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ridgeline-approval-letter.docx DOCUMENT Litigation

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED COMMUNICATION ATTORNEY WORK PRODUCT

RIDGELINE CAPITAL PARTNERS, LP 200 Clarendon Street, 40th Floor Boston, MA 02116 Tel: (617) 555-4200

Fax: (617) 555-4201

April 2, 2024

VIA EMAIL AND OVERNIGHT COURIER

Rebecca Tanaka, Esq. General Counsel Optiwave Semiconductor Corp. 4810 Bayside Technology Parkway, Suite 300 Santa Clara, CA 95054

Re: Authorization of Litigation Budget — Patent Infringement Action Against Lumicore Technologies, Inc. (Case No. 2:24-cv-00319-JRG, E.D. Tex.)

Dear Ms. Tanaka:

I write in my capacity as Managing Partner of Ridgeline Capital Partners, LP ("Ridgeline") and Board Chair of Optiwave Semiconductor Corp. ("OWS" or the "Company") to formally confirm the Board of Directors' authorization of the litigation budget and related expenditures in connection with the proposed patent infringement action against Lumicore Technologies, Inc. ("Lumicore"). This letter follows several weeks of productive discussions between Ridgeline, OWS management, and our outside counsel regarding the merits, scope, and anticipated costs of this litigation. In particular, I refer you to the engagement letter from Calderwood & Harkness LLP dated March 18, 2024, as well as the comprehensive litigation budget and staffing plan submitted by that firm on March 25, 2024, both of which the Board has carefully reviewed in reaching the determinations set forth below.

This letter constitutes the official written record of the Board's authorization and is intended to provide you with the authority and guidance necessary to proceed with the commencement and prosecution of this action on behalf of the Company.

I. Board Action and Authorization

The Board of Directors of Optiwave Semiconductor Corp. convened a duly noticed special meeting on April 1, 2024, at which a quorum was present and all directors participated either in person or by secure videoconference. Following a detailed presentation by you and by Alan Ngo of Calderwood & Harkness LLP, and after thorough deliberation, the Board adopted OWS Board Resolution No. 2024-07 by unanimous vote of all directors present.

Pursuant to Board Resolution No. 2024-07, the Board has reviewed and approved the following:

1. Commencement of Litigation. The commencement of a patent infringement action against Lumicore Technologies, Inc. in the United States District Court for the Eastern District of Texas, marshall Division, to be filed under Case No. 2:24-cv-00319-JRG (or such other case number as may be assigned upon filing).

2. Retention of Lead Litigation Counsel. The retention of Calderwood & Harkness LLP as lead litigation counsel for the Company in this matter, pursuant to and in accordance with the terms and conditions set forth in the engagement letter dated March 18, 2024, as negotiated between Calderwood & Harkness LLP, OWS, and Ridgeline.

3. Retention of Local Counsel. The retention of Whitmore & Callahan LLP as local counsel in the Eastern District of Texas to assist Calderwood & Harkness LLP in all aspects of the litigation requiring local representation, including compliance with local rules, attendance at hearings and conferences, and coordination with the court.

4. Total Litigation Budget. A total litigation budget of Eighteen Million Five Hundred Thousand Dollars ($18,500,000) through and including trial, subject to the phase-by-phase allocations and the reporting, oversight, and approval terms described in detail below.

II. Scope of Authorized Litigation

The Board has authorized the Company to bring an action for patent infringement under 35 U.S.C. §§ 271 et seq., seeking to enforce four United States utility patents owned by OWS against Lumicore's accused product lines. The patents at issue are as follows:

• U.S. Patent No. 10,234,847 (the "'847 Patent") — Integrated Silicon-Photonics Transceiver Module with Multi-Lane Optical Engine

• U.S. Patent No. 10,891,193 (the "'193 Patent") — Method for High-Bandwidth Dense Wavelength Division Multiplexing in Photonic Integrated Circuits

• U.S. Patent No. 9,678,562 (the "'562 Patent") — Low-Insertion-Loss Optical Coupling Architecture for Co-Packaged Optics

• U.S. Patent No. 11,402,015 (the "'015 Patent") — Thermal Management System for High-Power Silicon-Photonics Transceiver Arrays

Of these, the '847 Patent, the '193 Patent, and the '015 Patent were developed internally by OWS through its research and development activities and are named on the Company's patent ledger as organic IP assets. The '562 Patent was acquired from Solara Optics, Inc. pursuant to an asset purchase agreement dated June 15, 2018, for a total portfolio acquisition price of $34.5 million covering a twelve-patent portfolio. The Company holds full and unrestricted title to all four asserted patents, free of any encumbrances, liens, or licenses that would impair OWS's standing to bring this action.

