1032-00001 · Client 1032 · Memoranda

post-resolution-compliance-advisory.docx DOCUMENT Antitrust

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CALDERWOOD & HARKNESS LLP

Attorneys at Law

1301 Avenue of the Americas, 35th Floor New York, NY 10019 Tel: (212) 554-7200	Fax: (212) 554-7201
555 California Street, Suite 2800 San Francisco, CA 94104 Tel: (415) 398-4400	Fax: (415) 398-4401

www.calderwoodharkness.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

MEMORANDUM

TO:

Priya Nagarajan, U.S. Deputy General Counsel, Halcyon Semiconductor Americas Inc.

Katrin Schreiber, General Counsel, Halcyon Semiconductor AG

Dr. Tobias Wendt, Chief Executive Officer, Halcyon Semiconductor AG

FROM:

Elaine Forsythe, Partner Aaron Liu, Associate Monica Reyes, Associate

Antitrust & Competition Practice Group Calderwood & Harkness LLP

DATE: November 10, 2023

RE: Post-Resolution Compliance Advisory — Obligations Under the Final Judgment and Consent Decree Entered in State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274, Circuit Court of the State of Oregon for the County of Multnomah

MATTER NO.: 1032-00001

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I. Executive Summary

The purpose of this memorandum is to provide Halcyon Semiconductor AG ("Halcyon AG") and its U.S. subsidiary, Halcyon Semiconductor Americas Inc. ("Halcyon Americas" and, together with Halcyon AG, "Halcyon" or the "Company"), with a comprehensive guide to the compliance obligations arising from the consent decree entered as a Final Judgment by the Honorable Robert Castañeda on November 8, 2023, in State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274 (the "Consent Decree" or the "Decree"). This memorandum is intended to serve as both a legal reference and a practical implementation guide for the Company's leadership, in-house legal teams, and operational personnel who will bear responsibility for ensuring compliance over the five-year term of the Decree.

As the Company is aware, the State of Oregon, acting through Attorney General Diane Calloway and lead counsel Senior Assistant Attorney General Marcus Trujillo of the Oregon Department of Justice Antitrust Division, filed a civil enforcement action on April 17, 2023, under Oregon Revised Statutes §§ 646.730 and 646.775, challenging Halcyon's $2.15 billion all-cash acquisition of Meridian Photonics Inc. ("Meridian"), which had closed on January 31, 2023. The complaint alleged that the acquisition substantially lessened competition in the market for co-packaged optics ("CPO") transceiver modules for data-center applications in the United States, with particular emphasis on the impact on Oregon-based customers.

Following extensive litigation, including the denial of Halcyon's motion to dismiss and discovery proceedings, the Court encouraged the parties to pursue settlement discussions at the conclusion of a hearing on the State's motion for a preliminary injunction on September 22, 2023. Formal mediation commenced before the Honorable Patricia Loomis (Ret.) on October 6, 2023, and the parties reached agreement on a term sheet on October 20, 2023. The Final Consent Decree was fully executed by all parties on November 1, 2023, and was entered by the Court as a Final Judgment on November 8, 2023, at which time the case was closed.

The key outcome of this resolution is highly favorable to Halcyon: the Decree imposes behavioral remedies only and does not require any divestiture. Halcyon retains 100% ownership of Meridian Photonics Inc. as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc. This result preserves the Company's strategic objectives in acquiring Meridian and avoids the significant value destruction that would have accompanied a forced divestiture of Meridian's CPO business or patent portfolio.

The compliance obligations imposed by the Consent Decree are time-limited to a period of five (5) years from the date of entry, meaning that all behavioral obligations expire on November 8, 2028. While the obligations are finite in duration, they are substantive in scope and will require dedicated internal resources, systematic monitoring, and careful attention to operational detail. Failure to comply could result in contempt proceedings, additional civil penalties, and — most critically — the potential for the Oregon Attorney General to petition the Court for modification of the Decree to include structural remedies, including divestiture.

This memorandum identifies and analyzes each of the six substantive obligations imposed by the Consent Decree, specifies the duration and scope of each obligation, recommends the internal compliance infrastructure necessary to meet each obligation, explains the role and authority of the independent compliance monitor appointed under the Decree, identifies all reporting deadlines, describes the consequences of non-compliance, and provides points of contact at Calderwood & Harkness LLP for ongoing compliance questions. The memorandum should be read in conjunction with the full text of the Consent Decree, a copy of which is attached hereto as Enclosure A.

We strongly recommend that this memorandum be treated as the foundational compliance planning document for the Company's implementation efforts and that Halcyon promptly designate a single internal project leader — we suggest Priya Nagarajan — to coordinate implementation across all relevant functions.

II. Background and Procedural History

A. The Acquisition

On September 8, 2022, Halcyon Semiconductor AG, acting through its wholly owned U.S. subsidiary Halcyon Semiconductor Americas Inc. (EIN: 84-3921057), entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire 100% of the outstanding shares of Meridian Photonics Inc. (EIN: 93-1284563), a Delaware corporation headquartered at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. The transaction was structured as a reverse triangular merger, with a wholly owned acquisition subsidiary of Halcyon Americas merging with and into Meridian, with Meridian surviving the merger as a wholly owned subsidiary of Halcyon Americas.

Meridian is a leading designer and manufacturer of silicon photonics transceivers and co-packaged optics (CPO) modules for data-center and telecommunications applications. Founded in 2014, Meridian had grown to become one of the foremost participants in the rapidly expanding CPO market, serving major hyperscale cloud operators and telecommunications infrastructure providers across the United States and internationally. At the time of the acquisition, Meridian held forty-seven (47) U.S. patents related to CPO technology, encompassing innovations in silicon photonics integration, optical modulator design, high-bandwidth signal processing, thermal management for co-packaged configurations, and advanced packaging techniques for integrating optical components directly onto switch ASIC substrates. These patents represent a substantial and strategically significant portfolio in the CPO technology space.

The acquisition price was $2.15 billion in cash, representing a premium of approximately 34% over Meridian's implied enterprise value based on comparable public company trading multiples at the time of announcement. The transaction was funded through a $2.2 billion senior secured term loan facility arranged and led by Vereinigte Kreditbank AG as administrative agent, with Nordmark Capital Group and Pacific Rim Commercial Bank participating as syndicate members. Of the $2.2 billion available under the facility, $2.15 billion was drawn at closing to fund the acquisition consideration, with the remaining $50 million reserved for transaction costs and working capital purposes.

Callister Blackwood & Co. served as the exclusive investment banking advisor to Halcyon on the transaction. The Callister Blackwood engagement was led by Managing Director Jonathan Reiss, who provided fairness opinion and strategic advisory services throughout the deal process.

In compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Halcyon and Meridian submitted pre-merger notification filings to the Federal Trade Commission and the Department of Justice on October 3, 2022 (HSR File No. 20221003-1847). The initial waiting period was set to expire on November 2, 2022. On November 14, 2022, the FTC granted early termination of the waiting period, and no second request for additional information was issued by either the FTC or the DOJ Antitrust Division. The federal agencies thus took no action to challenge the transaction at the federal level.

The transaction closed on January 31, 2023. Following the closing, Meridian Photonics Inc. has continued to operate as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc., maintaining its existing Portland, Oregon headquarters and its manufacturing and engineering operations. Meridian's pre-existing customer relationships, product lines, and employee base have been preserved, and the integration of Meridian into the broader Halcyon organization has proceeded in accordance with the Company's previously disclosed integration plan.

B. The Oregon AG Enforcement Action

Notwithstanding the absence of a federal challenge, the Oregon Attorney General's office initiated a state-level antitrust investigation into the transaction in the spring of 2023. On April 10, 2023, the Antitrust Division of the Oregon Department of Justice, acting under the authority of Attorney General Diane Calloway, issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc., seeking documents and information related to the acquisition, Halcyon's and Meridian's market positions, pricing practices, customer relationships, and competitive dynamics in the CPO transceiver market.

Seven days later, on April 17, 2023, the State of Oregon filed a civil complaint in the Circuit Court of the State of Oregon for the County of Multnomah, Case No. 23CV-18274, asserting claims under ORS § 646.730 (Oregon's analog to Section 7 of the Clayton Act, prohibiting acquisitions that substantially lessen competition or tend to create a monopoly) and ORS § 646.775 (authorizing civil enforcement actions by the Attorney General and providing for injunctive relief and civil penalties). The complaint named Halcyon Semiconductor Americas Inc. as the sole defendant. Calderwood & Harkness LLP was engaged by Halcyon Americas on April 17, 2023, to serve as lead defense counsel, and the formal engagement letter was executed on April 18, 2023.

The State's complaint defined the relevant product market as co-packaged optics transceiver modules for data-center applications — a market encompassing CPO modules that integrate optical transceiver functionality directly onto or immediately adjacent to switch ASIC packages, providing higher bandwidth density and lower power consumption compared to traditional pluggable optical transceiver modules. The State defined the relevant geographic market as the United States, while emphasizing the particular impact of the acquisition on Oregon-based customers. The complaint specifically identified two major Oregon-headquartered data-center operators as significant purchasers of Meridian CPO modules: Cascadia Cloud Services Inc., which had purchased approximately $62 million of Meridian CPO products in fiscal year 2022, and Northstar Digital Infrastructure LLC, which had purchased approximately $28 million of Meridian CPO products in fiscal year 2022. Together, these two Oregon-based customers accounted for approximately $90 million in annual Meridian CPO revenue.

The State's market share allegations were central to its theory of competitive harm. According to the complaint, the post-merger combined Halcyon/Meridian share of U.S. CPO transceiver module sales was approximately 58%, representing approximately $507.5 million out of an estimated total U.S. CPO transceiver market of approximately $875 million in fiscal year 2022. The State further alleged that the acquisition increased the Herfindahl-Hirschman Index ("HHI") of market concentration from 2,818 to 4,050, an increase (or "delta") of 1,232 points. Under the framework of the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, an HHI above 2,500 is considered "highly concentrated," and an increase of more than 200 points in a highly concentrated market gives rise to a presumption that the merger is likely to enhance market power. The State's HHI analysis thus placed the transaction well above the thresholds that typically trigger heightened antitrust scrutiny.

The State retained outside counsel to assist with the litigation: Ashworth & Pendleton LLP, with lead partner Constance Yee and associate Derek Holmgren handling the day-to-day litigation. The State's expert economist was Dr. Evelyn Ng of Ridgeline Economic Consulting LLC, who was retained to provide economic analysis supporting the State's market definition, competitive effects, and market concentration theories.

Halcyon's defense team included Calderwood & Harkness LLP as lead national counsel and Grantham Davis & Kowalski LLP as local Oregon counsel. The Grantham Davis team was led by partner Thomas Kowalski and associate Rachel Ingram, who handled Oregon-specific procedural matters, local court filings, and in-state discovery coordination. Halcyon's expert economist was Dr. Franklin Morrow of Stonebridge Analytics LLC, who was engaged to provide competing economic analysis challenging the State's market definition, market share calculations, and competitive effects theories. Among other opinions, Dr. Morrow opined that the relevant market should be defined more broadly to include both co-packaged optics and next-generation pluggable transceivers, which would have significantly reduced the combined entity's market share and the associated HHI calculations.

C. Key Litigation Milestones Leading to Settlement

The litigation proceeded on an accelerated schedule, consistent with the State's emphasis on the urgency of the competitive concerns raised by the complaint. The following chronology summarizes the key milestones in the case:

May 5, 2023: Halcyon, through Calderwood & Harkness and Grantham Davis, filed its Answer to the State's complaint, denying the material allegations and asserting affirmative defenses including federal preemption, failure to state a claim upon which relief could be granted, and the procompetitive efficiencies of the transaction.

May 19, 2023: Halcyon filed a Motion to Dismiss the complaint, arguing (i) that the State's claims were preempted by federal antitrust law in light of the FTC's and DOJ's decision not to challenge the transaction following HSR review, and (ii) that the complaint failed to state a plausible claim under ORS § 646.730, particularly given the State's narrow market definition.

