dfars-foreign-ownership-disclosure-memo.docx

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CALDERWOOD & HARKNESS LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7200 Facsimile: (202) 555-7201

MEMORANDUM

This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and/or regulatory proceedings. It is intended solely for the use of the addressees identified above and such other persons as may be specifically authorized by Calderwood & Harkness LLP to receive it. Any dissemination, distribution, or copying of this memorandum or the information contained herein by or to anyone other than authorized recipients is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately at (202) 555-7200.

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I. EXECUTIVE SUMMARY

This memorandum analyzes the obligations of Marlowe Asset Management Photonics Inc. ("VPI") under DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") following the anticipated completion of Halcyon Semiconductor Aktiengesellschaft's ("HSAG") acquisition of one hundred percent (100%) of VPI's outstanding equity. The analysis is provided to assist the parties and their advisors in planning for the orderly disclosure of the ownership change to the relevant Department of Defense ("DoD") contracting officers and in coordinating that disclosure with related regulatory processes, including the FAR 42.12 novation procedure, CFIUS clearance and National Security Agreement compliance, DCSA notification, and DDTC registration transfer.

Transaction Overview. HSAG, a German Aktiengesellschaft publicly traded on the Frankfurt Stock Exchange (XETRA: HLC), is acquiring one hundred percent (100%) of the equity of VPI, a Delaware C-corporation, for a base purchase price of approximately $1.42 billion. The acquisition will be effected through Halcyon US Holdings Inc. ("HUSHI"), a Delaware C-corporation formed on June 5, 2023, as a wholly owned acquisition vehicle of HSAG. Upon completion of the transaction, VPI will become an indirect wholly owned subsidiary of HSAG, operating as a subsidiary of HUSHI.

VPI's Government Contracts Portfolio. VPI currently holds fourteen (14) active DoD contracts — thirteen (13) prime contracts and one (1) subcontract — with an aggregate remaining backlog of approximately $193 million. These contracts involve work for the U.S. Army Program Executive Office for intelligence, Electronic Warfare & Sensors ("PEO IEW&S") and the Communications-Electronics Research, Development and Engineering Center ("CERDEC"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), the U.S. Navy Naval Sea Systems Command ("NAVSEA") (via subcontract to Ironclad Defense Systems Inc.), the Department of Homeland Security Science and Technology Directorate ("DHS S&T"), and other DoD components. VPI's Facility Security Clearance ("FCL") is at the SECRET level (CAGE Code 7VK92), and approximately 212 of VPI's 486 employees hold active U.S. government security clearances at the SECRET or TOP SECRET level.

Key Conclusions. Based on our analysis of DFARS 252.209-7002, HSAG's corporate structure and shareholder base, and the surrounding regulatory framework, we reach the following principal conclusions:

1. DFARS 252.209-7002 requires disclosure of ownership or control by a foreign *government*, not foreign ownership generally. The clause is triggered by a specific nexus between the contractor and a foreign government or foreign government-controlled entity. While the change in VPI's ultimate ownership to a German parent company is plainly a material event requiring disclosure to contracting officers, the scope of the DFARS 252.209-7002 obligation itself is narrower than a general foreign-ownership notification requirement. Nonetheless, the disclosure framework must be navigated carefully, as contracting officers may treat the clause as a basis for broader inquiry into VPI's continued contractor responsibility.

2. HSAG is a publicly traded company with no identified German government ownership or control. Based on our concurrent FOCI Analysis, HSAG's shares are diffusely held among institutional and retail investors, with no German federal or state (Land) government entity holding a direct or indirect ownership interest, no government-appointed board members, and no contractual arrangements with any foreign government that would constitute "control" within the meaning of the DFARS clause. Accordingly, VPI should be able to certify that it is not owned or controlled by a foreign government.

3. Contracting officers will nonetheless expect notification of the foreign ownership change, and VPI must comply with broader DFARS and FAR foreign ownership-related provisions. The absence of a foreign government nexus does not eliminate VPI's obligation to disclose the change in its ultimate ownership to contracting officers. FAR Subpart 9.1 contractor responsibility standards, the FAR 42.12 novation process, DCSA notification requirements, and the general duty of good faith and fair dealing with the U.S. government all require that VPI proactively and transparently notify its contracting officers of the acquisition.

