Contract analysis

I. Executive Summary This memorandum analyzes the novation and change-of-name requirements under Subpart 42.12 of the Federal Acquisition Regulation ("FAR") triggered by the proposed acquisition of one hundred percent (100%) of the outstanding equity of Marlowe Asset Management Photonics Inc. ("VPI") by Halcyon Semiconductor Aktiengesellschaft ("HSAG"). The acquisition will be consummated through Halcyon US Holdings

II. Legal Framework — FAR Subpart 42.12 A. Applicable Regulations FAR Subpart 42.12 governs the procedures by which the United States Government recognizes a successor in interest to government contracts when a contractor undergoes a change in ownership, control, or corporate identity. The relevant regulatory provisions are as follows: FAR 42.1200 — Scope. This section establishes the scope of Subpart 42.12, providin

III. Marlowe Asset Management Photonics Inc. — Government Contracts Portfolio Overview A. Summary Table of All 14 Active Contracts The following table summarizes VPI's complete portfolio of fourteen (14) active government contracts, including both prime contracts and subcontracts. Contract numbers are assigned in the format "VPI-GOV-[sequential number]" for ease of reference within this memorandum and related corresp

1. U.S. Army CERDEC / PEO IEW&S (VPI-GOV-01) — GaN HEMT modules for the AN/TPS-80 Ground/Air Task-Oriented Radar ("G/ATOR") program. Remaining backlog of $52.3 million. This is VPI's largest active government contract and a critical revenue driver. The contract involves the manufacture and delivery of high-electron-mobility transistor ("HEMT") modules fabricated on VPI's proprietary 150mm GaN-on-SiC process at VPI's

2. U.S. Air Force Research Laboratory / AFRL (VPI-GOV-02) — Next-generation millimeter wave ("mmWave") power amplifiers. Remaining backlog of $41.7 million. This is a research and development contract focused on the development of advanced power amplifier technologies for future Air Force electronic warfare and communications systems. The contract involves substantial government-funded research generating patentable

3. Missile Defense Agency / MDA (VPI-GOV-03) — GaN-based transmit/receive ("T/R") modules for missile defense. Remaining backlog of $38.9 million. This prime contract supports the development and manufacture of T/R modules for integration into missile defense radar systems. The work is classified at the SECRET level and implicates heightened sensitivities associated with the missile defense mission area. Novation is

4. Ironclad Defense Systems Inc. Subcontract (VPI-GOV-04) — GaN power amplifier modules under a subcontract to Ironclad Defense Systems Inc. ("Ironclad"), whose prime contract is with the U.S. Navy Naval Sea Systems Command ("NAVSEA"), Contract No. N00024-22-C-6318. Remaining backlog of $34.1 million. This is VPI's sole major subcontract and presents unique novation challenges because the novation process must involv

5. DHS Science & Technology Directorate / DHS S&T (VPI-GOV-05) — Border surveillance RF components. Remaining backlog of $26.0 million. This prime contract supports the development and production of RF components for DHS border surveillance systems. The work is UNCLASSIFIED. Although no classified information is involved, the significant remaining backlog and the foreign ownership change necessitate novation. Novatio

1. VPI-GOV-01: U.S. Army CERDEC / PEO IEW&S — AN/TPS-80 GaN HEMT modules ($52.3M backlog, SECRET)

2. VPI-GOV-02: AFRL — Next-gen mmWave power amplifiers ($41.7M backlog, SECRET)

3. VPI-GOV-03: MDA — GaN-based T/R modules ($38.9M backlog, SECRET)

4. VPI-GOV-04: Ironclad Defense Systems Inc. subcontract ($34.1M backlog, UNCLASSIFIED/FOUO)

5. VPI-GOV-05: DHS S&T — Border surveillance RF components ($26.0M backlog, UNCLASSIFIED)

6. VPI-GOV-06: U.S. Army TACOM / PEO GCS — Ground vehicle comms upgrade ($7.4M backlog, SECRET)

7. VPI-GOV-07: U.S. Air Force / MIT Lincoln Lab subcontract — Space-based sensing devices ($6.8M backlog, SECRET)

8. VPI-GOV-08: U.S. Navy NAVAIR — Prototype EW module development ($4.2M backlog, SECRET) For each of these contracts, the contracting officer or contracting activity, the specific basis for requiring novation, and any special considerations are detailed in Section X.A below. C. Contracts Not Requiring Formal Novation (6 of 14) Six (6) of VPI's fourteen (14) active contracts are candidates for contracting officer wai

