Contract analysis

I. Purpose and Scope of Memorandum This memorandum serves as the internal closing record for Calderwood & Harkness LLP ("C&H") Matter No. 1032-00001. It documents the firm's defense of Halcyon Semiconductor Americas Inc. ("Halcyon Americas") in the civil enforcement action brought by the State of Oregon, by and through Attorney General Diane Calloway, under Oregon Revised Statutes ("ORS") § 646.730 (prohibiting contr

II. Client Information A. Client and Related Entities Client: Halcyon Semiconductor AG ("Halcyon" or "HSAG") is an Aktiengesellschaft organized under the laws of the Federal Republic of Germany and publicly traded on the Frankfurt Stock Exchange (FSE: HLC). The company is headquartered at Ludwigstraße 27, 80539 Munich, Bavaria, Germany. Halcyon's Chief Executive Officer is Dr. Tobias Wendt, and its General Counsel is

III. Engagement Team A. Calderwood & Harkness LLP The following C&H attorneys staffed this engagement: • Elaine Forsythe, Partner, Antitrust & Competition Practice Group — Responsible Partner. Ms. Forsythe maintained overall responsibility for the matter, oversaw litigation strategy and settlement negotiations, made all court appearances on motions of significance, and served as the primary point of contact with the

IV. Engagement Terms The engagement was governed by a written engagement letter executed on April 18, 2023, between Calderwood & Harkness LLP and Halcyon Semiconductor Americas Inc. (acting on behalf of its parent, Halcyon Semiconductor AG). The key terms of the engagement were as follows: • Engagement Letter Date: April 18, 2023 • C&H Matter Number: 1032-00001 • Scope of Engagement: Defense of Halcyon Semiconductor

V. Opposing Parties and Counsel A. Plaintiff The plaintiff in this action was the State of Oregon, by and through Attorney General Diane Calloway. The Attorney General brought the action in her capacity as the chief legal officer of the State, exercising the authority vested in the office under ORS § 646.775 to enforce Oregon's antitrust statutes through civil proceedings seeking injunctive relief and civil penalties

VI. Case Background A. The Underlying Transaction On September 8, 2022, Halcyon Semiconductor AG, acting through its U.S. operating subsidiary Halcyon Semiconductor Americas Inc., executed an Agreement and Plan of Merger (the "Merger Agreement") to acquire one hundred percent (100%) of the outstanding shares of Meridian Photonics Inc. The transaction was structured as a reverse triangular merger, with Meridian surviv

1. Elimination of an Independent, Disruptive Innovator. The AG alleged that Meridian had been an independent, disruptive innovator in CPO technology — a company whose entrepreneurial focus on silicon photonics had driven significant advances in the technology and exerted competitive pressure on larger incumbent semiconductor manufacturers, including Halcyon. The acquisition, the AG alleged, eliminated Meridian as an

2. Vertical Foreclosure. The AG alleged a theory of vertical foreclosure, arguing that Halcyon's vertically integrated position — as a company that designs both controlling integrated circuits (including power management ICs and interface ICs used in conjunction with CPO modules) and, post-acquisition, the photonics modules themselves — would enable Halcyon to degrade the interoperability of Meridian CPO modules with

VII. Procedural History and Key Litigation Milestones A. Engagement Opening and Initial Response (April 2023) April 17, 2023: The Oregon AG filed the civil complaint in Multnomah County Circuit Court (Case No. 23CV-18274). On the same date, Priya Nagarajan contacted Elaine Forsythe to retain C&H for the defense. The C&H engagement was formally opened and assigned Matter No. 1032-00001. Local counsel Grantham Davis &

1. Federal Preemption. Halcyon asserted that the Hart-Scott-Rodino Act review process, which culminated in the grant of early termination of the waiting period on November 14, 2022 (HSR File No. 20221003-1847), preempted the AG's post-closing state antitrust challenge. Halcyon argued that the federal government's decision not to challenge the transaction, following a review of the competitive implications under the H

2. Procompetitive Efficiencies. Halcyon asserted that the acquisition would generate substantial procompetitive efficiencies, including cost savings from vertical integration, enhanced innovation capabilities through the combination of Halcyon's IC expertise and Meridian's silicon photonics technology, and the delivery of higher-performance, lower-cost CPO modules to customers — including Oregon data-center operators

3. Failing-Firm Doctrine. Halcyon asserted that Meridian's standalone CPO business was at risk of financial failure absent the acquisition, and that the failing-firm defense applied to preclude antitrust liability. While this defense was preserved for trial, the factual basis for the defense was acknowledged internally as relatively weak, and it was treated as a secondary argument in the overall defense strategy.

