1014-00003 · Optiwave Semiconductor Corp · Settlement & Dismissal

ows-cross-license-proposal-term-sheet.docx DOCUMENT Litigation

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DRAFT — PRIVILEGED AND CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO FEDERAL RULE OF EVIDENCE 408

NON-BINDING TERM SHEET FOR PROPOSED CROSS-LICENSE AND SETTLEMENT AGREEMENT

March 15, 2023

Prepared by:

Alan Ngo, Responsible Partner Omar Siddiqui, Lead Associate Intellectual Property Group Calderwood & Harkness LLP One Embarcadero Center, 34th Floor San Francisco, California 94111 Telephone: (415) 773-5600

Prepared on behalf of:

Optiwave Semiconductor Corp. ("OWS")

Matter Reference: Calderwood & Harkness LLP Matter No. 1014-00003

Litigation Reference: Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California

DRAFT — FOR DISCUSSION PURPOSES ONLY — NON-BINDING SUBJECT TO BOARD AND MANAGEMENT APPROVAL BY BOTH PARTIES

RECITALS / BACKGROUND

A. Identification of the Parties.

This Non-Binding Term Sheet for Proposed Cross-License and Settlement Agreement (this "Term Sheet") sets forth the principal terms that are proposed by Optiwave Semiconductor Corp., a Delaware corporation with its principal place of business at 2775 Augustine Drive, Suite 400, San Jose, California 95054 ("OWS" or "Licensor/Cross-Licensee"), to serve as the framework for a negotiated settlement and cross-license agreement with Lumos Photonics, Inc., a Delaware corporation with its principal place of business at 9400 McNeil Drive, Building 7, Austin, Texas 78758 ("Lumos" or "Licensee/Cross-Licensor"). OWS and Lumos are each referred to herein individually as a "Party" and collectively as the "Parties."

B. Background of the Dispute.

OWS is the owner by assignment of United States Patent Nos. 10,234,567 (the "'567 Patent"), 10,891,234 (the "'234 Patent"), 11,045,678 (the "'678 Patent"), and 11,312,890 (the "'890 Patent") (collectively, the "Asserted Patents"). The Asserted Patents relate to various aspects of silicon photonics technology, including waveguide coupling, germanium-on-silicon photodetectors, multi-channel optical transceiver architectures, and driver circuit architectures for high-speed silicon photonic modulators. A detailed listing of the Asserted Patents is provided in Appendix A hereto.

On June 3, 2022, OWS filed the above-captioned action against Lumos in the United States District Court for the Northern District of California, asserting infringement of the Asserted Patents by Lumos's LumosBridge™ 800G Optical Engine and LumosEdge™ 400ZR+ Pluggable Transceiver products (collectively, the "Accused Products"). Lumos answered and filed counterclaims seeking declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102, 103, and 112. The Litigation has been actively prosecuted by both Parties through fact and expert discovery, including the exchange of infringement and invalidity contentions, document productions, depositions, and expert reports.

On February 17, 2023, the Court (the Honorable Edward J. Torvelis, United States District Judge) issued its Claim Construction Order (the "Markman Order"), construing eleven (11) disputed claim terms across the four Asserted Patents. The Markman Order resolved several key claim construction disputes and has materially informed both Parties' assessments of the relative strengths and risks of their respective positions in the Litigation.

The Parties, through their respective counsel — Calderwood & Harkness LLP for OWS and Brannick Howell & Stein LLP for Lumos — have agreed to a thirty (30)-day settlement discussion window commencing March 6, 2023. On March 10, 2023, the Court entered a Stipulated Order staying all discovery deadlines and case management dates through April 5, 2023, to facilitate settlement discussions. This Term Sheet is presented as a framework for those settlement discussions and is intended to facilitate a negotiated resolution of the Litigation through a cross-license arrangement that provides mutual benefits and commercial certainty to both Parties.

C. Disclaimer and FRE 408 Notice.

This Term Sheet constitutes a settlement communication protected under Federal Rule of Evidence 408 and the analogous provisions of all applicable state and federal evidence codes. This Term Sheet, its contents, and all communications related thereto are not admissible for any purpose in the Litigation or in any other proceeding, whether judicial, arbitral, administrative, or otherwise. Nothing contained in this Term Sheet constitutes an admission of infringement, non-infringement, validity, invalidity, enforceability, unenforceability, or liability by either Party. Neither the presentation of this Term Sheet nor any discussions arising therefrom shall be construed as creating any legally binding obligation on either Party.

SECTION 1: DEFINITIONS

As used in this Term Sheet, the following terms shall have the meanings set forth below. All defined terms used but not defined herein shall have the meanings ascribed to them in the definitive Cross-License and Settlement Agreement (the "Definitive Agreement"), once negotiated and executed.

1.1 "OWS Patent Portfolio" means all United States utility patents currently owned or controlled by OWS, including eighty-seven (87) issued U.S. utility patents and fourteen (14) pending U.S. patent applications as of the date of this Term Sheet, together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, inter partes reviews, post-grant reviews, and foreign counterparts thereof. The OWS Patent Portfolio is concentrated in the following technology areas: waveguide coupling, germanium-on-silicon photodetectors, modulator driver architectures for silicon photonics integrated circuits, co-packaged optics, and related data center interconnect and telecommunications technologies. A summary of the OWS Patent Portfolio is set forth in Appendix B hereto.

1.2 "Asserted Patents" means United States Patent Nos. 10,234,567; 10,891,234; 11,045,678; and 11,312,890, as more particularly described in Appendix A hereto.

1.3 "Lumos Patent Portfolio" means all United States utility patents and pending U.S. patent applications currently owned or controlled by Lumos Photonics, Inc., together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, inter partes reviews, post-grant reviews, and foreign counterparts thereof. The Parties anticipate that a full schedule of the Lumos Patent Portfolio will be prepared and exchanged during the negotiation of the Definitive Agreement.

1.4 "Accused Products" means the LumosBridge™ 800G Optical Engine and the LumosEdge™ 400ZR+ Pluggable Transceiver, including all versions, configurations, variants, updates, revisions, and successor products incorporating substantially similar technology, as more particularly described in Appendix C hereto.

1.5 "Licensed Products" means all products manufactured, sold, offered for sale, imported, or used by either Party that are covered by one or more claims of the other Party's patent portfolio, including without limitation all current and future products of either Party.

1.6 "Effective Date" means the date of execution of the Definitive Agreement by authorized representatives of both Parties.

1.7 "Litigation" means Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California, including all claims, counterclaims, defenses, and proceedings therein.

1.8 "Territory" means worldwide, including all countries, territories, and jurisdictions without geographic limitation.

1.9 "Term" means the period commencing on the Effective Date and continuing through the date of expiration of the last-to-expire patent in either Party's patent portfolio as of the Effective Date, unless earlier terminated in accordance with Section 12 of this Term Sheet.

SECTION 2: CROSS-LICENSE GRANT

2.1 License from OWS to Lumos

Subject to the terms and conditions of the Definitive Agreement and subject to receipt of the Settlement Payment as set forth in Section 3.1, OWS shall grant to Lumos a non-exclusive, non-transferable (except as provided in Section 8), royalty-bearing (as set forth in Section 3), worldwide license under the OWS Patent Portfolio — including all eighty-seven (87) issued U.S. utility patents and fourteen (14) pending U.S. patent applications as of the Effective Date — to make, have made, use, sell, offer to sell, and import Licensed Products within the Territory for the Term.

The license granted under this Section 2.1 shall cover all current and future products of Lumos, including but not limited to the Accused Products (the LumosBridge™ 800G Optical Engine and the LumosEdge™ 400ZR+ Pluggable Transceiver), for the duration of the Term. The license is intended to provide Lumos with freedom to operate under the OWS Patent Portfolio with respect to all of Lumos's silicon photonics products, optical engine and transceiver product lines, and related technologies.

No sublicense rights shall be granted to Lumos under this Section 2.1, except that Lumos shall have the right to extend the license to Lumos's contract manufacturers solely for the purpose of manufacturing, assembling, testing, and packaging Lumos-branded products. Such extension to contract manufacturers shall be limited in scope to activities undertaken at the direction of and on behalf of Lumos and shall not grant any independent rights to such contract manufacturers to manufacture, sell, or otherwise exploit products for their own account or for the account of any third party.

2.2 License from Lumos to OWS

Subject to the terms and conditions of the Definitive Agreement, Lumos shall grant to OWS a non-exclusive, non-transferable (except as provided in Section 8), fully paid-up, royalty-free, worldwide license under the Lumos Patent Portfolio to make, have made, use, sell, offer to sell, and import Licensed Products within the Territory for the Term.

The license granted under this Section 2.2 shall cover all current and future OWS products, including without limitation the OWS-400ZR and OWS-800LR coherent optical transceiver chipsets, integrated silicon photonics engines for co-packaged optics, and all related and successor products incorporating similar or derivative technology. The Parties acknowledge that OWS's product lines are focused on providing silicon photonics chipsets and integrated engines to hyperscale data center operators, telecommunications equipment manufacturers, and networking original equipment manufacturers, and the license is intended to encompass the full scope of OWS's commercial activities in these fields.

The "have made" right granted to OWS under this Section 2.2 shall specifically include the right to have Licensed Products manufactured by Pinnacle Semiconductor Foundry Co., Ltd. (Hsinchu, Taiwan) on Pinnacle's 45nm silicon-on-insulator (SOI) process or other applicable fabrication processes, as well as by any other contract foundries or contract manufacturers engaged by OWS from time to time for the production of OWS-designed products.

No sublicense rights shall be granted to OWS under this Section 2.2, except that OWS shall have the right to extend the license to OWS's contract manufacturers, including without limitation Pinnacle Semiconductor Foundry Co., Ltd., solely for the purpose of fabricating, assembling, testing, and packaging OWS-designed products. Such extension to contract manufacturers shall be limited in scope to activities undertaken at the direction of and on behalf of OWS and shall not grant any independent rights to such contract manufacturers to manufacture, sell, or otherwise exploit products for their own account or for the account of any third party.

2.3 Scope Limitations

The licenses granted under Sections 2.1 and 2.2 are limited to patents owned or controlled by the granting Party as of the Effective Date. After-acquired patents — that is, patents acquired by either Party after the Effective Date through purchase, assignment, or other transfer from a third party — shall not be included within the scope of either license unless expressly agreed by the Parties in a written amendment to the Definitive Agreement. For the avoidance of doubt, patents issuing from applications that are pending as of the Effective Date, and continuations, continuations-in-part, divisionals, reissues, and reexaminations of patents that are within the applicable Party's patent portfolio as of the Effective Date, shall be within the scope of the respective licenses.

