MEMORANDUM — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum was prepared by the Office of the General Counsel of Calderwood & Harkness LLP and constitutes attorney work product. It is protected by the attorney-client privilege and the work product doctrine. Distribution is restricted to the individuals identified herein. This memorandum and all information contained herein must not be disclosed to any person outside the firm without the prior written authorization of the Office of the General Counsel.
To: Jennifer Kwon, Responsible Partner, Capital Markets Group
From: Office of the General Counsel, Calderwood & Harkness LLP — Conflicts Review Committee
Date: March 3, 2023
Re: Conflicts Check — Proposed Representation of Optiwave Semiconductor Corp. in Connection with Convertible Notes Offering and Capped Call Overlay
Proposed Matter Number: 1014-00001
Billing Code: 48710-001
Priority: Expedited (engagement letter target date: March 6, 2023)
1. Purpose and Summary of Request
This memorandum documents the results of the conflicts check performed by the Conflicts Review Committee (the "Committee") of the Office of the General Counsel of Calderwood & Harkness LLP ("C&H" or the "Firm") in connection with the proposed engagement of C&H as issuer's counsel to Optiwave Semiconductor Corp. ("Optiwave Semi" or "OWS") in a proposed $250,000,000 Rule 144A offering of convertible senior notes due 2028 (the "Convertible Notes") with a concurrent privately negotiated capped call transaction (together with the offering, the "Transaction"). The convertible notes offering includes a 15% over-allotment option, which if fully exercised would bring the total aggregate principal amount to $287,500,000.
The conflicts check request was submitted by Jennifer Kwon (Responsible Partner, Capital Markets Group) on March 1, 2023, using the Firm's standard electronic Conflicts Check Request Form (Ref. No. CCR-2023-0438). The request identified the following staffing for the proposed engagement:
• Responsible Partner: Jennifer Kwon (Capital Markets Group, New York)
• Billing Partner: Theodore Langston (Capital Markets Group, New York)
• Lead Associate: Claire Dempsey (Capital Markets Group, New York)
• Working Associate: Audrey Zhou (Capital Markets Group, New York)
• Specialist Partner (Tax): Leonard Cross (Tax Group, New York)
The Committee conducted a comprehensive review of the Firm's conflicts database (the "C&H Conflicts System"), which encompasses all current and former clients, all current and former matters, all known adverse and related parties across all offices, and the personnel and relationship databases maintained by the Firm. The search was performed on March 2, 2023, and was supplemented with additional targeted searches completed on the morning of March 3, 2023, following receipt of supplemental party information from Ms. Kwon's team. The methodology employed is consistent with the Firm's Conflicts and New Business Intake Policy, as amended effective January 1, 2023 (the "Conflicts Policy").
Conclusion: Based on the analysis set forth in this memorandum, no disqualifying conflicts of interest have been identified that would preclude C&H from accepting the proposed engagement. The Committee has identified one matter requiring informed written consent — specifically, the Firm's current representation of Velthorn Zanthor & Co. in an unrelated arbitration matter — as well as two informational notations concerning prior closed representations of other Transaction participants. Subject to the informational disclosures and monitoring conditions set forth in Section 7 below, the engagement may proceed. The Committee authorizes the Responsible Partner and Billing Partner to finalize and execute an engagement letter with OWS, targeted for execution on March 6, 2023.
2. Client Identification
2.1 Prospective Client
The following information regarding the prospective client was provided by the requesting partner and supplemented by the Committee's independent review of publicly available filings with the Securities and Exchange Commission (the "SEC"), the Delaware Division of Corporations, and Nasdaq, Inc.:
Full Legal Name: Optiwave Semiconductor Corp.
Short Names / Aliases Searched: Optiwave Semi, OWS, Optiwave Semiconductor, Optiwave Corp., Optiwave
Entity Type: Corporation organized and existing under the laws of the State of Delaware (Delaware Division of Corporations file number 5738291; date of incorporation: April 18, 2014)
Employer Identification Number (EIN): 82-4917263
Principal Executive Offices: 4800 Great America Parkway, Suite 1200, San Jose, California 95054
Nasdaq Global Select Market Ticker Symbol: OWS
SEC Central Index Key (CIK): 0001823467
Industry Classification: Fabless semiconductor design company specializing in radio frequency (RF) and photonic integrated circuits for data-center optical interconnects, 5G wireless infrastructure, and next-generation network edge computing platforms. OWS designs and sells semiconductor products manufactured by third-party foundries and is classified within the SIC code 3674 (Semiconductors and Related Devices).
Fiscal Year 2022 Revenue: $812.4 million (as reported in OWS's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023)
Market Capitalization (as of March 3, 2023): Approximately $4.3 billion, based on 58.6 million diluted shares outstanding and a closing price of $73.38 per share on the Nasdaq Global Select Market as of the close of trading on March 2, 2023.