4. Coordination with the FAR 42.12 novation process, the CFIUS National Security Agreement, and DCSA FOCI mitigation procedures is essential. The DFARS 252.209-7002 disclosure should not be made in isolation but rather as part of a coordinated notification strategy that synchronizes with the novation request packages, the National Security Agreement (NSA-2024-0019) notification provisions, the DCSA post-closing notification, and the DDTC change-of-ownership notification under ITAR § 122.4(a).

This memorandum provides detailed analysis supporting each of these conclusions and sets forth specific recommendations for the content, timing, and coordination of VPI's DFARS 252.209-7002 disclosure obligations.

II. SCOPE AND METHODOLOGY

A. Scope of This Memorandum

This memorandum is limited in scope to the analysis of VPI's disclosure obligations under DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") and related DFARS and FAR provisions concerning foreign ownership disclosure in the government contracting context. The analysis addresses the regulatory framework, the applicability of the clause to VPI's existing contracts, the assessment of HSAG's ownership structure for purposes of determining whether foreign government ownership or control exists, the timing and content of required disclosures, and the coordination of those disclosures with related regulatory processes.

This memorandum does not address the following topics, each of which is covered by a separate companion memorandum prepared by Calderwood & Harkness LLP as part of the comprehensive regulatory analysis for this transaction:

• ITAR/EAR Export Control Notifications. The transfer of VPI's DDTC registration and the continuation of active DSP-5 export licenses are addressed in the DDTC Registration Transfer Analysis and the DSP-5 License Continuation Memo, both prepared by Christy Bauer of our International Trade & Sanctions practice. The classification of VPI's products under the ITAR and EAR is addressed in the ITAR/EAR Classification Review Memorandum, also prepared by Ms. Bauer.

• Facility Security Clearance Transition. The procedures for maintaining VPI's FCL during and after the change in ownership, including DCSA notification and the interaction with the NSA's FOCI mitigation provisions, are addressed in the Facility Security Clearance Transition Plan Memo.

• FAR 42.12 Novation Requirements. The requirements for novation of VPI's government contracts following the change in ownership, including the preparation and submission of novation agreement packages, are addressed in the Government Contracts Novation/Change-of-Name Analysis.

• FOCI Analysis. The comprehensive Foreign Ownership, Control, or Influence ("FOCI") analysis required for DCSA and CFIUS purposes is addressed in the FOCI Analysis Memo.

Where relevant, this memorandum cross-references these companion memoranda and identifies points of intersection between the DFARS 252.209-7002 disclosure and the other regulatory processes.

B. Sources Reviewed

In preparing this memorandum, we have reviewed the following sources:

1. VPI's fourteen (14) active DoD contracts (prime and subcontract), including all contract modifications, task orders, and associated solicitation provisions, provided to Calderwood & Harkness by VPI's counsel of record, Harrison Whitfield of Wethersfield & Gale LLP, on August 14, 2023.

2. The text of DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") as incorporated in VPI's contracts, and the current version of the clause as set forth in the Defense Federal Acquisition Regulation Supplement.

3. DFARS Subpart 209.1 (Responsible Prospective Contractors), including DFARS 209.104-1.

4. FAR 52.209-2 (Prohibition on Contracting with Inverted Domestic Corporations) — reviewed for potential applicability and determined to be inapplicable to the present transaction.

5. FAR Subpart 9.1 (Responsible Prospective Contractors), including FAR 9.104-1 (General Standards) and FAR 9.104-4 (Subcontractor Responsibility).

6. 10 U.S.C. § 4874 (formerly 10 U.S.C. § 2536), the statutory basis for the DFARS clause.

7. National Industrial Security Program Operating Manual ("NISPOM") (32 C.F.R. Part 117), including provisions relating to FOCI and facility security clearance requirements.

8. CFIUS-related guidance, including the regulations implementing FIRRMA (31 C.F.R. Parts 800 and 802), and the draft National Security Agreement (NSA-2024-0019) as currently under negotiation between the CFIUS monitoring agencies and the parties.

