CALDERWOOD & HARKNESS LLP
399 Park Avenue, 31st Floor New York, New York 10022
Telephone: (212) 555-7200
New York · Washington, DC · London · Frankfurt · Hong Kong · Tokyo
June 12, 2023
VIA EMAIL AND INTERNATIONAL COURIER
Stefan Lohse Chefjustitiar (General Counsel) Halcyon Semiconductor Aktiengesellschaft Industriestraße 44 01099 Dresden, Saxony Germany
Dear Stefan:
We are pleased that Halcyon Semiconductor Aktiengesellschaft has selected Calderwood & Harkness LLP to serve as its U.S. counsel in connection with the Committee on Foreign Investment in the United States ("CFIUS") review of the proposed acquisition of Marlowe Asset Management Photonics Inc. We look forward to working with you and your team on this important matter, and we appreciate the confidence you and your colleagues have placed in the Firm.
The purpose of this letter is to set forth the terms and conditions of our engagement to represent Halcyon Semiconductor Aktiengesellschaft and its U.S. acquisition vehicle in connection with the CFIUS review and related national security regulatory proceedings arising out of the proposed transaction. We ask that you review this letter carefully and contact us with any questions before countersigning.
1. ENGAGEMENT AND SCOPE OF REPRESENTATION
1.1 Identification of the Client
The client in this engagement is Halcyon Semiconductor Aktiengesellschaft ("HSAG"), an Aktiengesellschaft organized and existing under the laws of the Federal Republic of Germany, registered with the Amtsgericht Dresden under commercial register number HRB 28416, and listed on the Frankfurt Stock Exchange (XETRA: HLC). Our representation also extends to HSAG's wholly owned U.S. acquisition vehicle, Halcyon US Holdings Inc., a corporation organized under the laws of the State of Delaware on June 5, 2023, with its registered agent located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904, and bearing Employer Identification Number 93-2841067. Halcyon US Holdings Inc. was formed for the purpose of effecting the transaction described in Section 1.2 below.
Calderwood & Harkness LLP ("C&H" or the "Firm") is engaged to represent HSAG and Halcyon US Holdings Inc. (collectively, the "Client") in connection with the matters described in this engagement letter. References to the "Client" throughout this letter shall be understood to include both HSAG and Halcyon US Holdings Inc. unless the context otherwise requires.
1.2 Description of the Transaction
HSAG, acting through Halcyon US Holdings Inc. as its designated U.S. acquisition vehicle, proposes to acquire one hundred percent (100%) of the outstanding equity interests of Marlowe Asset Management Photonics Inc. ("VPI"), a C-corporation organized under the laws of the State of Delaware (Employer Identification Number 26-4371885), with its principal executive offices located at 7400 Ridgeline Parkway, Colorado Springs, Colorado 80919 (the "Transaction").
VPI is a U.S. business engaged in the design, development, and manufacture of advanced gallium-nitride (GaN) power amplifier semiconductor chips. VPI's products are utilized in a range of critical applications, including defense radar systems, satellite communications platforms, and fifth-generation (5G) wireless telecommunications infrastructure. VPI currently holds both classified and unclassified contracts with the U.S. Department of Defense and certain other agencies and departments of the U.S. government. VPI supplies components and technical data that are subject to export controls administered under the International Traffic in Arms Regulations ("ITAR"), 22 C.F.R. Parts 120–130, and the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730–774.
The Stock Purchase Agreement governing the Transaction was executed on June 10, 2023, by and among HSAG, Halcyon US Holdings Inc. (as purchaser), VPI, and the selling shareholders of VPI. The Transaction contemplates a base purchase price of One Billion Four Hundred Twenty Million Dollars ($1,420,000,000) on a cash-free, debt-free basis, subject to customary working capital adjustments based on a normalized net working capital target of Thirty-Four Million Six Hundred Thousand Dollars ($34,600,000). The closing of the Transaction is conditioned upon, among other things, obtaining clearance from the Committee on Foreign Investment in the United States ("CFIUS") under Section 721 of the Defense Production Act of 1950, as amended (50 U.S.C. § 4565), and the regulations promulgated thereunder at 31 C.F.R. Part 800.