The accused Lumicore product lines are:

• LumiLink 400G-ZR+ pluggable coherent transceiver module

• LumiLink 800G-DR8 multi-mode silicon-photonics transceiver module

• LumiEdge 1600G-LR co-packaged optics module for next-generation hyperscale data center switching platforms

The Company seeks approximately $210 million in damages, comprising lost profits attributable to diverted sales and market share erosion, reasonable royalties on infringing sales where lost profits cannot be established, and enhanced damages for willful infringement under 35 U.S.C. § 284. In addition, the Company will seek a permanent injunction under 35 U.S.C. § 283 to restrain Lumicore from continued manufacture, use, sale, offer for sale, and importation of the accused products.

For context, OWS is the third-largest U.S. supplier of silicon-photonics transceiver modules for hyperscale data centers, holding a portfolio of 142 issued U.S. patents and 58 pending patent applications. The Company reported revenue of $487.3 million for fiscal year 2023. The patents at issue cover core aspects of OWS's transceiver architecture and manufacturing processes and are central to the Company's competitive position in this rapidly growing market.

III. Budget Authorization Details

The Board has authorized a total litigation budget of $18,500,000 to cover all fees, costs, disbursements, and expenses from the pre-suit investigation stage through and including trial, which is currently estimated to occur no earlier than February 2026 based on the Eastern District of Texas's scheduling practices and the complexity of this matter.

The phase-by-phase budget allocation, as set forth in Calderwood & Harkness LLP's litigation budget and staffing plan dated March 25, 2024, is as follows:

No separate contingency reserve is allocated within this budget. The Board notes that the success fee component of the Calderwood & Harkness LLP engagement (described further in Section IV below) provides a closely aligned incentive structure that the Board believes will encourage both cost discipline and a results-oriented approach on the part of lead counsel throughout the litigation.

Expert Fees. The Board notes that estimated expert fees of approximately $2,800,000 in the aggregate are included within the expert discovery and trial preparation phase allocations. The anticipated expert retention and fee breakdown is as follows:

• Dr. Caroline Ashford (technical expert — silicon-photonics design and architecture; patent infringement and validity analysis): $1,100,000

• Dr. Lawrence Keating (damages expert — lost profits, reasonable royalty, and enhanced damages quantification): $950,000

• Gregory Falk (industry expert — hyperscale data center transceiver market dynamics and competitive analysis): $375,000

• Benchmark Semiconductor Analysis, LLC (technical consulting and product teardown analysis): $375,000

These expert fee estimates are based on Calderwood & Harkness LLP's experience in comparable patent infringement matters and the scope of work anticipated for each expert. Actual fees may vary within the overall authorized budget, and the General Counsel is authorized to reallocate amounts between individual experts as necessary, provided total expert expenditures do not exceed the combined authorized amounts for the expert discovery and trial preparation phases without further approval as described in Section V below.

IV. Billing Rate and Fee Structure Acknowledgment

The Board acknowledges and approves the following fee arrangements for outside counsel:

Calderwood & Harkness LLP — 2024 Billing Rates

Notwithstanding the foregoing standard rates, the Board confirms the negotiated blended cap rate of $925 per hour applicable to all timekeepers on the matter, as negotiated between Ridgeline and Calderwood & Harkness LLP in connection with the engagement letter dated March 18, 2024. All invoices shall be rendered at the blended cap rate regardless of the seniority or classification of the timekeeper performing the work, and in no event shall the effective blended rate for any billing period exceed $925 per hour across all timekeepers on the matter.

The Board further acknowledges the success fee component of the engagement: Calderwood & Harkness LLP shall be entitled to a success fee equal to five percent (5%) of the net recovery achieved by OWS above the first $150 million, whether by judgment, settlement, or other resolution. The terms, conditions, and definitions applicable to the success fee (including the definition of "net recovery" and the treatment of injunctive relief) are as set forth in the engagement letter dated March 18, 2024.

Whitmore & Callahan LLP — Local Counsel Rates

The Board acknowledges the following approved billing rates for local counsel:

Local counsel fees and expenses shall be included within and counted against the overall authorized litigation budget of $18.5 million and are not additive to the phase allocations set forth above.

V. Reporting and Oversight Requirements

The Board imposes the following reporting and oversight requirements for the duration of the litigation, which the General Counsel shall communicate to Calderwood & Harkness LLP and ensure compliance with:

1. Monthly Billing Summaries. Calderwood & Harkness LLP shall provide monthly billing summaries with detailed time narratives to the General Counsel no later than the fifteenth (15th) day of the calendar month following the billing period. Each summary shall include a breakdown of hours by timekeeper, a description of tasks performed with sufficient detail to permit evaluation of reasonableness and necessity, a comparison of actual expenditures to the applicable phase allocation, and a cumulative budget tracking report.

2. Quarterly Case Status Reports. Calderwood & Harkness LLP shall prepare and deliver quarterly case status reports to the General Counsel and to Ridgeline Capital Partners, LP (Attention: Franklin Osei, Managing Partner). Each quarterly report shall include a summary of material case developments, an updated assessment of the strengths and risks of the Company's position, a forward-looking litigation timeline, and a budget variance analysis comparing actual spending to projected spending for the relevant phase.