9. HSAG's public filings with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin"), including annual reports, shareholder notifications, and securities filings.

10. Due diligence materials provided by HSAG and VPI, including HSAG's corporate organizational chart, VPI's government contracts inventory, VPI's security clearance roster, and VPI's facility security documentation.

C. Assumptions. This memorandum is based on the following assumptions, which have been confirmed by VPI's management and counsel unless otherwise noted:

• The closing of the acquisition is anticipated to occur on or about February 9, 2024, subject to the completion of CFIUS review and the execution of the National Security Agreement.

• VPI will retain its legal identity as a Delaware C-corporation following closing. It will not merge into HUSHI or any other entity. VPI's name, CAGE Code, DUNS number, and EIN will remain unchanged.

• VPI's existing management team, including CEO Dr. Nathan Trevorrow, President and COO Marissa Sung-Avila, and VP Government Programs and Facility Security Officer Col. (Ret.) Bryce Hendrickson, will remain in their current positions following closing, subject to the personnel continuity provisions of the NSA.

• HSAG's shareholder structure as described in Section IV below is accurate as of the date of this memorandum and will not materially change prior to closing.

III. REGULATORY BACKGROUND: DFARS 252.209-7002

A. Statutory and Regulatory Framework

1. Statutory Basis: 10 U.S.C. § 4874. The disclosure obligations arising under DFARS 252.209-7002 find their statutory foundation in 10 U.S.C. § 4874 (formerly codified at 10 U.S.C. § 2536, and recently recodified as part of the reorganization of Title 10, Subtitle A, Part V). This provision prohibits the Department of Defense from entering into, or maintaining, a contract with an entity controlled by a foreign government if that contract requires access to proscribed information, unless a waiver is granted by the Secretary of Defense (or designee). The statute reflects Congress's concern that foreign government-controlled entities could exploit access to sensitive defense-related information or technologies to the detriment of U.S. national security.

The statute defines "proscribed information" to include certain categories of classified information and other sensitive technical data. Critically, the statutory prohibition is directed at entities controlled by a foreign government, and not at all entities with foreign ownership. This distinction is carried through into the implementing regulation.

It is important to note that 10 U.S.C. § 4874 operates as a prohibition subject to waiver, whereas DFARS 252.209-7002 functions primarily as a disclosure mechanism designed to enable contracting officers to determine whether the statutory prohibition applies. The clause requires the contractor to provide information that the contracting officer needs to assess whether the contractor is, in fact, owned or controlled by a foreign government, and whether a waiver or other action is necessary.

2. DFARS Subpart 209.104-1: Responsible Prospective Contractors. DFARS Subpart 209.1 implements DoD-specific standards for the determination of contractor responsibility, supplementing the general FAR standards found in FAR 9.104-1. DFARS 209.104-1 provides, in relevant part, that the contracting officer shall consider foreign ownership, control, or influence as a factor in determining whether a prospective contractor meets the general standards for contractor responsibility. This provision operates in conjunction with DFARS 252.209-7002 to create a framework in which contracting officers are both informed of, and empowered to act upon, foreign ownership circumstances that may affect a contractor's ability to perform its obligations to the U.S. government.

The responsibility determination under FAR 9.104-1 and DFARS 209.104-1 is broader in scope than the DFARS 252.209-7002 disclosure itself. A contracting officer may consider any aspect of foreign ownership, control, or influence — not only foreign government ownership or control — in assessing whether a contractor has the necessary organizational capability, financial capacity, performance record, and integrity to be deemed a responsible contractor. This broader authority is a significant consideration for VPI, as discussed in Section VIII (Risk Assessment) below.

3. DFARS 252.209-7002: Text and Operation. DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") is a contract clause prescribed for use in all DoD solicitations and contracts, including those for commercial items. The clause serves as the primary mechanism through which DoD implements the disclosure requirements necessary to enforce the prohibition in 10 U.S.C. § 4874.

