Agreement, the Company may disclose to the
          Distributor Confidential Information for which the Distributor has a
          need to know under this Agreement. Without obtaining the Company's
          prior written consent, the Distributor shall not copy or duplicate
          any Confidential Information by any means or technique. Except as
          specifically provided in this Agreement, the Distributor shall not
          acquire any right, title or interest in or to any Confidential
          Information or any files, lists, records, documents, drawings,
          specifications, equipment, or other tangible things that incorporate
          or refer to all or a portion of the Confidential Information.

     10.2 Unless with the prior written consent of the Company the Distributor
          shall not disclose or facilitate disclosure of such Confidential
          Information to any person, firm or entity except its employees,
          agents or consultants who have a need-to-know. The Distributor shall
          take all steps necessary or appropriate to protect the Confidential
          Information against unauthorized disclosure and misappropriation,
          including, without limitation, causing all persons, firms and
          entities with access to any Confidential Information to enter into a
          confidentiality agreement in a form acceptable to the Company. The
          Distributor shall use the standard of care generally appropriate for
          the industry (but no less than reasonable care) in order to avoid
          unauthorized disclosure or misappropriation of such Confidential
          Information.

     10.3 The Distributor shall refrain from using or exploiting any and all
          Confidential Information for any purposes or activities other than
          those expressly provided



                                       8


          in this Agreement or any other written agreement entered into by and
          between the parties

     10.4 The Distributor understands and agrees that the Confidential
          Information constitutes valuable business assets of the Company and/or
          its licensor, the unauthorized use or disclosure of which may
          irreparably damage the Company and/or its licensor. In the event of
          breach of confidence or threatened violation of its obligations under
          this Clause 10 by the Distributor, the Company shall be entitled to an
          injunction restraining the Distributor  from breaching this Agreement.
          Nothing in this Agreement shall be construed as prohibiting the
          Company from pursuing any other remedies available to it for such
          breach or threatened violation, including recovery of direct and
          consequential damages from the Distributor.

11.  INTELLECTUAL PROPERTY RIGHTS

     11.1 The Distributor acknowledges that the Company is the exclusive owner
          or authorized licensee of the Intellectual Property Rights. The
          Distributor shall not at any time do or cause to be done, and shall
          exercise its best efforts to ensure that none of its representatives
          does or causes to be done, any act impairing or tending to impair any
          part of any right, title or interest of the Company or its licensor in
          or to any Intellectual Property Rights provided, however, that any
          challenge of the validity of any item or part of the Intellectual
          Property Rights in a legal proceeding shall not be considered to be an
          act tending to impair said right, title or interest. With the
          exception of the rights expressly licensed under this Agreement, the
          Distributor shall not acquire any right, title or interest to or in
          the Intellectual Property Rights, or any invention, improvement or
          development based thereon. The Distributor further agrees that the
          Company shall have any and all right title and interest in and to any
          suggested modifications, design changes or improvements of the
          Products, without payment of any additional consideration therefore
          either to the Distributor, or its employees, agents or customers.

     11.2 The Distributor shall at all times conduct business only in its own
          name and shall not use any Intellectual Property Rights as part of its
          business name.

     11.3 The Distributor agrees that, as a condition of the rights granted
          under this Agreement and except as otherwise expressly and
          unambiguously authorized hereunder, it shall not:

          (i)   create or attempt to create, by reverse engineering or
                otherwise, the source code or internal structure of the Products
                or any part thereof from the object code or from the information
                made available to it;

          (ii)  modify, amend, add to or in any way alter any Product supplied
                to it under this Agreement;

          (iii) remove any product identification or notices of any
                confidential or copyright restrictions from the Products or any
                Documentation;

                                       9

          (iv) list or otherwise display or copy the object code of any Product;
               or

          (v)  copy the Products, develop any derivative works thereof or
               include any portion thereof in any other software program;

          (vi) prior to disposing of any media or apparatus, to destroy
               completely any proprietary information or Confidential
               Information contained therein.

     11.4 The Distributor agrees that it shall not use the Intellectual Property
          Rights except in conjunction with the marketing and distribution of
          the Products and the supply of the M&S Services, and in accordance
          with any guidelines as may be issued by the Company from time to time
          and the terms of this Agreement. The Company reserves the right to
          require the Distributor to submit to the Company for prior approval
          any and all advertising and sales literature of the Distributor that
          refers to the Products, or otherwise includes any Intellectual
          Property Rights. The Distributor shall make all modifications to the
          advertising and sales literature deemed necessary by the Company.

