Contract analysis

I. Executive Summary On September 15, 2023, the Antitrust Division of the United States Department of Justice ("DOJ" or the "Division") issued a Second Request, in the form of a Civil Investigative Demand ("CID"), to Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or the "Company") in connection with the proposed acquisition of Vectris Photonics, Inc. ("Vectris") for aggregate consideration of $800,000,000 in cas

II. Background A. Transaction Overview On August 10, 2023, Halcyon Semiconductor Aktiengesellschaft (FSE: HSAG; Nasdaq: HCYN), a publicly traded semiconductor company organized under the laws of the Federal Republic of Germany, with its principal U.S. offices in Santa Clara, California, entered into an Agreement and Plan of Merger (the "Merger Agreement") with Vectris Photonics, Inc. ("Vectris"), a Delaware corporati

III. Scope of the Second Request A. Overview of the CID The Second Request issued by the DOJ on September 15, 2023 is an expansive document and data demand designed to enable the Division to conduct a thorough investigation of the competitive effects of the Proposed Transaction. The CID is addressed to Halcyon Semiconductor Aktiengesellschaft and requires the production of documents, electronically stored information

1. Organizational and Structural Documents (Specifications 1–5) These specifications require the production of corporate organizational charts, board of directors presentations, strategic plans, annual reports, and internal management reports for Halcyon's semiconductor divisions, with a particular focus on the silicon photonics and data center interconnect product lines. This category also encompasses any documents

2. Competitive Analyses (Specifications 6–14) This category represents one of the most significant areas of focus for the DOJ. These specifications require the production of all documents that analyze competition, market share, market trends, pricing strategies, and competitive positioning in the markets for silicon photonics transceivers, co-packaged optics, and data center interconnect products generally. This incl

3. Transaction-Related Documents (Specifications 15–21) These specifications demand production of all documents created in connection with the evaluation, negotiation, and consummation of the Proposed Transaction. This includes, without limitation, Halcyon board of directors and management presentations relating to the acquisition; financial analyses prepared by Halcyon's financial advisor, Ridgeline Partners; synerg

4. Customer-Related Documents (Specifications 22–28) This category requires the production of customer contracts, correspondence, pricing proposals, requests for proposals ("RFPs"), requests for quotes ("RFQs"), win/loss analyses, and customer communications relating to silicon photonics transceiver products. The DOJ uses these documents to understand how Halcyon and Vectris compete for customers, the extent to which

5. Product Development and R&D (Specifications 29–34) These specifications require the production of documents relating to product roadmaps, R&D pipeline projects, patent strategy, and new product development in silicon photonics and related technologies. The DOJ seeks to understand the innovation trajectories of the merging parties and whether the Proposed Transaction would eliminate a significant independent source

6. Supply-Side and Entry Analysis (Specifications 35–39) These specifications require the production of documents analyzing potential market entrants, barriers to entry, capacity constraints, manufacturing capabilities, and supply-side substitutability. The DOJ uses these documents to evaluate whether the entry or expansion of other firms would be timely, likely, and sufficient to counteract any anticompetitive effec

7. Pricing and Financial Data (Specifications 40–45) These specifications require the production of transactional pricing data, revenue data, cost data, margin analyses, and profit-and-loss ("P&L") statements for the relevant product lines. As noted above, the pricing and financial data specifications extend the lookback period to seven years (September 2016 to the present), reflecting the DOJ's interest in understan

IV. Proposed Compliance Timeline A. Phased Approach We propose a four-phase compliance approach designed to achieve substantial compliance within approximately 14 to 16 weeks from the date of this memorandum. This timeline is aggressive but achievable with adequate resourcing and prioritization. We believe that targeting substantial compliance certification in early January 2024 is a realistic and appropriate goal, p

V. Custodian Identification A. Recommended Custodians — Halcyon Based on our review of the Second Request specifications, Halcyon's organizational structure, and the key individuals likely to possess responsive documents, we recommend a custodian list of approximately 18 to 22 individuals, organized into two tiers based on the likely significance and volume of their responsive documents. Tier 1 — Critical Custodians