4. Failure to Demonstrate Substantial Lessening of Competition. Halcyon asserted that the AG had failed to allege facts sufficient to demonstrate that the transaction would substantially lessen competition in any properly defined relevant market, given the dynamic nature of the CPO market, the presence of significant competitors (Luminos Systems Corp. at approximately 22% market share, Crestwave Optical Technologies

1. Federal Preemption. The motion argued that the HSR Act establishes a comprehensive federal scheme for pre-merger antitrust review, and that the grant of early termination — which followed a substantive review of the competitive implications of the Halcyon-Meridian transaction by the federal antitrust agencies — preempted the AG's attempt to mount an independent post-closing challenge under state law. The motion ci

2. Failure to State a Claim Under ORS § 646.730. The motion argued that the AG's complaint failed to allege facts sufficient to establish a plausible relevant product market or to demonstrate a substantial lessening of competition. Specifically, Halcyon contended that the AG's market definition was overly narrow — excluding traditional pluggable optical transceivers that compete with CPO modules at the margin — and t

1. AG Unlikely to Succeed on the Merits. Halcyon argued that the AG was unlikely to prevail on the merits of its claims given the substantial procompetitive efficiencies generated by the combination of Halcyon's analog IC expertise with Meridian's portfolio of 47 CPO-related U.S. patents. The opposition emphasized that the transaction would enable the development of next-generation, vertically integrated CPO solution

2. Balance of Equities Favors Halcyon. The opposition argued that the behavioral restrictions sought by the AG would disrupt the integration of Meridian into the Halcyon organization, delay the realization of procompetitive efficiencies, and harm the combined entity's ability to compete effectively in a rapidly evolving market. The opposition contended that the balance of equities tipped decidedly in favor of Halcyon

3. Public Interest Favors Continued Integration. Halcyon argued that the public interest was best served by permitting the continued integration of Halcyon and Meridian, which would deliver lower-cost, higher-performance CPO modules to Oregon data-center operators and other U.S. customers. The opposition contended that the AG's proposed restrictions would, paradoxically, harm the very customers the AG purported to pr

I. Mediation (October 6–20, 2023) October 6, 2023: The parties entered formal mediation before retired Judge Patricia Loomis, who was appointed by the court as mediator pursuant to the consent of both parties. Retired Judge Loomis was a highly regarded mediator with extensive experience in complex commercial disputes, including antitrust matters, and was mutually acceptable to both sides. The mediation sessions were

VIII. Outcome — Consent Decree Summary A. Key Terms of the Behavioral Remedy The Final Judgment and Consent Decree entered on November 8, 2023, imposed the following behavioral remedy and other terms on Halcyon Semiconductor Americas Inc.:

1. FRAND Licensing Commitment. Halcyon is required to offer Fair, Reasonable, and Non-Discriminatory ("FRAND") licenses for Meridian's forty-seven (47) CPO-related U.S. patents to any interested licensee that requests such a license. This obligation applies for a period of five (5) years from the date of entry of the consent decree, through November 8, 2028. The FRAND commitment is intended to ensure that competitors

2. Interoperability Obligation. Halcyon is required to maintain backward-compatible interoperability between Meridian CPO modules and third-party switch ASICs that conform to the Optical Internetworking Forum ("OIF") 400ZR and 800ZR standards. This obligation applies for a period of five (5) years from the date of entry of the consent decree, through November 8, 2028. The interoperability obligation is designed to ad

3. Non-Discrimination in Supply. Halcyon may not condition the supply of Meridian CPO modules on a customer's purchase of Halcyon power-management integrated circuits or other Halcyon components. This anti-tying provision prohibits bundling or other conditional sales practices that could leverage Halcyon's position in the CPO module market to gain competitive advantages in adjacent markets for semiconductor component

4. Independent Compliance Monitor. The consent decree provides for the appointment of an Independent Compliance Monitor to oversee Halcyon's compliance with the terms of the decree. The court appointed Kirkdale Compliance Group LLC (233 South Wacker Drive, Suite 4100, Chicago, IL 60606) as the monitor for the five-year term of the decree. The monitor is required to conduct semi-annual compliance reviews and submit wr

5. Civil Penalty. Halcyon is required to pay a civil penalty of $1,500,000 to the State of Oregon within thirty (30) days of the entry of the consent decree. The penalty is payable to the State's general fund and does not constitute a restitutionary payment to any identified customers or other private parties.

6. No Divestiture Required. Significantly, the consent decree does not require Halcyon to divest any portion of the Meridian business, any assets, or any of Meridian's 47 U.S. patents. Halcyon retains full ownership and operational control of Meridian as a wholly owned subsidiary.

7. Dispute Resolution and Modification. The consent decree includes provisions for dispute resolution in the event of disagreements between Halcyon and the AG's office regarding compliance with the decree's terms. The decree also includes modification provisions that permit either party to petition the court for modifications to the decree in light of changed circumstances, subject to a showing of good cause. B. Asse

IX. Fees and Costs Summary A. Calderwood & Harkness LLP Fees As set forth in the engagement letter, C&H's professional fees for this engagement were subject to a fee cap of $3,800,000, exclusive of out-of-pocket disbursements and exclusive of fees incurred by local counsel and the defense expert. Actual C&H fees billed for the engagement totaled $2,740,000, which represents $1,060,000 under the agreed fee cap. The fa

X. Post-Resolution Compliance Matters On November 10, 2023 — two days after the entry of the Final Judgment and Consent Decree — C&H delivered a comprehensive post-resolution compliance advisory memorandum to Priya Nagarajan, Katrin Schreiber, and Dr. Tobias Wendt. The memorandum outlined all of Halcyon's obligations under the consent decree in detail and provided actionable recommendations for implementation. The ke

XI. Lessons Learned The following observations are offered as lessons learned from this engagement for the benefit of the firm's institutional knowledge base, particularly within the Antitrust & Competition Practice Group. A. State AG Enforcement Post-HSR Clearance The most significant legal development in this matter was the court's unequivocal rejection of Halcyon's federal preemption argument. The court held that