     11.5 The Distributor's right to use the Intellectual Property Rights
          pursuant to Clause 11.4 shall cease upon termination of this
          Agreement.

     11.6 (i)  The Distributor agrees that it shall immediately notify the
               Company of any claims or objections, or indications of claims or
               objections, that use of the Intellectual Property Rights by the
               Distributor may or will infringe the proprietary rights of a
               third party.

          (ii) The Distributor agrees that it shall immediately notify the
               Company of any infringement, illegal use or misuse by third
               parties of the Intellectual Property Rights. Upon notification by
               the Distributor of any infringement, illegal use or misuse by
               third parties of the Intellectual Property Rights or upon the
               Company otherwise learning of such infringement, illegal use or
               misuse by third parties, the Company has the right and sole
               discretion, but not the duty, to initiate any proceeding relating
               to the protection of the Intellectual Property Rights. Should the
               Company make such an election to initiate proceedings, the
               Company shall bear the full burden of expenses for such
               proceedings and shall also take the full benefit, if any, of such
               proceedings. Furthermore, in the event the Company should make
               such an election, the Distributor shall provide all necessary
               assistance required by the Company. The Distributor shall be kept
               fully informed of the proceedings but the Company shall retain
               full control of the proceedings.

12.  USE OF TRADE MARKS

     12.1 The Distributor shall not acquire any right to or interest in any
          Trade Marks. The Distributor may only use the Trade Marks in carrying
          out its licensed activities under this Agreement, and then only
          provided that ownership of such Trade Marks is clearly attributed to
          the Company or its licensor(s).


                                       10


      12.2  The Distributor acknowledges and agrees that the Company is the
            owner and/or licensee of the Trade Marks and that all goodwill
            arising out of use of the Trade Marks by the Distributor pursuant
            to this Agreement shall inure to the Company. The Distributor shall
            not at any time or in any way indicate ownership of or any right in
            the Trade Marks and shall not contest the right of the Company
            and/or its affiliates to the use of any of the Trade Marks. The
            Distributor shall not, and shall not have the right to, register,
            or apply for registration, anywhere in the world, directly or
            indirectly, any trade mark, service mark, trade name, copyright,
            company name or other proprietary or commercial right which is
            confusingly similar to the Trade Marks or take any other action
            that jeopardizes the Company's proprietary rights in the Trade
            Marks.

      12.3  The Distributor shall at all times conduct business only under its
            own name and may not use any of the Trade Marks as part of its
            business name.

      12.4  The Distributor shall not attach, remove or disfigure any Trade
            Marks on the media containing the Product (or that appear as the
            result of executing the Product) nor attach any additional marks to
            the media containing the Product except as otherwise agreed by the
            Company in writing.

      12.5  The Distributor agrees not to alter, remove or obscure any
            copyright or other proprietary notices on or in the media
            containing the Product (or that appear as the result of executing
            the Product) or related documentation or materials.

      12.6  The Company reserves the right to require the Distributor to submit
            to the Company for prior approval any and all advertising and sales
            literature of the Distributor that refers to the Company, to the
            Products, or otherwise includes any of the Trade Marks. The
            Distributor shall make all modifications to the materials deemed
            necessary by the Company to protect the goodwill associated with
            the Trade Marks. The Distributor shall also comply with any
            guidelines relating to use of the Trade marks as may be furnished
            to the Distributor and revised by the Company from time to time.

      12.7  The Distributor's right to use the Trade Marks shall immediately
            cease upon termination or expiration of this Agreement.