1.3 Scope of CFIUS Engagement
This engagement covers the full range of CFIUS-related legal services required in connection with the Transaction. Specifically, the Firm is engaged to provide the following services:
(a) Jurisdictional Analysis. Conducting a comprehensive jurisdictional analysis under 31 C.F.R. Part 800, including an assessment of whether the Transaction constitutes a "covered transaction" within the meaning of 31 C.F.R. § 800.213, whether a mandatory filing obligation exists under 31 C.F.R. § 800.401 (including analysis of whether VPI constitutes a "TID U.S. business" as defined in 31 C.F.R. § 800.248), and the implications of VPI's classified contracts and facility security clearance for purposes of the CFIUS jurisdictional determination.
(b) Preparation and Filing of Voluntary Joint Notice. Preparation and filing of a voluntary joint notice under 31 C.F.R. § 800.501, in coordination with counsel to VPI, Wethersfield & Gale LLP (Harrison Whitfield, lead partner), including the drafting of all narrative sections, compilation of required exhibits and attachments, and assembly of all information required under 31 C.F.R. § 800.502.
(c) Pre-Filing Consultations. Conducting pre-filing consultations with the U.S. Department of the Treasury, Office of Investment Security, as lead agency for CFIUS, in order to introduce the Transaction, address preliminary questions, and facilitate an efficient review process upon formal submission of the joint notice.
(d) Representation During the Review Period. Representing the Client during the initial forty-five (45) day CFIUS review period following acceptance of the joint notice, including responding to inquiries from the CFIUS Staff Chairperson and constituent agencies.
(e) Representation During the Investigation Period. Representing the Client during any subsequent forty-five (45) day investigation period, should CFIUS determine that a full investigation is warranted, including all communications with CFIUS and its constituent agencies during such period.
(f) Requests for Information (RFIs). Preparing and submitting responses to Requests for Information ("RFIs") and any supplemental information requests issued by CFIUS or its constituent agencies, including but not limited to the Department of Defense, the Department of Energy, the Department of Commerce, the Department of Homeland Security, the Office of the Director of National intelligence, and any other agency participating in the CFIUS review.
(g) Mitigation Negotiation. Negotiating mitigation measures, including any National Security Agreement ("NSA"), Special Security Agreement ("SSA"), proxy agreement, or other security arrangements that CFIUS or its constituent agencies may require as a condition of clearance of the Transaction. This includes drafting, reviewing, and negotiating the terms of any such agreement and advising the Client on the operational and compliance implications thereof.
(h) DCSA Coordination. Coordinating with the Defense Counterintelligence and Security Agency ("DCSA") regarding VPI's existing Facility Security Clearance at the SECRET level (CAGE Code 7VK92), including any Foreign Ownership, Control, or Influence ("FOCI") mitigation requirements that may be imposed in connection with the change of ownership.
(i) Post-Closing Compliance Advisory. Advising the Client on post-closing compliance obligations arising from any CFIUS mitigation agreement, NSA, SSA, or related arrangement, including the establishment of compliance monitoring procedures, the appointment of required oversight personnel or boards, and initial compliance reporting obligations.
(j) German Counsel Coordination. Coordinating with HSAG's German counsel, Schilling Frey Rechtsanwälte (Prof. Dr. Ulrich Schilling, lead partner, Berlin office), on German regulatory and corporate governance matters that intersect with the CFIUS process, including German foreign direct investment screening under the Außenwirtschaftsgesetz (AWG) and Außenwirtschaftsverordnung (AWV), EU foreign subsidies regulation considerations, and corporate governance approvals required under HSAG's articles of association or applicable German law.
1.4 Matters Outside the Scope of This Engagement
This engagement letter does not cover, and the Firm's representation under this letter does not extend to, the following matters:
(a) General M&A Representation. The Firm's general M&A representation in connection with the Stock Purchase Agreement and the closing of the Transaction is covered under a separate engagement letter dated June 4, 2023, between the Firm and the Client and is not governed by the terms of this letter.
(b) intellectual Property and Export Control Diligence. intellectual property diligence, export control classification review (including ITAR and EAR commodity jurisdiction and classification analysis), and related IP matters are not included within the scope of this engagement. These matters may be covered by a separate engagement letter amendment, if appropriate, following further discussion with the Client.