The clause, as set forth in full in Appendix C to this memorandum, requires the offeror or contractor to disclose whether it is "owned or controlled" by a foreign government. If the answer is affirmative, the offeror or contractor must provide the following information:

(a) The name of the foreign government;

(b) The nature and extent of the foreign government's ownership or control, including whether the ownership or control is direct or indirect;

(c) Whether the foreign government's ownership or control is through a parent corporation, subsidiary, partnership, or other entity; and

(d) Any additional information that the contracting officer may request to assess the nature and extent of foreign government ownership or control.

The clause applies at two distinct points in time. First, it applies at the time of offer submission, when prospective contractors must include the required disclosures as part of their proposal. Second, and of particular relevance to the present transaction, the clause imposes a continuing obligation on existing contractors to notify the contracting officer of any changes in foreign government ownership or control during the period of contract performance. This continuing obligation is the primary mechanism by which VPI's disclosure requirements are triggered as a result of the HSAG acquisition.

4. Key Defined Terms. The critical definitional inquiry under DFARS 252.209-7002 is whether a contractor is "owned or controlled" by a foreign government. The clause does not provide an exhaustive definition of this phrase, but it is generally understood — consistent with the implementing statute, DoD guidance, and DCSA interpretive practice — to encompass situations in which:

• A foreign government holds a majority ownership interest (direct or indirect) in the contractor;

• A foreign government has the power to appoint or remove a majority of the contractor's board of directors or equivalent governing body;

• A foreign government has the power, through ownership, contractual arrangements, or other means, to direct or decide matters affecting the management and policies of the contractor; or

• An entity that is itself owned or controlled by a foreign government holds a controlling interest in, or exercises control over, the contractor.

The definition focuses on de facto control, not merely formal ownership. A foreign government might exercise control through contractual arrangements, special share rights (e.g., "golden shares"), veto rights, or other mechanisms that give it the ability to direct the contractor's affairs, even absent a majority equity stake.

Critically, the clause targets foreign government ownership or control specifically. It does not, on its face, require disclosure of foreign ownership by private entities, foreign nationals, or foreign corporations that are not themselves owned or controlled by a foreign government. This distinction is central to the analysis of HSAG's ownership structure in Section IV below.

B. Applicability to VPI's Existing Contracts

1. Inclusion in VPI's Contracts. We have reviewed all fourteen (14) of VPI's active DoD contracts and confirmed that DFARS 252.209-7002 is included in each of the thirteen (13) prime contracts, either by full text incorporation or by reference to the DFARS clause matrix applicable to the solicitation. The clause is a standard inclusion in DoD solicitations and contracts and its presence in VPI's contract portfolio is expected and unremarkable.

For VPI's single subcontract — the subcontract with Ironclad Defense Systems Inc. under the Ironclad/NAVSEA prime contract (remaining backlog of $34.1 million) — the flowdown analysis confirms that DFARS 252.209-7002 flows down to subcontractors. Ironclad's subcontract terms and conditions include a flowdown provision requiring VPI, as subcontractor, to comply with the disclosure obligations of the clause and to notify both Ironclad and the prime contract contracting officer of any changes in foreign government ownership or control. Accordingly, VPI has the same substantive disclosure obligation with respect to the Ironclad subcontract as it does with respect to its prime contracts, although the notification mechanics differ — VPI must notify Ironclad, which in turn has the obligation to notify the NAVSEA contracting officer.

2. Continuing Obligation. As noted above, the DFARS 252.209-7002 clause imposes a continuing disclosure obligation on contractors during the period of contract performance. This obligation is not limited to the time of initial offer submission but extends throughout the life of the contract. Any change in the contractor's ownership structure that results in foreign government ownership or control — or that could reasonably be interpreted as potentially resulting in such ownership or control — triggers the contractor's obligation to notify the contracting officer.

In VPI's case, the acquisition by HSAG constitutes a material change in VPI's ultimate ownership. Even though, as discussed in Section IV below, HSAG does not appear to be owned or controlled by a foreign government, the change from U.S.-person ownership to foreign corporate ownership is the type of event that should prompt disclosure under the clause. This is because the contracting officer cannot assess whether foreign government ownership or control exists without being informed of the change in ownership in the first instance.