Known Subsidiaries: Based on Exhibit 21.1 to OWS's most recent Annual Report on Form 10-K, OWS has the following wholly owned subsidiaries: (i) Optiwave Semiconductor Design (Shanghai) Co., Ltd. (PRC), (ii) Optiwave Semi Israel Ltd. (Israel), and (iii) Optiwave Semi International Holdings B.V. (Netherlands). Each subsidiary name was independently searched in the C&H Conflicts System.
2.2 Key Client Personnel
The following individuals were identified as key client personnel for purposes of the conflicts check. Each individual's name was searched against the Firm's conflicts database, personnel records, and relationship management systems:
• Marcus Harding — Chief Executive Officer and Director
• Priya Nandakumar — Chief Financial Officer
• David Shih — General Counsel and Corporate Secretary (primary day-to-day contact for the engagement)
• Rachel Fontaine — Treasurer (primary contact for capped call negotiations and treasury matters)
• Dr. Evelyn Matsuda — Chair of the Board of Directors (Independent Director)
The Committee notes that the full board of directors of OWS was not searched at this time, as only the board chair was identified as having a direct role in the Transaction. Should additional board members become involved in the authorization or approval process in a manner that would make their identification material for conflicts purposes, a supplemental search will be conducted.
2.3 Prior C&H Relationship with OWS
C&H has not previously represented Optiwave Semiconductor Corp. in any matter. A comprehensive search of the Firm's conflicts database was conducted using all variants of the company name (including "Optiwave Semiconductor Corp.," "Optiwave Semi," "OWS," "Optiwave Semiconductor," "Optiwave Corp.," and "Optiwave"), the company's EIN (82-4917263), its SEC CIK number (0001823467), and the names and EINs of each of its three known subsidiaries. No existing client records were identified in connection with any of these searches. The search was also extended to the Firm's closed-matter archive, which maintains records for a minimum of twelve years following matter closure, and no historical representations were found.
Accordingly, the proposed engagement of OWS would constitute a new client relationship for C&H. Standard new-client intake procedures, including anti-money laundering ("AML") and know-your-client ("KYC") screening, Office of Foreign Assets Control ("OFAC") verification, and engagement letter execution, will be required prior to the commencement of billable work. Ms. Kwon's team has been advised of these requirements and has initiated the new-client intake process in parallel with this conflicts review.
3. Transaction Description
Based on the information provided by the requesting partner and the Firm's review of the preliminary term sheet furnished by Ridgepoint Capital Markets LLC (the lead initial purchaser), the Transaction is described as follows:
Offering of Convertible Senior Notes. OWS proposes to offer $250,000,000 aggregate principal amount of convertible senior notes due 2028 (the "Notes"), with an option granted to the initial purchasers to purchase up to an additional $37,500,000 aggregate principal amount of Notes (the "Over-Allotment Option" or "Greenshoe"), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Notes are expected to be senior, unsecured obligations of OWS, bearing interest at a fixed rate to be determined at pricing, payable semi-annually in arrears. The Notes will be convertible into shares of OWS common stock, cash, or a combination thereof, at OWS's election, subject to customary conversion mechanics and adjustment provisions. The anticipated maturity date is June 1, 2028.
Capped Call Transactions. Concurrently with the pricing of the Notes (and, if applicable, upon exercise of the Over-Allotment Option), OWS intends to enter into privately negotiated capped call transactions (the "Capped Call Transactions") with two dealer counterparties — Ridgepoint Capital Markets LLC (acting in its principal capacity as a derivatives dealer) and Northvane Financial Products LP — to offset potential dilution upon conversion of the Notes and/or offset any cash payments OWS is required to make in excess of the principal amount of converted Notes. The aggregate capped call premium is expected to be approximately $28,750,000 (assuming full exercise of the Over-Allotment Option), with Ridgepoint allocated 60% of the notional ($172,500,000 notional; $17,250,000 premium) and Northvane allocated 40% ($115,000,000 notional; $11,500,000 premium). The capped call strike price will equal the initial conversion price of the Notes, and the cap price will be set at a premium to the last reported sale price of OWS common stock on the pricing date, the specific percentage to be determined based on market conditions.
C&H Scope of Engagement. C&H has been asked to serve as issuer's counsel in connection with the Transaction. The anticipated scope of C&H's engagement includes, without limitation:
(a) Drafting, negotiating, and finalizing the Indenture between OWS and Broadmere Trust Company, N.A. (as trustee), including all exhibits and supplements thereto;
(b) Drafting, negotiating, and finalizing the Purchase Agreement among OWS and the initial purchasers;
(c) Drafting and finalizing the Offering Memorandum (preliminary and final), including all disclosure items, risk factors, and description of notes sections;
(d) Drafting, negotiating, and finalizing the Capped Call Confirmations (based on ISDA 2002 Master Agreement forms) between OWS and each of Ridgepoint Capital Markets LLC and Northvane Financial Products LP, together with any related ISDA schedules and credit support documentation;
(e) Preparing corporate authorizations, including resolutions of the Board of Directors and any requisite committee approvals;
(f) Rendering customary issuer's counsel legal opinions (enforceability opinion, corporate authorization opinion, Securities Act compliance opinion, and Investment Company Act opinion);
(g) Preparing and filing the Form 8-K announcing the pricing and closing of the Transaction;
(h) Preparing a Limited Consent and Waiver under OWS's existing senior secured revolving credit facility to permit incurrence of the Notes as Permitted Additional Indebtedness;
(i) Coordinating with the trustee, transfer agent, DTC, and other administrative parties on closing mechanics and deliverables; and
(j) Such other ancillary matters as may arise in the ordinary course of the Transaction.