3. Expenditure Approval Thresholds. Any individual expenditure or commitment exceeding Five Hundred Thousand Dollars ($500,000) that falls outside the approved phase allocations set forth in Section III above shall require the prior written approval of the General Counsel before the expenditure is incurred. The General Counsel shall promptly notify the Board of any such approval. For the avoidance of doubt, expenditures within a given phase allocation that are consistent with the approved budget do not require separate Board or General Counsel approval, provided such expenditures do not cause the applicable phase allocation to be exceeded.

4. Material Changes in Strategy or Posture. Any material change in case strategy, settlement discussions or proposals (whether initiated by OWS or by Lumicore), or litigation posture (including any consideration of voluntary dismissal, narrowing of asserted claims or accused products, or modification of the damages demand) must be promptly communicated by the General Counsel to the Board Chair. No settlement or resolution discussions may be initiated or advanced beyond a preliminary stage without the knowledge and guidance of the Board Chair.

5. Insurance Coverage Notification. The Company maintains directors' and officers' liability and litigation-cost insurance coverage with Pacific Rim Insurance Group under Policy No. PLI-2023-08812. The General Counsel shall ensure that appropriate and timely notice of the litigation is provided to Pacific Rim Insurance Group promptly upon the filing of the complaint, in accordance with the policy's notice provisions, and shall pursue recovery of all eligible litigation costs under the policy throughout the pendency of the action.

VI. Funding Source and Financial Context

The Board confirms that the authorized litigation budget of $18,500,000 will be funded from OWS's operating cash flow and, to the extent necessary or advisable in the judgment of the Chief Financial Officer, from drawings on the Company's existing revolving credit facility with Weston Fidelity Bank, N.A. The revolving facility has a total commitment of $125,000,000, and the Company currently has substantial availability under the facility to accommodate the anticipated litigation expenditure profile without compromising operating liquidity or capital expenditure plans.

For context, the Board notes that the authorized litigation spend of $18.5 million represents approximately 3.8% of OWS's fiscal year 2023 revenue of $487.3 million and approximately 30.1% of fiscal year 2023 net income of $61.4 million. While this is a material commitment of the Company's resources, the Board considers this expenditure fully justified in light of the following considerations:

(a) Strength of the Patent Portfolio and Infringement Evidence. The Company's infringement contentions are supported by robust technical evidence, including the detailed product teardown analysis performed by Benchmark Semiconductor Analysis, LLC (report dated December 12, 2022), which identified multiple specific claim-element correspondences between the asserted patent claims and the internal architecture of Lumicore's accused products. Calderwood & Harkness LLP's preliminary assessment, reflected in its litigation budget memorandum, rates the Company's likelihood of establishing infringement on at least three of the four asserted patents as "strong" and the likelihood on the fourth patent as "favorable."

(b) Magnitude of Potential Recovery. The Company seeks approximately $210 million in total damages. Even accounting for litigation risk and the possibility that the damages ultimately awarded may be less than the full amount sought, the expected value of the litigation substantially exceeds the authorized budget under a range of reasonable probability-weighted scenarios.

(c) Strategic Importance of IP Enforcement. The patents at issue cover core aspects of OWS's silicon-photonics transceiver technology, which is the foundation of the Company's competitive position in the hyperscale data center market. Allowing a fast-growing competitor to infringe these patents without consequence would erode OWS's technological differentiation, undermine the Company's ability to command premium pricing, and signal to the broader market that OWS will not vigorously defend its intellectual property rights. The Board views this enforcement action as essential to preserving and enhancing the long-term value of the Company's IP portfolio.

(d) Lumicore's Revenue from Accused Products. Based on publicly available information and the Company's competitive intelligence, Lumicore's fiscal year 2023 revenue from the accused product lines was approximately $264.9 million, and projected accused-product revenue through the estimated trial date is approximately $714.6 million. These figures support both the damages quantum and the urgency of obtaining injunctive relief before Lumicore further entrenches its market position with infringing products.

(e) Exhaustion of Pre-Suit Licensing Efforts. The Company, through its licensing agent FairPoint Licensing Group, LLC, undertook good-faith pre-suit licensing efforts over an extended period before concluding that litigation was necessary. FairPoint sent detailed licensing correspondence to Lumicore on January 15, 2023 and May 15, 2023, and a substantive in-person meeting was conducted on April 20, 2023 in Austin, Texas, at which FairPoint presented detailed claim charts and a licensing proposal. Lumicore formally rejected OWS's licensing overtures by letter dated July 10, 2023, stating that it did not believe it infringed any valid OWS patent and declining further discussions. The Board is satisfied that the Company has exhausted reasonable pre-suit alternatives and that litigation is the appropriate and necessary course of action.

(f) Ridgeline Capital's Investment Context. Ridgeline Capital Partners holds a 55% ownership stake in OWS, acquired in 2019 for $780 million. The Board, including the Ridgeline-nominated directors, views vigorous enforcement of OWS's core intellectual property as essential to preserving and enhancing shareholder value and as consistent with the investment thesis under which Ridgeline acquired its stake.