IV. ANALYSIS: HSAG'S OWNERSHIP STRUCTURE AND FOREIGN GOVERNMENT NEXUS

A. HSAG Corporate Structure

Halcyon Semiconductor Aktiengesellschaft is a German Aktiengesellschaft (stock corporation) organized under the laws of the Federal Republic of Germany and publicly listed on the Frankfurt Stock Exchange under the ticker symbol XETRA: HLC. As of June 1, 2023, HSAG's market capitalization was approximately €14.8 billion. For fiscal year 2022, HSAG reported revenue of approximately €6.12 billion and EBITDA of approximately €1.37 billion.

HSAG is headquartered at Industriestraße 44, 01099 Dresden, Saxony, Germany. It is registered with the German commercial register (Handelsregister) maintained by the Amtsgericht (local court) Dresden under registration number HRB 28416. Its Legal Entity Identifier ("LEI") is 5299007KXQ2M4GHILZ38.

HSAG's management board (Vorstand) is composed of the following individuals:

• Dr. Maximilian Ehrhardt — Chief Executive Officer (Vorstandsvorsitzender). Dr. Ehrhardt has served as CEO since 2019 and previously held senior positions at Sundial Holdings and Marlowe Holdings

• Katarina Brückner — Chief Financial Officer (Finanzvorstand). Ms. Brückner joined HSAG in 2020 after serving as CFO of a mid-cap German technology company. She holds an MBA from INSEAD and is a member of the German Chartered Accountants Association (Wirtschaftsprüferkammer).

• Stefan Lohse — General Counsel and Chief Legal Officer (Chefjustitiar). Mr. Lohse holds an LL.M. from Georgetown University Law Center and is admitted to practice law in both New York and Germany. He serves as the lead client contact for this engagement.

HSAG's supervisory board (Aufsichtsrat) is composed of twelve (12) members, six (6) elected by shareholders at the annual general meeting and six (6) elected by employees pursuant to the German Co-Determination Act (Mitbestimmungsgesetz). No member of the supervisory board is a representative of, or has been appointed by, any German federal or state government entity.

HSAG's existing U.S. operations consist of Halcyon US Inc. ("HUI"), a Delaware corporation headquartered in Austin, Texas. HUI operates as a fabless semiconductor design center with approximately 320 employees. HUI does not engage in classified work, does not hold a facility security clearance, and does not maintain any active DoD contracts. HUI's Employer Identification Number is 81-3056429.

The acquisition of VPI will be effected through Halcyon US Holdings Inc. ("HUSHI"), a newly formed Delaware C-corporation established on June 5, 2023, as a wholly owned subsidiary of HSAG. HUSHI has been formed for the sole purpose of serving as the acquisition vehicle and direct parent of VPI post-closing. Post-closing, VPI will be a wholly owned subsidiary of HUSHI, which in turn is a wholly owned subsidiary of HSAG.

B. Assessment of Foreign Government Ownership or Control

The central question for purposes of DFARS 252.209-7002 is whether HSAG is "owned or controlled" by a foreign government, such that VPI — as a subsidiary of HSAG through HUSHI — would be subject to foreign government ownership or control.

Based on the FOCI Analysis Memo prepared concurrently by this team, the due diligence materials provided by HSAG, HSAG's public securities filings with BaFin, and information available through shareholder disclosure databases, we have reached the following conclusions:

No direct or indirect German government ownership. No German federal government entity, no German state (Land) government entity, and no entity owned or controlled by any German government body holds a direct or indirect ownership interest in HSAG's shares. HSAG's shares are publicly traded on the Frankfurt Stock Exchange with a diffuse shareholder base composed primarily of institutional investors (including U.S., European, and Asian asset managers and pension funds) and retail investors. Based on the most recently available major shareholder notifications filed with BaFin pursuant to the German Securities Trading Act (Wertpapierhandelsgesetz, "WpHG"), no single shareholder holds more than approximately 7.2% of HSAG's outstanding shares.

No government-appointed board members or special share rights. The German government (at the federal or state level) does not have the right to appoint any members of HSAG's management board (Vorstand) or supervisory board (Aufsichtsrat). HSAG has not issued any "golden shares" or special shares conferring veto or other governance rights on any government entity. The employee representatives on the supervisory board are elected by HSAG's employees under the Co-Determination Act and are not government appointees.