Anticipated Timeline. The Transaction is currently expected to be marketed and priced in late April or early May 2023, with closing anticipated in late May or early June 2023. The engagement letter is targeted for execution on March 6, 2023, and drafting is expected to commence promptly thereafter.
Fee Arrangement. The requesting partner has indicated that the fee arrangement will consist of a fee cap of $1,850,000 for all professional services rendered in connection with the Transaction, plus estimated out-of-pocket disbursements (including filing fees, printing costs, travel, and third-party vendor charges) of approximately $45,000. The fee arrangement is subject to the Firm's standard billing policies and will be memorialized in the engagement letter.
4. Identification of Adverse and Related Parties
The following sections identify each entity and individual that was searched against the C&H Conflicts System in connection with this conflicts check. The search methodology encompassed all known affiliates, subsidiaries, parent entities, predecessor entities, and current and former directors and officers of each identified party, to the extent such information was available to the Committee. Search results and the Committee's analysis of each are set forth below.
4.1 Initial Purchasers / Underwriters (Adverse Parties to OWS in the Offering)
The initial purchasers in the offering are structurally on the opposite side of the Purchase Agreement from the issuer. The Purchase Agreement will be negotiated at arm's length and will contain customary representations, warranties, indemnification provisions, and conditions precedent that reflect the divergent interests of the issuer and the initial purchasers. For purposes of this conflicts analysis, the initial purchasers are treated as parties whose interests are adverse to those of the prospective client (OWS) in the Transaction.
4.1.1 Ridgepoint Capital Markets LLC.
Role in Transaction: Lead initial purchaser and sole bookrunning manager for the convertible notes offering. Ridgepoint will also serve as a capped call counterparty (in its principal capacity as a derivatives dealer) with a 60% notional allocation. See Section 4.2.1 below for the capped call analysis.
Entity Type: Limited liability company organized under the laws of the State of Delaware; registered as a broker-dealer with the SEC (CRD No. 138724) and as a member of FINRA.
Principal Office: 383 Madison Avenue, 22nd Floor, New York, New York 10179.
Key Personnel Searched: Cameron Walsh (Head of Equity-Linked Origination), Natasha Okonkwo (Managing Director, Equity Capital Markets Execution).
C&H Conflicts System Search Results: The search identified two prior representations of Ridgepoint Capital Markets LLC by C&H:
(i) Matter No. 1014-00001: C&H represented Ridgepoint Capital Markets LLC as underwriter's counsel in a Rule 144A / Regulation S offering of $500 million aggregate principal amount of 6.750% senior notes due 2029 issued by Cascade Industrial Holdings, Inc. in September 2021. The matter was closed on October 15, 2021. The issuer (Cascade Industrial Holdings, Inc.) is not affiliated with OWS and operates in a different industry (industrial manufacturing). C&H acted for Ridgepoint, not adverse to Ridgepoint, in that engagement.
(ii) Matter No. 1014-00001: C&H represented Ridgepoint Capital Markets LLC as underwriter's counsel in a registered follow-on equity offering (public offering of 8,000,000 shares of common stock) by Veridian Health Sciences, Inc. in March 2022. The matter was closed on April 3, 2022. The issuer (Veridian Health Sciences, Inc.) is not affiliated with OWS and operates in a different industry (biopharmaceuticals). C&H acted for Ridgepoint, not adverse to Ridgepoint, in that engagement.
Analysis: Both prior representations of Ridgepoint are fully closed matters with no ongoing engagement, no pending deliverables, and no outstanding fee obligations. No ongoing attorney-client relationship exists between C&H and Ridgepoint. In the proposed Transaction, C&H would act on behalf of OWS (the issuer), and Ridgepoint's interests as initial purchaser and capped call counterparty are on the opposite side of the negotiated transaction documents. However, because the prior representations are closed, no current-client conflict arises under Rule 1.7 of the New York Rules of Professional Conduct (the "NYRPC") or any analogous rule applicable in any jurisdiction where C&H attorneys are admitted.