VII. Delegation of Authority

Pursuant to Board Resolution No. 2024-07, the Board hereby delegates the following authority to you, Rebecca Tanaka, in your capacity as General Counsel of Optiwave Semiconductor Corp.:

(a) You are authorized to execute all necessary documents in connection with the prosecution of this litigation, including, without limitation, the Calderwood & Harkness LLP engagement letter, any supplemental engagement letters or amendments thereto, retention agreements for experts and consultants (including the experts identified in Section III above and such additional experts as may be required), vendor agreements for e-discovery, trial technology, and related litigation support services, and all pleadings, motions, briefs, and other court filings.

(b) You are authorized to make all day-to-day litigation management decisions in consultation with Calderwood & Harkness LLP. The responsible partner at Calderwood & Harkness LLP for this matter is Alan Ngo, and the billing partner is Marcus Delgado. You shall serve as the primary point of contact between the Company and outside counsel and shall exercise your professional judgment in directing the conduct of the litigation on a day-to-day basis.

(c) You are authorized to approve expenditures within the authorized budget of $18,500,000 without further Board approval, subject to and in compliance with the reporting requirements and expenditure thresholds set forth in Section V above.

Notwithstanding the foregoing delegation, the Board expressly reserves to itself the following authorities, which may not be exercised by the General Counsel or by outside counsel without the prior approval of the Board of Directors (acting by majority vote at a duly convened meeting or by unanimous written consent):

(i) Approval of any settlement, consent judgment, or other resolution of the litigation, whether or not involving the payment or receipt of monetary consideration;

(ii) Any decision to seek or accept a permanent injunction, or to modify the scope of injunctive relief sought;

(iii) Any decision to materially modify the Company's damages demand (whether upward or downward); and

(iv) Any decision to voluntarily dismiss the action, in whole or in part, or to abandon any of the four asserted patents.

VIII. Closing

The Board has full confidence in you, in the Calderwood & Harkness LLP litigation team, and in the strength of OWS's patent infringement claims against Lumicore. We believe that this action represents a critically important step in protecting the Company's intellectual property, defending its market position, and maximizing value for all stakeholders.

This letter constitutes the official written confirmation of the Board of Directors' authorization pursuant to OWS Board Resolution No. 2024-07, adopted by unanimous vote on April 1, 2024. Please treat this letter, and all communications regarding litigation strategy, as privileged and confidential under the attorney-client privilege and the work product doctrine.

I ask that you acknowledge receipt of this letter at your earliest convenience and confirm that Calderwood & Harkness LLP has been informed of the Board's authorization and the terms set forth herein. Please also confirm that the engagement letter with Calderwood & Harkness LLP has been countersigned and that arrangements for the retention of Whitmore & Callahan LLP as local counsel are underway.

Should you have any questions, concerns, or need for further guidance from the Board, please do not hesitate to contact me directly. I am available at your convenience.

Sincerely,

RIDGELINE CAPITAL PARTNERS, LP

By: ________

Franklin Osei Managing Partner, Ridgeline Capital Partners, LP Board Chair, Optiwave Semiconductor Corp.

200 Clarendon Street, 40th Floor Boston, MA 02116 Tel: (617) 555-4200

Email: fosei@ridgelinecap.com

cc:

Dr. Priya Ramaswamy, Chief Executive Officer, Optiwave Semiconductor Corp.

David Leitner, Chief Financial Officer, Optiwave Semiconductor Corp.

Alan Ngo, Calderwood & Harkness LLP (via separate privileged transmission)

Board of Directors, Optiwave Semiconductor Corp. (via Board portal)

Enclosures:

1. Copy of OWS Board Resolution No. 2024-07 (dated April 1, 2024)

2. Calderwood & Harkness LLP Litigation Budget and Staffing Plan (dated March 25, 2024)

3. Calderwood & Harkness LLP Engagement Letter (dated March 18, 2024)

CONFIDENTIAL — This communication, including all enclosures, is protected by the attorney-client privilege and/or the work product doctrine. It is intended solely for the use of the addressee(s) identified above. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.

Phase	Authorized Budget
Pre-Suit Investigation and Case Preparation	$1,200,000
Pleadings and Early Motions (including venue challenges, if any)	$1,800,000
Fact discovery (including document review, depositions, and e-discovery)	$4,600,000
Claim Construction (Markman Hearing)	$2,100,000
Expert discovery (expert reports, depositions, and rebuttal)	$3,400,000
Dispositive Motions and Daubert Motions	$1,900,000
Trial Preparation (pretrial filings, exhibit preparation, witness preparation)	$2,300,000
Trial (estimated two-week jury trial)	$1,200,000
Total	$18,500,000
Timekeeper Category	Standard 2024 Rate
Partners	$1,150 – $1,350 per hour
Senior Associates	$825 per hour
Associates	$650 – $725 per hour
Paralegals	$375 per hour
Timekeeper	Approved Rate
Jim Callahan (Partner)	$575 per hour
Associate Support	$400 per hour
Paralegal	$275 per hour