No government subsidies or contractual arrangements constituting control. While HSAG has, like many German semiconductor companies, received certain European Union and German federal and state research and development grants and subsidies in the ordinary course of its business (including, for example, participation in the EU Important Projects of Common European Interest ("IPCEI") semiconductor initiative), these grants and subsidies do not confer any ownership interest, board representation, or contractual control rights on any government entity. They are standard industrial policy instruments available to qualified applicants in the European semiconductor industry and do not create a "control" relationship within the meaning of DFARS 252.209-7002.

No other foreign government nexus. We have not identified any other facts or circumstances that would suggest that HSAG is owned or controlled by a foreign government, including any controlling interest held by a sovereign wealth fund, state-owned enterprise, or foreign government-affiliated investment vehicle.

Conclusion: HSAG does not appear to be "owned or controlled" by a foreign government within the meaning of DFARS 252.209-7002. VPI should be able to certify, following the acquisition, that it is not owned or controlled by a foreign government.

Caveat and Ongoing Diligence. This conclusion is based on the current ownership structure of HSAG as of the date of this memorandum. HSAG's shares are publicly traded, and its shareholder base can change at any time. It is possible — though we have no reason to believe it is likely — that a foreign government-affiliated entity could in the future acquire a significant stake in HSAG, either through open-market purchases, a negotiated block transaction, or otherwise. Any such development would potentially trigger a new disclosure obligation under DFARS 252.209-7002 and could have significant implications for VPI's FCL, its government contracts, and the NSA governance structure. We strongly recommend that HSAG and VPI establish a monitoring protocol under which HSAG's shareholder register is reviewed on at least a quarterly basis for the appearance of any sovereign wealth fund, state-owned enterprise, or government-affiliated investor holding a material position. Any material changes should be promptly reported to Calderwood & Harkness for analysis.

C. Distinction: Foreign Ownership vs. Foreign Government Ownership

While the analysis above establishes that HSAG is not owned or controlled by a foreign government, it is equally clear that HSAG is a foreign entity. It is a German corporation, incorporated under German law, with its principal place of business in Dresden, Germany. Its management and supervisory boards are predominantly composed of German and other European nationals. The acquisition of VPI by HSAG thus constitutes a change from domestic (U.S.) ownership to foreign ownership — a material fact that has significant implications under multiple regulatory regimes, even though the specific DFARS 252.209-7002 disclosure obligation is limited to foreign government ownership or control.

The distinction between foreign ownership generally and foreign government ownership or control specifically is a critical one for purposes of this memorandum. Under DFARS 252.209-7002, VPI can — and should — certify that it is not owned or controlled by a foreign government. This certification is straightforward and should not create controversy with contracting officers, provided it is supported by adequate documentation of HSAG's ownership structure.

However, the change in VPI's ownership from U.S. persons — specifically, Dr. Nathan Trevorrow (co-founder and CEO), Marissa Sung-Avila (co-founder, President and COO), Ridgecrest Ventures Fund III, L.P. (a U.S.-based venture capital fund), Cascadian Capital Partners Growth Fund II, L.P. (a U.S.-based growth equity fund), employee option holders, and a group of U.S.-based angel investors — to a German parent company remains a material change that triggers notification and disclosure obligations under other regulatory provisions, including:

• FAR 42.12 (Novation and Change-of-Name Agreements): The change in VPI's ultimate ownership triggers the novation requirements of FAR 42.12, which requires the successor in interest to execute novation agreements with the U.S. government for affected contracts. This process is analyzed in detail in the companion Government Contracts Novation/Change-of-Name Analysis.

• DCSA FOCI Notification: VPI's change in ownership triggers FOCI notification requirements under the NISPOM and DCSA implementing guidance. This is addressed in the Facility Security Clearance Transition Plan Memo.

• DDTC Registration Transfer: VPI's change in ownership requires notification to DDTC under ITAR § 122.4(a) and may require amendment of existing export licenses. This is addressed in the DDTC Registration Transfer Analysis.