(c) Tax Advisory Services. All U.S. and international tax advisory services in connection with the Transaction are provided by Pemberton Kline LLP, which serves as HSAG's transaction tax advisor, and are not covered by this engagement.
(d) German Law Advice. All advice regarding German law, including German corporate law, German foreign investment review, and German regulatory matters, is handled by Schilling Frey Rechtsanwälte and is not within the scope of the Firm's engagement.
(e) Antitrust and Competition Filings. Antitrust and competition law filings in any jurisdiction, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the EU Merger Regulation, or the German Act Against Restraints of Competition (GWB), are not covered by this engagement.
(f) Financing-Related Representation. Legal representation in connection with the financing of the Transaction, including any debt or equity financing arrangements, is not covered by this engagement.
The scope of this engagement may be expanded or modified by written amendment to this letter, executed by both the Firm and the Client, as circumstances may require.
2. ENGAGEMENT TEAM
2.1 Responsible Partner
Beatrice Holloway, Partner, Mergers & Acquisitions Practice, resident in the Firm's New York office, will serve as the Responsible Partner with overall supervisory responsibility for this engagement. Ms. Holloway will be responsible for ensuring that the engagement is conducted in accordance with the Firm's professional standards and the terms of this letter, and will serve as the primary senior contact for the Client on engagement-level matters. Ms. Holloway can be reached at 399 Park Avenue, 31st Floor, New York, New York 10022, or by email at b.holloway@calderwoodharkness.com.
2.2 Billing Partner
James Prentice, Partner, Mergers & Acquisitions Practice, resident in the Firm's New York office, will serve as the Billing Partner with responsibility for all billing, fee, and financial administration matters arising under this engagement. All billing inquiries and fee-related communications should be directed to Mr. Prentice at j.prentice@calderwoodharkness.com.
2.3 CFIUS and National Security Team (Washington, DC Office)
The day-to-day substantive work on the CFIUS filing, review, investigation, and mitigation negotiation will be led by the Firm's National Security and CFIUS Practice, based in the Firm's Washington, DC office at 1750 K Street NW, Suite 800, Washington, DC 20006. The principal members of the CFIUS team are as follows:
Margaret "Peggy" Ashworth, Of Counsel, National Security & CFIUS Practice. Ms. Ashworth will serve as the day-to-day lead for all aspects of the CFIUS filing, review, investigation, and mitigation negotiation. Ms. Ashworth has extensive experience representing both foreign and domestic parties in CFIUS proceedings, including the negotiation of National Security Agreements and other mitigation arrangements. Prior to joining the Firm, Ms. Ashworth served in the U.S. government in positions relevant to CFIUS and national security regulation. Ms. Ashworth holds an inactive SECRET-level security clearance from her prior government service. She can be reached at p.ashworth@calderwoodharkness.com.
Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls Practice. Mr. Caruso will advise on all government contracts, DCSA coordination, FOCI mitigation, and export control aspects of the CFIUS process. Mr. Caruso served as a commissioned officer in the United States Army prior to entering private practice, with experience in defense procurement and industrial security matters. Mr. Caruso holds an inactive SECRET-level security clearance from his prior military and government service. He can be reached at d.caruso@calderwoodharkness.com.
Priya Venkataraman, Associate, International Trade & Sanctions Practice. Ms. Venkataraman will support CFIUS filings, RFI responses, and trade and sanctions analysis throughout the engagement. She can be reached at p.venkataraman@calderwoodharkness.com.
2.4 Corporate / M&A Support
Kenneth Morales, Associate, Corporate / M&A Practice, resident in the Firm's New York office, will provide corporate and transactional support for the preparation of the CFIUS notice, coordination of closing deliverables relating to the CFIUS clearance condition, and other corporate matters arising in connection with the CFIUS engagement. Mr. Morales can be reached at k.morales@calderwoodharkness.com.
2.5 Additional Team Members
The Firm may assign additional attorneys, paralegals, and professional staff as necessary to fulfill its obligations under this engagement. The Firm will notify the Client of any material additions to the engagement team. All work performed on this engagement will be conducted under the supervision of Ms. Holloway, as Responsible Partner, and Ms. Ashworth, as day-to-day CFIUS lead.