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED COMMUNICATION ATTORNEY WORK PRODUCT
RIDGELINE CAPITAL PARTNERS, LP 200 Clarendon Street, 40th Floor Boston, MA 02116 Tel: (617) 555-4200
Fax: (617) 555-4201
April 2, 2024
VIA EMAIL AND OVERNIGHT COURIER
Rebecca Tanaka, Esq. General Counsel Optiwave Semiconductor Corp. 4810 Bayside Technology Parkway, Suite 300 Santa Clara, CA 95054
Re: Authorization of Litigation Budget — Patent Infringement Action Against Lumicore Technologies, Inc. (Case No. 2:24-cv-00319-JRG, E.D. Tex.)
Dear Ms. Tanaka:
I write in my capacity as Managing Partner of Ridgeline Capital Partners, LP ("Ridgeline") and Board Chair of Optiwave Semiconductor Corp. ("OWS" or the "Company") to formally confirm the Board of Directors' authorization of the litigation budget and related expenditures in connection with the proposed patent infringement action against Lumicore Technologies, Inc. ("Lumicore"). This letter follows several weeks of productive discussions between Ridgeline, OWS management, and our outside counsel regarding the merits, scope, and anticipated costs of this litigation. In particular, I refer you to the engagement letter from Calderwood & Harkness LLP dated March 18, 2024, as well as the comprehensive litigation budget and staffing plan submitted by that firm on March 25, 2024, both of which the Board has carefully reviewed in reaching the determinations set forth below.
This letter constitutes the official written record of the Board's authorization and is intended to provide you with the authority and guidance necessary to proceed with the commencement and prosecution of this action on behalf of the Company.
I. Board Action and Authorization
The Board of Directors of Optiwave Semiconductor Corp. convened a duly noticed special meeting on April 1, 2024, at which a quorum was present and all directors participated either in person or by secure videoconference. Following a detailed presentation by you and by Alan Ngo of Calderwood & Harkness LLP, and after thorough deliberation, the Board adopted OWS Board Resolution No. 2024-07 by unanimous vote of all directors present.
Pursuant to Board Resolution No. 2024-07, the Board has reviewed and approved the following:
1. Commencement of Litigation. The commencement of a patent infringement action against Lumicore Technologies, Inc. in the United States District Court for the Eastern District of Texas, marshall Division, to be filed under Case No. 2:24-cv-00319-JRG (or such other case number as may be assigned upon filing).
2. Retention of Lead Litigation Counsel. The retention of Calderwood & Harkness LLP as lead litigation counsel for the Company in this matter, pursuant to and in accordance with the terms and conditions set forth in the engagement letter dated March 18, 2024, as negotiated between Calderwood & Harkness LLP, OWS, and Ridgeline.
3. Retention of Local Counsel. The retention of Whitmore & Callahan LLP as local counsel in the Eastern District of Texas to assist Calderwood & Harkness LLP in all aspects of the litigation requiring local representation, including compliance with local rules, attendance at hearings and conferences, and coordination with the court.
4. Total Litigation Budget. A total litigation budget of Eighteen Million Five Hundred Thousand Dollars ($18,500,000) through and including trial, subject to the phase-by-phase allocations and the reporting, oversight, and approval terms described in detail below.
II. Scope of Authorized Litigation
The Board has authorized the Company to bring an action for patent infringement under 35 U.S.C. §§ 271 et seq., seeking to enforce four United States utility patents owned by OWS against Lumicore's accused product lines. The patents at issue are as follows:
• U.S. Patent No. 10,234,847 (the "'847 Patent") — Integrated Silicon-Photonics Transceiver Module with Multi-Lane Optical Engine
• U.S. Patent No. 10,891,193 (the "'193 Patent") — Method for High-Bandwidth Dense Wavelength Division Multiplexing in Photonic Integrated Circuits
• U.S. Patent No. 9,678,562 (the "'562 Patent") — Low-Insertion-Loss Optical Coupling Architecture for Co-Packaged Optics
• U.S. Patent No. 11,402,015 (the "'015 Patent") — Thermal Management System for High-Power Silicon-Photonics Transceiver Arrays
Of these, the '847 Patent, the '193 Patent, and the '015 Patent were developed internally by OWS through its research and development activities and are named on the Company's patent ledger as organic IP assets. The '562 Patent was acquired from Solara Optics, Inc. pursuant to an asset purchase agreement dated June 15, 2018, for a total portfolio acquisition price of $34.5 million covering a twelve-patent portfolio. The Company holds full and unrestricted title to all four asserted patents, free of any encumbrances, liens, or licenses that would impair OWS's standing to bring this action.
The accused Lumicore product lines are:
• LumiLink 400G-ZR+ pluggable coherent transceiver module
• LumiLink 800G-DR8 multi-mode silicon-photonics transceiver module
• LumiEdge 1600G-LR co-packaged optics module for next-generation hyperscale data center switching platforms
The Company seeks approximately $210 million in damages, comprising lost profits attributable to diverted sales and market share erosion, reasonable royalties on infringing sales where lost profits cannot be established, and enhanced damages for willful infringement under 35 U.S.C. § 284. In addition, the Company will seek a permanent injunction under 35 U.S.C. § 283 to restrain Lumicore from continued manufacture, use, sale, offer for sale, and importation of the accused products.