1. Dr. Katarina Breuer — Chief Executive Officer. Dr. Breuer is the most senior executive of Halcyon and has ultimate oversight of all strategic decisions, including the approval of the Proposed Transaction. Her files are expected to contain board-level presentations, strategic planning documents, and high-level competitive analyses. She is also likely to have communications with Vectris's leadership regarding the tr

2. Markus Ellinger — Chief Financial Officer; Sole Director of Merger Sub. Mr. Ellinger is responsible for Halcyon's financial strategy and served as the sole initial director of Halcyon Acquisition Sub, Inc. His files are expected to contain financial analyses relating to the Proposed Transaction, including valuation models, synergy analyses, accretion/dilution analyses, and communications with Ridgeline Partners an

3. Dr. Luisa Hartmann — General Counsel. Dr. Hartmann oversees all legal matters, including the regulatory strategy for the Proposed Transaction. Her files will contain privileged communications with outside counsel and regulatory strategy documents. While many of these documents will be privileged and withheld from production, her files must nonetheless be collected and reviewed to identify non-privileged responsive

4. Head of Silicon Photonics Business Unit. [To be identified by Halcyon — we request that Halcyon confirm the identity of this individual by September 20, 2023.] This individual is responsible for the day-to-day management of the business unit most directly relevant to the DOJ's investigation. His or her files are expected to contain competitive analyses, product strategy documents, customer relationship files, pric

5. Vice President of Sales, Data Center Products. This individual oversees Halcyon's sales efforts for data center interconnect products, including silicon photonics transceivers. His or her files are expected to contain pricing proposals, customer contracts, RFP and RFQ responses, win/loss analyses, and customer correspondence. Given the DOJ's focus on customer-facing competition, this custodian's documents are like

6. Vice President of Corporate Development. This individual is responsible for evaluating and executing strategic transactions, including the Proposed Transaction. His or her files are expected to contain the internal deal evaluation materials, synergy analyses, communications with Ridgeline Partners (Halcyon's financial advisor) and Clearwater Zanthor, and integration planning documents.

7. Vice President of R&D, Photonics Division. This individual is responsible for research and development activities relating to silicon photonics and co-packaged optics technologies. His or her files are expected to contain product roadmaps, R&D pipeline documents, patent strategy materials, and technical assessments of Vectris's technology portfolio.

8. Chief Strategy Officer. This individual is responsible for Halcyon's long-range strategic planning, including market analyses, competitive positioning studies, and assessments of industry trends. His or her files are expected to contain formal and informal analyses of the competitive landscape in silicon photonics and data center interconnect markets.

9. Head of Marketing, Semiconductor Division. This individual is responsible for marketing strategy, competitive intelligence, and market share analysis for Halcyon's semiconductor products. His or her files are expected to contain market share estimates, competitive benchmarking reports, and marketing strategy documents that reference competitors and competitive dynamics.

10. Integration Planning Lead. This individual (who may have been appointed specifically in connection with the Proposed Transaction) is responsible for coordinating the post-merger integration of Halcyon and Vectris. His or her files are expected to contain integration planning documents, including organizational integration plans, product line rationalization analyses, and workforce integration assessments. These d

VI. Document Collection, Processing, and Review A. E-discovery Vendor Engagement Given the scale and complexity of the Second Request, we strongly recommend engaging a specialized e-discovery vendor to manage the forensic collection, processing, hosting, and review platform infrastructure. Handling these functions in-house is neither practical nor advisable for a compliance effort of this magnitude. We recommend enga

VII. Structured Data and Interrogatory Responses A. Structured Data Production The structured data requirements of the Second Request represent a significant undertaking that will require close collaboration between Calderwood & Harkness, Halcyon's IT department, and Halcyon's finance and accounting teams. The DOJ has requested transactional-level sales data for all silicon photonics products, covering a seven-year p

VIII. Estimated Costs A. External Costs Based on our experience with comparable Second Request compliance matters and our preliminary assessment of the scope of the current engagement, we estimate the following external costs: These estimates are based on the following assumptions: (i) a reviewable document population of 600,000 to 900,000 documents; (ii) a review team of 25 to 40 contract reviewers working over appr