July 7, 2023: The Honorable Robert Castañeda denied Halcyon's Motion to Dismiss in a written opinion. The Court held that Oregon's antitrust statutes provide an independent basis for state enforcement that is not preempted by federal law, and that the State's allegations, taken as true, were sufficient to state a plausible claim for relief. The Court noted that early termination of the HSR waiting period did not constitute an affirmative federal determination that the transaction was lawful, and that the absence of a federal challenge did not preclude state enforcement.

July 21, 2023: The parties commenced fact and expert discovery in accordance with a case management order issued by Judge Castañeda. The discovery period was set for a compressed eight-week period, reflecting the Court's recognition of the State's interest in prompt resolution.

August 15, 2023: The State filed a Motion for Preliminary Injunction seeking the imposition of interim behavioral restrictions on Halcyon pending a trial on the merits. The State's proposed preliminary injunction would have required Halcyon, on an interim basis, to maintain Meridian's pre-acquisition pricing terms, to refrain from conditioning CPO module sales on purchases of other Halcyon products, and to continue licensing Meridian's CPO patents on terms consistent with pre-acquisition practice. The motion was supported by declarations from representatives of Cascadia Cloud Services and Northstar Digital Infrastructure, as well as economic analysis from Dr. Evelyn Ng.

September 8, 2023: Halcyon filed its opposition to the State's Motion for Preliminary Injunction, arguing that the State had not demonstrated a likelihood of irreparable harm sufficient to justify the extraordinary remedy of preliminary injunctive relief, and that the proposed restrictions would impose undue operational burdens on the merged entity. Halcyon's opposition was supported by the Declaration of Dr. Franklin Morrow, who provided detailed economic analysis challenging the State's market definition and competitive effects theories, and by declarations from Halcyon Americas executives regarding the operational disruption that would result from the proposed interim restrictions.

September 22, 2023: The Court held an evidentiary hearing on the State's Motion for Preliminary Injunction. At the conclusion of the hearing, Judge Castañeda indicated from the bench that the case presented "close questions on the merits that would benefit from the parties' serious exploration of a negotiated resolution." The Court specifically noted the possibility of a behavioral remedy that would address the State's concerns while preserving the economic efficiencies of the transaction, and strongly encouraged the parties to engage in mediation. Both sides agreed to pursue settlement discussions.

October 6, 2023: Formal mediation commenced before the Honorable Patricia Loomis (Ret.), a former judge of the Oregon Court of Appeals with extensive experience mediating complex commercial and antitrust disputes. The mediation sessions extended over a period of approximately two weeks and involved multiple rounds of in-person and telephonic negotiations.

October 20, 2023: The parties reached agreement on the terms of a proposed consent decree, memorialized in a term sheet signed by counsel for both sides. The term sheet established the framework for the behavioral remedies that would subsequently be incorporated into the final Consent Decree.

November 1, 2023: The Final Consent Decree was fully drafted, negotiated in final form, and executed by all parties — the State of Oregon (acting through Senior Assistant AG Marcus Trujillo on behalf of Attorney General Diane Calloway) and Halcyon Semiconductor Americas Inc. (acting through Priya Nagarajan, U.S. Deputy General Counsel, with authorization from Katrin Schreiber, General Counsel of Halcyon AG, and Dr. Tobias Wendt, CEO of Halcyon AG).

November 8, 2023: The Consent Decree was entered by the Honorable Robert Castañeda as a Final Judgment of the Circuit Court of the State of Oregon for the County of Multnomah. The case was closed. The Calderwood & Harkness litigation engagement under Matter No. 1032-00001 was formally closed as of the same date.

III. Overview of Consent Decree Obligations

The Consent Decree imposes six principal categories of obligations on Halcyon, each of which is discussed in detail in Sections IV through IX below. For ease of reference, the six categories are summarized here:

1. FRAND Patent Licensing Commitment (Section IV): Halcyon must offer Fair, Reasonable, and Non-Discriminatory licenses for all 47 of Meridian's CPO-related U.S. patents to any third party that submits a bona fide licensing request.

2. Interoperability Maintenance Obligation (Section V): Halcyon must maintain backward-compatible interoperability between Meridian CPO modules and third-party switch ASICs conforming to OIF 400ZR and 800ZR standards.

3. Non-Discrimination in Supply (Section VI): Halcyon may not condition the sale of Meridian CPO modules on a customer's purchase of other Halcyon products, and may not offer preferential pricing or terms to customers who purchase bundled Halcyon products.

4. Compliance Monitor Cooperation (Section VII): Halcyon must cooperate fully with the independent compliance monitor, Kirkdale Compliance Group LLC, which has broad authority to access records, interview personnel, and report to the Oregon AG.

5. Civil Penalty Payment (Section VIII): Halcyon must pay a civil penalty of $1,500,000 to the State of Oregon within thirty (30) calendar days of entry of the Decree.

6. Reporting and Record-Keeping (Section IX): Halcyon must maintain complete records related to compliance with all obligations and must cooperate with information requests from the Oregon AG's Antitrust Division.

All behavioral obligations under the Consent Decree have a duration of five (5) years from the date of entry of the Decree, meaning they are effective from November 8, 2023, through November 8, 2028. At the expiration of the five-year term, all behavioral obligations terminate automatically, and no further court action is required to dissolve or vacate the Decree.

It is important to emphasize that the Consent Decree does not impose any structural remedy. No divestiture of Meridian Photonics Inc. or any of its assets, business units, or patents is required. Halcyon retains full ownership and operational control of Meridian as a wholly owned subsidiary. This is a significant outcome, as the State's complaint had requested that the Court consider structural relief, including the potential divestiture of Meridian's CPO business or patent portfolio. The behavioral-only resolution reflects the strength of Halcyon's litigation position and the effectiveness of the mediation process in achieving a commercially viable outcome.

IV. Obligation 1: FRAND Patent Licensing Commitment

A. Scope of Obligation

The Consent Decree requires Halcyon to offer Fair, Reasonable, and Non-Discriminatory ("FRAND") licenses for all forty-seven (47) of Meridian's U.S. patents related to co-packaged optics technology (the "Covered Patents") to any third party that submits a bona fide licensing request during the five-year term of the Decree. A complete list of the Covered Patents, identified by patent number, title, and filing date, is attached hereto as Enclosure B.

The FRAND licensing obligation is broadly defined. It covers not only the 47 currently issued Covered Patents, but also any continuations, divisionals, or reissues of those patents filed during the five-year term that claim priority to one or more of the 47 Covered Patents. This provision is designed to prevent Halcyon from circumventing the FRAND commitment by filing continuation applications that cover substantially the same technology under new patent numbers. Accordingly, Halcyon's patent prosecution activities relating to the Covered Patents must be monitored throughout the term to ensure that any new filings claiming priority to the Covered Patents are brought within the scope of the FRAND licensing program.

The license terms offered by Halcyon must be consistent with standard FRAND principles as understood in the technology licensing industry. Specifically, Halcyon must offer licenses that include:

(a) Royalty rates that are fair and reasonable, meaning that they do not exceed what would be charged in an arms-length negotiation between a willing licensor and a willing licensee, taking into account the scope and value of the patented technology, comparable licenses in the CPO and broader silicon photonics industry, and the licensee's intended field of use;

(b) Non-discriminatory terms, meaning that similarly situated licensees must be offered substantially similar license terms, and Halcyon may not impose materially different conditions on licensees based on their competitive relationship with Halcyon or for other anticompetitive reasons; and

(c) No unreasonable conditions, meaning that Halcyon may not condition the grant of a FRAND license on acceptance of terms unrelated to the licensed technology, such as cross-licensing of the licensee's unrelated patents, exclusive supply arrangements, or other provisions designed to extract value beyond the fair value of the licensed CPO patents.

The FRAND licensing commitment is in effect for the full five-year term of the Consent Decree, through November 8, 2028. After that date, Halcyon's obligation to offer FRAND licenses terminates, and Halcyon will be free to license (or decline to license) the Covered Patents on whatever terms it deems appropriate, subject to applicable patent and antitrust law.

B. Recommended Internal Compliance Steps — Establishment of a FRAND Licensing Desk

To ensure timely, systematic, and documented compliance with the FRAND licensing obligation, we recommend that Halcyon establish a dedicated FRAND Licensing Desk within Halcyon's intellectual property department or, alternatively, within the Meridian Photonics business unit. The FRAND Licensing Desk should serve as the single, centralized point of contact for all incoming FRAND licensing requests from third parties. Centralizing the intake and processing of FRAND requests will reduce the risk of requests being overlooked, misrouted, or handled inconsistently across different parts of the organization.

Staffing: We recommend that the Company appoint a dedicated FRAND Licensing Manager to lead the FRAND Licensing Desk. This individual should have experience in technology licensing negotiations and should report to Priya Nagarajan, U.S. Deputy General Counsel, or to a designated intellectual property lead within Halcyon Americas who, in turn, reports to Priya Nagarajan. The FRAND Licensing Manager should have authority to negotiate and execute FRAND licenses within pre-approved parameters established by Halcyon's management and legal teams. For requests that fall outside pre-approved parameters, the FRAND Licensing Manager should have a clear escalation path to Priya Nagarajan and, as appropriate, to outside counsel at Calderwood & Harkness LLP.

Standard FRAND License Agreement Template: We recommend that Halcyon develop a Standard FRAND License Agreement template for use in responding to licensing requests under the Consent Decree. This template should be reviewed and approved by Calderwood & Harkness LLP before deployment to ensure consistency with the Decree's requirements and with industry best practices. The template should incorporate, at a minimum:

(i) Royalty rate benchmarks based on an analysis of comparable licenses in the CPO and silicon photonics industry, conducted by Halcyon's licensing team in consultation with outside counsel and, if warranted, an independent valuation expert;

(ii) Standardized grant-back provisions that are reasonable and proportionate, and that do not impose unreasonable burdens on licensees;

(iii) Field-of-use limitations that are consistent with CPO applications and that do not unduly restrict the licensee's ability to use the licensed technology for its intended purposes; and

(iv) Standard terms and conditions addressing the duration of the license, territorial scope, sublicensing rights, confidentiality obligations, audit rights, representations and warranties, indemnification, limitation of liability, and dispute resolution mechanisms.

FRAND Licensing Procedures Manual: We further recommend that the Company develop an internal FRAND Licensing Procedures Manual documenting the end-to-end process for receiving, evaluating, negotiating, and executing FRAND license requests. The Procedures Manual should address the following elements:

• Intake: How licensing requests are received (e.g., via a dedicated email address, a web portal, or direct correspondence to the FRAND Licensing Manager), how they are logged, and how the initial acknowledgment of receipt is communicated to the requestor.

• Evaluation: How the FRAND Licensing Desk evaluates whether a licensing request is bona fide (i.e., whether the requestor has a genuine need for a license to practice the Covered Patents in a CPO application), and how the specific patents relevant to the request are identified.

• Negotiation: How the FRAND Licensing Desk conducts negotiations with the requestor, including the applicable timeline (we recommend an initial substantive response within 30 calendar days of receipt of a bona fide request, and completion of negotiations, where possible, within 90 calendar days), the parameters within which the FRAND Licensing Manager is authorized to negotiate, and the escalation path for requests that exceed those parameters.

• Execution: How executed FRAND licenses are documented, countersigned, and archived, and how the FRAND License Log is updated upon execution.

• Non-Execution: How the FRAND Licensing Desk documents situations in which negotiations do not result in an executed license, including the reasons for non-execution, and how such situations are reported to the compliance monitor.