The Committee further analyzed whether a former-client conflict exists under NYRPC Rule 1.9. Rule 1.9(a) provides that a lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client, unless the former client gives informed consent, confirmed in writing. The prior representations of Ridgepoint involved entirely different issuers (Cascade Industrial Holdings, Inc. and Veridian Health Sciences, Inc.), entirely different securities (high-yield notes and common equity, respectively), and entirely different industries. There is no substantial relationship between the subject matter of those prior representations and the proposed OWS convertible notes offering. No confidential information obtained in the course of the prior Ridgepoint representations could reasonably be expected to be material to or usable in the current OWS engagement. Accordingly, no disqualifying former-client conflict exists, and no consent from Ridgepoint is required.
Conclusion: No disqualifying conflict. Informational notation in the conflicts file. See Section 7.2.
4.1.2 Harborstone Securities Inc.
Role in Transaction: Co-manager and initial purchaser, with a 25% economics allocation (underwriting commitment of $62,500,000 aggregate principal amount of Notes, or $71,875,000 if the Over-Allotment Option is fully exercised).
Entity Type: Corporation organized under the laws of the State of Delaware; registered as a broker-dealer with the SEC (CRD No. 107892) and as a member of FINRA.
Principal Office: 200 Vesey Street, Suite 3100, New York, New York 10281.
Key Personnel Searched: Jonathan Mercer (Managing Director, Equity-Linked Products).
C&H Conflicts System Search Results: No prior or current representations of Harborstone Securities Inc. or any known affiliate were identified in the C&H Conflicts System. The search was conducted using the entity's full legal name, common abbreviations ("Harborstone Securities," "Harborstone Sec."), CRD number, and the names of its known parent entity (Harborstone Financial Group, Inc.) and key subsidiaries. No matches were returned.
Analysis: Harborstone Securities is not a current or former client of C&H. No conflict of interest exists.
Conclusion: No conflict. No action required.
4.1.3 Velthorn Zanthor & Co.
Role in Transaction: Co-manager and initial purchaser, with a 15% economics allocation (underwriting commitment of $37,500,000 aggregate principal amount of Notes, or $43,125,000 if the Over-Allotment Option is fully exercised).
Entity Type: General partnership organized under the laws of the State of New York; registered as a broker-dealer with the SEC (CRD No. 112543) and as a member of FINRA.
Principal Office: 750 Seventh Avenue, 18th Floor, New York, New York 10019.
Key Personnel Searched: Samira El-Amin (Director, Convertible Bond Desk).
C&H Conflicts System Search Results: The search identified one current, active representation of Velthorn Zanthor & Co. by C&H:
Matter No. 1014-00001: C&H's Litigation Group (lead partner: Margaret A. Dalton, Litigation Department, New York) currently represents Velthorn Zanthor & Co. as respondent in a pending commercial arbitration proceeding administered by the American Arbitration Association (AAA Case No. 01-22-0004-7891). The arbitration involves a dispute arising under a commercial office lease for Velthorn Zanthor's former satellite office space in Boston, Massachusetts. The claimant in the arbitration is Tremont Property Holdings LLC, the landlord. The dispute concerns Velthorn Zanthor's early termination of the lease and the landlord's claim for unpaid rent, restoration costs, and liquidated damages. The matter was opened on June 14, 2022, and remains active. The next scheduled arbitration hearing date is April 27, 2023. The matter is entirely unrelated to capital markets, securities offerings, semiconductor industry matters, convertible notes, capped call transactions, or any of the parties to the proposed OWS Transaction.
Analysis: Velthorn Zanthor & Co. is a current client of C&H by virtue of the Firm's ongoing representation in the commercial arbitration matter (Matter No. 1014-00001). The proposed OWS engagement would place C&H in the position of representing OWS (the issuer) in a transaction in which Velthorn Zanthor (a current C&H client) is an initial purchaser on the opposite side of the Purchase Agreement.
Under NYRPC Rule 1.7(a)(1), a lawyer shall not represent a client if a reasonable lawyer would conclude that the representation will involve the lawyer in representing differing interests. Rule 1.7(a)(2) further provides that a lawyer shall not represent a client if a reasonable lawyer would conclude that there is a significant risk that the lawyer's professional judgment on behalf of a client will be adversely affected by the lawyer's own financial, business, property, or other personal interests. Notwithstanding, Rule 1.7(b) permits the representation if, among other things, the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client, the representation is not prohibited by law, the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal, and each affected client gives informed consent, confirmed in writing.
The Committee's analysis is as follows:
Nature of the adversity: In a capital markets offering, the initial purchasers and the issuer sit on opposite sides of the Purchase Agreement. The Purchase Agreement involves arm's-length negotiations over pricing, allocation, representations, warranties, indemnification, contribution, conditions precedent, and termination provisions. While the Transaction is fundamentally a consensual commercial arrangement — all parties seek a successful offering — the negotiation of the Purchase Agreement does involve divergent economic interests and allocation of risk between the issuer and the initial purchasers. Velthorn Zanthor, as a co-manager with a 15% economics allocation, has a financial stake in the terms of the Purchase Agreement, although it is not the lead bookrunner and its individual negotiating leverage is limited relative to Ridgepoint Capital Markets LLC (the lead initial purchaser). As a practical matter, Prescott Whitfield LLP (counsel to the initial purchasers) will negotiate the Purchase Agreement on behalf of all three initial purchasers collectively, and Velthorn Zanthor's specific interests in the Purchase Agreement negotiations are unlikely to diverge materially from those of the other initial purchasers.