• Contracting Officer Responsibility Determinations: Even in the absence of a foreign government nexus, contracting officers retain the authority under FAR 9.104-1 and DFARS 209.104-1 to consider foreign ownership as a factor in contractor responsibility determinations. A contracting officer who learns of the change in VPI's ownership may request additional information, convene a responsibility review, or take other actions within the scope of the contracting officer's authority.

For these reasons, while VPI's DFARS 252.209-7002 disclosure can properly certify the absence of foreign government ownership or control, the accompanying notification to contracting officers should be transparent and comprehensive regarding the change in foreign ownership generally. The recommended content of such notification is discussed in Section V.B below.

V. DISCLOSURE OBLIGATIONS AND TIMING

A. Timing of Disclosure under DFARS 252.209-7002

1. Trigger Events. The DFARS 252.209-7002 clause requires disclosure "at the time of offer" for new contracts and solicitation responses. For existing contracts, the clause imposes a continuing obligation to notify the contracting officer of changes in the contractor's ownership or control status. The trigger event for VPI's disclosure obligation is the completion of the acquisition — i.e., the closing of the transaction, at which point VPI's ownership will change from U.S. persons to HUSHI (and, through HUSHI, to HSAG).

Based on the current transaction timeline and subject to the completion of CFIUS review, we anticipate the following sequence of events:

• January 19, 2024 (estimated): Execution of the National Security Agreement (NSA-2024-0019) between HSAG, VPI, and the CFIUS monitoring agencies.

• January 26, 2024 (estimated): Issuance of CFIUS safe harbor letter (Case No. CFIUS-023-07-3841), confirming that CFIUS has concluded its review and that the transaction may proceed subject to the terms of the NSA.

• February 9, 2024 (estimated): Closing of the acquisition. Transfer of 100% of VPI's outstanding equity from existing shareholders to HUSHI.

The closing date — February 9, 2024 — is the trigger event for VPI's DFARS 252.209-7002 disclosure obligation. Upon closing, VPI's ownership will have changed, and the continuing obligation to notify contracting officers of changes in foreign government ownership or control status is activated.

2. Recommended Timing: 30 Calendar Days Post-Closing. Neither DFARS 252.209-7002 nor its implementing guidance specifies a precise deadline for post-closing notification to contracting officers. The clause states that the contractor must disclose the required information but does not prescribe a specific number of days within which the disclosure must be made following a change in ownership.

We recommend that VPI provide written notice to each contracting officer within thirty (30) calendar days of closing — i.e., by approximately March 11, 2024. This timeline is based on the following considerations:

• Consistency with the NSA. The National Security Agreement (NSA-2024-0019) as currently drafted contains a thirty (30) calendar day pre-notification requirement for material changes to VPI's business, including changes affecting government contracts. While the NSA pre-notification provision operates prospectively (i.e., notice before making changes rather than notice after a change has occurred), aligning the DFARS disclosure timeline with the NSA's thirty-day framework creates administrative consistency and reduces the risk of conflicting timelines.

• Consistency with FAR 42.12 Novation Notification. The FAR 42.12 novation process also contemplates prompt notification to the contracting officer following a change in the contractor's ownership. While FAR 42.12 does not specify a precise deadline, industry practice and GAO interpretive guidance suggest that notification within thirty (30) days is considered timely.

• Practical Considerations. A thirty-day window provides sufficient time for VPI and its counsel to (a) confirm that closing has occurred and all transaction-related documentation is finalized; (b) finalize and tailor the disclosure letters for each of the fourteen (14) contracts; (c) coordinate with Col. (Ret.) Hendrickson on the distribution strategy; and (d) coordinate with the FAR 42.12 novation request packages so that the disclosures and novation requests can be submitted simultaneously where appropriate.

3. Pre-Closing Notification Considerations. Consideration should be given to providing advance informational notice to key contracting officers before the closing date, particularly for VPI's highest-value contracts. The three largest contracts by remaining backlog are:

• U.S. Army CERDEC / PEO IEW&S — GaN HEMT modules for the AN/TPS-80 Multi-Mission Radar — $52.3 million remaining backlog;

• AFRL — Next-generation mmWave power amplifiers — $41.7 million remaining backlog; and

• MDA — GaN-based T/R (Transmit/Receive) modules for missile defense applications — $38.9 million remaining backlog.

