Contract analysis

I. Executive Summary This memorandum analyzes the availability of exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act"), for the proposed offering by Optiwave Semiconductor Corp. ("OWS" or the "Company") of $250,000,000 aggregate principal amount of 2.75% Convertible Senior Notes due 2028 (the "Notes"), together with a 15% over-allotment option providing for the sale of up t

II. Background and Transaction Overview A. The Company Optiwave Semiconductor Corp. is a Delaware corporation (Delaware Division of Corporations file number 5738291), with its principal executive offices located at 4800 Great America Parkway, Suite 1200, San Jose, California 95054. OWS is a fabless semiconductor company whose shares of common stock are listed and traded on the Nasdaq Global Select Market under the ti

III. Statutory Framework: Section 5 Registration Requirements

Section 5 of the Securities Act is the cornerstone provision that mandates registration of securities offerings. In relevant part, Section 5(a) provides that, unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security t

IV. Section 4(a)(2) Private Placement Exemption — Sale to Initial Purchasers A. Statutory Basis

Section 4(a)(2) of the Securities Act exempts from the registration requirements of Section 5 "transactions by an issuer not involving any public offering." This exemption is the principal statutory basis on which issuers rely when selling securities in private placement transactions, including in the context of initial sales of securities to initial purchasers in Rule 144A offerings. The scope and application of the

V. Rule 144A — Resale Exemption for Initial Purchasers and Subsequent Holders A. Overview of Rule 144A Rule 144A was adopted by the SEC in 1990 to establish a non-exclusive safe harbor from the registration requirements of Section 5 of the Securities Act for resales of "restricted securities" to QIBs. The rule was designed to enhance the liquidity of privately placed securities by facilitating an efficient institutio

1. Eligible Securities (Rule 144A(d)(3)). Rule 144A(d)(3) provides that, at the time of issuance, the securities being offered and sold must not be of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted on a U.S. automated inter-dealer quotation system. OWS's shares of common stock are listed on the Nasdaq Global Select Market (ticker: OWS). H

2. Qualified Institutional Buyers (Rule 144A(a)(1)). Rule 144A(a)(1) defines QIBs to include several categories of institutional investors, including: (a) Any entity (other than a bank, savings and loan association, or registered broker-dealer) that, in the aggregate, owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the entity (the "$100 million thr

3. Seller's Reasonable Belief (Rule 144A(d)(1)). Rule 144A(d)(1) requires that the seller of the securities take reasonable steps to ensure that the purchaser is aware that the seller may rely on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. In addition, the seller must reasonably believe that the buyer is a QIB and is purchasing for its own account or for the account of

4. Information Requirement (Rule 144A(d)(4)). Rule 144A(d)(4) imposes an information requirement designed to ensure that holders and prospective purchasers of Rule 144A securities have access to reasonably current information about the issuer. The precise nature of the information required depends on the issuer's reporting status: (i) If the issuer is a reporting company under Sections 13 or 15(d) of the Exchange Act

5. No General Solicitation (Rule 144A(d)(1) and Section 4(a)(2) Coordination). The interaction between Rule 144A and the prohibition on general solicitation merits careful analysis. Rule 144A itself does not contain an express prohibition on general solicitation. Indeed, following the enactment of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and the SEC's implementing amendments to Rule 144A (effe

VI. Conversion Shares — Section 3(a)(9) Exemption

Section 3(a)(9) of the Securities Act provides an exemption from the registration requirements of Section 5 for "any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange." The conversion of the Notes into shares of OWS common stock constitutes an exchange of one security (the Notes

VII. Regulation S — No Offshore Tranche We note for the record that no Regulation S tranche is contemplated for this offering. All Notes will be offered and sold solely within the United States (or to U.S. persons) to QIBs in reliance on Rule 144A. No separate offshore tranche under Regulation S (Rules 901 through 905 under the Securities Act) will be established, and no Regulation S Global Note will be issued. Notwi

VIII. Integration Analysis A. Integration Doctrine Overview Under the Securities Act integration doctrine, ostensibly separate securities offerings may, under certain circumstances, be "integrated" and treated as a single offering. Integration of two or more offerings may have adverse consequences for the availability of exemptions from registration. For example, if a Rule 144A offering were integrated with a prior o

IX. General Solicitation — Detailed Analysis The preservation of the Section 4(a)(2) exemption for the initial sale of Notes by OWS to the Initial Purchasers requires that no general solicitation or general advertising be employed in connection with the offering. This section provides a detailed analysis of the general solicitation prohibition and its application to the proposed offering. A. Pre-Offering Period OWS a

X. Information Requirements and Offering Memorandum Considerations A. Scope and Content of Offering Memorandum Although no registration statement is required to be filed under the Securities Act in connection with the proposed offering, market practice for Rule 144A convertible notes offerings by reporting issuers requires the preparation and distribution of a comprehensive offering memorandum. The offering memorandu

XI. Capped Call Transactions — Securities Act Analysis In connection with the pricing of the Notes, OWS will enter into the Capped Call Transactions with two counterparties: • Ridgepoint Capital Markets LLC: 60% allocation; notional amount of $172,500,000; premium of $17,250,000. • Northvane Financial Products LP: 40% allocation; notional amount of $115,000,000; premium of $11,500,000. The aggregate cost of the Cappe