Neither license granted hereunder shall extend to third-party products or to products of any joint venture, consortium, or collaborative arrangement unless the applicable Party is the majority owner (i.e., holds greater than fifty percent (50%) of the equity interests or voting control) of such joint venture or collaborative entity. The Parties intend that the licenses are personal to OWS and Lumos, respectively, and are not intended to confer patent immunity on unrelated third parties.

SECTION 3: FINANCIAL TERMS

3.1 Settlement Payment

As consideration for the license grant from OWS to Lumos under Section 2.1 and the mutual releases set forth in Section 6, Lumos shall pay to OWS a one-time, lump-sum payment in the amount of Five Hundred Thousand Dollars ($500,000.00) (the "Settlement Payment") within thirty (30) calendar days of the Effective Date. Payment shall be made by wire transfer of immediately available funds to a bank account designated by OWS in writing, such designation to be provided no later than five (5) business days following the Effective Date. If the Settlement Payment is not received by OWS within the thirty (30)-day period specified above, Lumos shall be in default, and interest shall accrue on the unpaid amount at the rate of one percent (1%) per month, compounded monthly, from the date the payment was due until received.

3.2 No Ongoing Royalties

No running royalties, milestone payments, minimum annual royalties, or other periodic payments shall be payable by either Party under the cross-license arrangement contemplated herein. The cross-license shall be fully paid-up for the entirety of the Term following receipt of the Settlement Payment by OWS. For the avoidance of doubt, the license from Lumos to OWS under Section 2.2 is fully paid-up and royalty-free, with no further payments due from OWS at any time.

3.3 Tax Treatment

Each Party shall be solely responsible for its own tax obligations arising from or related to the transactions contemplated by this Term Sheet and the Definitive Agreement, including without limitation any income taxes, withholding taxes, franchise taxes, or other governmental levies or assessments. The Settlement Payment shall be treated by the Parties as consideration for a patent license for all applicable tax purposes. Neither Party shall be required to indemnify the other for any taxes assessed or imposed on the other Party in connection with the Settlement Payment or the cross-license grants.

3.4 No Admission of Damages

The Parties acknowledge and agree that the Settlement Payment does not constitute an admission by Lumos that any amount of damages was owed, nor that any infringement occurred with respect to the Asserted Patents or any other patent. The Settlement Payment likewise does not constitute an admission by OWS that its damages claims were not meritorious. For informational purposes, OWS notes that its damages claims in the Litigation were estimated to exceed Seventy-Five Million Dollars ($75,000,000), based on a reasonable royalty rate of approximately seven and one-half percent (7.5%) applied to approximately One Hundred Forty-Eight Million Six Hundred Thousand Dollars ($148,600,000) in accused product revenue attributable to the Accused Products during the relevant damages period. OWS further notes that its pre-litigation patent valuation, performed by Clearpath IP Valuation Services, Inc., valued the four Asserted Patents collectively at Forty-Two Million Eight Hundred Thousand Dollars ($42,800,000). The nominal $500,000 Settlement Payment reflects the current post-Markman litigation posture, the Parties' mutual desire to avoid the costs and uncertainties of continued litigation, and the value of the reciprocal license grants and covenants exchanged hereunder.

SECTION 4: MUTUAL COVENANT NOT TO SUE

4.1 OWS Covenant

OWS covenants and agrees that, during the Term, it shall not initiate, file, maintain, or cause to be initiated any action, suit, proceeding, complaint, charge, or claim against Lumos or against Lumos's customers, distributors, resellers, or end users for infringement, contributory infringement, or inducement of infringement of any patent in the OWS Patent Portfolio with respect to Licensed Products. This covenant extends to all forms of intellectual property enforcement actions, including actions for damages, injunctive relief, and declaratory judgment.

4.2 Lumos Covenant

Lumos covenants and agrees that, during the Term, it shall not initiate, file, maintain, or cause to be initiated any action, suit, proceeding, complaint, charge, or claim against OWS or against OWS's customers, distributors, resellers, or end users for infringement, contributory infringement, or inducement of infringement of any patent in the Lumos Patent Portfolio with respect to Licensed Products. This covenant extends to all forms of intellectual property enforcement actions, including actions for damages, injunctive relief, and declaratory judgment.

4.3 Scope of Covenants

The covenants set forth in Sections 4.1 and 4.2 shall extend to all current and future patents owned or controlled by either Party as of the Effective Date, including patents issuing from applications pending as of the Effective Date and all continuations, continuations-in-part, divisionals, reissues, and reexaminations thereof. The covenants are personal to OWS and Lumos, respectively, and do not extend to successors or assigns of either Party except as expressly provided in Section 8. For the avoidance of doubt, in the event of a permitted assignment or change of control, the covenants shall continue in effect as set forth in Section 8.

SECTION 5: DISMISSAL OF LITIGATION

5.1 Joint Stipulation of Dismissal

Within five (5) business days following the later of (a) the execution of the Definitive Agreement by both Parties, and (b) the receipt by OWS of the Settlement Payment in full, the Parties shall file a Joint Stipulation of Dismissal with Prejudice in the Litigation (Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California). The Joint Stipulation of Dismissal shall provide for the dismissal with prejudice of all claims asserted by OWS — including all claims of infringement of the four Asserted Patents — and all counterclaims asserted by Lumos — including Lumos's counterclaims for declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102, 103, and 112. The form and content of the Joint Stipulation of Dismissal shall be mutually agreed upon by the Parties' respective counsel.

5.2 Costs and Fees

Each Party shall bear its own attorneys' fees, costs, disbursements, and expenses incurred in connection with the Litigation, including all fees and expenses of outside counsel, expert witnesses, consultants, and other litigation support providers. Neither Party shall seek to recover any such fees, costs, or expenses from the other Party. For informational purposes, OWS notes that its total litigation spend through the date of this Term Sheet is approximately Two Million Five Hundred Fifty Thousand Dollars ($2,550,000), comprising approximately One Million Eight Hundred Forty-Seven Thousand Three Hundred Twelve Dollars ($1,847,312) in legal fees billed by Calderwood & Harkness LLP, approximately Two Hundred Eighty-Nine Thousand Four Hundred Fifty-Six Dollars ($289,456) in costs and disbursements, and approximately Four Hundred Twelve Thousand Eight Hundred Dollars ($412,800) in expert fees from Whitfield Technical Consulting Group, Inc. and Apex Claim Analytics LLC.

5.3 No Admission

The filing of the Joint Stipulation of Dismissal and the dismissal of the Litigation shall not constitute an admission by either Party of infringement, non-infringement, validity, invalidity, enforceability, or unenforceability of any patent, or of the merits or lack of merits of any claim or defense asserted in the Litigation.

SECTION 6: MUTUAL GENERAL RELEASES

6.1 OWS Release of Lumos

Effective as of the Effective Date, OWS, on behalf of itself and its officers, directors, employees, agents, affiliates, successors, and assigns, hereby fully and forever releases and discharges Lumos and its officers — including James Harrelson, Chief Executive Officer; Dr. Mei-Lin Chen, Chief Technology Officer; Richard Talbot, General Counsel; and Dr. Nikolai Petrov, Vice President of Engineering — and its directors, employees, agents, representatives, successors, and assigns (collectively, the "Lumos Released Parties") from any and all claims, demands, damages, losses, liabilities, obligations, costs, expenses, actions, and causes of action of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or fixed, accrued or unaccrued, that arise from or relate to the Litigation, the Asserted Patents, the Accused Products, or any act or omission occurring on or prior to the Effective Date in connection with the subject matter of the Litigation.

6.2 Lumos Release of OWS

Effective as of the Effective Date, Lumos, on behalf of itself and its officers, directors, employees, agents, affiliates, successors, and assigns, hereby fully and forever releases and discharges OWS and its officers — including Dr. Priya Ramanathan, Chief Executive Officer; Dr. Kevin Fong, Chief Technology Officer; Sandra Ellison, General Counsel; and Theodore Marchetti, Vice President of intellectual Property — and its directors, employees, agents, representatives, affiliates (including Vantage Point Capital Partners Fund IV, LP and Vantage Point Capital GP IV, LLC), successors, and assigns (collectively, the "OWS Released Parties") from any and all claims, demands, damages, losses, liabilities, obligations, costs, expenses, actions, and causes of action of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or fixed, accrued or unaccrued, that arise from or relate to the Litigation and the counterclaims asserted therein, or any act or omission occurring on or prior to the Effective Date in connection with the subject matter of the Litigation.

6.3 California Civil Code § 1542 Waiver

Each Party, on behalf of itself and its respective released parties, expressly acknowledges that this release is intended to include all claims described above, whether known or unknown, and to that end each Party hereby expressly waives and relinquishes all rights and benefits that it may have under California Civil Code § 1542, which provides:

"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."

Each Party further waives and relinquishes any similar right or benefit under any analogous provision of the laws of any other state or jurisdiction. Each Party acknowledges that it may discover facts other than or different from those that it presently knows or believes to be true with respect to the claims released herein, and each Party agrees that this release shall remain fully effective notwithstanding the subsequent discovery of such facts.

SECTION 7: CONFIDENTIALITY

7.1 Confidentiality of Settlement Terms

The terms of the Definitive Agreement, including without limitation the amount of the Settlement Payment and the specific terms of the cross-license grants, shall be treated as confidential by both Parties. Neither Party shall disclose, publish, or disseminate the terms of the Definitive Agreement to any third party, except as follows:

(a) As required by applicable law, regulation, court order, or the rules of any stock exchange or securities regulatory authority. The Parties acknowledge that Lumos is a publicly traded company listed on the Nasdaq Stock Market (ticker symbol: LMPH), and that Lumos may be required to disclose certain information regarding the settlement under its reporting obligations pursuant to the Securities Exchange Act of 1934 and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the Nasdaq Stock Market. Any such disclosures by Lumos shall be limited to the minimum information reasonably necessary to satisfy its legal and regulatory obligations.

(b) OWS may disclose the terms of the Definitive Agreement to Vantage Point Capital Partners Fund IV, LP (as majority shareholder, holding approximately sixty-two percent (62%) of OWS's outstanding equity) and to First Pacific Commerce Bank, N.A. (as primary lender under OWS's Forty Million Dollar ($40,000,000) revolving credit facility), in each case solely to the extent required under OWS's existing agreements with such entities. OWS shall ensure that any such disclosures are made subject to confidentiality obligations no less protective than those set forth in this Section 7.

(c) Either Party may disclose the terms of the Definitive Agreement to its legal counsel, accountants, tax advisors, and auditors, in each case subject to obligations of professional confidentiality.