Materiality and risk assessment: The Committee concludes that, although a technical current-client conflict may exist under a strict reading of Rule 1.7(a)(1), the risk to C&H's independent professional judgment is low. The two representations are entirely unrelated in subject matter — a commercial lease arbitration in Boston bears no relationship to a convertible notes offering and capped call transaction for a semiconductor company. No confidential information from either representation could reasonably be expected to be relevant to the other. The Firm's ability to provide competent and diligent representation to both OWS (in the convertible notes offering) and Velthorn Zanthor (in the arbitration) is not impaired. The matters are handled by different practice groups (Capital Markets and Litigation, respectively), different partners, and different teams.
Consentability: The Committee has determined that the concurrent representation is consentable under NYRPC Rule 1.7(b). The Firm reasonably believes it can provide competent and diligent representation to each affected client. The representation is not prohibited by law. The representation does not involve the assertion of a claim by OWS against Velthorn Zanthor (or vice versa) in the same proceeding before a tribunal.
Recommended course of action: Out of an abundance of caution, and consistent with the Firm's Conflicts Policy, the Committee recommends that C&H obtain informed written consent from both affected clients — Velthorn Zanthor & Co. and OWS — prior to the commencement of the engagement. The specific recommended action items are set forth in Section 7.1 below.
Conclusion: Potential current-client conflict identified. Consentable with informed written consent from both Velthorn Zanthor & Co. and OWS. See Section 7.1 for required action items.
4.2 Capped Call Counterparties
The capped call counterparties will enter into privately negotiated derivative transactions with OWS. The Capped Call Confirmations will be documented under ISDA Master Agreements and will involve arm's-length negotiation of economic and credit terms. For purposes of this conflicts analysis, the capped call counterparties are treated as parties whose interests are adverse to those of OWS.
4.2.1 Ridgepoint Capital Markets LLC (Acting in Principal Capacity).
This is the same entity identified in Section 4.1.1 above, acting in a dual capacity in the Transaction: as lead initial purchaser and sole bookrunning manager for the convertible notes offering, and as a capped call counterparty in its principal capacity as a derivatives dealer. Ridgepoint's capped call allocation is 60% of the total notional amount, representing $172,500,000 in notional (based on full exercise of the Over-Allotment Option) and an estimated premium share of $17,250,000.
The conflicts analysis set forth in Section 4.1.1 encompasses both of Ridgepoint's roles in the Transaction. No additional or different conflict arises from Ridgepoint's role as a capped call counterparty beyond that already analyzed. The prior closed representations of Ridgepoint by C&H did not involve derivatives, ISDA documentation, or capped call transactions, further confirming the absence of any substantial relationship.
Conclusion: No additional conflict beyond that already analyzed in Section 4.1.1. No further action required.
4.2.2 Northvane Financial Products LP.
Role in Transaction: Capped call counterparty, with a 40% notional allocation ($115,000,000 in notional, based on full exercise of the Over-Allotment Option; estimated premium share of $11,500,000).
Entity Type: Limited partnership organized under the laws of the State of Delaware; registered as a swap dealer with the Commodity Futures Trading Commission ("CFTC") (NFA ID No. 0487291) and as a security-based swap dealer with the SEC.
Principal Office: 1 Liberty Plaza, 40th Floor, New York, New York 10006.
Key Personnel Searched: Philip Granier (Head of Equity Derivatives).
C&H Conflicts System Search Results: No prior or current representations of Northvane Financial Products LP or any known affiliate (including its general partner, Northvane Financial Holdings LLC, and its ultimate parent entity, Northvane Group, Inc.) were identified in the C&H Conflicts System. The search was conducted using the entity's full legal name, common abbreviations, NFA ID number, and the names of its known parent and affiliated entities.
Analysis: Northvane Financial Products LP is not a current or former client of C&H. No conflict of interest exists.
Conclusion: No conflict. No action required.
4.3 Trustee / Paying Agent
4.3.1 Broadmere Trust Company, N.A.
Role in Transaction: Trustee, registrar, paying agent, and conversion agent under the Indenture to be entered into in connection with the issuance of the Notes. Broadmere Trust will also serve as custodian for the global note certificates deposited with The Depository Trust Company ("DTC").
Entity Type: National banking association organized and existing under the laws of the United States; regulated by the Office of the Comptroller of the Currency ("OCC").
Corporate Trust Office: 100 Wall Street, 6th Floor, New York, New York 10005.