3. FEES AND BILLING ARRANGEMENTS
3.1 Hourly Rates
The Firm's current standard hourly rates applicable to this engagement are set forth in the following table:
These rates are effective as of the date of this engagement letter and are subject to the Firm's annual rate adjustments, which typically take effect on January 1 of each calendar year. The Client will be notified in writing in advance of any changes to the applicable hourly rates. Paralegal and legal assistant time will be billed at rates ranging from $350 to $475 per hour, depending on the experience level and role of the individual.
3.2 Fee Cap
Notwithstanding the foregoing hourly rates, the total professional fees for the CFIUS engagement as described in Section 1.3 of this letter shall not exceed Three Million Eight Hundred Thousand Dollars ($3,800,000), exclusive of disbursements and out-of-pocket expenses (the "Fee Cap").
The Fee Cap applies solely to the scope of legal services described in Section 1.3 of this engagement letter — namely, the CFIUS filing, review, investigation, and mitigation negotiation phases of the engagement. The Fee Cap does not extend to any expanded scope of services that may be authorized by subsequent amendment to this letter, including, without limitation, any intellectual property, export control, or other diligence work that may be added to the Firm's mandate.
In the event that the Firm reasonably anticipates that aggregate professional fees incurred in connection with the CFIUS engagement will approach the Fee Cap, the Firm will promptly notify the Client and the parties will discuss in good faith whether an adjustment to the Fee Cap is appropriate in light of the circumstances then prevailing, including the complexity of the review and any unanticipated developments in the CFIUS process.
For the Client's reference and planning purposes, the Firm's estimated total aggregate professional fees across all phases of the broader transaction engagement — encompassing the M&A advisory engagement, intellectual property diligence (if engaged), the CFIUS engagement, and trade and export control advisory services — are approximately Five Million Two Hundred Thousand Dollars ($5,200,000). The Fee Cap set forth in this Section 3.2 relates solely to the CFIUS phase and does not limit fees incurred under separate engagement letters or amendments.
3.3 Phased Budget Estimates
Within the aggregate Fee Cap, the Firm has prepared the following indicative phase-level budget allocations to provide the Client with visibility into the anticipated distribution of professional fees across the principal phases of the CFIUS engagement:
These phase-level estimates are provided for informational and planning purposes only. Actual professional fees per phase may vary depending on the complexity of the review, the volume and nature of RFIs, the scope of any mitigation negotiations, and other factors that cannot be fully predicted in advance. The binding obligation of the Firm with respect to fees is the aggregate Fee Cap of $3,800,000, not the individual phase-level estimates.
3.4 Disbursements and Out-of-Pocket Expenses
In addition to professional fees, the Client will reimburse the Firm for reasonable out-of-pocket disbursements incurred in connection with this engagement. Disbursements typically include, but are not limited to, the following categories:
• Travel expenses, including airfare, ground transportation, lodging, and meals, primarily associated with Washington, DC–based meetings with CFIUS agencies, DCSA, and the Client's personnel;
• Courier, express delivery, and shipping charges;
• Online legal research and database service charges (e.g., Westmark Data Systems, Sundial Solutions, and specialized regulatory databases);
• Copying, printing, binding, and document production costs;
• Filing fees and government charges; and
• Other reasonable and customary out-of-pocket expenses directly attributable to the engagement.
Disbursements and out-of-pocket expenses are not subject to the Fee Cap set forth in Section 3.2 and will be billed at the Firm's actual cost. The Firm will endeavor to manage disbursement costs prudently and will consult with the Client before incurring any single extraordinary expense in excess of $10,000.
3.5 Retainer. Upon execution of this engagement letter, the Client shall pay to the Firm an advance retainer in the amount of Two Hundred Fifty Thousand Dollars ($250,000) (the "Retainer"). The Retainer will be deposited into the Firm's client trust account maintained in accordance with the applicable rules of professional conduct governing attorney trust accounts in the State of New York.
The Retainer will be applied against the Firm's monthly invoices as they are rendered. Each invoice will reflect a credit for amounts drawn from the Retainer. In the event the balance of the Retainer is drawn below Fifty Thousand Dollars ($50,000) at any time during the engagement, the Client shall, upon written notice from the Firm, replenish the Retainer to its original amount of $250,000 within fifteen (15) business days of such notice.