7.2 Return and Destruction of Confidential Materials

Within thirty (30) calendar days of the Effective Date, each Party shall comply fully with the post-termination provisions of the Stipulated Protective Order entered by the Court in the Litigation in September 2022 (Dkt. No. 47), including without limitation all provisions governing the return or destruction of documents and information designated as "Confidential" or "Highly Confidential — Attorneys' Eyes Only" under such Stipulated Protective Order. Each Party's outside counsel shall provide written certification of compliance with such obligations within the thirty (30)-day period, and the Parties shall cooperate in filing any necessary notices or certifications with the Court.

7.3 Public Statements

Any public statement, press release, or other public disclosure regarding the settlement of the Litigation shall be limited to a jointly agreed statement or disclosure, the form and content of which shall be mutually agreed upon by the Parties prior to its release. Absent mutual agreement, each Party may state only that the Litigation has been resolved by mutual agreement and dismissed, without disclosing any financial terms, business terms, or other specifics of the settlement arrangement. Neither Party shall make any public statement that characterizes the settlement in a manner that implies fault, liability, or wrongdoing by the other Party.

SECTION 8: ASSIGNMENT AND CHANGE OF CONTROL

8.1 No Assignment

Neither Party may assign, transfer, or delegate its rights or obligations under the Definitive Agreement, in whole or in part, without the prior written consent of the other Party, which consent may be withheld in such other Party's sole discretion. Notwithstanding the foregoing, either Party may assign the Definitive Agreement, without the consent of the other Party, in connection with a merger, acquisition, consolidation, or sale of all or substantially all of the assigning Party's assets or business to which the Definitive Agreement relates, provided that the assignee assumes in writing all of the assigning Party's obligations under the Definitive Agreement. Any attempted assignment in violation of this Section 8.1 shall be null and void.

8.2 Change of Control Provisions

In the event of a change of control of either Party — defined as the acquisition by a third party of more than fifty percent (50%) of the voting securities or equity interests of such Party, or the merger or consolidation of such Party with or into another entity, or the sale of all or substantially all of such Party's assets — the license grants and covenants set forth in the Definitive Agreement shall continue in effect for the surviving or acquiring entity with respect to the products and patent portfolio of the original licensed Party. However, the license grants shall not extend to (a) the acquiring entity's pre-existing product lines, or (b) the acquiring entity's pre-existing patent portfolio, in each case as they existed prior to the closing of the change of control transaction. The Parties acknowledge the following as relevant context for these provisions:

(i) Lumos's current market capitalization is approximately Two Billion Two Hundred Forty Million Dollars ($2,240,000,000) as of the period in which the Markman Order was issued, making Lumos a potential acquisition target in the silicon photonics and optical networking industry.

(ii) OWS is majority-owned (approximately sixty-two percent (62%)) by Vantage Point Capital Partners Fund IV, LP (fund size: $2.1 billion, vintage 2018), managed by Vantage Point Capital GP IV, LLC. A future exit transaction by Vantage Point — whether through a sale, merger, or initial public offering — is a foreseeable event, and the change of control provisions are intended to address the implications of such a transaction for the cross-license arrangement.

SECTION 9: REPRESENTATIONS AND WARRANTIES

9.1 OWS Representations and Warranties

OWS represents and warrants to Lumos as follows:

(a) Ownership. OWS is the sole and exclusive owner of the OWS Patent Portfolio, including all right, title, and interest in and to the Asserted Patents. The Asserted Patents were duly assigned to OWS by the named inventors — Dr. Kevin Fong, Dr. Priya Ramanathan, Hideo Tanaka, Dr. Amara Osei, Liwei Zhang, and Rajesh Iyer — pursuant to valid written assignments that have been recorded with the United States Patent and Trademark Office.

(b) Corporate Authority. OWS has full corporate power and authority to enter into the Definitive Agreement and to grant the licenses and covenants contemplated herein. The execution, delivery, and performance of the Definitive Agreement by OWS have been duly authorized by all necessary corporate action, subject to any required approvals of the OWS Board of Directors and Vantage Point Capital Partners Fund IV, LP, as noted herein.

(c) Encumbrances. OWS is not aware of any liens, encumbrances, pledges, security interests, or other restrictions on the OWS Patent Portfolio that would prevent the grant of licenses and covenants hereunder, other than the lien and security interest held by First Pacific Commerce Bank, N.A. under OWS's Forty Million Dollar ($40,000,000) revolving credit facility. OWS shall obtain any necessary consents, waivers, or releases from First Pacific Commerce Bank, N.A. prior to the execution of the Definitive Agreement, and shall provide evidence of such consents or waivers to Lumos upon request.

9.2 Lumos Representations and Warranties

Lumos represents and warrants to OWS as follows:

(a) Ownership. Lumos is the sole and exclusive owner of the Lumos Patent Portfolio, including all right, title, and interest therein.

(b) Corporate Authority. Lumos has full corporate power and authority to enter into the Definitive Agreement and to grant the licenses and covenants contemplated herein. The execution, delivery, and performance of the Definitive Agreement by Lumos have been duly authorized by all necessary corporate action.

9.3 Disclaimer of Additional Representations and Warranties

EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 9.1 AND 9.2 OF THIS TERM SHEET (AND THE CORRESPONDING PROVISIONS OF THE DEFINITIVE AGREEMENT), NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THE VALIDITY, ENFORCEABILITY, SCOPE, OR BREADTH OF ANY PATENT IN ITS PATENT PORTFOLIO. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY REGARDING NON-INFRINGEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS. ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT, ARE HEREBY EXPRESSLY DISCLAIMED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW.

SECTION 10: INDEMNIFICATION

10.1 Mutual Indemnification. Each Party (the "Indemnifying Party") shall indemnify, defend, and hold harmless the other Party (the "Indemnified Party") and its officers, directors, employees, agents, successors, and assigns from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and court costs) arising out of or resulting from any third-party claim, action, suit, or proceeding that is based upon or arises from a breach by the Indemnifying Party of its representations and warranties set forth in Section 9 of this Term Sheet (and the corresponding provisions of the Definitive Agreement).

10.2 Exclusion. For the avoidance of doubt, neither Party shall have any obligation to indemnify the other Party with respect to any claim, action, suit, or proceeding brought by a third party alleging infringement of such third party's intellectual property rights. The Parties expressly disclaim any obligation of patent indemnification, and each Party shall be solely responsible for its own freedom-to-operate analysis and clearance with respect to third-party patents.

10.3 Limitations. The aggregate liability of each Party under this Section 10 shall not exceed the amount of the Settlement Payment ($500,000). The indemnification obligations set forth in this Section 10 shall be subject to customary procedural requirements, including prompt notice of claims, cooperation in defense, and the right of the Indemnifying Party to control the defense of any covered claim.

SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION

11.1 Governing Law

The Definitive Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California, without giving effect to any choice-of-law or conflict-of-laws rules or provisions that would cause the application of the substantive laws of any other jurisdiction. To the extent that federal law applies to any issue arising under or in connection with the Definitive Agreement, including any issue relating to patent law, the Definitive Agreement shall be construed in accordance with applicable federal law.

11.2 Dispute Resolution

Any dispute, controversy, or claim arising out of, relating to, or in connection with the Definitive Agreement, or the breach, termination, or validity thereof (a "Dispute"), shall be resolved in accordance with the following procedures:

(a) Negotiation. Any Dispute shall first be submitted to good-faith negotiation between the Parties' respective General Counsels — Sandra Ellison for OWS and Richard Talbot for Lumos — for a period of thirty (30) calendar days following written notice from one Party to the other identifying the Dispute and requesting negotiation.

(b) Binding Arbitration. If the Dispute is not resolved through good-faith negotiation within the thirty (30)-day period specified above, either Party may submit the Dispute to binding arbitration. Such arbitration shall be administered by a mutually agreed arbitration provider (e.g., JAMS or the American Arbitration Association), conducted by a single neutral arbitrator mutually selected by the Parties who has substantial experience in patent licensing and intellectual property transactions, and seated in San Francisco, California. The arbitration shall be conducted in accordance with the applicable rules of the selected arbitration provider, and the arbitrator's decision shall be final and binding on the Parties and may be entered as a judgment in any court of competent jurisdiction.

11.3 Retained Jurisdiction

The Parties shall include in the Joint Stipulation of Dismissal a provision requesting that the United States District Court for the Northern District of California retain jurisdiction to enforce the terms of the Definitive Agreement (to the extent it constitutes a settlement agreement in the Litigation) for a period of one (1) year following the date of dismissal. During such retention period, either Party may apply to the Court for enforcement of the settlement terms, in addition to any rights it may have under the dispute resolution procedures set forth in Section 11.2.

SECTION 12: TERM AND TERMINATION

12.1 Term. The Definitive Agreement shall be effective as of the Effective Date and shall continue in full force and effect for the life of the last-to-expire patent in either Party's patent portfolio (the OWS Patent Portfolio or the Lumos Patent Portfolio, as applicable) as of the Effective Date, unless earlier terminated in accordance with Section 12.2 (such period, the "Term").

12.2 Termination for Material Breach

Either Party may terminate the Definitive Agreement upon sixty (60) calendar days' prior written notice to the other Party in the event of a material breach by the other Party of any material term or condition of the Definitive Agreement. The written notice shall specify in reasonable detail the nature of the alleged breach. The Party receiving such notice shall have sixty (60) calendar days from the date of receipt of such notice (the "Cure Period") within which to cure the breach to the reasonable satisfaction of the non-breaching Party. If the breach is cured within the Cure Period, the notice of termination shall be deemed withdrawn, and the Definitive Agreement shall continue in full force and effect. If the breach is not cured within the Cure Period, the Definitive Agreement shall terminate effective as of the expiration of the Cure Period.

12.3 Survival. The following provisions of the Definitive Agreement shall survive the expiration or termination of the Definitive Agreement, regardless of the reason for such expiration or termination: (a) the mutual general releases set forth in Section 6; (b) the confidentiality obligations set forth in Section 7; (c) the governing law and dispute resolution provisions set forth in Section 11; (d) the mutual covenants not to sue set forth in Section 4 (to the extent accrued prior to termination); and (e) any other provisions that by their nature are intended to survive expiration or termination.

SECTION 13: MISCELLANEOUS

13.1 Entire Agreement

The Definitive Agreement shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede and replace all prior and contemporaneous negotiations, representations, understandings, and agreements between the Parties, whether written or oral, relating to the subject matter of the Definitive Agreement, including this Term Sheet and all discussions, correspondence, and proposals exchanged during the settlement discussion period.

13.2 Amendments. No amendment, modification, supplement, or waiver of any provision of the Definitive Agreement shall be effective unless set forth in a written instrument duly executed by authorized representatives of both Parties. No failure or delay by either Party in exercising any right, power, or privilege under the Definitive Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.