FRAND License Log: The FRAND Licensing Desk should maintain a centralized FRAND License Log recording the following information for each licensing request received:

• Date of receipt of the licensing request

• Identity of the requestor (company name, contact person, and contact information)

• Patents at issue (identified by patent number)

• Summary of terms offered by Halcyon

• Summary of terms requested by the licensee

• Terms ultimately accepted or rejected by either party

• Date of execution of the license agreement (if applicable)

• Reasons for non-execution (if applicable)

• Any disputes or complaints raised by the requestor

• Referrals to the compliance monitor or to the Oregon AG's office

The FRAND License Log should be maintained in electronic format, with appropriate access controls to ensure that it is available for review by the compliance monitor and by outside counsel, while remaining protected by attorney-client privilege and work product protections to the extent applicable.

Training: Halcyon should conduct annual training for all Halcyon and Meridian personnel in intellectual property, licensing, legal, and sales functions on the FRAND licensing obligations under the Consent Decree. Training should cover the scope of the FRAND commitment, the procedures established for handling licensing requests, the importance of non-discriminatory treatment of similarly situated licensees, the prohibition on delay or obstruction of licensing negotiations, and the consequences of non-compliance. Training attendance records and training materials should be maintained for review by the compliance monitor.

C. Risk Areas and Guidance

Several areas of potential risk merit particular attention in the context of the FRAND licensing obligation:

Constructive Refusal to License. The Consent Decree prohibits not only outright refusal to license the Covered Patents, but also conduct that amounts to a de facto refusal to license. This includes deliberate delay in responding to licensing requests, imposition of unreasonable or pretextual conditions on license negotiations, and the use of excessive or unjustified royalty demands as a means of discouraging potential licensees from pursuing a license. Halcyon must ensure that its FRAND Licensing Desk responds to all bona fide requests in a timely and good-faith manner, and that the terms offered are genuinely consistent with FRAND principles. We recommend that Halcyon document all interactions with potential licensees to create a clear record of good-faith engagement.

Reasonableness Disputes. It is possible that a potential licensee will disagree with Halcyon regarding the reasonableness of the terms offered under a FRAND license. The Consent Decree provides that such disputes may be referred to the compliance monitor for evaluation and, if necessary, to the Oregon Attorney General's office for further action. Halcyon should be prepared to defend the reasonableness of its offered terms based on comparable industry licenses, the value of the patented technology, and other relevant factors. We recommend that Halcyon retain a licensing valuation expert to develop a robust royalty rate benchmarking analysis that can be used to support the Company's FRAND licensing terms in the event of a dispute.

Scope of Covered Patents. If Halcyon takes the position that a particular patent is not within the scope of the 47 Covered Patents listed in Enclosure B — for example, because it does not relate to CPO technology, or because a continuation application does not claim priority to any of the Covered Patents — that determination should be documented with a detailed legal analysis prepared by patent counsel. The analysis should be retained in the Company's compliance files, promptly reported to the compliance monitor, and made available to the Oregon AG's office upon request.

V. Obligation 2: Interoperability Maintenance Obligation

A. Scope of Obligation

The Consent Decree requires Halcyon 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 is designed to ensure that Halcyon does not use its ownership of Meridian to degrade the ability of data-center operators to use Meridian CPO modules with switch ASICs manufactured by Halcyon's competitors.

Specifically, the Decree prohibits Halcyon from implementing any design changes, firmware updates, or specification modifications to Meridian CPO modules that would degrade, limit, or eliminate interoperability with OIF 400ZR/800ZR-compliant third-party components. This prohibition is broadly drafted and covers changes made at any level of the product — including hardware design, firmware, embedded software, optical specifications, electrical interface specifications, and packaging — that could adversely affect interoperability.

The obligation extends to new-generation Meridian CPO modules introduced during the five-year term. If Meridian develops and commercializes new CPO module products during the term of the Decree, those new products must also maintain backward-compatible interoperability with OIF 400ZR/800ZR-compliant third-party switch ASICs. This provision prevents Halcyon from circumventing the interoperability obligation by discontinuing existing interoperable products and replacing them with new products that are not interoperable with third-party components.

The interoperability maintenance obligation is in effect for the full five-year term of the Consent Decree, through November 8, 2028.

B. Recommended Internal Compliance Steps — Interoperability Testing Protocols

Compliance with the interoperability obligation will require systematic testing and documentation procedures integrated into Meridian's product development and release processes. We recommend the following measures:

Formal Interoperability Testing Protocol. Halcyon should establish a formal Interoperability Testing Protocol applicable to all Meridian CPO module product releases, including new product introductions, hardware revisions, and firmware updates. The Testing Protocol should define the specific test procedures, pass/fail criteria, and documentation requirements for verifying OIF 400ZR and 800ZR interoperability before any CPO module is released for commercial shipment.

Minimum Testing Requirements. Before any CPO module release or update, Halcyon must conduct interoperability testing against at least three representative third-party switch ASIC platforms conforming to OIF 400ZR and OIF 800ZR standards. The selection of test platforms should be designed to provide a representative cross-section of the third-party ASIC ecosystem, and should include platforms manufactured by at least two different ASIC vendors. We recommend that the specific platforms selected for testing be documented and periodically reviewed to ensure that they remain representative of the current market.

Testing Lab Certification Log. Halcyon should maintain a detailed Testing Lab Certification Log documenting the results of each interoperability test conducted under the Testing Protocol. The Log should record, at a minimum:

(i) The product and/or firmware version of the Meridian CPO module being tested;

(ii) The identity of the third-party switch ASIC platforms tested against, identified by manufacturer, model number, and firmware/software version;

(iii) The date on which testing was conducted;

(iv) The detailed test results, including performance on each defined interoperability metric (e.g., link establishment, data throughput, error rates, power levels, signal integrity);

(v) A pass/fail determination for each test;

(vi) The name and title of the engineer or engineers conducting the test;

(vii) A description of any corrective actions taken in response to test failures, including design modifications, firmware patches, or other remedial steps; and

(viii) Sign-off by the Interoperability Compliance Officer certifying that the product release meets OIF 400ZR/800ZR interoperability requirements.

Interoperability Compliance Officer. Halcyon should designate a senior engineer within the Meridian engineering team as the Interoperability Compliance Officer (the "ICO"). The ICO will be responsible for overseeing all interoperability testing activities, certifying OIF 400ZR/800ZR compliance before commercial shipment of any CPO module product or update, and serving as the primary technical point of contact for the compliance monitor on interoperability matters. The ICO should have sufficient seniority and authority within the Meridian engineering organization to ensure that interoperability requirements are taken seriously and that product releases are not shipped without proper testing and certification.

Integration with Product Development Lifecycle. The interoperability testing requirement should be incorporated as a mandatory gate in Meridian's stage-gate product development process. Specifically, we recommend that interoperability review be inserted at both the design-review stage (to ensure that proposed product designs do not introduce interoperability risks) and the pre-release stage (to verify interoperability through formal testing before commercial shipment). No CPO module product or update should proceed past the pre-release gate without a documented sign-off from the ICO confirming OIF 400ZR/800ZR compliance.

Record Retention. All test results, engineering records, and related documentation generated under the Interoperability Testing Protocol should be archived and retained for the duration of the Consent Decree plus two years — that is, through November 8, 2030. This retention period ensures that records will be available for review by the compliance monitor during the five-year term, and that a reasonable post-expiration buffer is maintained for any potential dispute resolution or enforcement proceedings.

C. Risk Areas and Guidance

Definition of "Interoperability." The Consent Decree defines interoperability by reference to the OIF 400ZR and 800ZR standards as they exist at the time of the Decree's entry, plus any subsequent OIF-ratified amendments to the 400ZR and 800ZR standards adopted during the five-year term. This is an important baseline. If OIF issues new standards that supersede 400ZR and 800ZR during the term of the Decree (for example, a hypothetical OIF 1600ZR standard), the question of whether Halcyon's interoperability obligation extends to the new standard is not squarely addressed by the Decree. We recommend that Halcyon consult with Calderwood & Harkness LLP before taking any position regarding the scope of the interoperability obligation in light of new OIF standards, and that any ambiguity be resolved through proactive engagement with the compliance monitor and, if necessary, with the Oregon AG's office.

Customer Complaints. Any customer complaint alleging that a Meridian CPO module has experienced interoperability degradation with a third-party switch ASIC should be treated as a potential compliance issue and escalated immediately to the Interoperability Compliance Officer and to legal counsel. The ICO should investigate the complaint, document all investigation steps (including testing conducted, root cause analysis, and any corrective actions taken), and report findings to Priya Nagarajan and to the compliance monitor. Even if the investigation determines that the complaint is unfounded or attributable to a third-party ASIC issue rather than a Meridian product issue, the investigation and its conclusions should be thoroughly documented for compliance purposes.

Firmware and Software Updates. Particular attention should be paid to firmware and software updates for Meridian CPO modules, as these updates have the greatest potential to introduce unintended interoperability regressions. Every firmware and software update, no matter how minor, should be subject to the Interoperability Testing Protocol before release.

VI. Obligation 3: Non-Discrimination in Supply of CPO Modules

A. Scope of Obligation

The Consent Decree prohibits Halcyon from engaging in discriminatory practices in the sale and supply of Meridian CPO modules. This obligation has two principal components:

No Tying or Bundling. Halcyon may not condition the sale or supply of Meridian CPO modules on a customer's purchase of Halcyon power-management ICs, analog semiconductors, or any other Halcyon component product. In other words, Halcyon may not require customers to buy other Halcyon products as a prerequisite to purchasing Meridian CPO modules, and may not refuse to sell CPO modules to customers who decline to purchase other Halcyon products. This prohibition addresses the State's concern that Halcyon would use its control of Meridian's dominant CPO product line as leverage to force customers to purchase other Halcyon semiconductor products — a classic tying arrangement.

No Preferential Treatment. Halcyon may not offer preferential pricing, delivery terms, or allocation of Meridian CPO modules to customers who also purchase other Halcyon products, relative to customers who purchase only Meridian CPO modules on a standalone basis. This means that a customer who purchases Meridian CPO modules without purchasing any other Halcyon products must receive pricing, delivery timelines, and product allocation that are at least as favorable as those offered to customers who purchase bundled Halcyon products, holding all other commercially relevant factors (such as order volume, contract duration, and creditworthiness) constant.

The non-discrimination obligation applies to all customers, including but not limited to the Oregon-based data-center operators specifically identified in the State's complaint: Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC. It also applies to all other domestic and international customers of Meridian CPO modules during the five-year term.

The non-discrimination obligation is in effect for the full five-year term of the Consent Decree, through November 8, 2028.

B. Recommended Internal Compliance Steps — Non-Discrimination Audit Procedures

Effective compliance with the non-discrimination obligation will require a combination of clear internal policies, regular auditing, comprehensive training, and robust documentation. We recommend the following measures:

Non-Discrimination Compliance Policy. Halcyon should develop and promulgate a formal Non-Discrimination Compliance Policy applicable to all Halcyon and Meridian sales, account management, and business development personnel. The Policy should clearly articulate the prohibitions set forth in the Consent Decree, provide concrete examples of prohibited conduct, and establish the consequences for policy violations. The Policy should be distributed to all relevant personnel, and acknowledgment of receipt should be documented.

Prohibition on Improper Communications. The Policy should specifically prohibit any written or verbal communication to customers — whether in formal proposals, informal sales calls, marketing materials, or any other medium — that suggests, implies, or requires the purchase of other Halcyon products as a condition of CPO module supply. This prohibition extends to sales pitches, negotiations, and customer relationship management interactions at all levels.

Quarterly Internal Audits. Halcyon should establish a program of quarterly internal audits of Meridian CPO module sales data designed to identify potential patterns of discriminatory pricing, allocation, or delivery terms. Each quarterly audit should include, at a minimum:

• Pricing Analysis: A comparison of CPO module pricing offered to customers who purchase bundled Halcyon products versus CPO module pricing offered to standalone CPO module purchasers, controlling for commercially relevant factors such as order volume, contract duration, product mix, and creditworthiness. Any statistically significant pricing disparities that cannot be explained by legitimate commercial factors should be flagged for further investigation.