For context, OWS is the third-largest U.S. supplier of silicon-photonics transceiver modules for hyperscale data centers, holding a portfolio of 142 issued U.S. patents and 58 pending patent applications. The Company reported revenue of $487.3 million for fiscal year 2023. The patents at issue cover core aspects of OWS's transceiver architecture and manufacturing processes and are central to the Company's competitive position in this rapidly growing market.
III. Budget Authorization Details
The Board has authorized a total litigation budget of $18,500,000 to cover all fees, costs, disbursements, and expenses from the pre-suit investigation stage through and including trial, which is currently estimated to occur no earlier than February 2026 based on the Eastern District of Texas's scheduling practices and the complexity of this matter.
The phase-by-phase budget allocation, as set forth in Calderwood & Harkness LLP's litigation budget and staffing plan dated March 25, 2024, is as follows:
No separate contingency reserve is allocated within this budget. The Board notes that the success fee component of the Calderwood & Harkness LLP engagement (described further in Section IV below) provides a closely aligned incentive structure that the Board believes will encourage both cost discipline and a results-oriented approach on the part of lead counsel throughout the litigation.
Expert Fees. The Board notes that estimated expert fees of approximately $2,800,000 in the aggregate are included within the expert discovery and trial preparation phase allocations. The anticipated expert retention and fee breakdown is as follows:
• Dr. Caroline Ashford (technical expert — silicon-photonics design and architecture; patent infringement and validity analysis): $1,100,000
• Dr. Lawrence Keating (damages expert — lost profits, reasonable royalty, and enhanced damages quantification): $950,000
• Gregory Falk (industry expert — hyperscale data center transceiver market dynamics and competitive analysis): $375,000
• Benchmark Semiconductor Analysis, LLC (technical consulting and product teardown analysis): $375,000
These expert fee estimates are based on Calderwood & Harkness LLP's experience in comparable patent infringement matters and the scope of work anticipated for each expert. Actual fees may vary within the overall authorized budget, and the General Counsel is authorized to reallocate amounts between individual experts as necessary, provided total expert expenditures do not exceed the combined authorized amounts for the expert discovery and trial preparation phases without further approval as described in Section V below.
IV. Billing Rate and Fee Structure Acknowledgment
The Board acknowledges and approves the following fee arrangements for outside counsel:
Calderwood & Harkness LLP — 2024 Billing Rates
Notwithstanding the foregoing standard rates, the Board confirms the negotiated blended cap rate of $925 per hour applicable to all timekeepers on the matter, as negotiated between Ridgeline and Calderwood & Harkness LLP in connection with the engagement letter dated March 18, 2024. All invoices shall be rendered at the blended cap rate regardless of the seniority or classification of the timekeeper performing the work, and in no event shall the effective blended rate for any billing period exceed $925 per hour across all timekeepers on the matter.
The Board further acknowledges the success fee component of the engagement: Calderwood & Harkness LLP shall be entitled to a success fee equal to five percent (5%) of the net recovery achieved by OWS above the first $150 million, whether by judgment, settlement, or other resolution. The terms, conditions, and definitions applicable to the success fee (including the definition of "net recovery" and the treatment of injunctive relief) are as set forth in the engagement letter dated March 18, 2024.
Whitmore & Callahan LLP — Local Counsel Rates
The Board acknowledges the following approved billing rates for local counsel:
Local counsel fees and expenses shall be included within and counted against the overall authorized litigation budget of $18.5 million and are not additive to the phase allocations set forth above.
V. Reporting and Oversight Requirements
The Board imposes the following reporting and oversight requirements for the duration of the litigation, which the General Counsel shall communicate to Calderwood & Harkness LLP and ensure compliance with:
1. Monthly Billing Summaries. Calderwood & Harkness LLP shall provide monthly billing summaries with detailed time narratives to the General Counsel no later than the fifteenth (15th) day of the calendar month following the billing period. Each summary shall include a breakdown of hours by timekeeper, a description of tasks performed with sufficient detail to permit evaluation of reasonableness and necessity, a comparison of actual expenditures to the applicable phase allocation, and a cumulative budget tracking report.
2. Quarterly Case Status Reports. Calderwood & Harkness LLP shall prepare and deliver quarterly case status reports to the General Counsel and to Ridgeline Capital Partners, LP (Attention: Franklin Osei, Managing Partner). Each quarterly report shall include a summary of material case developments, an updated assessment of the strengths and risks of the Company's position, a forward-looking litigation timeline, and a budget variance analysis comparing actual spending to projected spending for the relevant phase.
3. Expenditure Approval Thresholds. Any individual expenditure or commitment exceeding Five Hundred Thousand Dollars ($500,000) that falls outside the approved phase allocations set forth in Section III above shall require the prior written approval of the General Counsel before the expenditure is incurred. The General Counsel shall promptly notify the Board of any such approval. For the avoidance of doubt, expenditures within a given phase allocation that are consistent with the approved budget do not require separate Board or General Counsel approval, provided such expenditures do not cause the applicable phase allocation to be exceeded.