13.   COMPANY COVENANTS AND REPRESENTATIONS

      The Company represents and agrees to:

      13.1  provide such assistance the Distributor in its marketing programs
            as the Company thinks fit;

      13.2  fulfill orders accepted by the Company for the Products in
            accordance with this Agreement;

      13.3  notify the Distributor as soon as practicable regarding the release
            of new or revised Products;


                                       11

     13.4 furnish the Distributor with forty (40) sets of marketing materials at
          no charge, and to provide additional copies at cost;

     13.5 provide Distributor with timely responses regarding plans to correct
          bugs and enhance the products;

     13.6 send one Company application engineer to Distributor during the
          earlier stages of the Product release for at least one week to provide
          Distributor with additional support; the terms and timing of this
          support will be mutually agreed upon;

     13.7 provide a mutually agreed upon Field Application Engineer's
          Qualification Program including training, performance evaluation, and
          correction actions;

     13.8 visit Korea at least once each quarter and conduct face to face
          meetings with both the Distributor and customer to understand,
          evaluate and advise the Distributor; and

     13.9 provide the Distributor with a reasonable number of demonstration or
          customer evaluation copies of the Product for customer purchase
          evaluations at no charge to the Distributor.

14.  DISTRIBUTOR COVENANTS AND REPRESENTATIONS

     The Distributor represents and agrees:

     14.1 to provide the Company with (a) two-quarter rolling forecast by the
          end of each calendar quarter, (b) monthly sales forecast update by the
          end of each month and (c) weekly sales prospects when possible;

     14.2 to use its best efforts to market and distribute the Products
          (including without limitation, inclusion of the Products in the
          Distributor's catalogs and other promotional materials) and provide
          M&S Services (including installation, training and other customer
          support) on a continuing basis and to comply with good business
          practices and all laws and regulations relevant to this Agreement or
          the subject matter hereof;

     14.3 to keep the Company informed as to any problems encountered with the
          Products and any resolutions arrived at for those problems, to
          participate in management reviews, and to communicate promptly to the
          Company any and all modifications, design changes or improvements of
          the Products suggested by any End User, employee or agent;

     14.4 not to incur any liability on behalf of the Company or in any way
          pledge or purport to pledge the Company's credit or purport to make
          any contract binding upon the Company;

     14.5 immediately bring to the attention of the Company any information
          received by the Distributor which is likely to be of interest, use or
          benefit to the Company in relation to the marketing and/or support of
          the Products;


                                       12

     14.6  to keep full, proper and up to date books of accounts and records
           showing clearly all inquiries, transactions, proceedings and End
           User calls relating to the Products and will allow a duly authorised
           representative of the Company to have access to the said books and
           records and take such copies thereof as such representatives may
           require;

     14.7  that neither this Agreement (or any term hereof) nor the performance
           of or exercise of rights under this Agreement is restricted by, or
           contrary to, in conflict with any prior obligations of the
           Distributor to any third parties;

     14.8  to provide Company Operations VP with written account activity
           report (including account situation, activity planning and change,
           technical support, customer requests, travel plans etc.) at the end
           of each month;

     14.9  to arrange face-to-face meeting between major account executives
           (Division General Manager level or above, i.e., above Director
           level) with Company President and CEO minimum once each quarter;

     14.10 to qualify all Distributor Application Engineers through Field
           Application Engineers Qualification Program developed by Company;

     14.11 to communicate with the Company through the defined official
           communication channels to Company Operations VP when necessary;

     14.12 to attend Company's annual Sale Meeting at the Company's designated
           location at the Distributor's expense. The Distributor shall make
           strong efforts to visit the Company in US on a regular basis to
           maintain good communication; and

     14.13 that neither this Agreement (or any term hereof) nor the performance
           of or exercise of the rights under this Agreement, is restricted by,
           contrary to, in conflict with, ineffective under, or affects the
           Company's proprietary rights (or the duration thereof) under, or
           will required any termination payment or compulsory licensing under,
           any law or regulation of Korea. The Distributor shall making any
           filings required under Korean laws and regulations.

15.  WARRANTY

     15.1  The Company warrants that the program media of each Product will
           materially conform to the then current Documentation for three (3)
           months after it is delivered to an End User, provided the Products
           are maintained to the Company's maintenance recommendation and in a
           manner specified by the Company. The Company shall replace any
           defective media within such period, provided the Distributor bears
           the cost of freight and insurance to the point of repair. The
           company will bear the cost of freight and insurance for the return
           of the Products to the Distributor.



                                       13



      15.2  The Distributor will handle and be responsible for all warranty
            returns from its End Users. The Company will bear the costs of
            freight and insurance for the return of goods to Distributor.

      15.3  The Company does not warrant that it will be able to correct all
            programming errors or other problems encountered by the Distributor
            and the End Users. If Company cannot, or determines that it is not
            practical to repair or replace the returned Product, the price
            therefor paid by Distributor shall be refunded.