• Allocation and Lead-Time Analysis: A comparison of CPO module allocation priority and delivery lead times for customers who purchase bundled Halcyon products versus standalone CPO module purchasers. During periods of supply constraint, which are common in the semiconductor industry, allocation decisions are particularly susceptible to discriminatory behavior and must be closely monitored.

• Customer Complaint Review: A review of all customer complaints or inquiries received during the quarter relating to bundling, conditioning, or discriminatory treatment in the supply of CPO modules. Each complaint should be investigated, documented, and resolved, and any systemic issues should be escalated.

Non-Discrimination Compliance Coordinator. Halcyon should designate a Non-Discrimination Compliance Coordinator within Halcyon Americas' commercial operations team. This individual will be responsible for conducting or overseeing the quarterly internal audits described above, maintaining audit documentation, and reporting audit results to Priya Nagarajan and to the compliance monitor. The Compliance Coordinator should have sufficient access to sales data, pricing systems, allocation databases, and customer records to conduct meaningful and comprehensive audits.

Training. Halcyon should conduct semi-annual training for all Meridian and Halcyon sales teams, account managers, and business development personnel covering the non-discrimination obligation under the Consent Decree. Training should address the specific prohibited conduct, provide real-world examples and hypothetical scenarios, explain the reporting mechanisms for suspected violations, and emphasize the seriousness of the consequences of non-compliance. Training should be conducted at least twice per year, timed to precede each compliance monitor reporting period so that any issues identified during training can be addressed before the monitor's review.

Record Retention. All audit reports, sales data analyses, pricing comparison documents, customer complaint files, and training records related to the non-discrimination obligation should be maintained for the duration of the Consent Decree plus two years — through November 8, 2030.

C. Risk Areas and Guidance

Volume-Based discounts. The non-discrimination obligation does not prohibit all forms of volume-based pricing or standard commercial incentives. Volume-based discounts are permissible, provided they are applied on a non-discriminatory basis and are not conditioned on cross-product bundling. For example, Halcyon may offer a discount to a customer who commits to purchasing a large volume of CPO modules, provided that the same discount is available on equivalent terms to all customers who commit to similar volumes, regardless of whether those customers also purchase other Halcyon products. The key distinction is between legitimate volume incentives (permissible) and bundling-conditioned incentives (prohibited).

Pre-Clearance of New Pricing Structures. Any proposed new pricing structures, loyalty programs, marketing promotions, or bundling arrangements involving Meridian CPO modules and other Halcyon products should be reviewed by legal counsel before implementation. If the proposed arrangement has any potential to be perceived as conditioning CPO module pricing or availability on the purchase of other Halcyon products, we recommend that it be pre-cleared with the compliance monitor before implementation. Proactive engagement with the monitor on potentially sensitive commercial decisions will reduce the risk of inadvertent non-compliance and will demonstrate Halcyon's good-faith commitment to the Decree.

Sales Compensation Plans. Halcyon should review its sales compensation plans and incentive structures to ensure that no compensation arrangement inadvertently encourages sales personnel to bundle Meridian CPO modules with other Halcyon products in violation of the Decree. For example, if a sales representative's bonus or commission is tied to revenue from multi-product bundles that include CPO modules, the incentive structure could create pressure to condition CPO module sales on purchases of other Halcyon products. Any such structures should be modified to ensure compliance with the non-discrimination obligation.

VII. Obligation 4: Independent Compliance Monitor

A. Identity and Appointment

The Consent Decree appoints Kirkdale Compliance Group LLC ("Kirkdale" or the "Monitor") as the independent compliance monitor for the full five-year term of the Decree (November 8, 2023, through November 8, 2028). Kirkdale is a compliance consulting firm headquartered at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606. Contact information for Kirkdale is provided in Enclosure C attached hereto.

Kirkdale was jointly selected by the parties during the mediation process and was approved by the Court. Kirkdale has extensive experience serving as an independent compliance monitor in antitrust consent decrees and regulatory settlements, including engagements in the technology, telecommunications, and healthcare sectors. The firm is led by a team of former federal regulators, compliance professionals, and industry consultants with deep expertise in antitrust compliance monitoring.

B. Role and Authority

The Consent Decree grants the compliance monitor broad authority to assess and verify Halcyon's compliance with all behavioral obligations imposed by the Decree. Specifically, the Monitor has the authority to:

• Access Books, Records, and Facilities: Review and inspect Halcyon's and Meridian's books, records, databases, electronic systems, and physical facilities to the extent relevant to the Consent Decree obligations. This includes access to licensing records, pricing data, sales records, product development documentation, interoperability test results, training records, and any other documents bearing on compliance.

• Interview Personnel: Conduct interviews of Halcyon and Meridian employees, officers, directors, and agents regarding matters relevant to the Consent Decree obligations. Halcyon personnel must make themselves available for interviews upon reasonable notice from the Monitor, and must respond truthfully and completely to the Monitor's inquiries.

• Review and Assess Compliance: Evaluate Halcyon's compliance with the FRAND licensing, interoperability maintenance, and non-discrimination obligations, including reviewing the internal compliance procedures, audit results, and testing records described in Sections IV, V, and VI of this memorandum.

• Receive and Investigate Complaints: Receive complaints from third parties — including potential licensees, customers, competitors, and other market participants — alleging non-compliance with the Consent Decree obligations. The Monitor has the authority to investigate such complaints, request information from Halcyon in connection with such investigations, and make findings regarding the merits of the complaints.

• Issue Recommendations: Based on its review and assessment, the Monitor may issue recommendations to Halcyon regarding corrective actions, improvements to compliance procedures, or modifications to business practices necessary to ensure compliance with the Decree. While the Monitor's recommendations are not formally binding, failure to adopt reasonable recommendations may be cited by the Oregon AG as evidence of non-compliance in any enforcement proceeding.

• Report to the Oregon AG: The Monitor will submit semi-annual compliance reports to the Oregon Attorney General's office (Antitrust Division, Senior Assistant Attorney General Marcus Trujillo), detailing its findings, assessments, and recommendations regarding Halcyon's compliance with each obligation under the Decree.

C. Semi-Annual Reporting Deadlines

The compliance monitor will issue semi-annual compliance reports to the Oregon AG's office. The reporting periods and approximate due dates are as follows:

A total of ten (10) semi-annual reports will be issued over the five-year term. Each report will cover a six-month period, and the Monitor will prepare its report following the close of each period. The tenth and final report will cover the last six months of the Decree's term and will serve as the final compliance assessment.

Importantly, the Consent Decree provides that Halcyon will receive a draft of each semi-annual report for factual accuracy review before the Monitor submits the final version to the Oregon AG. The review window is typically ten (10) business days from Halcyon's receipt of the draft. During this review period, Halcyon may submit corrections of factual inaccuracies and provide additional context or information for the Monitor's consideration. The Monitor retains sole discretion regarding the content and conclusions of the final report. We recommend that Halcyon designate Priya Nagarajan and outside counsel at Calderwood & Harkness LLP as the review team for each draft report, and that the Company exercise its review rights fully and promptly for every report.

D. Monitor Fees and Cost Allocation

All compliance monitor fees and expenses are borne by Halcyon Semiconductor Americas Inc. The estimated annual fee for the Monitor's services is approximately $175,000 per year, reflecting the Monitor's anticipated time commitment for document reviews, site visits, interviews, complaint investigations, and report preparation. Over the full five-year term of the Decree, the estimated total cost of the compliance monitor is approximately $875,000.

Halcyon should budget for these costs accordingly and should establish a direct billing relationship with Kirkdale Compliance Group LLC. We recommend that Halcyon Americas' finance team work with Kirkdale to agree upon billing and payment procedures, including the frequency of invoicing (monthly or quarterly), the format and level of detail of invoices, and the payment terms.

It is important to note that the compliance monitor fees are in addition to, and separate from, the $1,500,000 civil penalty required under the Decree and the defense costs incurred during the litigation. The Monitor's fees are an ongoing operational cost that will be incurred over the full five-year term.

E. Halcyon's Cooperation Obligations

The Consent Decree imposes on Halcyon an express obligation to provide full, prompt, and good-faith cooperation with the compliance monitor. This cooperation obligation is broadly defined and encompasses all aspects of the Monitor's authority described above. Halcyon must make its personnel, records, and facilities available to the Monitor upon reasonable notice, must respond to the Monitor's information requests in a timely and complete manner, and must not obstruct, delay, or interfere with the Monitor's activities.

Internal Points of Contact. We recommend that Halcyon designate the following internal points of contact for the compliance monitor:

• Primary Legal Contact: Priya Nagarajan, U.S. Deputy General Counsel, Halcyon Semiconductor Americas Inc.

• FRAND Licensing Operational Contact: The FRAND Licensing Manager designated under Section IV.B above.

• Interoperability Operational Contact: The Interoperability Compliance Officer designated under Section V.B above.

• Non-Discrimination Operational Contact: The Non-Discrimination Compliance Coordinator designated under Section VI.B above.

Employee Awareness. All Halcyon and Meridian personnel should be informed that the compliance monitor has access authority under the Consent Decree and that cooperation with the Monitor is mandatory. Employees should understand that they may be contacted by the Monitor for interviews or document requests, and that they are required to respond truthfully, completely, and promptly. Cooperation with the Monitor should be incorporated into the Company's Consent Decree Compliance Training Program described in Section XI.B below.

Disputes with the Monitor. In the event of a dispute between Halcyon and the compliance monitor regarding the scope of the Monitor's authority, the reasonableness of a particular information request, or any other aspect of the monitoring arrangement, the dispute should be escalated first to Calderwood & Harkness LLP for legal advice and, if the dispute cannot be resolved informally, brought before the Court for resolution. Halcyon should not unilaterally refuse to cooperate with the Monitor based on its own assessment of the scope of the Monitor's authority without first obtaining legal advice.

VIII. Obligation 5: Civil Penalty Payment

A. Amount and Deadline

The Consent Decree requires Halcyon Semiconductor Americas Inc. to pay a civil penalty of $1,500,000 to the State of Oregon. This penalty was negotiated as part of the overall settlement and reflects the State's view that the acquisition resulted in a substantial lessening of competition in the CPO transceiver market, warranting a monetary sanction in addition to behavioral relief.

Payment is due within thirty (30) calendar days of the entry of the Consent Decree — that is, by December 8, 2023. Payment must be made by wire transfer to a bank account designated by the Oregon Department of Justice. Wire transfer instructions should be obtained by contacting Senior Assistant Attorney General Marcus Trujillo of the Antitrust Division of the Oregon Department of Justice.

Failure to make timely payment of the civil penalty would constitute a violation of the Consent Decree and could expose Halcyon to contempt proceedings, additional penalties, and the adverse consequences described in Section X of this memorandum.

B. Recommended Action

We recommend that Halcyon Semiconductor Americas Inc.'s treasury and finance team initiate the wire transfer promptly and well in advance of the December 8, 2023, deadline to ensure that payment is received by the State of Oregon on or before the due date. We further recommend the following steps:

1. Contact Senior Assistant AG Marcus Trujillo at the Oregon Department of Justice Antitrust Division to obtain the official wire transfer instructions for the designated State of Oregon account.

2. Execute the wire transfer in the amount of $1,500,000 with sufficient lead time to ensure receipt by December 8, 2023, accounting for potential banking processing delays.

3. Retain a copy of the wire transfer confirmation, including the transaction reference number, date and time of execution, and the identity of the receiving account.

4. Provide a copy of the wire transfer confirmation to Calderwood & Harkness LLP (attention: Elaine Forsythe) for inclusion in the matter file.

5. Provide a copy of the wire transfer confirmation to Kirkdale Compliance Group LLC for inclusion in the first semi-annual compliance report covering the period from November 8, 2023, through May 8, 2024.