13.3 Notices. All notices, requests, demands, consents, and other communications required or permitted under the Definitive Agreement shall be in writing and shall be deemed duly given when delivered personally, when sent by certified or registered mail (return receipt requested, postage prepaid), when sent by nationally recognized overnight courier (with tracking capability), or when sent by email (with confirmation of receipt) to the following addresses (or to such other address as a Party may designate by written notice to the other Party):

If to OWS:

Sandra Ellison, General Counsel Optiwave Semiconductor Corp. 2775 Augustine Drive, Suite 400 San Jose, California 95054

With a copy to (which shall not constitute notice):

Alan Ngo, Partner Calderwood & Harkness LLP One Embarcadero Center, 34th Floor San Francisco, California 94111

If to Lumos:

Richard Talbot, General Counsel Lumos Photonics, Inc. 9400 McNeil Drive, Building 7 Austin, Texas 78758

With a copy to (which shall not constitute notice):

Victoria Ashworth, Partner Brannick Howell & Stein LLP 555 California Street, Suite 2800 San Francisco, California 94104

13.4 Counterparts. The Definitive Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of the Definitive Agreement by electronic transmission of a signed counterpart (including by PDF or similar electronic format) shall be deemed to be valid and sufficient delivery thereof.

13.5 No Third-Party Beneficiaries

Except as expressly provided in this Term Sheet or the Definitive Agreement — including the individuals and entities identified as released parties under Section 6 (the Lumos Released Parties and the OWS Released Parties) — nothing in the Definitive Agreement is intended to confer upon any person or entity other than the Parties hereto and their permitted successors and assigns any rights, benefits, remedies, obligations, or liabilities under or by reason of the Definitive Agreement.

SECTION 14: NON-BINDING NATURE OF TERM SHEET

14.1 This Term Sheet is non-binding and is intended solely as a basis for further negotiation between the Parties toward the execution of a Definitive Agreement. This Term Sheet does not create any legally binding obligation on either Party.

14.2 Neither Party shall have any obligation with respect to the transactions described herein unless and until a Definitive Agreement has been negotiated, agreed upon, and duly executed by authorized representatives of both Parties. Until such time, either Party may, in its sole and absolute discretion, withdraw from negotiations at any time and for any reason or for no reason, without liability or obligation to the other Party.

14.3 This Term Sheet is presented as a settlement communication within the meaning of Federal Rule of Evidence 408 and the analogous provisions of all applicable state and federal evidence codes. This Term Sheet, its contents, and all discussions, negotiations, correspondence, and communications related thereto are not admissible for any purpose in the Litigation or in any other proceeding, whether judicial, arbitral, administrative, or otherwise. The presentation of this Term Sheet and the engagement in settlement discussions shall not be construed as a waiver of any right, claim, defense, or privilege of either Party.

14.4 The Parties acknowledge that this Term Sheet is subject to the approval of the Board of Directors of OWS, the approval of Vantage Point Capital Partners Fund IV, LP (as majority shareholder of OWS), and the approval of the Board of Directors and/or management of Lumos, and that neither Party's representatives are authorized to bind their respective principals absent such approvals.

SIGNATURE BLOCK (DRAFT — NOT FOR EXECUTION)

IN WITNESS WHEREOF, the Parties have caused this Non-Binding Term Sheet to be executed by their duly authorized representatives as of the date first written above.

OPTIWAVE SEMICONDUCTOR CORP.

By: ________

Name: Sandra Ellison

Title: General Counsel

Date: ________

Alternatively:

By: ________

Name: Dr. Priya Ramanathan

Title: Chief Executive Officer

Date: ________

LUMOS PHOTONICS, INC.

By: ________

Name: Richard Talbot

Title: General Counsel

Date: ________

Alternatively:

By: ________

Name: James Harrelson

Title: Chief Executive Officer

Date: ________

DRAFT — NOT FOR EXECUTION Subject to approval by OWS Board of Directors and Vantage Point Capital Partners Fund IV, LP

APPENDIX A: LIST OF OWS ASSERTED PATENTS

The following table sets forth the four Asserted Patents that form the basis of the claims asserted by OWS in the Litigation:

The Asserted Patents are each assigned to OWS by the respective named inventors. All assignments have been duly recorded with the United States Patent and Trademark Office. The Asserted Patents collectively cover key aspects of silicon photonics technology relevant to the design, fabrication, and operation of high-speed optical transceivers and co-packaged optics engines, including waveguide coupling architectures, photodetector structures, multi-channel transceiver integration, and modulator driver circuits.

APPENDIX B: IDENTIFIED OWS PATENT PORTFOLIO SUMMARY

The following is a high-level summary of the OWS Patent Portfolio as of the date of this Term Sheet:

Portfolio Concentration Areas:

The OWS Patent Portfolio is concentrated in the following principal technology areas:

• Waveguide Coupling: Patents and applications directed to edge couplers, grating couplers, tapered mode converters, inverse-taper structures, and related waveguide coupling architectures for efficient optical signal routing in silicon photonics integrated circuits.

• Germanium-on-Silicon Photodetectors: Patents and applications directed to Ge-on-Si photodetector structures, including graded buffer layers, avalanche photodiodes, lateral and vertical PIN photodetectors, and related detector architectures for high-responsivity, low-dark-current photodetection at telecommunications wavelengths (1310 nm and 1550 nm).

• Modulator Driver Architectures: Patents and applications directed to driver circuit designs for high-speed Mach-Zehnder modulators, including segmented electrode designs, traveling-wave electrode architectures, differential driver circuits, and CMOS-photonics co-integration techniques for data rates of 100 Gbps and above per lane.

• Co-Packaged Optics: Patents and applications directed to co-packaged optics (CPO) integration architectures, including chiplet-based designs, interposer structures, and thermal management solutions for integration of silicon photonics engines with switch ASICs in data center switch platforms.

• Silicon Photonics Integrated Circuits for Data Center Interconnects and Telecom Applications: Patents and applications directed to integrated silicon photonics transceivers and engines for data center interconnect (DCI), metro networking, and long-haul telecommunications applications, including 400G, 800G, and next-generation coherent and intensity-modulation direct-detection (IMDD) architectures.

A full and complete schedule of all patents and patent applications within the OWS Patent Portfolio, including patent numbers, titles, filing dates, issue dates, expiration dates, and named inventors, shall be prepared and attached as an exhibit to the Definitive Agreement.

APPENDIX C: ACCUSED PRODUCTS DESCRIPTION

The following is a description of the Accused Products identified in the Litigation:

1. LumosBridge™ 800G Optical Engine

The LumosBridge™ 800G Optical Engine is a co-packaged optics (CPO) engine designed for integration with next-generation network switch ASICs in hyperscale data center switch platforms. The LumosBridge™ product utilizes a silicon photonics integrated circuit fabricated on a silicon-on-insulator (SOI) platform and incorporates on-chip germanium photodetectors, silicon Mach-Zehnder modulators, and integrated wavelength-division multiplexing (WDM) components. The LumosBridge™ 800G supports data rates of up to 800 Gbps aggregate throughput using 8 × 100G PAM4 optical lanes.

• First Commercial Shipment: Q1 2022

• Unit Price Range: $1,200 — $1,800 (depending on configuration and volume)

• Primary Customers: Hyperscale cloud service providers and data center switch OEMs

2. LumosEdge™ 400ZR+ Pluggable Transceiver

The LumosEdge™ 400ZR+ Pluggable Transceiver is a coherent pluggable optical transceiver module in a QSFP-DD (Quad Small Form Factor Pluggable — Double Density) form factor, designed for metro and data center interconnect (DCI) applications. The LumosEdge™ product incorporates a silicon photonics-based coherent optical engine, integrated digital signal processing (DSP), and supports 400 Gbps data rates over single-mode fiber at distances of up to 120 km. The product is compliant with the OIF 400ZR and OpenZR+ interoperability specifications.

• First Commercial Shipment: Q3 2021

• Unit Price Range: $600 — $900 (depending on configuration and volume)

• Primary Customers: Telecommunications carriers, internet content providers, and DCI network operators

3. Combined Accused Product Revenue

Based on Lumos's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission for the fiscal year ended December 31, 2022, and Lumos's discovery responses in the Litigation (including Lumos's responses to OWS's First Set of Interrogatories and OWS's First Set of Requests for Production of Documents), the combined revenue attributable to the Accused Products for calendar year 2022 was approximately One Hundred Forty-Eight Million Six Hundred Thousand Dollars ($148,600,000). This revenue figure served as the basis for OWS's damages analysis and reasonable royalty calculations in the Litigation.

END OF TERM SHEET

CONFIDENTIAL — DRAFT — FOR DISCUSSION PURPOSES ONLY — NON-BINDING — SUBJECT TO BOARD AND MANAGEMENT APPROVAL BY BOTH PARTIES — SETTLEMENT COMMUNICATION PURSUANT TO FRE 408

Patent No.	Title	Filing Date	Issue Date	Named Inventors
U.S. 10,234,567	Integrated Waveguide Coupler with Tapered Mode Converter for Silicon Photonics Platforms	March 14, 2017	March 19, 2019	Dr. Kevin Fong, Dr. Priya Ramanathan, Hideo Tanaka
U.S. 10,891,234	Germanium-on-Silicon Photodetector with Graded Buffer Layer for Enhanced Responsivity	September 8, 2017	January 14, 2021	Dr. Kevin Fong, Dr. Amara Osei
U.S. 11,045,678	Multi-Channel Optical Transceiver with Integrated Wavelength-Division Multiplexing on Silicon	June 22, 2018	June 29, 2021	Dr. Priya Ramanathan, Dr. Amara Osei, Liwei Zhang
U.S. 11,312,890	Driver Circuit Architecture for High-Speed Silicon Photonic Mach-Zehnder Modulators	November 15, 2018	April 26, 2022	Dr. Kevin Fong, Rajesh Iyer
Category	Count
Issued U.S. Utility Patents	87
Pending U.S. Patent Applications	14
Total	101