Upon the conclusion of the engagement, whether by completion, termination, or otherwise, any unused portion of the Retainer will be promptly refunded to the Client, net of any outstanding fees and disbursements.
3.6 Billing and Payment
The Firm will render monthly invoices to the Client for professional fees and disbursements incurred during the preceding calendar month. Each invoice will include a summary of services rendered, the identity of each timekeeper who performed work during the billing period, the number of hours worked by each timekeeper, and a description of the services performed.
Invoices are due and payable within thirty (30) days of the invoice date. All invoices will be directed to the attention of the Billing Partner, James Prentice, and rendered to the Client's General Counsel, Stefan Lohse, at the address set forth at the beginning of this letter, or by email to s.lohse@hsag.de, unless the Client designates an alternative billing contact in writing.
Payment shall be made in United States Dollars by wire transfer to the Firm's designated bank account. Wire transfer instructions will be provided to the Client separately in the enclosure accompanying this letter. The Firm reserves the right to charge interest on past-due amounts at a rate of one percent (1%) per month, or the maximum rate permitted by applicable law, whichever is less.
4. RESPONSIBILITIES OF THE CLIENT
4.1 Information and Cooperation
The Client agrees to provide the Firm with timely, complete, and accurate information necessary for the preparation of the CFIUS filing and all related submissions, responses, and correspondence. The Client recognizes that the quality and timeliness of the CFIUS filing, and the Firm's ability to respond effectively to CFIUS inquiries and RFIs, depend in significant part upon the Client's prompt provision of requested information and documentation.
The Client will designate appropriate personnel — including officers, directors, and employees of HSAG, Halcyon US Holdings Inc., and their respective subsidiaries and affiliates — to respond to the Firm's inquiries and to coordinate with the Firm's engagement team on an ongoing basis throughout the duration of the engagement.
The Client's principal point of contact for this engagement shall be Stefan Lohse, Chefjustitiar (General Counsel) of HSAG, who may be reached at the address set forth at the beginning of this letter and by email at s.lohse@hsag.de. The Client may designate additional or alternative contacts by written notice to the Firm at any time.
4.2 Coordination with VPI and Seller's Counsel
The CFIUS voluntary joint notice contemplated by this engagement requires the cooperation and joint participation of both the acquiring party (the Client) and the target company (VPI) and/or its selling shareholders. Accordingly, the Client authorizes the Firm to coordinate and communicate with VPI and its legal counsel, Wethersfield & Gale LLP (Harrison Whitfield, lead partner; Sandra Niehaus, lead M&A partner), located at 2000 Pennsylvania Avenue NW, Suite 600, Washington, DC 20006, as necessary and appropriate for the preparation and filing of the joint notice, the compilation of required exhibits and supporting documentation, responses to CFIUS RFIs, and other matters arising during the review and investigation process.
The Client understands and acknowledges that Wethersfield & Gale LLP represents VPI and the selling shareholders of VPI in connection with the Transaction and does not represent HSAG or Halcyon US Holdings Inc. The Client further understands that in the course of coordinating with Wethersfield & Gale LLP, the Firm may share certain information provided by the Client, subject to applicable confidentiality obligations and the Client's prior authorization.
4.3 Third-Party Advisors
The Client's financial advisor, Ashgrove Capital Group (Philippe Beaumont, Managing Director), and other third-party advisors to the Client may be consulted by the Firm as necessary in connection with the preparation of CFIUS filings and related submissions, subject to the Client's prior authorization. The Firm will coordinate with HSAG's auditor, Leinberger & Hess Wirtschaftsprüfungsgesellschaft (Dr. Markus Hess, engagement partner, Frankfurt am Main), as needed for the compilation and verification of financial information to be included in CFIUS submissions.
The Client shall ensure that its third-party advisors cooperate with the Firm in a timely manner and provide requested information and documentation promptly. The Firm shall not be responsible for delays or deficiencies in the CFIUS process resulting from the failure of the Client's third-party advisors to provide timely or accurate information.