IX. Obligation 6: Reporting and Record-Keeping

A. Internal Record-Keeping Requirements

The Consent Decree requires Halcyon to maintain complete and accurate records related to compliance

CALDERWOOD & HARKNESS LLP
Attorneys at Law
1301 Avenue of the Americas, 35th Floor New York, NY 10019 Tel: (212) 554-7200 | Fax: (212) 554-7201
555 California Street, Suite 2800 San Francisco, CA 94104 Tel: (415) 398-4400 | Fax: (415) 398-4401
www.calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
MEMORANDUM
TO:
Priya Nagarajan, U.S. Deputy General Counsel, Halcyon Semiconductor Americas Inc.
Katrin Schreiber, General Counsel, Halcyon Semiconductor AG
Dr. Tobias Wendt, Chief Executive Officer, Halcyon Semiconductor AG
FROM:
Elaine Forsythe, Partner Aaron Liu, Associate Monica Reyes, Associate
Antitrust & Competition Practice Group Calderwood & Harkness LLP
DATE: November 10, 2023
RE: Post-Resolution Compliance Advisory — Obligations Under the Final Judgment and Consent Decree Entered in State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274, Circuit Court of the State of Oregon for the County of Multnomah
MATTER NO.: 1032-00001
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I. Executive Summary
The purpose of this memorandum is to provide Halcyon Semiconductor AG ("Halcyon AG") and its U.S. subsidiary, Halcyon Semiconductor Americas Inc. ("Halcyon Americas" and, together with Halcyon AG, "Halcyon" or the "Company"), with a comprehensive guide to the compliance obligations arising from the consent decree entered as a Final Judgment by the Honorable Robert Castañeda on November 8, 2023, in State of Oregon v. Halcyon Semiconductor Americas Inc., Case No. 23CV-18274 (the "Consent Decree" or the "Decree"). This memorandum is intended to serve as both a legal reference and a practical implementation guide for the Company's leadership, in-house legal teams, and operational personnel who will bear responsibility for ensuring compliance over the five-year term of the Decree.
As the Company is aware, the State of Oregon, acting through Attorney General Diane Calloway and lead counsel Senior Assistant Attorney General Marcus Trujillo of the Oregon Department of Justice Antitrust Division, filed a civil enforcement action on April 17, 2023, under Oregon Revised Statutes §§ 646.730 and 646.775, challenging Halcyon's $2.15 billion all-cash acquisition of Meridian Photonics Inc. ("Meridian"), which had closed on January 31, 2023. The complaint alleged that the acquisition substantially lessened competition in the market for co-packaged optics ("CPO") transceiver modules for data-center applications in the United States, with particular emphasis on the impact on Oregon-based customers.
Following extensive litigation, including the denial of Halcyon's motion to dismiss and discovery proceedings, the Court encouraged the parties to pursue settlement discussions at the conclusion of a hearing on the State's motion for a preliminary injunction on September 22, 2023. Formal mediation commenced before the Honorable Patricia Loomis (Ret.) on October 6, 2023, and the parties reached agreement on a term sheet on October 20, 2023. The Final Consent Decree was fully executed by all parties on November 1, 2023, and was entered by the Court as a Final Judgment on November 8, 2023, at which time the case was closed.
The key outcome of this resolution is highly favorable to Halcyon: the Decree imposes behavioral remedies only and does not require any divestiture. Halcyon retains 100% ownership of Meridian Photonics Inc. as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc. This result preserves the Company's strategic objectives in acquiring Meridian and avoids the significant value destruction that would have accompanied a forced divestiture of Meridian's CPO business or patent portfolio.
The compliance obligations imposed by the Consent Decree are time-limited to a period of five (5) years from the date of entry, meaning that all behavioral obligations expire on November 8, 2028. While the obligations are finite in duration, they are substantive in scope and will require dedicated internal resources, systematic monitoring, and careful attention to operational detail. Failure to comply could result in contempt proceedings, additional civil penalties, and — most critically — the potential for the Oregon Attorney General to petition the Court for modification of the Decree to include structural remedies, including divestiture.
This memorandum identifies and analyzes each of the six substantive obligations imposed by the Consent Decree, specifies the duration and scope of each obligation, recommends the internal compliance infrastructure necessary to meet each obligation, explains the role and authority of the independent compliance monitor appointed under the Decree, identifies all reporting deadlines, describes the consequences of non-compliance, and provides points of contact at Calderwood & Harkness LLP for ongoing compliance questions. The memorandum should be read in conjunction with the full text of the Consent Decree, a copy of which is attached hereto as Enclosure A.
We strongly recommend that this memorandum be treated as the foundational compliance planning document for the Company's implementation efforts and that Halcyon promptly designate a single internal project leader — we suggest Priya Nagarajan — to coordinate implementation across all relevant functions.
II. Background and Procedural History
A. The Acquisition
On September 8, 2022, Halcyon Semiconductor AG, acting through its wholly owned U.S. subsidiary Halcyon Semiconductor Americas Inc. (EIN: 84-3921057), entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire 100% of the outstanding shares of Meridian Photonics Inc. (EIN: 93-1284563), a Delaware corporation headquartered at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. The transaction was structured as a reverse triangular merger, with a wholly owned acquisition subsidiary of Halcyon Americas merging with and into Meridian, with Meridian surviving the merger as a wholly owned subsidiary of Halcyon Americas.
Meridian is a leading designer and manufacturer of silicon photonics transceivers and co-packaged optics (CPO) modules for data-center and telecommunications applications. Founded in 2014, Meridian had grown to become one of the foremost participants in the rapidly expanding CPO market, serving major hyperscale cloud operators and telecommunications infrastructure providers across the United States and internationally. At the time of the acquisition, Meridian held forty-seven (47) U.S. patents related to CPO technology, encompassing innovations in silicon photonics integration, optical modulator design, high-bandwidth signal processing, thermal management for co-packaged configurations, and advanced packaging techniques for integrating optical components directly onto switch ASIC substrates. These patents represent a substantial and strategically significant portfolio in the CPO technology space.
The acquisition price was $2.15 billion in cash, representing a premium of approximately 34% over Meridian's implied enterprise value based on comparable public company trading multiples at the time of announcement. The transaction was funded through a $2.2 billion senior secured term loan facility arranged and led by Vereinigte Kreditbank AG as administrative agent, with Nordmark Capital Group and Pacific Rim Commercial Bank participating as syndicate members. Of the $2.2 billion available under the facility, $2.15 billion was drawn at closing to fund the acquisition consideration, with the remaining $50 million reserved for transaction costs and working capital purposes.
Callister Blackwood & Co. served as the exclusive investment banking advisor to Halcyon on the transaction. The Callister Blackwood engagement was led by Managing Director Jonathan Reiss, who provided fairness opinion and strategic advisory services throughout the deal process.
In compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Halcyon and Meridian submitted pre-merger notification filings to the Federal Trade Commission and the Department of Justice on October 3, 2022 (HSR File No. 20221003-1847). The initial waiting period was set to expire on November 2, 2022. On November 14, 2022, the FTC granted early termination of the waiting period, and no second request for additional information was issued by either the FTC or the DOJ Antitrust Division. The federal agencies thus took no action to challenge the transaction at the federal level.
The transaction closed on January 31, 2023. Following the closing, Meridian Photonics Inc. has continued to operate as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc., maintaining its existing Portland, Oregon headquarters and its manufacturing and engineering operations. Meridian's pre-existing customer relationships, product lines, and employee base have been preserved, and the integration of Meridian into the broader Halcyon organization has proceeded in accordance with the Company's previously disclosed integration plan.
B. The Oregon AG Enforcement Action
Notwithstanding the absence of a federal challenge, the Oregon Attorney General's office initiated a state-level antitrust investigation into the transaction in the spring of 2023. On April 10, 2023, the Antitrust Division of the Oregon Department of Justice, acting under the authority of Attorney General Diane Calloway, issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc., seeking documents and information related to the acquisition, Halcyon's and Meridian's market positions, pricing practices, customer relationships, and competitive dynamics in the CPO transceiver market.
Seven days later, on April 17, 2023, the State of Oregon filed a civil complaint in the Circuit Court of the State of Oregon for the County of Multnomah, Case No. 23CV-18274, asserting claims under ORS § 646.730 (Oregon's analog to Section 7 of the Clayton Act, prohibiting acquisitions that substantially lessen competition or tend to create a monopoly) and ORS § 646.775 (authorizing civil enforcement actions by the Attorney General and providing for injunctive relief and civil penalties). The complaint named Halcyon Semiconductor Americas Inc. as the sole defendant. Calderwood & Harkness LLP was engaged by Halcyon Americas on April 17, 2023, to serve as lead defense counsel, and the formal engagement letter was executed on April 18, 2023.
The State's complaint defined the relevant product market as co-packaged optics transceiver modules for data-center applications — a market encompassing CPO modules that integrate optical transceiver functionality directly onto or immediately adjacent to switch ASIC packages, providing higher bandwidth density and lower power consumption compared to traditional pluggable optical transceiver modules. The State defined the relevant geographic market as the United States, while emphasizing the particular impact of the acquisition on Oregon-based customers. The complaint specifically identified two major Oregon-headquartered data-center operators as significant purchasers of Meridian CPO modules: Cascadia Cloud Services Inc., which had purchased approximately $62 million of Meridian CPO products in fiscal year 2022, and Northstar Digital Infrastructure LLC, which had purchased approximately $28 million of Meridian CPO products in fiscal year 2022. Together, these two Oregon-based customers accounted for approximately $90 million in annual Meridian CPO revenue.
The State's market share allegations were central to its theory of competitive harm. According to the complaint, the post-merger combined Halcyon/Meridian share of U.S. CPO transceiver module sales was approximately 58%, representing approximately $507.5 million out of an estimated total U.S. CPO transceiver market of approximately $875 million in fiscal year 2022. The State further alleged that the acquisition increased the Herfindahl-Hirschman Index ("HHI") of market concentration from 2,818 to 4,050, an increase (or "delta") of 1,232 points. Under the framework of the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, an HHI above 2,500 is considered "highly concentrated," and an increase of more than 200 points in a highly concentrated market gives rise to a presumption that the merger is likely to enhance market power. The State's HHI analysis thus placed the transaction well above the thresholds that typically trigger heightened antitrust scrutiny.
The State retained outside counsel to assist with the litigation: Ashworth & Pendleton LLP, with lead partner Constance Yee and associate Derek Holmgren handling the day-to-day litigation. The State's expert economist was Dr. Evelyn Ng of Ridgeline Economic Consulting LLC, who was retained to provide economic analysis supporting the State's market definition, competitive effects, and market concentration theories.
Halcyon's defense team included Calderwood & Harkness LLP as lead national counsel and Grantham Davis & Kowalski LLP as local Oregon counsel. The Grantham Davis team was led by partner Thomas Kowalski and associate Rachel Ingram, who handled Oregon-specific procedural matters, local court filings, and in-state discovery coordination. Halcyon's expert economist was Dr. Franklin Morrow of Stonebridge Analytics LLC, who was engaged to provide competing economic analysis challenging the State's market definition, market share calculations, and competitive effects theories. Among other opinions, Dr. Morrow opined that the relevant market should be defined more broadly to include both co-packaged optics and next-generation pluggable transceivers, which would have significantly reduced the combined entity's market share and the associated HHI calculations.
C. Key Litigation Milestones Leading to Settlement
The litigation proceeded on an accelerated schedule, consistent with the State's emphasis on the urgency of the competitive concerns raised by the complaint. The following chronology summarizes the key milestones in the case:
May 5, 2023: Halcyon, through Calderwood & Harkness and Grantham Davis, filed its Answer to the State's complaint, denying the material allegations and asserting affirmative defenses including federal preemption, failure to state a claim upon which relief could be granted, and the procompetitive efficiencies of the transaction.
May 19, 2023: Halcyon filed a Motion to Dismiss the complaint, arguing (i) that the State's claims were preempted by federal antitrust law in light of the FTC's and DOJ's decision not to challenge the transaction following HSR review, and (ii) that the complaint failed to state a plausible claim under ORS § 646.730, particularly given the State's narrow market definition.