DRAFT — PRIVILEGED AND CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO FEDERAL RULE OF EVIDENCE 408
NON-BINDING TERM SHEET FOR PROPOSED CROSS-LICENSE AND SETTLEMENT AGREEMENT
March 15, 2023
Prepared by:
Alan Ngo, Responsible Partner Omar Siddiqui, Lead Associate Intellectual Property Group Calderwood & Harkness LLP One Embarcadero Center, 34th Floor San Francisco, California 94111 Telephone: (415) 773-5600
Prepared on behalf of:
Optiwave Semiconductor Corp. ("OWS")
Matter Reference: Calderwood & Harkness LLP Matter No. 1014-00003
Litigation Reference: Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California
DRAFT — FOR DISCUSSION PURPOSES ONLY — NON-BINDING SUBJECT TO BOARD AND MANAGEMENT APPROVAL BY BOTH PARTIES
RECITALS / BACKGROUND
A. Identification of the Parties.
This Non-Binding Term Sheet for Proposed Cross-License and Settlement Agreement (this "Term Sheet") sets forth the principal terms that are proposed by Optiwave Semiconductor Corp., a Delaware corporation with its principal place of business at 2775 Augustine Drive, Suite 400, San Jose, California 95054 ("OWS" or "Licensor/Cross-Licensee"), to serve as the framework for a negotiated settlement and cross-license agreement with Lumos Photonics, Inc., a Delaware corporation with its principal place of business at 9400 McNeil Drive, Building 7, Austin, Texas 78758 ("Lumos" or "Licensee/Cross-Licensor"). OWS and Lumos are each referred to herein individually as a "Party" and collectively as the "Parties."
B. Background of the Dispute.
OWS is the owner by assignment of United States Patent Nos. 10,234,567 (the "'567 Patent"), 10,891,234 (the "'234 Patent"), 11,045,678 (the "'678 Patent"), and 11,312,890 (the "'890 Patent") (collectively, the "Asserted Patents"). The Asserted Patents relate to various aspects of silicon photonics technology, including waveguide coupling, germanium-on-silicon photodetectors, multi-channel optical transceiver architectures, and driver circuit architectures for high-speed silicon photonic modulators. A detailed listing of the Asserted Patents is provided in Appendix A hereto.
On June 3, 2022, OWS filed the above-captioned action against Lumos in the United States District Court for the Northern District of California, asserting infringement of the Asserted Patents by Lumos's LumosBridge™ 800G Optical Engine and LumosEdge™ 400ZR+ Pluggable Transceiver products (collectively, the "Accused Products"). Lumos answered and filed counterclaims seeking declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102, 103, and 112. The Litigation has been actively prosecuted by both Parties through fact and expert discovery, including the exchange of infringement and invalidity contentions, document productions, depositions, and expert reports.
On February 17, 2023, the Court (the Honorable Edward J. Torvelis, United States District Judge) issued its Claim Construction Order (the "Markman Order"), construing eleven (11) disputed claim terms across the four Asserted Patents. The Markman Order resolved several key claim construction disputes and has materially informed both Parties' assessments of the relative strengths and risks of their respective positions in the Litigation.
The Parties, through their respective counsel — Calderwood & Harkness LLP for OWS and Brannick Howell & Stein LLP for Lumos — have agreed to a thirty (30)-day settlement discussion window commencing March 6, 2023. On March 10, 2023, the Court entered a Stipulated Order staying all discovery deadlines and case management dates through April 5, 2023, to facilitate settlement discussions. This Term Sheet is presented as a framework for those settlement discussions and is intended to facilitate a negotiated resolution of the Litigation through a cross-license arrangement that provides mutual benefits and commercial certainty to both Parties.
C. Disclaimer and FRE 408 Notice.
This Term Sheet constitutes a settlement communication protected under Federal Rule of Evidence 408 and the analogous provisions of all applicable state and federal evidence codes. This Term Sheet, its contents, and all communications related thereto are not admissible for any purpose in the Litigation or in any other proceeding, whether judicial, arbitral, administrative, or otherwise. Nothing contained in this Term Sheet constitutes an admission of infringement, non-infringement, validity, invalidity, enforceability, unenforceability, or liability by either Party. Neither the presentation of this Term Sheet nor any discussions arising therefrom shall be construed as creating any legally binding obligation on either Party.
SECTION 1: DEFINITIONS
As used in this Term Sheet, the following terms shall have the meanings set forth below. All defined terms used but not defined herein shall have the meanings ascribed to them in the definitive Cross-License and Settlement Agreement (the "Definitive Agreement"), once negotiated and executed.
1.1 "OWS Patent Portfolio" means all United States utility patents currently owned or controlled by OWS, including eighty-seven (87) issued U.S. utility patents and fourteen (14) pending U.S. patent applications as of the date of this Term Sheet, together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, inter partes reviews, post-grant reviews, and foreign counterparts thereof. The OWS Patent Portfolio is concentrated in the following technology areas: waveguide coupling, germanium-on-silicon photodetectors, modulator driver architectures for silicon photonics integrated circuits, co-packaged optics, and related data center interconnect and telecommunications technologies. A summary of the OWS Patent Portfolio is set forth in Appendix B hereto.
1.2 "Asserted Patents" means United States Patent Nos. 10,234,567; 10,891,234; 11,045,678; and 11,312,890, as more particularly described in Appendix A hereto.
1.3 "Lumos Patent Portfolio" means all United States utility patents and pending U.S. patent applications currently owned or controlled by Lumos Photonics, Inc., together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, inter partes reviews, post-grant reviews, and foreign counterparts thereof. The Parties anticipate that a full schedule of the Lumos Patent Portfolio will be prepared and exchanged during the negotiation of the Definitive Agreement.
1.4 "Accused Products" means the LumosBridge™ 800G Optical Engine and the LumosEdge™ 400ZR+ Pluggable Transceiver, including all versions, configurations, variants, updates, revisions, and successor products incorporating substantially similar technology, as more particularly described in Appendix C hereto.
1.5 "Licensed Products" means all products manufactured, sold, offered for sale, imported, or used by either Party that are covered by one or more claims of the other Party's patent portfolio, including without limitation all current and future products of either Party.
1.6 "Effective Date" means the date of execution of the Definitive Agreement by authorized representatives of both Parties.
1.7 "Litigation" means Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California, including all claims, counterclaims, defenses, and proceedings therein.
1.8 "Territory" means worldwide, including all countries, territories, and jurisdictions without geographic limitation.
1.9 "Term" means the period commencing on the Effective Date and continuing through the date of expiration of the last-to-expire patent in either Party's patent portfolio as of the Effective Date, unless earlier terminated in accordance with Section 12 of this Term Sheet.
SECTION 2: CROSS-LICENSE GRANT
2.1 License from OWS to Lumos
Subject to the terms and conditions of the Definitive Agreement and subject to receipt of the Settlement Payment as set forth in Section 3.1, OWS shall grant to Lumos a non-exclusive, non-transferable (except as provided in Section 8), royalty-bearing (as set forth in Section 3), worldwide license under the OWS Patent Portfolio — including all eighty-seven (87) issued U.S. utility patents and fourteen (14) pending U.S. patent applications as of the Effective Date — to make, have made, use, sell, offer to sell, and import Licensed Products within the Territory for the Term.
The license granted under this Section 2.1 shall cover all current and future products of Lumos, including but not limited to the Accused Products (the LumosBridge™ 800G Optical Engine and the LumosEdge™ 400ZR+ Pluggable Transceiver), for the duration of the Term. The license is intended to provide Lumos with freedom to operate under the OWS Patent Portfolio with respect to all of Lumos's silicon photonics products, optical engine and transceiver product lines, and related technologies.
No sublicense rights shall be granted to Lumos under this Section 2.1, except that Lumos shall have the right to extend the license to Lumos's contract manufacturers solely for the purpose of manufacturing, assembling, testing, and packaging Lumos-branded products. Such extension to contract manufacturers shall be limited in scope to activities undertaken at the direction of and on behalf of Lumos and shall not grant any independent rights to such contract manufacturers to manufacture, sell, or otherwise exploit products for their own account or for the account of any third party.
2.2 License from Lumos to OWS
Subject to the terms and conditions of the Definitive Agreement, Lumos shall grant to OWS a non-exclusive, non-transferable (except as provided in Section 8), fully paid-up, royalty-free, worldwide license under the Lumos Patent Portfolio to make, have made, use, sell, offer to sell, and import Licensed Products within the Territory for the Term.
The license granted under this Section 2.2 shall cover all current and future OWS products, including without limitation the OWS-400ZR and OWS-800LR coherent optical transceiver chipsets, integrated silicon photonics engines for co-packaged optics, and all related and successor products incorporating similar or derivative technology. The Parties acknowledge that OWS's product lines are focused on providing silicon photonics chipsets and integrated engines to hyperscale data center operators, telecommunications equipment manufacturers, and networking original equipment manufacturers, and the license is intended to encompass the full scope of OWS's commercial activities in these fields.
The "have made" right granted to OWS under this Section 2.2 shall specifically include the right to have Licensed Products manufactured by Pinnacle Semiconductor Foundry Co., Ltd. (Hsinchu, Taiwan) on Pinnacle's 45nm silicon-on-insulator (SOI) process or other applicable fabrication processes, as well as by any other contract foundries or contract manufacturers engaged by OWS from time to time for the production of OWS-designed products.
No sublicense rights shall be granted to OWS under this Section 2.2, except that OWS shall have the right to extend the license to OWS's contract manufacturers, including without limitation Pinnacle Semiconductor Foundry Co., Ltd., solely for the purpose of fabricating, assembling, testing, and packaging OWS-designed products. Such extension to contract manufacturers shall be limited in scope to activities undertaken at the direction of and on behalf of OWS and shall not grant any independent rights to such contract manufacturers to manufacture, sell, or otherwise exploit products for their own account or for the account of any third party.
2.3 Scope Limitations
The licenses granted under Sections 2.1 and 2.2 are limited to patents owned or controlled by the granting Party as of the Effective Date. After-acquired patents — that is, patents acquired by either Party after the Effective Date through purchase, assignment, or other transfer from a third party — shall not be included within the scope of either license unless expressly agreed by the Parties in a written amendment to the Definitive Agreement. For the avoidance of doubt, patents issuing from applications that are pending as of the Effective Date, and continuations, continuations-in-part, divisionals, reissues, and reexaminations of patents that are within the applicable Party's patent portfolio as of the Effective Date, shall be within the scope of the respective licenses.
Neither license granted hereunder shall extend to third-party products or to products of any joint venture, consortium, or collaborative arrangement unless the applicable Party is the majority owner (i.e., holds greater than fifty percent (50%) of the equity interests or voting control) of such joint venture or collaborative entity. The Parties intend that the licenses are personal to OWS and Lumos, respectively, and are not intended to confer patent immunity on unrelated third parties.
SECTION 3: FINANCIAL TERMS
3.1 Settlement Payment
As consideration for the license grant from OWS to Lumos under Section 2.1 and the mutual releases set forth in Section 6, Lumos shall pay to OWS a one-time, lump-sum payment in the amount of Five Hundred Thousand Dollars ($500,000.00) (the "Settlement Payment") within thirty (30) calendar days of the Effective Date. Payment shall be made by wire transfer of immediately available funds to a bank account designated by OWS in writing, such designation to be provided no later than five (5) business days following the Effective Date. If the Settlement Payment is not received by OWS within the thirty (30)-day period specified above, Lumos shall be in default, and interest shall accrue on the unpaid amount at the rate of one percent (1%) per month, compounded monthly, from the date the payment was due until received.
3.2 No Ongoing Royalties
No running royalties, milestone payments, minimum annual royalties, or other periodic payments shall be payable by either Party under the cross-license arrangement contemplated herein. The cross-license shall be fully paid-up for the entirety of the Term following receipt of the Settlement Payment by OWS. For the avoidance of doubt, the license from Lumos to OWS under Section 2.2 is fully paid-up and royalty-free, with no further payments due from OWS at any time.
3.3 Tax Treatment
Each Party shall be solely responsible for its own tax obligations arising from or related to the transactions contemplated by this Term Sheet and the Definitive Agreement, including without limitation any income taxes, withholding taxes, franchise taxes, or other governmental levies or assessments. The Settlement Payment shall be treated by the Parties as consideration for a patent license for all applicable tax purposes. Neither Party shall be required to indemnify the other for any taxes assessed or imposed on the other Party in connection with the Settlement Payment or the cross-license grants.
3.4 No Admission of Damages
The Parties acknowledge and agree that the Settlement Payment does not constitute an admission by Lumos that any amount of damages was owed, nor that any infringement occurred with respect to the Asserted Patents or any other patent. The Settlement Payment likewise does not constitute an admission by OWS that its damages claims were not meritorious. For informational purposes, OWS notes that its damages claims in the Litigation were estimated to exceed Seventy-Five Million Dollars ($75,000,000), based on a reasonable royalty rate of approximately seven and one-half percent (7.5%) applied to approximately One Hundred Forty-Eight Million Six Hundred Thousand Dollars ($148,600,000) in accused product revenue attributable to the Accused Products during the relevant damages period. OWS further notes that its pre-litigation patent valuation, performed by Clearpath IP Valuation Services, Inc., valued the four Asserted Patents collectively at Forty-Two Million Eight Hundred Thousand Dollars ($42,800,000). The nominal $500,000 Settlement Payment reflects the current post-Markman litigation posture, the Parties' mutual desire to avoid the costs and uncertainties of continued litigation, and the value of the reciprocal license grants and covenants exchanged hereunder.
SECTION 4: MUTUAL COVENANT NOT TO SUE
4.1 OWS Covenant
OWS covenants and agrees that, during the Term, it shall not initiate, file, maintain, or cause to be initiated any action, suit, proceeding, complaint, charge, or claim against Lumos or against Lumos's customers, distributors, resellers, or end users for infringement, contributory infringement, or inducement of infringement of any patent in the OWS Patent Portfolio with respect to Licensed Products. This covenant extends to all forms of intellectual property enforcement actions, including actions for damages, injunctive relief, and declaratory judgment.