4. Material Changes in Strategy or Posture. Any material change in case strategy, settlement discussions or proposals (whether initiated by OWS or by Lumicore), or litigation posture (including any consideration of voluntary dismissal, narrowing of asserted claims or accused products, or modification of the damages demand) must be promptly communicated by the General Counsel to the Board Chair. No settlement or resolution discussions may be initiated or advanced beyond a preliminary stage without the knowledge and guidance of the Board Chair.
5. Insurance Coverage Notification. The Company maintains directors' and officers' liability and litigation-cost insurance coverage with Pacific Rim Insurance Group under Policy No. PLI-2023-08812. The General Counsel shall ensure that appropriate and timely notice of the litigation is provided to Pacific Rim Insurance Group promptly upon the filing of the complaint, in accordance with the policy's notice provisions, and shall pursue recovery of all eligible litigation costs under the policy throughout the pendency of the action.
VI. Funding Source and Financial Context
The Board confirms that the authorized litigation budget of $18,500,000 will be funded from OWS's operating cash flow and, to the extent necessary or advisable in the judgment of the Chief Financial Officer, from drawings on the Company's existing revolving credit facility with Weston Fidelity Bank, N.A. The revolving facility has a total commitment of $125,000,000, and the Company currently has substantial availability under the facility to accommodate the anticipated litigation expenditure profile without compromising operating liquidity or capital expenditure plans.
For context, the Board notes that the authorized litigation spend of $18.5 million represents approximately 3.8% of OWS's fiscal year 2023 revenue of $487.3 million and approximately 30.1% of fiscal year 2023 net income of $61.4 million. While this is a material commitment of the Company's resources, the Board considers this expenditure fully justified in light of the following considerations:
(a) Strength of the Patent Portfolio and Infringement Evidence. The Company's infringement contentions are supported by robust technical evidence, including the detailed product teardown analysis performed by Benchmark Semiconductor Analysis, LLC (report dated December 12, 2022), which identified multiple specific claim-element correspondences between the asserted patent claims and the internal architecture of Lumicore's accused products. Calderwood & Harkness LLP's preliminary assessment, reflected in its litigation budget memorandum, rates the Company's likelihood of establishing infringement on at least three of the four asserted patents as "strong" and the likelihood on the fourth patent as "favorable."
(b) Magnitude of Potential Recovery. The Company seeks approximately $210 million in total damages. Even accounting for litigation risk and the possibility that the damages ultimately awarded may be less than the full amount sought, the expected value of the litigation substantially exceeds the authorized budget under a range of reasonable probability-weighted scenarios.
(c) Strategic Importance of IP Enforcement. The patents at issue cover core aspects of OWS's silicon-photonics transceiver technology, which is the foundation of the Company's competitive position in the hyperscale data center market. Allowing a fast-growing competitor to infringe these patents without consequence would erode OWS's technological differentiation, undermine the Company's ability to command premium pricing, and signal to the broader market that OWS will not vigorously defend its intellectual property rights. The Board views this enforcement action as essential to preserving and enhancing the long-term value of the Company's IP portfolio.
(d) Lumicore's Revenue from Accused Products. Based on publicly available information and the Company's competitive intelligence, Lumicore's fiscal year 2023 revenue from the accused product lines was approximately $264.9 million, and projected accused-product revenue through the estimated trial date is approximately $714.6 million. These figures support both the damages quantum and the urgency of obtaining injunctive relief before Lumicore further entrenches its market position with infringing products.
(e) Exhaustion of Pre-Suit Licensing Efforts. The Company, through its licensing agent FairPoint Licensing Group, LLC, undertook good-faith pre-suit licensing efforts over an extended period before concluding that litigation was necessary. FairPoint sent detailed licensing correspondence to Lumicore on January 15, 2023 and May 15, 2023, and a substantive in-person meeting was conducted on April 20, 2023 in Austin, Texas, at which FairPoint presented detailed claim charts and a licensing proposal. Lumicore formally rejected OWS's licensing overtures by letter dated July 10, 2023, stating that it did not believe it infringed any valid OWS patent and declining further discussions. The Board is satisfied that the Company has exhausted reasonable pre-suit alternatives and that litigation is the appropriate and necessary course of action.
(f) Ridgeline Capital's Investment Context. Ridgeline Capital Partners holds a 55% ownership stake in OWS, acquired in 2019 for $780 million. The Board, including the Ridgeline-nominated directors, views vigorous enforcement of OWS's core intellectual property as essential to preserving and enhancing shareholder value and as consistent with the investment thesis under which Ridgeline acquired its stake.
VII. Delegation of Authority