July 7, 2023: The Honorable Robert Castañeda denied Halcyon's Motion to Dismiss in a written opinion. The Court held that Oregon's antitrust statutes provide an independent basis for state enforcement that is not preempted by federal law, and that the State's allegations, taken as true, were sufficient to state a plausible claim for relief. The Court noted that early termination of the HSR waiting period did not constitute an affirmative federal determination that the transaction was lawful, and that the absence of a federal challenge did not preclude state enforcement.
July 21, 2023: The parties commenced fact and expert discovery in accordance with a case management order issued by Judge Castañeda. The discovery period was set for a compressed eight-week period, reflecting the Court's recognition of the State's interest in prompt resolution.
August 15, 2023: The State filed a Motion for Preliminary Injunction seeking the imposition of interim behavioral restrictions on Halcyon pending a trial on the merits. The State's proposed preliminary injunction would have required Halcyon, on an interim basis, to maintain Meridian's pre-acquisition pricing terms, to refrain from conditioning CPO module sales on purchases of other Halcyon products, and to continue licensing Meridian's CPO patents on terms consistent with pre-acquisition practice. The motion was supported by declarations from representatives of Cascadia Cloud Services and Northstar Digital Infrastructure, as well as economic analysis from Dr. Evelyn Ng.
September 8, 2023: Halcyon filed its opposition to the State's Motion for Preliminary Injunction, arguing that the State had not demonstrated a likelihood of irreparable harm sufficient to justify the extraordinary remedy of preliminary injunctive relief, and that the proposed restrictions would impose undue operational burdens on the merged entity. Halcyon's opposition was supported by the Declaration of Dr. Franklin Morrow, who provided detailed economic analysis challenging the State's market definition and competitive effects theories, and by declarations from Halcyon Americas executives regarding the operational disruption that would result from the proposed interim restrictions.
September 22, 2023: The Court held an evidentiary hearing on the State's Motion for Preliminary Injunction. At the conclusion of the hearing, Judge Castañeda indicated from the bench that the case presented "close questions on the merits that would benefit from the parties' serious exploration of a negotiated resolution." The Court specifically noted the possibility of a behavioral remedy that would address the State's concerns while preserving the economic efficiencies of the transaction, and strongly encouraged the parties to engage in mediation. Both sides agreed to pursue settlement discussions.
October 6, 2023: Formal mediation commenced before the Honorable Patricia Loomis (Ret.), a former judge of the Oregon Court of Appeals with extensive experience mediating complex commercial and antitrust disputes. The mediation sessions extended over a period of approximately two weeks and involved multiple rounds of in-person and telephonic negotiations.
October 20, 2023: The parties reached agreement on the terms of a proposed consent decree, memorialized in a term sheet signed by counsel for both sides. The term sheet established the framework for the behavioral remedies that would subsequently be incorporated into the final Consent Decree.
November 1, 2023: The Final Consent Decree was fully drafted, negotiated in final form, and executed by all parties — the State of Oregon (acting through Senior Assistant AG Marcus Trujillo on behalf of Attorney General Diane Calloway) and Halcyon Semiconductor Americas Inc. (acting through Priya Nagarajan, U.S. Deputy General Counsel, with authorization from Katrin Schreiber, General Counsel of Halcyon AG, and Dr. Tobias Wendt, CEO of Halcyon AG).
November 8, 2023: The Consent Decree was entered by the Honorable Robert Castañeda as a Final Judgment of the Circuit Court of the State of Oregon for the County of Multnomah. The case was closed. The Calderwood & Harkness litigation engagement under Matter No. 1032-00001 was formally closed as of the same date.
III. Overview of Consent Decree Obligations
The Consent Decree imposes six principal categories of obligations on Halcyon, each of which is discussed in detail in Sections IV through IX below. For ease of reference, the six categories are summarized here:
1. FRAND Patent Licensing Commitment (Section IV): Halcyon must offer Fair, Reasonable, and Non-Discriminatory licenses for all 47 of Meridian's CPO-related U.S. patents to any third party that submits a bona fide licensing request.
2. Interoperability Maintenance Obligation (Section V): Halcyon must maintain backward-compatible interoperability between Meridian CPO modules and third-party switch ASICs conforming to OIF 400ZR and 800ZR standards.
3. Non-Discrimination in Supply (Section VI): Halcyon may not condition the sale of Meridian CPO modules on a customer's purchase of other Halcyon products, and may not offer preferential pricing or terms to customers who purchase bundled Halcyon products.
4. Compliance Monitor Cooperation (Section VII): Halcyon must cooperate fully with the independent compliance monitor, Kirkdale Compliance Group LLC, which has broad authority to access records, interview personnel, and report to the Oregon AG.
5. Civil Penalty Payment (Section VIII): Halcyon must pay a civil penalty of $1,500,000 to the State of Oregon within thirty (30) calendar days of entry of the Decree.
6. Reporting and Record-Keeping (Section IX): Halcyon must maintain complete records related to compliance with all obligations and must cooperate with information requests from the Oregon AG's Antitrust Division.
All behavioral obligations under the Consent Decree have a duration of five (5) years from the date of entry of the Decree, meaning they are effective from November 8, 2023, through November 8, 2028. At the expiration of the five-year term, all behavioral obligations terminate automatically, and no further court action is required to dissolve or vacate the Decree.
It is important to emphasize that the Consent Decree does not impose any structural remedy. No divestiture of Meridian Photonics Inc. or any of its assets, business units, or patents is required. Halcyon retains full ownership and operational control of Meridian as a wholly owned subsidiary. This is a significant outcome, as the State's complaint had requested that the Court consider structural relief, including the potential divestiture of Meridian's CPO business or patent portfolio. The behavioral-only resolution reflects the strength of Halcyon's litigation position and the effectiveness of the mediation process in achieving a commercially viable outcome.
IV. Obligation 1: FRAND Patent Licensing Commitment
A. Scope of Obligation
The Consent Decree requires Halcyon to offer Fair, Reasonable, and Non-Discriminatory ("FRAND") licenses for all forty-seven (47) of Meridian's U.S. patents related to co-packaged optics technology (the "Covered Patents") to any third party that submits a bona fide licensing request during the five-year term of the Decree. A complete list of the Covered Patents, identified by patent number, title, and filing date, is attached hereto as Enclosure B.
The FRAND licensing obligation is broadly defined. It covers not only the 47 currently issued Covered Patents, but also any continuations, divisionals, or reissues of those patents filed during the five-year term that claim priority to one or more of the 47 Covered Patents. This provision is designed to prevent Halcyon from circumventing the FRAND commitment by filing continuation applications that cover substantially the same technology under new patent numbers. Accordingly, Halcyon's patent prosecution activities relating to the Covered Patents must be monitored throughout the term to ensure that any new filings claiming priority to the Covered Patents are brought within the scope of the FRAND licensing program.
The license terms offered by Halcyon must be consistent with standard FRAND principles as understood in the technology licensing industry. Specifically, Halcyon must offer licenses that include:
(a) Royalty rates that are fair and reasonable, meaning that they do not exceed what would be charged in an arms-length negotiation between a willing licensor and a willing licensee, taking into account the scope and value of the patented technology, comparable licenses in the CPO and broader silicon photonics industry, and the licensee's intended field of use;
(b) Non-discriminatory terms, meaning that similarly situated licensees must be offered substantially similar license terms, and Halcyon may not impose materially different conditions on licensees based on their competitive relationship with Halcyon or for other anticompetitive reasons; and
(c) No unreasonable conditions, meaning that Halcyon may not condition the grant of a FRAND license on acceptance of terms unrelated to the licensed technology, such as cross-licensing of the licensee's unrelated patents, exclusive supply arrangements, or other provisions designed to extract value beyond the fair value of the licensed CPO patents.
The FRAND licensing commitment is in effect for the full five-year term of the Consent Decree, through November 8, 2028. After that date, Halcyon's obligation to offer FRAND licenses terminates, and Halcyon will be free to license (or decline to license) the Covered Patents on whatever terms it deems appropriate, subject to applicable patent and antitrust law.
B. Recommended Internal Compliance Steps — Establishment of a FRAND Licensing Desk
To ensure timely, systematic, and documented compliance with the FRAND licensing obligation, we recommend that Halcyon establish a dedicated FRAND Licensing Desk within Halcyon's intellectual property department or, alternatively, within the Meridian Photonics business unit. The FRAND Licensing Desk should serve as the single, centralized point of contact for all incoming FRAND licensing requests from third parties. Centralizing the intake and processing of FRAND requests will reduce the risk of requests being overlooked, misrouted, or handled inconsistently across different parts of the organization.
Staffing: We recommend that the Company appoint a dedicated FRAND Licensing Manager to lead the FRAND Licensing Desk. This individual should have experience in technology licensing negotiations and should report to Priya Nagarajan, U.S. Deputy General Counsel, or to a designated intellectual property lead within Halcyon Americas who, in turn, reports to Priya Nagarajan. The FRAND Licensing Manager should have authority to negotiate and execute FRAND licenses within pre-approved parameters established by Halcyon's management and legal teams. For requests that fall outside pre-approved parameters, the FRAND Licensing Manager should have a clear escalation path to Priya Nagarajan and, as appropriate, to outside counsel at Calderwood & Harkness LLP.
Standard FRAND License Agreement Template: We recommend that Halcyon develop a Standard FRAND License Agreement template for use in responding to licensing requests under the Consent Decree. This template should be reviewed and approved by Calderwood & Harkness LLP before deployment to ensure consistency with the Decree's requirements and with industry best practices. The template should incorporate, at a minimum:
(i) Royalty rate benchmarks based on an analysis of comparable licenses in the CPO and silicon photonics industry, conducted by Halcyon's licensing team in consultation with outside counsel and, if warranted, an independent valuation expert;
(ii) Standardized grant-back provisions that are reasonable and proportionate, and that do not impose unreasonable burdens on licensees;
(iii) Field-of-use limitations that are consistent with CPO applications and that do not unduly restrict the licensee's ability to use the licensed technology for its intended purposes; and
(iv) Standard terms and conditions addressing the duration of the license, territorial scope, sublicensing rights, confidentiality obligations, audit rights, representations and warranties, indemnification, limitation of liability, and dispute resolution mechanisms.
FRAND Licensing Procedures Manual: We further recommend that the Company develop an internal FRAND Licensing Procedures Manual documenting the end-to-end process for receiving, evaluating, negotiating, and executing FRAND license requests. The Procedures Manual should address the following elements:
• Intake: How licensing requests are received (e.g., via a dedicated email address, a web portal, or direct correspondence to the FRAND Licensing Manager), how they are logged, and how the initial acknowledgment of receipt is communicated to the requestor.
• Evaluation: How the FRAND Licensing Desk evaluates whether a licensing request is bona fide (i.e., whether the requestor has a genuine need for a license to practice the Covered Patents in a CPO application), and how the specific patents relevant to the request are identified.
• Negotiation: How the FRAND Licensing Desk conducts negotiations with the requestor, including the applicable timeline (we recommend an initial substantive response within 30 calendar days of receipt of a bona fide request, and completion of negotiations, where possible, within 90 calendar days), the parameters within which the FRAND Licensing Manager is authorized to negotiate, and the escalation path for requests that exceed those parameters.
• Execution: How executed FRAND licenses are documented, countersigned, and archived, and how the FRAND License Log is updated upon execution.
• Non-Execution: How the FRAND Licensing Desk documents situations in which negotiations do not result in an executed license, including the reasons for non-execution, and how such situations are reported to the compliance monitor.
FRAND License Log: The FRAND Licensing Desk should maintain a centralized FRAND License Log recording the following information for each licensing request received:
• Date of receipt of the licensing request
• Identity of the requestor (company name, contact person, and contact information)
• Patents at issue (identified by patent number)
• Summary of terms offered by Halcyon
• Summary of terms requested by the licensee
• Terms ultimately accepted or rejected by either party
• Date of execution of the license agreement (if applicable)
• Reasons for non-execution (if applicable)
• Any disputes or complaints raised by the requestor
• Referrals to the compliance monitor or to the Oregon AG's office
The FRAND License Log should be maintained in electronic format, with appropriate access controls to ensure that it is available for review by the compliance monitor and by outside counsel, while remaining protected by attorney-client privilege and work product protections to the extent applicable.