4.2 Lumos Covenant
Lumos covenants and agrees that, during the Term, it shall not initiate, file, maintain, or cause to be initiated any action, suit, proceeding, complaint, charge, or claim against OWS or against OWS's customers, distributors, resellers, or end users for infringement, contributory infringement, or inducement of infringement of any patent in the Lumos Patent Portfolio with respect to Licensed Products. This covenant extends to all forms of intellectual property enforcement actions, including actions for damages, injunctive relief, and declaratory judgment.
4.3 Scope of Covenants
The covenants set forth in Sections 4.1 and 4.2 shall extend to all current and future patents owned or controlled by either Party as of the Effective Date, including patents issuing from applications pending as of the Effective Date and all continuations, continuations-in-part, divisionals, reissues, and reexaminations thereof. The covenants are personal to OWS and Lumos, respectively, and do not extend to successors or assigns of either Party except as expressly provided in Section 8. For the avoidance of doubt, in the event of a permitted assignment or change of control, the covenants shall continue in effect as set forth in Section 8.
SECTION 5: DISMISSAL OF LITIGATION
5.1 Joint Stipulation of Dismissal
Within five (5) business days following the later of (a) the execution of the Definitive Agreement by both Parties, and (b) the receipt by OWS of the Settlement Payment in full, the Parties shall file a Joint Stipulation of Dismissal with Prejudice in the Litigation (Case No. 5:22-cv-03417-EJD, United States District Court for the Northern District of California). The Joint Stipulation of Dismissal shall provide for the dismissal with prejudice of all claims asserted by OWS — including all claims of infringement of the four Asserted Patents — and all counterclaims asserted by Lumos — including Lumos's counterclaims for declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102, 103, and 112. The form and content of the Joint Stipulation of Dismissal shall be mutually agreed upon by the Parties' respective counsel.
5.2 Costs and Fees
Each Party shall bear its own attorneys' fees, costs, disbursements, and expenses incurred in connection with the Litigation, including all fees and expenses of outside counsel, expert witnesses, consultants, and other litigation support providers. Neither Party shall seek to recover any such fees, costs, or expenses from the other Party. For informational purposes, OWS notes that its total litigation spend through the date of this Term Sheet is approximately Two Million Five Hundred Fifty Thousand Dollars ($2,550,000), comprising approximately One Million Eight Hundred Forty-Seven Thousand Three Hundred Twelve Dollars ($1,847,312) in legal fees billed by Calderwood & Harkness LLP, approximately Two Hundred Eighty-Nine Thousand Four Hundred Fifty-Six Dollars ($289,456) in costs and disbursements, and approximately Four Hundred Twelve Thousand Eight Hundred Dollars ($412,800) in expert fees from Whitfield Technical Consulting Group, Inc. and Apex Claim Analytics LLC.
5.3 No Admission
The filing of the Joint Stipulation of Dismissal and the dismissal of the Litigation shall not constitute an admission by either Party of infringement, non-infringement, validity, invalidity, enforceability, or unenforceability of any patent, or of the merits or lack of merits of any claim or defense asserted in the Litigation.
SECTION 6: MUTUAL GENERAL RELEASES
6.1 OWS Release of Lumos
Effective as of the Effective Date, OWS, on behalf of itself and its officers, directors, employees, agents, affiliates, successors, and assigns, hereby fully and forever releases and discharges Lumos and its officers — including James Harrelson, Chief Executive Officer; Dr. Mei-Lin Chen, Chief Technology Officer; Richard Talbot, General Counsel; and Dr. Nikolai Petrov, Vice President of Engineering — and its directors, employees, agents, representatives, successors, and assigns (collectively, the "Lumos Released Parties") from any and all claims, demands, damages, losses, liabilities, obligations, costs, expenses, actions, and causes of action of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or fixed, accrued or unaccrued, that arise from or relate to the Litigation, the Asserted Patents, the Accused Products, or any act or omission occurring on or prior to the Effective Date in connection with the subject matter of the Litigation.
6.2 Lumos Release of OWS
Effective as of the Effective Date, Lumos, on behalf of itself and its officers, directors, employees, agents, affiliates, successors, and assigns, hereby fully and forever releases and discharges OWS and its officers — including Dr. Priya Ramanathan, Chief Executive Officer; Dr. Kevin Fong, Chief Technology Officer; Sandra Ellison, General Counsel; and Theodore Marchetti, Vice President of intellectual Property — and its directors, employees, agents, representatives, affiliates (including Vantage Point Capital Partners Fund IV, LP and Vantage Point Capital GP IV, LLC), successors, and assigns (collectively, the "OWS Released Parties") from any and all claims, demands, damages, losses, liabilities, obligations, costs, expenses, actions, and causes of action of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or fixed, accrued or unaccrued, that arise from or relate to the Litigation and the counterclaims asserted therein, or any act or omission occurring on or prior to the Effective Date in connection with the subject matter of the Litigation.
6.3 California Civil Code § 1542 Waiver
Each Party, on behalf of itself and its respective released parties, expressly acknowledges that this release is intended to include all claims described above, whether known or unknown, and to that end each Party hereby expressly waives and relinquishes all rights and benefits that it may have under California Civil Code § 1542, which provides:
"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."
Each Party further waives and relinquishes any similar right or benefit under any analogous provision of the laws of any other state or jurisdiction. Each Party acknowledges that it may discover facts other than or different from those that it presently knows or believes to be true with respect to the claims released herein, and each Party agrees that this release shall remain fully effective notwithstanding the subsequent discovery of such facts.
SECTION 7: CONFIDENTIALITY
7.1 Confidentiality of Settlement Terms
The terms of the Definitive Agreement, including without limitation the amount of the Settlement Payment and the specific terms of the cross-license grants, shall be treated as confidential by both Parties. Neither Party shall disclose, publish, or disseminate the terms of the Definitive Agreement to any third party, except as follows:
(a) As required by applicable law, regulation, court order, or the rules of any stock exchange or securities regulatory authority. The Parties acknowledge that Lumos is a publicly traded company listed on the Nasdaq Stock Market (ticker symbol: LMPH), and that Lumos may be required to disclose certain information regarding the settlement under its reporting obligations pursuant to the Securities Exchange Act of 1934 and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the Nasdaq Stock Market. Any such disclosures by Lumos shall be limited to the minimum information reasonably necessary to satisfy its legal and regulatory obligations.
(b) OWS may disclose the terms of the Definitive Agreement to Vantage Point Capital Partners Fund IV, LP (as majority shareholder, holding approximately sixty-two percent (62%) of OWS's outstanding equity) and to First Pacific Commerce Bank, N.A. (as primary lender under OWS's Forty Million Dollar ($40,000,000) revolving credit facility), in each case solely to the extent required under OWS's existing agreements with such entities. OWS shall ensure that any such disclosures are made subject to confidentiality obligations no less protective than those set forth in this Section 7.
(c) Either Party may disclose the terms of the Definitive Agreement to its legal counsel, accountants, tax advisors, and auditors, in each case subject to obligations of professional confidentiality.
7.2 Return and Destruction of Confidential Materials
Within thirty (30) calendar days of the Effective Date, each Party shall comply fully with the post-termination provisions of the Stipulated Protective Order entered by the Court in the Litigation in September 2022 (Dkt. No. 47), including without limitation all provisions governing the return or destruction of documents and information designated as "Confidential" or "Highly Confidential — Attorneys' Eyes Only" under such Stipulated Protective Order. Each Party's outside counsel shall provide written certification of compliance with such obligations within the thirty (30)-day period, and the Parties shall cooperate in filing any necessary notices or certifications with the Court.
7.3 Public Statements
Any public statement, press release, or other public disclosure regarding the settlement of the Litigation shall be limited to a jointly agreed statement or disclosure, the form and content of which shall be mutually agreed upon by the Parties prior to its release. Absent mutual agreement, each Party may state only that the Litigation has been resolved by mutual agreement and dismissed, without disclosing any financial terms, business terms, or other specifics of the settlement arrangement. Neither Party shall make any public statement that characterizes the settlement in a manner that implies fault, liability, or wrongdoing by the other Party.
SECTION 8: ASSIGNMENT AND CHANGE OF CONTROL
8.1 No Assignment
Neither Party may assign, transfer, or delegate its rights or obligations under the Definitive Agreement, in whole or in part, without the prior written consent of the other Party, which consent may be withheld in such other Party's sole discretion. Notwithstanding the foregoing, either Party may assign the Definitive Agreement, without the consent of the other Party, in connection with a merger, acquisition, consolidation, or sale of all or substantially all of the assigning Party's assets or business to which the Definitive Agreement relates, provided that the assignee assumes in writing all of the assigning Party's obligations under the Definitive Agreement. Any attempted assignment in violation of this Section 8.1 shall be null and void.
8.2 Change of Control Provisions
In the event of a change of control of either Party — defined as the acquisition by a third party of more than fifty percent (50%) of the voting securities or equity interests of such Party, or the merger or consolidation of such Party with or into another entity, or the sale of all or substantially all of such Party's assets — the license grants and covenants set forth in the Definitive Agreement shall continue in effect for the surviving or acquiring entity with respect to the products and patent portfolio of the original licensed Party. However, the license grants shall not extend to (a) the acquiring entity's pre-existing product lines, or (b) the acquiring entity's pre-existing patent portfolio, in each case as they existed prior to the closing of the change of control transaction. The Parties acknowledge the following as relevant context for these provisions:
(i) Lumos's current market capitalization is approximately Two Billion Two Hundred Forty Million Dollars ($2,240,000,000) as of the period in which the Markman Order was issued, making Lumos a potential acquisition target in the silicon photonics and optical networking industry.
(ii) OWS is majority-owned (approximately sixty-two percent (62%)) by Vantage Point Capital Partners Fund IV, LP (fund size: $2.1 billion, vintage 2018), managed by Vantage Point Capital GP IV, LLC. A future exit transaction by Vantage Point — whether through a sale, merger, or initial public offering — is a foreseeable event, and the change of control provisions are intended to address the implications of such a transaction for the cross-license arrangement.
SECTION 9: REPRESENTATIONS AND WARRANTIES
9.1 OWS Representations and Warranties
OWS represents and warrants to Lumos as follows:
(a) Ownership. OWS is the sole and exclusive owner of the OWS Patent Portfolio, including all right, title, and interest in and to the Asserted Patents. The Asserted Patents were duly assigned to OWS by the named inventors — Dr. Kevin Fong, Dr. Priya Ramanathan, Hideo Tanaka, Dr. Amara Osei, Liwei Zhang, and Rajesh Iyer — pursuant to valid written assignments that have been recorded with the United States Patent and Trademark Office.
(b) Corporate Authority. OWS has full corporate power and authority to enter into the Definitive Agreement and to grant the licenses and covenants contemplated herein. The execution, delivery, and performance of the Definitive Agreement by OWS have been duly authorized by all necessary corporate action, subject to any required approvals of the OWS Board of Directors and Vantage Point Capital Partners Fund IV, LP, as noted herein.
(c) Encumbrances. OWS is not aware of any liens, encumbrances, pledges, security interests, or other restrictions on the OWS Patent Portfolio that would prevent the grant of licenses and covenants hereunder, other than the lien and security interest held by First Pacific Commerce Bank, N.A. under OWS's Forty Million Dollar ($40,000,000) revolving credit facility. OWS shall obtain any necessary consents, waivers, or releases from First Pacific Commerce Bank, N.A. prior to the execution of the Definitive Agreement, and shall provide evidence of such consents or waivers to Lumos upon request.
9.2 Lumos Representations and Warranties
Lumos represents and warrants to OWS as follows:
(a) Ownership. Lumos is the sole and exclusive owner of the Lumos Patent Portfolio, including all right, title, and interest therein.
(b) Corporate Authority. Lumos has full corporate power and authority to enter into the Definitive Agreement and to grant the licenses and covenants contemplated herein. The execution, delivery, and performance of the Definitive Agreement by Lumos have been duly authorized by all necessary corporate action.
9.3 Disclaimer of Additional Representations and Warranties
EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 9.1 AND 9.2 OF THIS TERM SHEET (AND THE CORRESPONDING PROVISIONS OF THE DEFINITIVE AGREEMENT), NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THE VALIDITY, ENFORCEABILITY, SCOPE, OR BREADTH OF ANY PATENT IN ITS PATENT PORTFOLIO. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY REGARDING NON-INFRINGEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS. ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT, ARE HEREBY EXPRESSLY DISCLAIMED TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW.
SECTION 10: INDEMNIFICATION
10.1 Mutual Indemnification. Each Party (the "Indemnifying Party") shall indemnify, defend, and hold harmless the other Party (the "Indemnified Party") and its officers, directors, employees, agents, successors, and assigns from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and court costs) arising out of or resulting from any third-party claim, action, suit, or proceeding that is based upon or arises from a breach by the Indemnifying Party of its representations and warranties set forth in Section 9 of this Term Sheet (and the corresponding provisions of the Definitive Agreement).
10.2 Exclusion. For the avoidance of doubt, neither Party shall have any obligation to indemnify the other Party with respect to any claim, action, suit, or proceeding brought by a third party alleging infringement of such third party's intellectual property rights. The Parties expressly disclaim any obligation of patent indemnification, and each Party shall be solely responsible for its own freedom-to-operate analysis and clearance with respect to third-party patents.