Key Personnel Searched: Karen Llewellyn (Relationship Manager, Corporate Trust).
DTC Participant Number: 2174.
C&H Conflicts System Search Results: The C&H Conflicts System reflects numerous instances in which C&H has interacted with Broadmere Trust Company, N.A. in its capacity as trustee, paying agent, registrar, or conversion agent in connection with debt and equity-linked securities offerings where C&H represented the issuer or the underwriters. These interactions are in the ordinary course of capital markets transactions and do not constitute an attorney-client relationship between C&H and Broadmere Trust. Broadmere Trust Company, N.A. is not a current client of C&H. The Firm has not represented Broadmere Trust in any capacity — advisory, transactional, or litigation — during the period covered by the Firm's conflicts database.
Analysis: The trustee in a debt offering acts in a neutral fiduciary capacity for the benefit of the holders of the notes. The trustee's interests are not adverse to those of the issuer in the ordinary course of the offering transaction, and the trustee is not a counterparty to the issuer in the same sense as the initial purchasers or capped call counterparties. Broadmere Trust is neither a current client nor a former client of C&H. No conflict of interest exists.
Conclusion: No conflict. No action required.
4.4 Opposing Counsel
4.4.1 Prescott Whitfield LLP.
Role in Transaction: Outside counsel to the initial purchasers (Ridgepoint Capital Markets LLC, Harborstone Securities Inc., and Velthorn Zanthor & Co.) in connection with the convertible notes offering. Prescott Whitfield will negotiate the Purchase Agreement, review the Offering Memorandum, and render customary initial purchasers' counsel legal opinions.
Entity Type: Limited liability partnership organized under the laws of the State of New York; headquartered in New York.
Principal Office: 51 West 52nd Street, New York, New York 10019.
Key Personnel Identified: Diana Castellano (Lead Partner, Capital Markets), Ryan Fujimoto (Lead Associate).
C&H Conflicts System Search Results: Prescott Whitfield LLP is a well-known law firm that regularly appears as opposing counsel in capital markets transactions in which C&H participates. The Firm's conflicts database does not track opposing counsel as clients or adverse parties (as opposing counsel are not parties to the transaction), and no attorney-client relationship between C&H and Prescott Whitfield has ever existed. C&H and Prescott Whitfield have worked on opposite sides of numerous transactions without incident.
Analysis: The involvement of Prescott Whitfield LLP as opposing counsel does not give rise to any conflict of interest. Opposing law firms are not parties to the transaction, and no professional responsibility rule prohibits a firm from participating in a transaction in which a particular law firm appears on the opposite side, absent unusual circumstances not present here.
Conclusion: No conflict. No action required.
4.5 Other Transaction Participants
The following additional entities were identified as participants in the Transaction or as parties with a contractual or regulatory relationship with OWS that may be affected by the Transaction. Each was searched against the C&H Conflicts System.
4.5.1 Aldgate & Finch LLP (Independent Auditor).
Role: Independent registered public accounting firm for OWS. Aldgate & Finch audits OWS's annual financial statements and reviews OWS's interim financial statements, all of which will be incorporated by reference or included in the Offering Memorandum. Aldgate & Finch will deliver a customary comfort letter to the initial purchasers in connection with the offering.
PCAOB Registration: Registered with the Public Company Accounting Oversight Board.
Principal Office: 350 South Grand Avenue, Suite 3000, Los Angeles, California 90071.
Key Personnel Searched: Robert Nishimura (Engagement Partner for the OWS audit).
C&H Conflicts System Search Results: No current or prior representation of Aldgate & Finch LLP or any known affiliate was identified. The search was conducted using the firm's full name, common abbreviations, and known office locations.
Analysis: Aldgate & Finch is not a current or former client of C&H. The auditor's role in the Transaction is that of an independent professional engaged by OWS; the auditor is not adverse to OWS or to any other party for conflict-of-interest purposes. No conflict exists.
Conclusion: No conflict. No action required.
4.5.2 Clearwater Transfer Services Inc. (Transfer Agent).
Role: Transfer agent and registrar for OWS's common stock (Nasdaq: OWS). In connection with the Transaction, Clearwater Transfer Services may be required to issue or reserve shares of OWS common stock underlying the Notes upon conversion and to coordinate with Broadmere Trust Company, N.A. and DTC on book-entry settlement mechanics.
Principal Office: 6201 15th Avenue, Brooklyn, New York 11219.
C&H Conflicts System Search Results: No current or prior representation of Clearwater Transfer Services Inc. or any known affiliate was identified in the C&H Conflicts System.
Analysis: Clearwater Transfer Services is not a current or former client of C&H. The transfer agent's role is administrative and ministerial. No conflict exists.
Conclusion: No conflict. No action required.