      15.3  THE COMPANY AND ITS SUPPLIERS MAKE NO OTHER WARRANTIES WITH RESPECT
            TO THE PRODUCTS OR ANY SERVICES AND HEREBY DISCLAIM ALL OTHER
            WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
            PARTICULAR PURPOSE, NON-INFRINGEMENT, TITLE, COURSE OF DEALING,
            USAGE OR ERROR FREE OPERATION.

      15.4  The above warranty does not extend to any Product that is modified,
            or altered, is not maintained to the Company's maintenance
            recommendations, is operated in a manner other than that specified
            by the Company, has its serial number removed or altered or is
            treated with abuse, negligence or other improper treatment
            (including, without limitation, use outside the recommended
            environment). The Distributor's sole remedy with respect to any
            warranty or defect is as stated above. The Distributor is fully
            responsible for satisfaction of its customers and will be
            responsible for all claims, damages, settlements, expenses and
            attorney's fees incurred by the Company with respect to the
            Distributor's claims or representations regarding the Products
            beyond Company's above warranty obligations to the Distributor.

16.   INDEMNIFICATION

      16.1  The Company shall hold the Distributor harmless from any third
            party claims for damages and settlements, including reasonable
            attorneys' fees and expenses related thereto, resulting from
            infringement by the Products of any United States or Korea patent
            or any United States or Korea copyrights, provided the Company is
            promptly notified of any and all threats, claims and proceedings
            related thereto and given reasonable assistance by the Distributor
            and the opportunity to assume sole control over the defense and all
            negotiations for a settlement or compromise; the Company will not
            be responsible for any settlement it does not approve in writing.
            Notwithstanding the foregoing, the Company is not liable to any
            claims of infringement of a patent or copyright in which
            Distributor or any affiliate of Distributor has an interest or
            license.

      16.2  If all or any part of the Products is, or in the opinion of the
            Company, may become, the subject of a claim or suit of
            infringement, the Company may:

            (i)   secure the right of the Distributor, or End Users to continue
                  Using the Products;

            (ii)  modify the Products to render them non-infringing; or



                                       14

          (iii) reimburse the Distributor the Net Licensing Revenue paid to the
                Company for such infringing Products.

          THE FOREGOING IS THE EXCLUSIVE REMEDY FOR DISTRIBUTOR AND IS IN LIEU
          OF ANY WARRANTIES OF NON-INFRINGEMENT, WHICH ARE HEREBY DISCLAIMED.

     16.3 The foregoing obligation of the Company does not apply with respect to
          Products or portions or components thereof:

          (i)   not supplied by the Company;

          (ii)  made in whole or in part in accordance to the specifications of
                the Distributor or End User if the alleged infringement is
                caused by such specifications;

          (iii) which are modified (other than by the Company) after shipment by
                the Company, if the alleged infringement relates to such
                modification;

          (iv)  combined with other products, processes or materials where the
                alleged infringement relates to such combination;

          (v)   where the Distributor and/or End Users continue allegedly
                infringing activity after being notified thereof or after being
                informed of modifications that would have avoided the alleged
                infringement;

          (vi)  where the use of the Product is incident to an infringement not
                resulting primarily from the Product; or

          (vii) where the Product is used in an application or environment for
                which such Product was not designed, or where the use is not
                strictly in accordance with the pertinent directions.

     16.4 The Distributor shall hold the Company harmless from and shall
          indemnify the Company and its officers, directors, agents and
          employees from all damages, settlements, attorney's Fees and expenses
          related to a claim caused by the Distributor's act, omission,
          misconduct, negligence or breach of any term of this Agreement.

17.  LIMITED LIABILITY

     EXCEPT AS PROVIDED IN CLAUSE 16 ABOVE, NOTWITHSTANDING ANYTHING ELSE IN
     THIS AGREEMENT OR OTHERWISE, THE COMPANY AND ITS SUPPLIER WILL NOT BE
     LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
     CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
     FOR

     (I)  ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO THE
          COMPANY HEREUNDER DURING THE EIGHTEEN


                                       15


           MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE; OR

     (II)  ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOST
           PROFITS OR LOST OR INACCURATE DATA, EVEN IF THE COMPANY OR ITS
           SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; OR

     (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. THE
           COMPANY SHALL HAVE NO LIABILITY FOR ANY FAILURE OR DELAY DUE TO
           MATTERS BEYOND ITS REASONABLE CONTROL.