1. VPI-GOV-09: U.S. Army DEVCOM ARL — GaN reliability study ($380K backlog, UNCLASSIFIED/CUI). This contract is approximately 88% complete, with only $380,000 in remaining backlog and a period of performance ending April 30, 2024. The remaining work consists of final testing and report preparation. The contracting officer has indicated informally that novation would not be required given the minimal remaining scope.

2. VPI-GOV-10: U.S. Air Force Space Command — RF subsystem evaluation ($210K backlog, UNCLASSIFIED). This contract is approximately 93% complete, with a period of performance ending February 28, 2024, which is less than three weeks after the anticipated closing date. Remaining work consists of delivery of a final technical report and data package. Novation is impractical given the timeline; the contracting officer ha

3. VPI-GOV-11: GSA / Federal Civilian (IRS) — COTS RF test equipment ($145K backlog, UNCLASSIFIED). This is a GSA Schedule delivery order for commercial off-the-shelf RF test equipment. The remaining deliveries consist of routine equipment shipments with a period of performance ending January 31, 2024. The GSA Schedule itself does not require novation for a change in upstream ownership where the contractor legal enti

4. VPI-GOV-12: HHS / NIH NIBIB — mmWave biomedical imaging components ($310K backlog, UNCLASSIFIED). This is a small research contract with de minimis remaining value. The NIH contracting officer has indicated that a formal novation is unnecessary given the contract's size and remaining scope, and that notification and updated representations will be sufficient.

5. VPI-GOV-13: DOE / Sandia National Laboratories — High-power RF devices ($480K backlog, UNCLASSIFIED/CUI). This is a subcontract to Sandia National Laboratories for directed energy research. The remaining scope is limited, and the subcontract terms provide for assignment with the prime contractor's consent. Sandia's subcontract administration office has indicated informally that a subcontract modification reflectin

6. VPI-GOV-14: NOAA / NWS — Weather radar replacement amplifier modules ($75K backlog, UNCLASSIFIED). This contract is virtually complete, with only $75,000 in remaining deliveries and a period of performance ending December 31, 2023—well before the anticipated closing date. No novation action is required; VPI will deliver all remaining items prior to closing. For each of these contracts, VPI will nonetheless be requ

IV. Novation Agreement Process and Requirements A. Required Documentation Under FAR 42.1204(e) FAR 42.1204(e) specifies the documentation that must be submitted to each responsible contracting officer in support of a novation agreement request. Based on our review of the regulation and current agency practices, we recommend that VPI and Halcyon US Holdings Inc. prepare and submit the following documentation package f

1. Three (3) signed copies of the proposed novation agreement. The novation agreement should be prepared using the standard form prescribed by FAR 42.1204(e)(3), adapted as necessary to reflect the specific facts of the transaction. As discussed in Section IV.B below, the novation agreement is a tri-party instrument executed by the transferor (VPI's selling shareholders or their authorized representative), the transf

2. Certified copy of the Stock Purchase Agreement. A certified copy of the SPA executed on June 10, 2023, together with all amendments, schedules, and exhibits thereto (to the extent not subject to confidentiality restrictions that would preclude disclosure to the government). If any portions of the SPA are redacted for confidentiality reasons, we recommend providing a cover letter explaining the basis for each redac

3. Certified copy of the instrument of transfer. In a stock purchase transaction, the "instrument of transfer" consists of the stock certificates or stock powers evidencing the transfer of VPI's outstanding shares from the selling shareholders to Halcyon US Holdings Inc. If VPI's shares are held in book-entry form (as is typical for a private company with institutional investors), the transfer agent's confirmation of