4.5.3 Crestline National Bank, N.A. (Revolving Credit Facility Agent).
Role: Administrative agent and a lender under OWS's existing $300,000,000 senior secured revolving credit facility (the "Revolving Credit Facility"), which was entered into pursuant to a Credit Agreement, dated as of August 15, 2022 (as amended from time to time, the "Credit Agreement"), among OWS, as borrower, the lenders party thereto, and Crestline National Bank, N.A., as administrative agent and collateral agent. As of the anticipated pricing date for the convertible notes offering, approximately $75,000,000 is expected to be outstanding under the Revolving Credit Facility. A portion of the net proceeds of the convertible notes offering may be used to repay outstanding borrowings under the Revolving Credit Facility.
In connection with the Transaction, a limited consent and waiver under Section 7.01(b) of the Credit Agreement (the "Negative Covenants — Indebtedness" provision) will be required from the requisite lenders (defined in the Credit Agreement as lenders holding more than 50% of the aggregate revolving commitments) to permit the incurrence of the Notes as "Permitted Additional Indebtedness" thereunder (or, alternatively, to waive any default that would arise from such incurrence). C&H will prepare and negotiate the Limited Consent and Waiver on behalf of OWS. Crestline National Bank, N.A. will be a signatory to the Limited Consent and Waiver in its capacity as administrative agent.
Entity Type: National banking association; OCC-regulated.
Principal Office: 227 Park Avenue, 14th Floor, New York, New York 10172.
C&H Conflicts System Search Results: The search identified one prior representation of Crestline National Bank, N.A. by C&H:
Matter No. 1014-00001: C&H represented Crestline National Bank, N.A. as administrative agent and co-lead arranger in a $750,000,000 syndicated term loan and revolving credit facility for Westmark Logistics Corp. in 2019-2020. The matter was closed on February 28, 2020. The borrower (Westmark Logistics Corp.) is not affiliated with OWS and operates in a different industry (transportation and logistics). C&H acted for Crestline National, not adverse to Crestline National, in that engagement.
No other current or prior representations of Crestline National Bank, N.A. were identified.
Analysis: The prior representation of Crestline National is a fully closed matter with no ongoing engagement, no pending deliverables, and no outstanding fee obligations. No ongoing attorney-client relationship exists between C&H and Crestline National. In the proposed Transaction, C&H will draft the Limited Consent and Waiver on behalf of OWS, which requires Crestline National's signature as administrative agent. Crestline National is not in an adverse position to OWS in the conventional sense — the consent and waiver is a collaborative process, and Crestline National's interests as administrative agent and lender are generally aligned with permitting a transaction that enhances the borrower's liquidity and financial flexibility (and that may result in partial repayment of outstanding Revolving Credit Facility borrowings). No former-client conflict exists under NYRPC Rule 1.9 because the prior representation of Crestline National involved a different borrower, a different transaction, and a different industry, and no confidential information from that prior engagement could reasonably be expected to be material to the current OWS engagement. No consent is required.
Conclusion: No conflict. Informational notation in the conflicts file. See Section 7.3.
4.5.4 Piedmont Commerce Bank (Syndicate Lender).
Role: Syndicate lender under OWS's Revolving Credit Facility. Piedmont Commerce Bank is a member of the lending syndicate and will be required to consent to (or at least not object to) the Limited Consent and Waiver if the requisite lender threshold so requires.
Entity Type: State-chartered commercial bank organized under the laws of the State of North Carolina.
C&H Conflicts System Search Results: No current or prior representation of Piedmont Commerce Bank or any known affiliate was identified in the C&H Conflicts System. The search was conducted using the bank's full name, known abbreviations, and state charter information.
Analysis: Piedmont Commerce Bank is not a current or former client of C&H. No conflict exists.
Conclusion: No conflict. No action required.
4.5.5 Lakeshore Federal Credit Corp. (Syndicate Lender).
Role: Syndicate lender under OWS's Revolving Credit Facility. Lakeshore Federal Credit Corp. is a member of the lending syndicate and, like Piedmont Commerce Bank, may be required to consent to the Limited Consent and Waiver.
Entity Type: Corporation organized under the laws of the State of Delaware.
C&H Conflicts System Search Results: No current or prior representation of Lakeshore Federal Credit Corp. or any known affiliate was identified in the C&H Conflicts System. The search was conducted using the entity's full name and known abbreviations.
Analysis: Lakeshore Federal Credit Corp. is not a current or former client of C&H. No conflict exists.
Conclusion: No conflict. No action required.
5. Director and Officer Cross-Check
In accordance with the Firm's Conflicts Policy, the Committee conducted a cross-check of the names of all identified OWS directors and officers against the Firm's personnel database (encompassing all current partners, counsel, associates, and professional staff across all C&H offices), the Firm's client relationship management system, and publicly available sources (including SEC filings, Westmark Health IT, and professional directories). The following individuals were searched:
• Marcus Harding, Chief Executive Officer and Director
• Priya Nandakumar, Chief Financial Officer
• David Shih, General Counsel and Corporate Secretary
• Rachel Fontaine, Treasurer
• Dr. Evelyn Matsuda, Chair of the Board of Directors (Independent Director)
The results of the cross-check are as follows:
Familial Relationships. No C&H attorney or professional staff member has a familial relationship (including spouse, domestic partner, parent, child, sibling, or any other relationship by blood, marriage, or adoption within the second degree of consanguinity or affinity) with any of the identified OWS directors or officers.