10.3 Limitations. The aggregate liability of each Party under this Section 10 shall not exceed the amount of the Settlement Payment ($500,000). The indemnification obligations set forth in this Section 10 shall be subject to customary procedural requirements, including prompt notice of claims, cooperation in defense, and the right of the Indemnifying Party to control the defense of any covered claim.
SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION
11.1 Governing Law
The Definitive Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California, without giving effect to any choice-of-law or conflict-of-laws rules or provisions that would cause the application of the substantive laws of any other jurisdiction. To the extent that federal law applies to any issue arising under or in connection with the Definitive Agreement, including any issue relating to patent law, the Definitive Agreement shall be construed in accordance with applicable federal law.
11.2 Dispute Resolution
Any dispute, controversy, or claim arising out of, relating to, or in connection with the Definitive Agreement, or the breach, termination, or validity thereof (a "Dispute"), shall be resolved in accordance with the following procedures:
(a) Negotiation. Any Dispute shall first be submitted to good-faith negotiation between the Parties' respective General Counsels — Sandra Ellison for OWS and Richard Talbot for Lumos — for a period of thirty (30) calendar days following written notice from one Party to the other identifying the Dispute and requesting negotiation.
(b) Binding Arbitration. If the Dispute is not resolved through good-faith negotiation within the thirty (30)-day period specified above, either Party may submit the Dispute to binding arbitration. Such arbitration shall be administered by a mutually agreed arbitration provider (e.g., JAMS or the American Arbitration Association), conducted by a single neutral arbitrator mutually selected by the Parties who has substantial experience in patent licensing and intellectual property transactions, and seated in San Francisco, California. The arbitration shall be conducted in accordance with the applicable rules of the selected arbitration provider, and the arbitrator's decision shall be final and binding on the Parties and may be entered as a judgment in any court of competent jurisdiction.
11.3 Retained Jurisdiction
The Parties shall include in the Joint Stipulation of Dismissal a provision requesting that the United States District Court for the Northern District of California retain jurisdiction to enforce the terms of the Definitive Agreement (to the extent it constitutes a settlement agreement in the Litigation) for a period of one (1) year following the date of dismissal. During such retention period, either Party may apply to the Court for enforcement of the settlement terms, in addition to any rights it may have under the dispute resolution procedures set forth in Section 11.2.
SECTION 12: TERM AND TERMINATION
12.1 Term.  The Definitive Agreement shall be effective as of the Effective Date and shall continue in full force and effect for the life of the last-to-expire patent in either Party's patent portfolio (the OWS Patent Portfolio or the Lumos Patent Portfolio, as applicable) as of the Effective Date, unless earlier terminated in accordance with Section 12.2 (such period, the "Term").
12.2 Termination for Material Breach
Either Party may terminate the Definitive Agreement upon sixty (60) calendar days' prior written notice to the other Party in the event of a material breach by the other Party of any material term or condition of the Definitive Agreement. The written notice shall specify in reasonable detail the nature of the alleged breach. The Party receiving such notice shall have sixty (60) calendar days from the date of receipt of such notice (the "Cure Period") within which to cure the breach to the reasonable satisfaction of the non-breaching Party. If the breach is cured within the Cure Period, the notice of termination shall be deemed withdrawn, and the Definitive Agreement shall continue in full force and effect. If the breach is not cured within the Cure Period, the Definitive Agreement shall terminate effective as of the expiration of the Cure Period.
12.3 Survival.  The following provisions of the Definitive Agreement shall survive the expiration or termination of the Definitive Agreement, regardless of the reason for such expiration or termination: (a) the mutual general releases set forth in Section 6; (b) the confidentiality obligations set forth in Section 7; (c) the governing law and dispute resolution provisions set forth in Section 11; (d) the mutual covenants not to sue set forth in Section 4 (to the extent accrued prior to termination); and (e) any other provisions that by their nature are intended to survive expiration or termination.
SECTION 13: MISCELLANEOUS
13.1 Entire Agreement
The Definitive Agreement shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede and replace all prior and contemporaneous negotiations, representations, understandings, and agreements between the Parties, whether written or oral, relating to the subject matter of the Definitive Agreement, including this Term Sheet and all discussions, correspondence, and proposals exchanged during the settlement discussion period.
13.2 Amendments.  No amendment, modification, supplement, or waiver of any provision of the Definitive Agreement shall be effective unless set forth in a written instrument duly executed by authorized representatives of both Parties. No failure or delay by either Party in exercising any right, power, or privilege under the Definitive Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.
13.3 Notices.  All notices, requests, demands, consents, and other communications required or permitted under the Definitive Agreement shall be in writing and shall be deemed duly given when delivered personally, when sent by certified or registered mail (return receipt requested, postage prepaid), when sent by nationally recognized overnight courier (with tracking capability), or when sent by email (with confirmation of receipt) to the following addresses (or to such other address as a Party may designate by written notice to the other Party):
If to OWS:
Sandra Ellison, General Counsel Optiwave Semiconductor Corp. 2775 Augustine Drive, Suite 400 San Jose, California 95054
With a copy to (which shall not constitute notice):
Alan Ngo, Partner Calderwood & Harkness LLP One Embarcadero Center, 34th Floor San Francisco, California 94111
If to Lumos:
Richard Talbot, General Counsel Lumos Photonics, Inc. 9400 McNeil Drive, Building 7 Austin, Texas 78758
With a copy to (which shall not constitute notice):
Victoria Ashworth, Partner Brannick Howell & Stein LLP 555 California Street, Suite 2800 San Francisco, California 94104
13.4 Counterparts.  The Definitive Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of the Definitive Agreement by electronic transmission of a signed counterpart (including by PDF or similar electronic format) shall be deemed to be valid and sufficient delivery thereof.
13.5 No Third-Party Beneficiaries
Except as expressly provided in this Term Sheet or the Definitive Agreement — including the individuals and entities identified as released parties under Section 6 (the Lumos Released Parties and the OWS Released Parties) — nothing in the Definitive Agreement is intended to confer upon any person or entity other than the Parties hereto and their permitted successors and assigns any rights, benefits, remedies, obligations, or liabilities under or by reason of the Definitive Agreement.
SECTION 14: NON-BINDING NATURE OF TERM SHEET
14.1 This Term Sheet is non-binding and is intended solely as a basis for further negotiation between the Parties toward the execution of a Definitive Agreement. This Term Sheet does not create any legally binding obligation on either Party.
14.2 Neither Party shall have any obligation with respect to the transactions described herein unless and until a Definitive Agreement has been negotiated, agreed upon, and duly executed by authorized representatives of both Parties. Until such time, either Party may, in its sole and absolute discretion, withdraw from negotiations at any time and for any reason or for no reason, without liability or obligation to the other Party.
14.3 This Term Sheet is presented as a settlement communication within the meaning of Federal Rule of Evidence 408 and the analogous provisions of all applicable state and federal evidence codes. This Term Sheet, its contents, and all discussions, negotiations, correspondence, and communications related thereto are not admissible for any purpose in the Litigation or in any other proceeding, whether judicial, arbitral, administrative, or otherwise. The presentation of this Term Sheet and the engagement in settlement discussions shall not be construed as a waiver of any right, claim, defense, or privilege of either Party.
14.4 The Parties acknowledge that this Term Sheet is subject to the approval of the Board of Directors of OWS, the approval of Vantage Point Capital Partners Fund IV, LP (as majority shareholder of OWS), and the approval of the Board of Directors and/or management of Lumos, and that neither Party's representatives are authorized to bind their respective principals absent such approvals.
SIGNATURE BLOCK (DRAFT — NOT FOR EXECUTION)
IN WITNESS WHEREOF, the Parties have caused this Non-Binding Term Sheet to be executed by their duly authorized representatives as of the date first written above.
OPTIWAVE SEMICONDUCTOR CORP.
By: ________
Name: Sandra Ellison
Title: General Counsel
Date: ________
Alternatively:
By: ________
Name: Dr. Priya Ramanathan
Title: Chief Executive Officer
Date: ________
LUMOS PHOTONICS, INC.
By: ________
Name: Richard Talbot
Title: General Counsel
Date: ________
Alternatively:
By: ________
Name: James Harrelson
Title: Chief Executive Officer
Date: ________
DRAFT — NOT FOR EXECUTION Subject to approval by OWS Board of Directors and Vantage Point Capital Partners Fund IV, LP
APPENDIX A: LIST OF OWS ASSERTED PATENTS
The following table sets forth the four Asserted Patents that form the basis of the claims asserted by OWS in the Litigation:
The Asserted Patents are each assigned to OWS by the respective named inventors. All assignments have been duly recorded with the United States Patent and Trademark Office. The Asserted Patents collectively cover key aspects of silicon photonics technology relevant to the design, fabrication, and operation of high-speed optical transceivers and co-packaged optics engines, including waveguide coupling architectures, photodetector structures, multi-channel transceiver integration, and modulator driver circuits.
APPENDIX B: IDENTIFIED OWS PATENT PORTFOLIO SUMMARY
The following is a high-level summary of the OWS Patent Portfolio as of the date of this Term Sheet:
Portfolio Concentration Areas:
The OWS Patent Portfolio is concentrated in the following principal technology areas:
•  Waveguide Coupling: Patents and applications directed to edge couplers, grating couplers, tapered mode converters, inverse-taper structures, and related waveguide coupling architectures for efficient optical signal routing in silicon photonics integrated circuits.
•  Germanium-on-Silicon Photodetectors: Patents and applications directed to Ge-on-Si photodetector structures, including graded buffer layers, avalanche photodiodes, lateral and vertical PIN photodetectors, and related detector architectures for high-responsivity, low-dark-current photodetection at telecommunications wavelengths (1310 nm and 1550 nm).
•  Modulator Driver Architectures: Patents and applications directed to driver circuit designs for high-speed Mach-Zehnder modulators, including segmented electrode designs, traveling-wave electrode architectures, differential driver circuits, and CMOS-photonics co-integration techniques for data rates of 100 Gbps and above per lane.
•  Co-Packaged Optics: Patents and applications directed to co-packaged optics (CPO) integration architectures, including chiplet-based designs, interposer structures, and thermal management solutions for integration of silicon photonics engines with switch ASICs in data center switch platforms.
•  Silicon Photonics Integrated Circuits for Data Center Interconnects and Telecom Applications: Patents and applications directed to integrated silicon photonics transceivers and engines for data center interconnect (DCI), metro networking, and long-haul telecommunications applications, including 400G, 800G, and next-generation coherent and intensity-modulation direct-detection (IMDD) architectures.
A full and complete schedule of all patents and patent applications within the OWS Patent Portfolio, including patent numbers, titles, filing dates, issue dates, expiration dates, and named inventors, shall be prepared and attached as an exhibit to the Definitive Agreement.
APPENDIX C: ACCUSED PRODUCTS DESCRIPTION
The following is a description of the Accused Products identified in the Litigation:
1. LumosBridge™ 800G Optical Engine
The LumosBridge™ 800G Optical Engine is a co-packaged optics (CPO) engine designed for integration with next-generation network switch ASICs in hyperscale data center switch platforms. The LumosBridge™ product utilizes a silicon photonics integrated circuit fabricated on a silicon-on-insulator (SOI) platform and incorporates on-chip germanium photodetectors, silicon Mach-Zehnder modulators, and integrated wavelength-division multiplexing (WDM) components. The LumosBridge™ 800G supports data rates of up to 800 Gbps aggregate throughput using 8 × 100G PAM4 optical lanes.
•  First Commercial Shipment: Q1 2022
•  Unit Price Range: $1,200 — $1,800 (depending on configuration and volume)
•  Primary Customers: Hyperscale cloud service providers and data center switch OEMs
2. LumosEdge™ 400ZR+ Pluggable Transceiver
The LumosEdge™ 400ZR+ Pluggable Transceiver is a coherent pluggable optical transceiver module in a QSFP-DD (Quad Small Form Factor Pluggable — Double Density) form factor, designed for metro and data center interconnect (DCI) applications. The LumosEdge™ product incorporates a silicon photonics-based coherent optical engine, integrated digital signal processing (DSP), and supports 400 Gbps data rates over single-mode fiber at distances of up to 120 km. The product is compliant with the OIF 400ZR and OpenZR+ interoperability specifications.
•  First Commercial Shipment: Q3 2021
•  Unit Price Range: $600 — $900 (depending on configuration and volume)
•  Primary Customers: Telecommunications carriers, internet content providers, and DCI network operators
3. Combined Accused Product Revenue
Based on Lumos's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission for the fiscal year ended December 31, 2022, and Lumos's discovery responses in the Litigation (including Lumos's responses to OWS's First Set of Interrogatories and OWS's First Set of Requests for Production of Documents), the combined revenue attributable to the Accused Products for calendar year 2022 was approximately One Hundred Forty-Eight Million Six Hundred Thousand Dollars ($148,600,000). This revenue figure served as the basis for OWS's damages analysis and reasonable royalty calculations in the Litigation.
END OF TERM SHEET
CONFIDENTIAL — DRAFT — FOR DISCUSSION PURPOSES ONLY — NON-BINDING — SUBJECT TO BOARD AND MANAGEMENT APPROVAL BY BOTH PARTIES — SETTLEMENT COMMUNICATION PURSUANT TO FRE 408
Patent No. | Title | Filing Date | Issue Date | Named Inventors
U.S. 10,234,567 | Integrated Waveguide Coupler with Tapered Mode Converter for Silicon Photonics Platforms | March 14, 2017 | March 19, 2019 | Dr. Kevin Fong, Dr. Priya Ramanathan, Hideo Tanaka
U.S. 10,891,234 | Germanium-on-Silicon Photodetector with Graded Buffer Layer for Enhanced Responsivity | September 8, 2017 | January 14, 2021 | Dr. Kevin Fong, Dr. Amara Osei
U.S. 11,045,678 | Multi-Channel Optical Transceiver with Integrated Wavelength-Division Multiplexing on Silicon | June 22, 2018 | June 29, 2021 | Dr. Priya Ramanathan, Dr. Amara Osei, Liwei Zhang
U.S. 11,312,890 | Driver Circuit Architecture for High-Speed Silicon Photonic Mach-Zehnder Modulators | November 15, 2018 | April 26, 2022 | Dr. Kevin Fong, Rajesh Iyer
Category | Count
Issued U.S. Utility Patents | 87
Pending U.S. Patent Applications | 14
Total | 101