4. A list of all affected contracts. This list should include, for each contract: (a) the contract number; (b) the name and address of the contracting office; (c) the name and contact information of the responsible contracting officer (or the Administrative Contracting Officer ("ACO") and Procuring Contracting Officer ("PCO"), as applicable); (d) the total contract value; (e) the remaining backlog; and (f) the period

5. Evidence of the transferee's capability to perform the contracts. This documentation should demonstrate that Halcyon US Holdings Inc. (and through it, VPI under new ownership) has the financial resources, technical qualifications, and organizational infrastructure to perform the affected contracts. Specific items should include: (a) Audited financial statements of HSAG for the most recent fiscal year (audited by L

6. The transferee's consent to the novation. A written statement from Halcyon US Holdings Inc. (executed by an authorized officer) consenting to the novation and agreeing to assume all obligations, covenants, and conditions under the affected contracts.

7. Evidence of legal authority for the transfer. Board resolutions from both HSAG (Vorstand and Aufsichtsrat) and VPI's board of directors authorizing the transaction, together with any required shareholder approvals or consents. For HSAG, these resolutions should be certified by the Vorstandsvorsitzender or Handlungsbevollmächtigter and accompanied by an English translation certified by a qualified translator.

8. Opinion of legal counsel regarding the validity of the transfer. Calderwood & Harkness LLP will provide a legal opinion confirming: (a) the SPA constitutes a valid and binding agreement; (b) the transfer of VPI's shares to Halcyon US Holdings Inc. has been duly authorized and is legally effective; (c) VPI continues as a validly existing corporation under the laws of the State of Delaware; and (d) the novation agre

9. Balance sheets of both VPI and the acquiring entity. The most recent audited balance sheets of VPI (audited by Arbor & Greenfield LLP, Albuquerque) and HSAG (audited by Leinberger & Hess Wirtschaftsprüfungsgesellschaft, Stuttgart). The HSAG balance sheet should be presented in both the original format (IFRS, denominated in Euros) and a reconciliation to U.S. GAAP for the convenience of the contracting officer. In

V. DFARS Supplemental Requirements A. DFARS 252.209-7002 — Disclosure of Ownership or Control by a Foreign Government DFARS 252.209-7002, "Disclosure of Ownership or Control by the Government of a Country that is a State Sponsor of Terrorism," requires defense contractors to disclose to the contracting officer any ownership or control by a foreign government. Although Germany is not a state sponsor of terrorism, the

VI. Interaction with CFIUS National Security Agreement A. NSA Provisions Relevant to Government Contracts The National Security Agreement, designated NSA-2024-0019, was executed on January 19, 2024, following extensive negotiations among HSAG, VPI, the CFIUS monitoring agencies (Department of Defense and Department of Justice, as co-lead agencies), and the CFIUS Staff Chairperson (Department of the Treasury). The NSA

VII. Interaction with Export Control Requirements VPI's products include items controlled under both the International Traffic in Arms Regulations ("ITAR") and the Export Administration Regulations ("EAR"). Specifically, certain of VPI's GaN power amplifier modules and related defense articles are classified under Category XI(a)(3) of the United States Munitions List ("USML"), which covers "electronic equipment speci

VIII. Proposed Timeline and Sequencing The novation process must be carefully sequenced and coordinated with the parallel CFIUS, DCSA, DDTC, and closing workstreams. The following timeline reflects our recommended approach, based on the current transaction schedule and our assessment of typical government processing timelines. A. Pre-Closing Steps (Prior to Closing on February 9, 2024) B. Post-Closing Steps (Followin

IX. Impact on Contract Performance During Novation Process A. Continuity of Performance A fundamental principle of the FAR novation framework—and one that distinguishes a stock purchase from an asset purchase—is that in a stock purchase transaction, the performing contractor remains the same legal entity throughout the transition. VPI will retain its EIN (26-4371885), CAGE Code (7VK92), and DUNS Number (07-812-4493).