     THE DISTRIBUTOR HEREBY ACKNOWLEDGES THAT THE MUTUAL COVENANTS AND
     AGREEMENTS SET FORTH IN THIS AGREEMENT REFLECT THIS ALLOCATION OF RISK.

18.  TERM AND TERMINATION

     18.1 Subject to Clause 18.2 below, this Agreement shall be for a
          non-cancelable term up to 31 December, 2007. Thereafter, this
          Agreement shall be renewed automatically for successive periods of
          five (5) years unless either Party notifies the other Party of its
          intention not to renew at least six (6) months prior to the expiration
          of the then current term of this Agreement.

     18.2 This Agreement may be terminated by a party for cause immediately by
          written notice upon the occurrence of any of the following events:

          (i)   if the other ceases to do business, or otherwise terminates its
                business operations or if there is a material change in control
                of the other; or

          (ii)  if the other breaches any material provision of this Agreement
                and fails to cure such breach within 30 days of written notice
                describing the breach; or

          (iii) if the other shall fail to promptly secure or renew any license,
                registration, permit, authorization or approval for the conduct
                of its business in the manner contemplated by this Agreement of
                any such license, registration, permit, authorization or
                approval is revoked or suspended and not reinstated within
                thirty (30) days; or

          (iv)  if the other becomes insolvent or seeks protection under any
                bankruptcy, receivership, trust deed, creditors arrangement,
                composition or comparable proceeding, or if any such proceeding
                is instituted against that party.

     18.3 Clauses 10, 11, 12, 15, 16, 17, 18, 19 and 20 shall survive
          termination of this Agreement.

19. CONSEQUENCE OF TERMINATION


                                       16


      19.1  Upon termination or expiration of this Agreement for any reason
            whatsoever, the Distributor shall immediately:

            (i)   discontinue any use of any Intellectual Property Rights of
                  the Company;

            (ii)  discontinue all representations or statements from which it
                  might be inferred that the Distributor is a distributor of
                  the Products in the Territory or is in any way related to the
                  Company;

            (iii) cease to promote, solicit orders for or procure orders for
                  Products (but will not act in any way to damage the
                  reputation of the Company or any Product) or M&S Services;

            (iv)  provide the Company with details of all End Users so that the
                  Company may enter into direct contractual relationship with
                  them regarding the distribution and support of Products in
                  the Territory with the intent that the Company shall assume
                  all maintenance and support obligations for the Products to
                  customers in the Territory;

            (v)   return to the Company at the Distributor's expense, all
                  catalogues and literature of the Company then in possession
                  of the Distributor; and

            (vi)  return to the Company at the Distributor's expense, all
                  copies in whatever media of Confidential Information in the
                  Distributor's possession, power, custody or control or at the
                  Company's election, certify the destruction of the same by an
                  officer of the Distributor.

      19.2  Unless expressly provided otherwise herein, each party understands
            that the rights of termination hereunder are absolute. Neither
            party shall incur any liability whatsoever for any damage, loss or
            expenses of any kind suffered or incurred by the other (or for any
            compensation to the other) arising from or incident to any
            termination of this Agreement by such party which complies with the
            terms of the Agreement whether or not such party is aware of such
            damage, loss or expenses.

      19.3  Upon termination, Distributor shall be entitled to compensation to
            be calculated by the following formula: total amount of Income from
            the previous twelve (12) months immediately prior to the date of
            termination multiplied by the number of months remaining under the
            Agreement divided by twelve (12). "Income" shall mean total product
            revenue earned by the Distributor from distributing products
            covered by the Agreement minus total cost of such Product paid to
            the Company.

20.   MISCELLANEOUS

      20.1  Amendment and Waiver: Except as otherwise expressly provided
            herein, any provision of this Agreement may be amended and the
            observance of any provision of this Agreement may be waived (either
            generally or any particular


                                       17

           instance and either retroactively or prospectively) only with the
           written consent of the parties.