4.4 Certifications. The Client acknowledges that CFIUS filings require certifications under 31 C.F.R. § 800.502 by an authorized officer of each filing party as to the accuracy and completeness of the information contained in the notice and any supplemental submissions. Such certifications must be made under penalty of perjury pursuant to 18 U.S.C. § 1001.
The Client agrees that Dr. Maximilian Ehrhardt, Vorstandsvorsitzender (Chief Executive Officer) of HSAG, or another senior officer designated by the Client in writing, will be available to review and execute such certifications as are required by CFIUS in connection with the joint notice and any supplemental filings. The Firm will provide the certifying officer with reasonable opportunity to review the relevant submissions prior to execution of any certification.
5. CONFIDENTIALITY
5.1 Attorney-Client Privilege and Work Product
All communications between the Firm and the Client in connection with this engagement are intended to be protected by the attorney-client privilege, the work product doctrine, and any other applicable privileges or protections under the laws of the State of New York, federal law, and, to the extent applicable, the laws of the Federal Republic of Germany. The Firm will take reasonable measures to preserve the confidentiality of all privileged communications and attorney work product generated in connection with this engagement.
The Client agrees to take reasonable steps to maintain the confidentiality of privileged communications and to limit the dissemination of such communications to those individuals within the Client's organization who have a need to know in connection with the Transaction. The Client acknowledges that disclosure of privileged communications to third parties who are not agents of the Client may result in a waiver of the attorney-client privilege.
5.2 Confidential and Classified Information
The Firm acknowledges that VPI's business involves both classified national security information and export-controlled technical data and that certain aspects of the Transaction and the CFIUS review may touch upon such information.
The Firm confirms that the members of its engagement team do not currently hold active U.S. government security clearances. Ms. Ashworth and Mr. Caruso each hold inactive SECRET-level security clearances from their prior service with the U.S. government and the U.S. military, respectively. The Firm will not seek or accept access to classified information in connection with this engagement. All matters involving classified information will be handled by appropriately cleared personnel on the Client's and VPI's side, in coordination with VPI's Facility Security Officer and DCSA, as applicable.
With respect to Controlled Unclassified Information ("CUI") and technical data controlled under ITAR (22 C.F.R. Parts 120–130) or the EAR (15 C.F.R. Parts 730–774), the Firm will comply with all applicable U.S. export control regulations. In particular, the Firm will not disclose ITAR-controlled technical data or EAR-controlled technology to non-U.S. persons (as defined under the applicable regulations) without obtaining prior written authorization from the Client and, where required, the appropriate U.S. government agency (the Directorate of Defense Trade Controls or the Bureau of Industry and Security, as applicable). The Firm's engagement team members who will have access to export-controlled information are U.S. persons for purposes of the applicable export control regulations.
5.3 CFIUS Confidentiality Provisions
The Client acknowledges that CFIUS proceedings are confidential under applicable law and regulation. Specifically, Section 721(c) of the Defense Production Act of 1950, as amended (50 U.S.C. § 4565(c)), and 31 C.F.R. § 800.702 impose strict confidentiality requirements on information submitted to or received from CFIUS in connection with a notice or review.
The Firm and the Client each agree to maintain the confidentiality of all CFIUS submissions, communications with CFIUS and its constituent agencies, and the substance of CFIUS proceedings, consistent with the requirements of 50 U.S.C. § 4565(c) and 31 C.F.R. § 800.702. Neither the Firm nor the Client shall disclose the content of CFIUS submissions or the details of CFIUS communications to any third party except as expressly permitted by law or regulation, or with the prior written consent of the other party, or as may be required in connection with the joint notice process (e.g., to VPI's counsel, Wethersfield & Gale LLP, as co-filer).
6. CONFLICTS OF INTEREST
6.1 Conflict Check
The Firm has conducted a comprehensive conflicts check across all of its offices worldwide in accordance with its standard policies and the applicable Rules of Professional Conduct. The Firm has screened against all known parties to the Transaction, including the following entities and persons:
• Marlowe Asset Management Photonics Inc.;
• Ridgecrest Ventures Fund III, L.P.;
• Ridgecrest Ventures Management LLC;
• Cascadian Capital Partners Growth Fund II, L.P.;
• Cascadian Capital Partners Management LLC;
• Wethersfield & Gale LLP;
• Meridian National Bank;
• Atlas Commercial Lending AG;
• Pacific Basin Credit Corp.;
• Rheinische Handelsbank AG;
• Pinnacle Trust Company, N.A.;
• Graystone Specialty Insurance Company; and
• Other identified transaction parties, including officers, directors, and significant shareholders of VPI and the selling funds.