Training: Halcyon should conduct annual training for all Halcyon and Meridian personnel in intellectual property, licensing, legal, and sales functions on the FRAND licensing obligations under the Consent Decree. Training should cover the scope of the FRAND commitment, the procedures established for handling licensing requests, the importance of non-discriminatory treatment of similarly situated licensees, the prohibition on delay or obstruction of licensing negotiations, and the consequences of non-compliance. Training attendance records and training materials should be maintained for review by the compliance monitor.
C. Risk Areas and Guidance
Several areas of potential risk merit particular attention in the context of the FRAND licensing obligation:
Constructive Refusal to License. The Consent Decree prohibits not only outright refusal to license the Covered Patents, but also conduct that amounts to a de facto refusal to license. This includes deliberate delay in responding to licensing requests, imposition of unreasonable or pretextual conditions on license negotiations, and the use of excessive or unjustified royalty demands as a means of discouraging potential licensees from pursuing a license. Halcyon must ensure that its FRAND Licensing Desk responds to all bona fide requests in a timely and good-faith manner, and that the terms offered are genuinely consistent with FRAND principles. We recommend that Halcyon document all interactions with potential licensees to create a clear record of good-faith engagement.
Reasonableness Disputes. It is possible that a potential licensee will disagree with Halcyon regarding the reasonableness of the terms offered under a FRAND license. The Consent Decree provides that such disputes may be referred to the compliance monitor for evaluation and, if necessary, to the Oregon Attorney General's office for further action. Halcyon should be prepared to defend the reasonableness of its offered terms based on comparable industry licenses, the value of the patented technology, and other relevant factors. We recommend that Halcyon retain a licensing valuation expert to develop a robust royalty rate benchmarking analysis that can be used to support the Company's FRAND licensing terms in the event of a dispute.
Scope of Covered Patents. If Halcyon takes the position that a particular patent is not within the scope of the 47 Covered Patents listed in Enclosure B — for example, because it does not relate to CPO technology, or because a continuation application does not claim priority to any of the Covered Patents — that determination should be documented with a detailed legal analysis prepared by patent counsel. The analysis should be retained in the Company's compliance files, promptly reported to the compliance monitor, and made available to the Oregon AG's office upon request.
V. Obligation 2: Interoperability Maintenance Obligation
A. Scope of Obligation
The Consent Decree requires Halcyon 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 is designed to ensure that Halcyon does not use its ownership of Meridian to degrade the ability of data-center operators to use Meridian CPO modules with switch ASICs manufactured by Halcyon's competitors.
Specifically, the Decree prohibits Halcyon from implementing any design changes, firmware updates, or specification modifications to Meridian CPO modules that would degrade, limit, or eliminate interoperability with OIF 400ZR/800ZR-compliant third-party components. This prohibition is broadly drafted and covers changes made at any level of the product — including hardware design, firmware, embedded software, optical specifications, electrical interface specifications, and packaging — that could adversely affect interoperability.
The obligation extends to new-generation Meridian CPO modules introduced during the five-year term. If Meridian develops and commercializes new CPO module products during the term of the Decree, those new products must also maintain backward-compatible interoperability with OIF 400ZR/800ZR-compliant third-party switch ASICs. This provision prevents Halcyon from circumventing the interoperability obligation by discontinuing existing interoperable products and replacing them with new products that are not interoperable with third-party components.
The interoperability maintenance obligation is in effect for the full five-year term of the Consent Decree, through November 8, 2028.
B. Recommended Internal Compliance Steps — Interoperability Testing Protocols
Compliance with the interoperability obligation will require systematic testing and documentation procedures integrated into Meridian's product development and release processes. We recommend the following measures:
Formal Interoperability Testing Protocol. Halcyon should establish a formal Interoperability Testing Protocol applicable to all Meridian CPO module product releases, including new product introductions, hardware revisions, and firmware updates. The Testing Protocol should define the specific test procedures, pass/fail criteria, and documentation requirements for verifying OIF 400ZR and 800ZR interoperability before any CPO module is released for commercial shipment.
Minimum Testing Requirements. Before any CPO module release or update, Halcyon must conduct interoperability testing against at least three representative third-party switch ASIC platforms conforming to OIF 400ZR and OIF 800ZR standards. The selection of test platforms should be designed to provide a representative cross-section of the third-party ASIC ecosystem, and should include platforms manufactured by at least two different ASIC vendors. We recommend that the specific platforms selected for testing be documented and periodically reviewed to ensure that they remain representative of the current market.
Testing Lab Certification Log. Halcyon should maintain a detailed Testing Lab Certification Log documenting the results of each interoperability test conducted under the Testing Protocol. The Log should record, at a minimum:
(i) The product and/or firmware version of the Meridian CPO module being tested;
(ii) The identity of the third-party switch ASIC platforms tested against, identified by manufacturer, model number, and firmware/software version;
(iii) The date on which testing was conducted;
(iv) The detailed test results, including performance on each defined interoperability metric (e.g., link establishment, data throughput, error rates, power levels, signal integrity);
(v) A pass/fail determination for each test;
(vi) The name and title of the engineer or engineers conducting the test;
(vii) A description of any corrective actions taken in response to test failures, including design modifications, firmware patches, or other remedial steps; and
(viii) Sign-off by the Interoperability Compliance Officer certifying that the product release meets OIF 400ZR/800ZR interoperability requirements.
Interoperability Compliance Officer. Halcyon should designate a senior engineer within the Meridian engineering team as the Interoperability Compliance Officer (the "ICO"). The ICO will be responsible for overseeing all interoperability testing activities, certifying OIF 400ZR/800ZR compliance before commercial shipment of any CPO module product or update, and serving as the primary technical point of contact for the compliance monitor on interoperability matters. The ICO should have sufficient seniority and authority within the Meridian engineering organization to ensure that interoperability requirements are taken seriously and that product releases are not shipped without proper testing and certification.
Integration with Product Development Lifecycle. The interoperability testing requirement should be incorporated as a mandatory gate in Meridian's stage-gate product development process. Specifically, we recommend that interoperability review be inserted at both the design-review stage (to ensure that proposed product designs do not introduce interoperability risks) and the pre-release stage (to verify interoperability through formal testing before commercial shipment). No CPO module product or update should proceed past the pre-release gate without a documented sign-off from the ICO confirming OIF 400ZR/800ZR compliance.
Record Retention. All test results, engineering records, and related documentation generated under the Interoperability Testing Protocol should be archived and retained for the duration of the Consent Decree plus two years — that is, through November 8, 2030. This retention period ensures that records will be available for review by the compliance monitor during the five-year term, and that a reasonable post-expiration buffer is maintained for any potential dispute resolution or enforcement proceedings.
C. Risk Areas and Guidance
Definition of "Interoperability." The Consent Decree defines interoperability by reference to the OIF 400ZR and 800ZR standards as they exist at the time of the Decree's entry, plus any subsequent OIF-ratified amendments to the 400ZR and 800ZR standards adopted during the five-year term. This is an important baseline. If OIF issues new standards that supersede 400ZR and 800ZR during the term of the Decree (for example, a hypothetical OIF 1600ZR standard), the question of whether Halcyon's interoperability obligation extends to the new standard is not squarely addressed by the Decree. We recommend that Halcyon consult with Calderwood & Harkness LLP before taking any position regarding the scope of the interoperability obligation in light of new OIF standards, and that any ambiguity be resolved through proactive engagement with the compliance monitor and, if necessary, with the Oregon AG's office.
Customer Complaints. Any customer complaint alleging that a Meridian CPO module has experienced interoperability degradation with a third-party switch ASIC should be treated as a potential compliance issue and escalated immediately to the Interoperability Compliance Officer and to legal counsel. The ICO should investigate the complaint, document all investigation steps (including testing conducted, root cause analysis, and any corrective actions taken), and report findings to Priya Nagarajan and to the compliance monitor. Even if the investigation determines that the complaint is unfounded or attributable to a third-party ASIC issue rather than a Meridian product issue, the investigation and its conclusions should be thoroughly documented for compliance purposes.
Firmware and Software Updates. Particular attention should be paid to firmware and software updates for Meridian CPO modules, as these updates have the greatest potential to introduce unintended interoperability regressions. Every firmware and software update, no matter how minor, should be subject to the Interoperability Testing Protocol before release.
VI. Obligation 3: Non-Discrimination in Supply of CPO Modules
A. Scope of Obligation
The Consent Decree prohibits Halcyon from engaging in discriminatory practices in the sale and supply of Meridian CPO modules. This obligation has two principal components:
No Tying or Bundling. Halcyon may not condition the sale or supply of Meridian CPO modules on a customer's purchase of Halcyon power-management ICs, analog semiconductors, or any other Halcyon component product. In other words, Halcyon may not require customers to buy other Halcyon products as a prerequisite to purchasing Meridian CPO modules, and may not refuse to sell CPO modules to customers who decline to purchase other Halcyon products. This prohibition addresses the State's concern that Halcyon would use its control of Meridian's dominant CPO product line as leverage to force customers to purchase other Halcyon semiconductor products — a classic tying arrangement.
No Preferential Treatment. Halcyon may not offer preferential pricing, delivery terms, or allocation of Meridian CPO modules to customers who also purchase other Halcyon products, relative to customers who purchase only Meridian CPO modules on a standalone basis. This means that a customer who purchases Meridian CPO modules without purchasing any other Halcyon products must receive pricing, delivery timelines, and product allocation that are at least as favorable as those offered to customers who purchase bundled Halcyon products, holding all other commercially relevant factors (such as order volume, contract duration, and creditworthiness) constant.
The non-discrimination obligation applies to all customers, including but not limited to the Oregon-based data-center operators specifically identified in the State's complaint: Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC. It also applies to all other domestic and international customers of Meridian CPO modules during the five-year term.
The non-discrimination obligation is in effect for the full five-year term of the Consent Decree, through November 8, 2028.
B. Recommended Internal Compliance Steps — Non-Discrimination Audit Procedures
Effective compliance with the non-discrimination obligation will require a combination of clear internal policies, regular auditing, comprehensive training, and robust documentation. We recommend the following measures:
Non-Discrimination Compliance Policy. Halcyon should develop and promulgate a formal Non-Discrimination Compliance Policy applicable to all Halcyon and Meridian sales, account management, and business development personnel. The Policy should clearly articulate the prohibitions set forth in the Consent Decree, provide concrete examples of prohibited conduct, and establish the consequences for policy violations. The Policy should be distributed to all relevant personnel, and acknowledgment of receipt should be documented.
Prohibition on Improper Communications. The Policy should specifically prohibit any written or verbal communication to customers — whether in formal proposals, informal sales calls, marketing materials, or any other medium — that suggests, implies, or requires the purchase of other Halcyon products as a condition of CPO module supply. This prohibition extends to sales pitches, negotiations, and customer relationship management interactions at all levels.
Quarterly Internal Audits. Halcyon should establish a program of quarterly internal audits of Meridian CPO module sales data designed to identify potential patterns of discriminatory pricing, allocation, or delivery terms. Each quarterly audit should include, at a minimum:
• Pricing Analysis: A comparison of CPO module pricing offered to customers who purchase bundled Halcyon products versus CPO module pricing offered to standalone CPO module purchasers, controlling for commercially relevant factors such as order volume, contract duration, product mix, and creditworthiness. Any statistically significant pricing disparities that cannot be explained by legitimate commercial factors should be flagged for further investigation.