Financial Relationships. No C&H attorney or professional staff member has a direct financial interest (including equity ownership, debt obligations, or material business arrangements) in or with any of the identified OWS directors or officers, other than incidental holdings of publicly traded securities that may include OWS common stock in diversified mutual funds or index funds over which C&H personnel exercise no individual investment discretion. Such incidental holdings do not give rise to a conflict under the applicable rules of professional conduct or the Firm's Conflicts Policy.
Prior Professional Relationships. No C&H attorney identified through the cross-check has previously served as counsel to, or in any other professional capacity for, any of the identified OWS directors or officers in their individual capacities. No C&H attorney has previously been employed by OWS or any of its subsidiaries, or has previously been employed by any entity at which one of the identified OWS directors or officers was concurrently employed, to the extent such concurrent employment would create a prior professional relationship material for conflicts purposes.
Board Interlocks. The Committee reviewed publicly available information regarding the board memberships of each identified OWS director to determine whether any OWS director serves on the board of directors of any current C&H client. No board interlock was identified. Specifically:
• Dr. Evelyn Matsuda serves on the boards of two other publicly traded companies (NovaTech Instruments, Inc. and Aether Biosciences Corp.), neither of which is a current or former client of C&H.
• Marcus Harding does not serve on the board of any entity other than OWS.
• The remaining officers (Nandakumar, Shih, and Fontaine) do not serve on the board of any other publicly traded or privately held entity that is a current or former C&H client.
Results: No conflict identified. No action required.
6. Summary of Conflicts Analysis
The following table summarizes the results of the conflicts analysis for all parties searched in connection with the proposed engagement:
7. Recommended Actions and Conditions
Based on the foregoing analysis, the Committee recommends the following action items and conditions as prerequisites or conditions to the engagement:
7.1 Velthorn Zanthor & Co. — Informed Consent/Waiver
The identification of Velthorn Zanthor & Co. as a current client of C&H (in the unrelated commercial arbitration matter, Matter No. 1014-00001) requires the following steps prior to the commencement of the proposed OWS engagement:
(a) Notification to the Litigation Group. The Committee will promptly notify Margaret A. Dalton (lead partner on Matter No. 1014-00001, Litigation Department, New York) of the proposed OWS engagement and the involvement of Velthorn Zanthor as a co-manager in the convertible notes offering. Ms. Dalton should be consulted regarding the status of the arbitration matter and any circumstances that might bear on the consentability analysis. This notification was initiated on March 3, 2023, and Ms. Dalton's response is pending as of the date of this memorandum.
(b) Informed Written Consent from Velthorn Zanthor & Co. C&H should obtain informed written consent from Velthorn Zanthor & Co. (through its authorized representative, which may be its in-house legal department or the individual who authorized the engagement of C&H in the arbitration matter) acknowledging and consenting to C&H's representation of OWS in the convertible notes offering and waiving any conflict arising from C&H's concurrent representation of Velthorn Zanthor in the unrelated arbitration matter. The consent letter should:
(i) Identify the nature of the proposed OWS engagement (issuer's counsel in a convertible notes offering in which Velthorn Zanthor is a co-manager);
(ii) Confirm that C&H will continue to represent Velthorn Zanthor diligently in the arbitration matter and that the OWS engagement will not affect C&H's commitment to or performance in the arbitration;
(iii) Confirm that no confidential information from the Velthorn Zanthor arbitration will be shared with or accessible to the OWS engagement team, and vice versa;
(iv) Request Velthorn Zanthor's written confirmation that it consents to C&H's undertaking the OWS engagement notwithstanding the concurrent representation; and
(v) Be signed by an authorized representative of Velthorn Zanthor and retained in both the arbitration matter file (Matter No. 1014-00001) and the new OWS matter file (proposed Matter No. 1014-00001).
(c) Disclosure to OWS and Informed Written Consent from OWS. C&H should disclose to David Shih (General Counsel of OWS) the fact that C&H currently represents Velthorn Zanthor & Co. — one of the co-managers in the offering — in an unrelated matter. The disclosure should make clear that C&H's representation of Velthorn Zanthor in the unrelated matter will not affect C&H's ability to represent OWS zealously and diligently in the convertible notes offering. OWS should be asked to provide informed written consent to C&H's acceptance of the engagement notwithstanding the concurrent Velthorn Zanthor relationship. This disclosure and consent should be incorporated into the engagement letter to be executed by OWS on or about March 6, 2023, or in a separate consent letter annexed to the engagement letter.