Based on the results of this conflicts check, the Firm has identified no conflicts of interest that would prevent the Firm from representing the Client in this engagement. Should any conflicts of interest arise during the course of the engagement, the Firm will promptly notify the Client and take all steps required by the applicable rules of professional conduct, including, if necessary, seeking the Client's informed consent to continued representation or withdrawing from the engagement.
6.2 Waivers. No conflict waivers are required at this time. In the event that a waiver is required at any point during the engagement, the Firm will provide the Client with full disclosure of the relevant circumstances and obtain the Client's informed written consent before proceeding.
7. LIMITATION OF ENGAGEMENT
7.1 No Guarantee of Outcome
The Client understands and acknowledges that the outcome of the CFIUS review process is not within the Firm's control and cannot be guaranteed. CFIUS may take any of the following actions, among others, with respect to the Transaction:
• Clear the Transaction without conditions;
• Clear the Transaction subject to mitigation measures, such as a National Security Agreement, Special Security Agreement, proxy agreement, or other arrangements;
• Decline to clear the Transaction and refer it to the President of the United States with a recommendation for presidential action under 50 U.S.C. § 4565(d);
• Request that the parties withdraw and refile the notice, extending the review timeline; or
• Take other actions within its statutory and regulatory authority.
The Firm will use its best professional efforts to achieve a favorable outcome for the Client, including vigorous advocacy on the Client's behalf in all dealings with CFIUS and its constituent agencies, the preparation of thorough and persuasive filings, and the negotiation of mitigation measures on terms acceptable to the Client. However, the Firm cannot and does not guarantee any particular result or timeline.
7.2 Regulatory and Political Factors
The Client further acknowledges that the CFIUS review process involves the participation of multiple U.S. government agencies and departments and that the process may be influenced by policy considerations, national security assessments, intelligence community inputs, and political factors that are beyond the Firm's control or ability to predict. The semiconductor industry is currently the subject of heightened regulatory scrutiny in the United States and in other jurisdictions, and the Client should be prepared for the possibility that the review process may involve substantial engagement with CFIUS agencies on issues relating to supply chain security, technology transfer, and industrial base concerns.
Based on the Firm's experience with transactions of comparable size, complexity, and sensitivity, the anticipated timeline from the filing of the joint notice to the issuance of CFIUS clearance is approximately four (4) to seven (7) months. However, this is an estimate only, and the Client should be prepared for potential delays, including delays resulting from the volume of CFIUS caseload, the complexity of mitigation negotiations, requests by CFIUS for additional time or information, and other factors.
8. TERM AND TERMINATION
8.1 Commencement. This engagement is effective as of June 12, 2023, the date of execution of this engagement letter by both parties.
8.2 Termination. Either party may terminate this engagement at any time upon written notice to the other party. In the event of termination by either party:
(a) The Client will remain responsible for all professional fees and disbursements properly incurred by the Firm through the effective date of termination.
(b) The Firm will take all reasonable steps to protect the Client's interests during any transition period, including cooperating in the transfer of the engagement file and work product to successor counsel designated by the Client.
(c) Upon request, the Firm will provide the Client with copies of all non-privileged engagement files, correspondence, and documents in the Firm's possession relating to this engagement.
8.3 Conclusion of Engagement
Unless terminated earlier pursuant to Section 8.2, this engagement shall conclude upon the earliest to occur of the following:
(i) The issuance of CFIUS clearance with respect to the Transaction (including any safe-harbor letter or written confirmation of clearance from CFIUS) and the completion of all associated closing deliverables and post-clearance compliance setup activities described in Section 1.3(i);
(ii) The abandonment or termination of the Transaction by the parties thereto for any reason; or
(iii) The mutual written agreement of the Firm and the Client to conclude the engagement.