• Allocation and Lead-Time Analysis: A comparison of CPO module allocation priority and delivery lead times for customers who purchase bundled Halcyon products versus standalone CPO module purchasers. During periods of supply constraint, which are common in the semiconductor industry, allocation decisions are particularly susceptible to discriminatory behavior and must be closely monitored.
• Customer Complaint Review: A review of all customer complaints or inquiries received during the quarter relating to bundling, conditioning, or discriminatory treatment in the supply of CPO modules. Each complaint should be investigated, documented, and resolved, and any systemic issues should be escalated.
Non-Discrimination Compliance Coordinator. Halcyon should designate a Non-Discrimination Compliance Coordinator within Halcyon Americas' commercial operations team. This individual will be responsible for conducting or overseeing the quarterly internal audits described above, maintaining audit documentation, and reporting audit results to Priya Nagarajan and to the compliance monitor. The Compliance Coordinator should have sufficient access to sales data, pricing systems, allocation databases, and customer records to conduct meaningful and comprehensive audits.
Training. Halcyon should conduct semi-annual training for all Meridian and Halcyon sales teams, account managers, and business development personnel covering the non-discrimination obligation under the Consent Decree. Training should address the specific prohibited conduct, provide real-world examples and hypothetical scenarios, explain the reporting mechanisms for suspected violations, and emphasize the seriousness of the consequences of non-compliance. Training should be conducted at least twice per year, timed to precede each compliance monitor reporting period so that any issues identified during training can be addressed before the monitor's review.
Record Retention. All audit reports, sales data analyses, pricing comparison documents, customer complaint files, and training records related to the non-discrimination obligation should be maintained for the duration of the Consent Decree plus two years — through November 8, 2030.
C. Risk Areas and Guidance
Volume-Based discounts. The non-discrimination obligation does not prohibit all forms of volume-based pricing or standard commercial incentives. Volume-based discounts are permissible, provided they are applied on a non-discriminatory basis and are not conditioned on cross-product bundling. For example, Halcyon may offer a discount to a customer who commits to purchasing a large volume of CPO modules, provided that the same discount is available on equivalent terms to all customers who commit to similar volumes, regardless of whether those customers also purchase other Halcyon products. The key distinction is between legitimate volume incentives (permissible) and bundling-conditioned incentives (prohibited).
Pre-Clearance of New Pricing Structures. Any proposed new pricing structures, loyalty programs, marketing promotions, or bundling arrangements involving Meridian CPO modules and other Halcyon products should be reviewed by legal counsel before implementation. If the proposed arrangement has any potential to be perceived as conditioning CPO module pricing or availability on the purchase of other Halcyon products, we recommend that it be pre-cleared with the compliance monitor before implementation. Proactive engagement with the monitor on potentially sensitive commercial decisions will reduce the risk of inadvertent non-compliance and will demonstrate Halcyon's good-faith commitment to the Decree.
Sales Compensation Plans. Halcyon should review its sales compensation plans and incentive structures to ensure that no compensation arrangement inadvertently encourages sales personnel to bundle Meridian CPO modules with other Halcyon products in violation of the Decree. For example, if a sales representative's bonus or commission is tied to revenue from multi-product bundles that include CPO modules, the incentive structure could create pressure to condition CPO module sales on purchases of other Halcyon products. Any such structures should be modified to ensure compliance with the non-discrimination obligation.
VII. Obligation 4: Independent Compliance Monitor
A. Identity and Appointment
The Consent Decree appoints Kirkdale Compliance Group LLC ("Kirkdale" or the "Monitor") as the independent compliance monitor for the full five-year term of the Decree (November 8, 2023, through November 8, 2028). Kirkdale is a compliance consulting firm headquartered at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606. Contact information for Kirkdale is provided in Enclosure C attached hereto.
Kirkdale was jointly selected by the parties during the mediation process and was approved by the Court. Kirkdale has extensive experience serving as an independent compliance monitor in antitrust consent decrees and regulatory settlements, including engagements in the technology, telecommunications, and healthcare sectors. The firm is led by a team of former federal regulators, compliance professionals, and industry consultants with deep expertise in antitrust compliance monitoring.
B. Role and Authority
The Consent Decree grants the compliance monitor broad authority to assess and verify Halcyon's compliance with all behavioral obligations imposed by the Decree. Specifically, the Monitor has the authority to:
• Access Books, Records, and Facilities: Review and inspect Halcyon's and Meridian's books, records, databases, electronic systems, and physical facilities to the extent relevant to the Consent Decree obligations. This includes access to licensing records, pricing data, sales records, product development documentation, interoperability test results, training records, and any other documents bearing on compliance.
• Interview Personnel: Conduct interviews of Halcyon and Meridian employees, officers, directors, and agents regarding matters relevant to the Consent Decree obligations. Halcyon personnel must make themselves available for interviews upon reasonable notice from the Monitor, and must respond truthfully and completely to the Monitor's inquiries.
• Review and Assess Compliance: Evaluate Halcyon's compliance with the FRAND licensing, interoperability maintenance, and non-discrimination obligations, including reviewing the internal compliance procedures, audit results, and testing records described in Sections IV, V, and VI of this memorandum.
• Receive and Investigate Complaints: Receive complaints from third parties — including potential licensees, customers, competitors, and other market participants — alleging non-compliance with the Consent Decree obligations. The Monitor has the authority to investigate such complaints, request information from Halcyon in connection with such investigations, and make findings regarding the merits of the complaints.
• Issue Recommendations: Based on its review and assessment, the Monitor may issue recommendations to Halcyon regarding corrective actions, improvements to compliance procedures, or modifications to business practices necessary to ensure compliance with the Decree. While the Monitor's recommendations are not formally binding, failure to adopt reasonable recommendations may be cited by the Oregon AG as evidence of non-compliance in any enforcement proceeding.
• Report to the Oregon AG: The Monitor will submit semi-annual compliance reports to the Oregon Attorney General's office (Antitrust Division, Senior Assistant Attorney General Marcus Trujillo), detailing its findings, assessments, and recommendations regarding Halcyon's compliance with each obligation under the Decree.
C. Semi-Annual Reporting Deadlines
The compliance monitor will issue semi-annual compliance reports to the Oregon AG's office. The reporting periods and approximate due dates are as follows:
A total of ten (10) semi-annual reports will be issued over the five-year term. Each report will cover a six-month period, and the Monitor will prepare its report following the close of each period. The tenth and final report will cover the last six months of the Decree's term and will serve as the final compliance assessment.
Importantly, the Consent Decree provides that Halcyon will receive a draft of each semi-annual report for factual accuracy review before the Monitor submits the final version to the Oregon AG. The review window is typically ten (10) business days from Halcyon's receipt of the draft. During this review period, Halcyon may submit corrections of factual inaccuracies and provide additional context or information for the Monitor's consideration. The Monitor retains sole discretion regarding the content and conclusions of the final report. We recommend that Halcyon designate Priya Nagarajan and outside counsel at Calderwood & Harkness LLP as the review team for each draft report, and that the Company exercise its review rights fully and promptly for every report.
D. Monitor Fees and Cost Allocation
All compliance monitor fees and expenses are borne by Halcyon Semiconductor Americas Inc. The estimated annual fee for the Monitor's services is approximately $175,000 per year, reflecting the Monitor's anticipated time commitment for document reviews, site visits, interviews, complaint investigations, and report preparation. Over the full five-year term of the Decree, the estimated total cost of the compliance monitor is approximately $875,000.
Halcyon should budget for these costs accordingly and should establish a direct billing relationship with Kirkdale Compliance Group LLC. We recommend that Halcyon Americas' finance team work with Kirkdale to agree upon billing and payment procedures, including the frequency of invoicing (monthly or quarterly), the format and level of detail of invoices, and the payment terms.
It is important to note that the compliance monitor fees are in addition to, and separate from, the $1,500,000 civil penalty required under the Decree and the defense costs incurred during the litigation. The Monitor's fees are an ongoing operational cost that will be incurred over the full five-year term.
E. Halcyon's Cooperation Obligations
The Consent Decree imposes on Halcyon an express obligation to provide full, prompt, and good-faith cooperation with the compliance monitor. This cooperation obligation is broadly defined and encompasses all aspects of the Monitor's authority described above. Halcyon must make its personnel, records, and facilities available to the Monitor upon reasonable notice, must respond to the Monitor's information requests in a timely and complete manner, and must not obstruct, delay, or interfere with the Monitor's activities.
Internal Points of Contact. We recommend that Halcyon designate the following internal points of contact for the compliance monitor:
• Primary Legal Contact: Priya Nagarajan, U.S. Deputy General Counsel, Halcyon Semiconductor Americas Inc.
• FRAND Licensing Operational Contact: The FRAND Licensing Manager designated under Section IV.B above.
• Interoperability Operational Contact: The Interoperability Compliance Officer designated under Section V.B above.
• Non-Discrimination Operational Contact: The Non-Discrimination Compliance Coordinator designated under Section VI.B above.
Employee Awareness. All Halcyon and Meridian personnel should be informed that the compliance monitor has access authority under the Consent Decree and that cooperation with the Monitor is mandatory. Employees should understand that they may be contacted by the Monitor for interviews or document requests, and that they are required to respond truthfully, completely, and promptly. Cooperation with the Monitor should be incorporated into the Company's Consent Decree Compliance Training Program described in Section XI.B below.
Disputes with the Monitor. In the event of a dispute between Halcyon and the compliance monitor regarding the scope of the Monitor's authority, the reasonableness of a particular information request, or any other aspect of the monitoring arrangement, the dispute should be escalated first to Calderwood & Harkness LLP for legal advice and, if the dispute cannot be resolved informally, brought before the Court for resolution. Halcyon should not unilaterally refuse to cooperate with the Monitor based on its own assessment of the scope of the Monitor's authority without first obtaining legal advice.
VIII. Obligation 5: Civil Penalty Payment
A. Amount and Deadline
The Consent Decree requires Halcyon Semiconductor Americas Inc. to pay a civil penalty of $1,500,000 to the State of Oregon. This penalty was negotiated as part of the overall settlement and reflects the State's view that the acquisition resulted in a substantial lessening of competition in the CPO transceiver market, warranting a monetary sanction in addition to behavioral relief.
Payment is due within thirty (30) calendar days of the entry of the Consent Decree — that is, by December 8, 2023. Payment must be made by wire transfer to a bank account designated by the Oregon Department of Justice. Wire transfer instructions should be obtained by contacting Senior Assistant Attorney General Marcus Trujillo of the Antitrust Division of the Oregon Department of Justice.
Failure to make timely payment of the civil penalty would constitute a violation of the Consent Decree and could expose Halcyon to contempt proceedings, additional penalties, and the adverse consequences described in Section X of this memorandum.
B. Recommended Action
We recommend that Halcyon Semiconductor Americas Inc.'s treasury and finance team initiate the wire transfer promptly and well in advance of the December 8, 2023, deadline to ensure that payment is received by the State of Oregon on or before the due date. We further recommend the following steps:
1. Contact Senior Assistant AG Marcus Trujillo at the Oregon Department of Justice Antitrust Division to obtain the official wire transfer instructions for the designated State of Oregon account.
2. Execute the wire transfer in the amount of $1,500,000 with sufficient lead time to ensure receipt by December 8, 2023, accounting for potential banking processing delays.
3. Retain a copy of the wire transfer confirmation, including the transaction reference number, date and time of execution, and the identity of the receiving account.
4. Provide a copy of the wire transfer confirmation to Calderwood & Harkness LLP (attention: Elaine Forsythe) for inclusion in the matter file.
5. Provide a copy of the wire transfer confirmation to Kirkdale Compliance Group LLC for inclusion in the first semi-annual compliance report covering the period from November 8, 2023, through May 8, 2024.
IX. Obligation 6: Reporting and Record-Keeping
A. Internal Record-Keeping Requirements
The Consent Decree requires Halcyon to maintain complete and accurate records related to compliance

CALDERWOOD & HARKNESS LLP

MEMORANDUM

MATTER NO.: 1032-00001

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