Pursuant to Board Resolution No. 2024-07, the Board hereby delegates the following authority to you, Rebecca Tanaka, in your capacity as General Counsel of Optiwave Semiconductor Corp.:
(a) You are authorized to execute all necessary documents in connection with the prosecution of this litigation, including, without limitation, the Calderwood & Harkness LLP engagement letter, any supplemental engagement letters or amendments thereto, retention agreements for experts and consultants (including the experts identified in Section III above and such additional experts as may be required), vendor agreements for e-discovery, trial technology, and related litigation support services, and all pleadings, motions, briefs, and other court filings.
(b) You are authorized to make all day-to-day litigation management decisions in consultation with Calderwood & Harkness LLP. The responsible partner at Calderwood & Harkness LLP for this matter is Alan Ngo, and the billing partner is Marcus Delgado. You shall serve as the primary point of contact between the Company and outside counsel and shall exercise your professional judgment in directing the conduct of the litigation on a day-to-day basis.
(c) You are authorized to approve expenditures within the authorized budget of $18,500,000 without further Board approval, subject to and in compliance with the reporting requirements and expenditure thresholds set forth in Section V above.
Notwithstanding the foregoing delegation, the Board expressly reserves to itself the following authorities, which may not be exercised by the General Counsel or by outside counsel without the prior approval of the Board of Directors (acting by majority vote at a duly convened meeting or by unanimous written consent):
(i) Approval of any settlement, consent judgment, or other resolution of the litigation, whether or not involving the payment or receipt of monetary consideration;
(ii) Any decision to seek or accept a permanent injunction, or to modify the scope of injunctive relief sought;
(iii) Any decision to materially modify the Company's damages demand (whether upward or downward); and
(iv) Any decision to voluntarily dismiss the action, in whole or in part, or to abandon any of the four asserted patents.
VIII. Closing
The Board has full confidence in you, in the Calderwood & Harkness LLP litigation team, and in the strength of OWS's patent infringement claims against Lumicore. We believe that this action represents a critically important step in protecting the Company's intellectual property, defending its market position, and maximizing value for all stakeholders.
This letter constitutes the official written confirmation of the Board of Directors' authorization pursuant to OWS Board Resolution No. 2024-07, adopted by unanimous vote on April 1, 2024. Please treat this letter, and all communications regarding litigation strategy, as privileged and confidential under the attorney-client privilege and the work product doctrine.
I ask that you acknowledge receipt of this letter at your earliest convenience and confirm that Calderwood & Harkness LLP has been informed of the Board's authorization and the terms set forth herein. Please also confirm that the engagement letter with Calderwood & Harkness LLP has been countersigned and that arrangements for the retention of Whitmore & Callahan LLP as local counsel are underway.
Should you have any questions, concerns, or need for further guidance from the Board, please do not hesitate to contact me directly. I am available at your convenience.
Sincerely,
RIDGELINE CAPITAL PARTNERS, LP
By: ________
Franklin Osei Managing Partner, Ridgeline Capital Partners, LP Board Chair, Optiwave Semiconductor Corp.
200 Clarendon Street, 40th Floor Boston, MA 02116 Tel: (617) 555-4200
Email: fosei@ridgelinecap.com
cc:
Dr. Priya Ramaswamy, Chief Executive Officer, Optiwave Semiconductor Corp.
David Leitner, Chief Financial Officer, Optiwave Semiconductor Corp.
Alan Ngo, Calderwood & Harkness LLP (via separate privileged transmission)
Board of Directors, Optiwave Semiconductor Corp. (via Board portal)
Enclosures:
1. Copy of OWS Board Resolution No. 2024-07 (dated April 1, 2024)
2. Calderwood & Harkness LLP Litigation Budget and Staffing Plan (dated March 25, 2024)
3. Calderwood & Harkness LLP Engagement Letter (dated March 18, 2024)
CONFIDENTIAL — This communication, including all enclosures, is protected by the attorney-client privilege and/or the work product doctrine. It is intended solely for the use of the addressee(s) identified above. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this communication in error, please notify the sender immediately and destroy all copies.
Phase | Authorized Budget
Pre-Suit Investigation and Case Preparation | $1,200,000
Pleadings and Early Motions (including venue challenges, if any) | $1,800,000
Fact discovery (including document review, depositions, and e-discovery) | $4,600,000
Claim Construction (Markman Hearing) | $2,100,000
Expert discovery (expert reports, depositions, and rebuttal) | $3,400,000
Dispositive Motions and Daubert Motions | $1,900,000
Trial Preparation (pretrial filings, exhibit preparation, witness preparation) | $2,300,000
Trial (estimated two-week jury trial) | $1,200,000
Total | $18,500,000
Timekeeper Category | Standard 2024 Rate
Partners | $1,150 – $1,350 per hour
Senior Associates | $825 per hour
Associates | $650 – $725 per hour
Paralegals | $375 per hour
Timekeeper | Approved Rate
Jim Callahan (Partner) | $575 per hour
Associate Support | $400 per hour
Paralegal | $275 per hour

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED COMMUNICATION ATTORNEY WORK PRODUCT

VIA EMAIL AND OVERNIGHT COURIER

RIDGELINE CAPITAL PARTNERS, LP

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