     20.2  Governing Law and Legal Actions: This Agreement shall be governed by
           and construed under the laws of the State of California and the
           United States without regard to conflicts of laws or provisions
           thereof and without regard to the United Nations Convention on
           Contracts for the International Sale of goods. Unless waived by
           Company in writing for the particular instance (which Company may do
           at its option), the sole jurisdiction and venue for actions related
           to the subject matter hereof shall be the U.S. federal courts having
           within their jurisdiction the location of Company's principal place
           of business. Both parties consent to the jurisdiction of such courts
           and agree that process may be served in the manner provided for
           giving of notices or otherwise as allowed by California State or
           federal law. In any action or proceeding to enforce rights under this
           Agreement, the prevailing party shall be entitled to recover costs
           and attorneys' fees.

     20.3  Headings: Headings and captions are for convenience only and are not
           to be used in the interpretation of this Agreement.

     20.4  Export Laws: The Distributor agrees with all applicable international
           and national laws that apply to the export and import of the
           Products, including the Department of Commerce and the US Export
           Administration Regulations (or any successor supplement or
           regulations) as well as end-user, end-used country destination
           restrictions issued by the US Export Administration and other
           government. The Distributor shall demonstrate to the Company
           compliance with all applicable laws and regulations prior to delivery
           thereof by Company.

     20.5  Notices: Notices under this Agreement shall be sufficient only if (x)
           personally delivered, (y) faxed to the fax number of a party as it
           may notify the other party in writing from time to time, with
           confirmed answer-back report, or (z) delivered by a major commercial
           rapid delivery courier or mailed by certified or registered mail,
           return receipt requested to a party at its addresses first set forth
           herein or as amended by notice pursuant to this subsection. If not
           received sooner, notice by fax shall be deemed received one (1) day
           after the date indicated in the answer-back report and notice by mail
           shall be deemed received fourteen (14) days after deposit in the
           mail.

     20.6  This Agreement and the rights hereunder are not transferable or
           assignable without prior written consent of the parties hereto,
           except for rights to payment and except to a person or entity who
           acquires all or substantially all of the assets or business of a
           party, whether by sale, merger or otherwise; any such assignee shall
           agree to abide by the terms and conditions of this Agreement.

     20.7  Confidentiality: The parties will not disclose the terms of this
           Agreement or any attachment hereto to any third party without the
           prior written consent of the other party (except that either party
           may disclose such terms to potential investors, their attorney's and
           accountants, and government officials).



                                       18


          20.8 Severability: If any provision of this Agreement is held by a
               court of competent jurisdiction to be illegal, invalid or
               unenforceable, that provision shall be limited or eliminated to
               the minimum extent necessary so that this Agreement shall
               otherwise remain in full force and effect and enforceable.

          20.9 Force Majeure: Neither party hereto shall be responsible for any
               failure to perform its obligations under this Agreement (other
               than any payment obligations) if such failure is caused by acts
               of God, war, strikes, revolutions, lack or failure of
               transportation facilities, laws or governmental regulations or
               other causes which are beyond the reasonable control of such
               party. Obligations hereunder, however, shall in no event be
               executed but shall be suspended only until the cessation of any
               cause of such failure. In the event that such force majeure
               should obstruct performance of this Agreement for more than one
               (1) month, the parties hereto shall consult with each other to
               determine whether this Agreement should be modified or
               terminated. The party facing an event of force majeure shall use
               its best endeavors in order to remedy that sensation as well as
               to minimize its effects. A case of force majeure shall be
               notified to the other party by telex or telefax within five (5)
               days after its occurrence and shall be confirmed by a letter.

         20.10 Relationship of Parties: The parties hereto expressly understand
               and agree that Distributor is an independent contractor in the
               performance of each and every part of this Agreement, is solely
               responsible for all of its employees and agents  and its labor
               costs and expenses arising in connection therewith.

         20.11 Entire Agreement: This Agreement supersedes all proposals, oral
               or written, all negotiations, conversations, discussions or
               prior agreements between or among parties relating to the
               subject matter of this Agreement and all past dealing or
               industry custom.

         20.12 Counterparts: This Agreement may be executed in counterparts,
               each of which shall be deemed an original, but both of which
               together shall constitute one and the same instrument.