9. GOVERNING LAW AND DISPUTE RESOLUTION
This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law provision or rule that would cause the application of the laws of any other jurisdiction.
Any dispute, claim, or controversy arising out of or relating to this engagement letter, the Firm's representation of the Client, or the fees charged in connection herewith, shall be resolved by binding arbitration in New York, New York, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules then in effect. The arbitration shall be conducted before a single arbitrator mutually agreed upon by the parties or, in the absence of agreement, appointed by the American Arbitration Association. The decision of the arbitrator shall be final and binding upon both parties and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any such arbitration, unless the arbitrator determines otherwise.
10. ENTIRE AGREEMENT AND AMENDMENTS
This engagement letter constitutes the entire agreement between the Firm and the Client with respect to the engagement described herein and supersedes all prior and contemporaneous oral and written communications, negotiations, representations, and understandings between the parties regarding the subject matter hereof. No representations or warranties have been made by either party except as expressly set forth in this letter.
This engagement letter may be amended, modified, or supplemented only by a written instrument executed by both the Firm and the Client. No oral agreement or understanding shall be binding upon either party. For the avoidance of doubt, the parties anticipate that Engagement Letter Amendment No. 1, expanding the scope of this engagement to include intellectual property diligence and export control classification review, will be executed on or about June 20, 2023. It is anticipated that Amendment No. 1 will add Omar Siddiqui, Associate, intellectual Property Practice, as Lead Associate for IP matters, and Christy Bauer, Associate, intellectual Property Practice, as Working Associate for IP matters, to the engagement team, and will set forth the terms, fees, and scope of work applicable to such expanded services.
11. ACCEPTANCE AND EXECUTION
11.1 Acknowledgment. If the foregoing terms are acceptable to the Client, please signify your acceptance by countersigning the enclosed duplicate copy of this engagement letter in the space provided below and returning the countersigned copy to the undersigned at the Firm's New York office, together with the advance retainer payment of Two Hundred Fifty Thousand Dollars ($250,000) in accordance with the wire transfer instructions enclosed herewith. Upon receipt of the countersigned letter and the retainer, the engagement will be deemed fully effective and the Firm will commence work immediately.
We are very much looking forward to working with you and the HSAG team on this important transaction. Please do not hesitate to contact me or Peggy Ashworth if you have any questions regarding this letter or the engagement.
With best regards,
11.2 Signature block — Firm
CALDERWOOD & HARKNESS LLP
By: ________
Name: Beatrice Holloway
Title: Partner, Mergers & Acquisitions
Address: 399 Park Avenue, 31st Floor
New York, New York 10022
Date: June 12, 2023
11.3 Signature block — Client
ACCEPTED AND AGREED:
HALCYON SEMICONDUCTOR AKTIENGESELLSCHAFT
By: ________
Name: Stefan Lohse
Title: Chefjustitiar (General Counsel)
Address: Industriestraße 44, 01099 Dresden, Saxony, Germany
Date: ________
Enclosures
(1) Wire transfer instructions for advance retainer payment of $250,000
(2) Duplicate original of this engagement letter for the Client's records (to be countersigned and returned to the Firm)
(3) IRS Form W-8BEN-E (to be completed and returned by the Client for U.S. tax withholding purposes, as applicable)
This engagement letter and its contents are confidential and subject to the attorney-client privilege. This letter is intended solely for the use of the addressee and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
| Timekeeper Category | Standard Hourly Rate | |
| Partners | $1,450 | |
| Of Counsel | $1,250 | |
| Senior Counsel | $1,150 | |
| Associates (senior, 6th year and above) | $975 | |
| Associates (mid-level and junior, 1st–5th year) | $850 | |
| Phase | Description | Estimated Fees |
| Phase 1 | Pre-filing (jurisdictional analysis, strategy development, Treasury consultation) | $420,000 |
| Phase 2 | Notice preparation and filing | $680,000 |
| Phase 3 | Review and investigation (including RFI responses) | $1,100,000 |
| Phase 4 | NSA / mitigation negotiation | $1,200,000 |
| Phase 5 | Closing deliverables and post-clearance compliance setup | $400,000 |
| Total (CFIUS Fee Cap) | $3,800,000 |