DRAFT — PRIVILEGED AND CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO FEDERAL RULE OF EVIDENCE 408

NON-BINDING TERM SHEET FOR PROPOSED CROSS-LICENSE AND SETTLEMENT AGREEMENT

RECITALS / BACKGROUND

SECTION 1: DEFINITIONS

SECTION 2: CROSS-LICENSE GRANT

SECTION 3: FINANCIAL TERMS

SECTION 4: MUTUAL COVENANT NOT TO SUE

SECTION 5: DISMISSAL OF LITIGATION

SECTION 6: MUTUAL GENERAL RELEASES

SECTION 7: CONFIDENTIALITY

SECTION 8: ASSIGNMENT AND CHANGE OF CONTROL

SECTION 9: REPRESENTATIONS AND WARRANTIES

SECTION 10: INDEMNIFICATION

SECTION 11: GOVERNING LAW AND DISPUTE RESOLUTION

SECTION 12: TERM AND TERMINATION

SECTION 13: MISCELLANEOUS

SECTION 14: NON-BINDING NATURE OF TERM SHEET

OPTIWAVE SEMICONDUCTOR CORP.

LUMOS PHOTONICS, INC.

APPENDIX A: LIST OF OWS ASSERTED PATENTS

APPENDIX B: IDENTIFIED OWS PATENT PORTFOLIO SUMMARY

APPENDIX C: ACCUSED PRODUCTS DESCRIPTION

END OF TERM SHEET

Record

Parties

Dates

Amounts