COMPANY:                                 DISTRIBUTOR:


By:  /s/ JOHN HSU                        By: /s/ SANCHO PARK
   -----------------------                  ------------------------
Date: Oct. 13, 2000                      Date: 10/23/2000

Name: John Hsu                           Name: Sancho Park

Title: President                         Title: Executive Director


                                       19


                                  Attachment A

                          MINIMUM PURCHASE COMMITMENT



- --------------------------------------------------------------------------------
      MINIMUM PURCHASE COMMITMENT                    PERIOD [Q/YR]
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------



                [PLEASE INSERT. NOT STATED IN ORIGINAL CONTRACT]



                                       20




                                  Attachment B

                      DISCOUNTS AND NET LICENSING REVENUE


Products       The discounts for the Products shall be 45% off the Recommended
               Price for the relevant Product as set out in the Recommended
               Price List.

M&S Services   The discounts for the M&S Services shall be 35% off the
               Recommended Price for the relevant M&S Services as set out in
               the Recommended Price List.


                              FIXED EXCHANGE RATE

The fixed exchange rate for the purpose of Clause 9.1 of this Agreement shall be
1,050 won to 1 US dollar.



                                       21

                                  Attachment C

                                    PRODUCTS

All Products produced or acquired by the Company as of the date of this
Agreement less those products to be distributed by third parties, which are
agreed upon between the Company and the Distributor.





                                       22

                                  Attachment D


                                   TERRITORY

              The Territory includes the entire Republic of Korea





                                       23

EX-10.20

PROMISSORY NOTE                                               Exhibit 10.20

AMOUNT: $300,000.00                                           DATE: JUNE 5, 1998


I, Mark Chimura (the "Promisor"), an Avant! Corporation employee SS# ###-##-####
in consideration for the receipt of three hundred thousand U.S. Dollars (US
$300,000) (the "Principal") from Avant! Corporation (the "Payee", "Promisee", or
"Avant!") which is now acknowledged, hereby promises to pay to Avant! at 46871
Bayside Parkway, Fremont, CA 94538 (or such other address that Avant! may
designate) on or before June 6, 2003 (the "Due Date") the sum of the Principal,
three hundred thousand U.S. Dollars (US $300,000), plus any and all accrued and
unpaid interest with the annual interest rate being three percent (3%) which
starts accruing on June 6, 1998 (the "Initial Date") and which will compound
annually.

I understand that all payments on this Note shall be applied first in the
payment of accrued interest and any remainder toward the reduction of the
principal. Interest payments will be due and payable monthly. I reserve the
right to prepay this Note, in whole or in part, prior to the due date with no
prepayment penalty.

If any of the following events occur, I will be waived permanently from paying
any unpaid principal loan amount and any accrued and unpaid interest:

1) If Gerald C. Hsu is no longer president and CEO of Avant! Corporation; or
2) If I die or become permanently disabled.

If none of the previous events occur, in the event that I decided to leave the
employ of Avant! Corporation I agree that any unpaid principal loan amount
plus any accrued and unpaid interest shall become immediately due and payable
to Avant! and that I shall pay such sum to Avant! without demand or notice.

Additionally, I understand that if any of the following events of default
occur, this Note and any other obligation that I have to Avant! shall become
due immediately, without demand or notice:
1) If I fail to pay the principal and any accrued interest in full on or before
   the Due Date;
2) If I file bankruptcy proceedings as a Debtor;
3) If I file for an application for appointment of a receiver;
4) If I make a general assignment for the benefit of My creditors;
5) If I become insolvent; or
6) If I have made a misrepresentation to Avant! for the purpose of obtaining or
   extending credit.

If any payment obligation under this Note is not paid when due, I promise to
pay all costs of collection, including reasonable attorney fees, whether or not
a lawsuit is commenced as part of the collection process.

I understand that the non-renewal or extension of this Note, delay in enforcing
any right of Avant! under this Note, or the assignment by Avant! of this Note
shall not affect the liability I have with Avant! or its successor under this
Note. I waive my rights for the presentment for payment, protest, and notice of
pretest and nonpayment of this Note.

If any one or more of the provisions of the Note are determined to be
unenforceable, in whole or in part, for any reason, I agree that the remaining
provisions shall remain fully operative. I agree that this Note shall be
construed in accordance with the laws of the State of California.



      O.K.                              Mark Chimura
/s/ GERALD C. HSU                       14010 Jerries Drive
     6/9/98                             Saratoga, CA 95070



                                        Signature of Promisor

                                        /s/ MARK CHIMURA