Together, these three contracts represent approximately $132.9 million, or approximately 68.8%, of VPI's total government contracts backlog. The contracting officers responsible for these programs have a significant interest in being informed of the ownership change as early as possible, as the change may affect their own internal reporting requirements and program management decisions.

A proactive approach — providing advance notice before closing, rather than waiting until after the fact — can facilitate smoother post-closing interactions with contracting officers, reduce the risk of surprise or adverse reaction, and demonstrate VPI's good faith and transparency. Contracting officers who feel blindsided by a change in contractor ownership may be more inclined to request formal responsibility determinations or take other protective actions.

However, any pre-closing disclosure must be carefully coordinated with CFIUS counsel to ensure that it does not conflict with CFIUS confidentiality requirements during the review process. While there is no blanket prohibition on disclosing the existence of a pending CFIUS review, the parties have committed in their CFIUS filing to maintain confidentiality regarding certain aspects of the review process. We recommend that pre-closing notification be limited to general statements that VPI's ownership is expected to change and that a CFIUS review is underway, without disclosing specific details of the NSA or the CFIUS deliberations. Post-clearance — i.e., after the CFIUS safe harbor letter is issued — confidentiality concerns are substantially diminished, and more detailed notifications can be provided.

Peggy Ashworth's team is best positioned to advise on the precise scope of permissible pre-closing disclosure in light of the CFIUS confidentiality framework, and we recommend close coordination with her on this question.

B. Content of Disclosure

1. Narrow Disclosure under DFARS 252.209-7002. The disclosure required by DFARS 252.209-7002 is relatively narrow in scope. The clause requires the contractor to disclose:

(a) Whether it is owned or controlled by a foreign government;

(b) If so, the identity of the foreign government, the nature and extent of the ownership or control, and whether it is direct or indirect; and

In VPI's case, the narrow DFARS 252.209-7002 disclosure would state that:

• VPI has been acquired by Halcyon US Holdings Inc. ("HUSHI"), a Delaware C-corporation and wholly owned subsidiary of Halcyon Semiconductor Aktiengesellschaft ("HSAG"), a publicly traded German Aktiengesellschaft;

• HSAG is not owned or controlled by any foreign government; and

• Accordingly, VPI is not owned or controlled by a foreign government within the meaning of DFARS 252.209-7002.

This narrow disclosure, standing alone, would technically satisfy the requirements of the clause. However, for the reasons discussed below, we recommend that VPI supplement the narrow disclosure with additional information.

2. Recommended Supplemental Information. Although not strictly required by the narrow text of DFARS 252.209-7002, we strongly recommend that VPI include the following supplemental information in its disclosure letters to contracting officers:

(a) Identification of the Acquiring Entity. Full identification of HSAG, including its legal name, country of incorporation, principal place of business (Dresden, Germany), nature of business (semiconductor design and manufacturing), stock exchange listing (XETRA: HLC), and general description of its size and scope of operations. This information provides context for the contracting officer and demonstrates VPI's transparency.

(b) Acquisition Structure. A brief description of the acquisition structure — i.e., that the acquisition was effected through HUSHI, a newly formed Delaware C-corporation, and that VPI retains its legal identity, CAGE Code, DUNS number, and EIN post-closing.

(c) CFIUS Clearance and National Security Agreement. Reference to the CFIUS clearance (Case No. CFIUS-023-07-3841), including the date of the safe harbor letter (January 26, 2024), and the existence of the National Security Agreement (NSA-2024-0019). The fact that the U.S. government — through the CFIUS interagency process — has reviewed and approved the transaction, subject to mitigation measures, is a powerful indicator that the acquisition does not pose an unacceptable national security risk. Contracting officers will find this information reassuring and it may preempt requests for additional information or formal responsibility determinations.

(d) Continuation of Facility Security Clearance and FSO. Confirmation that VPI's FCL at the SECRET level (CAGE Code 7VK92) will be maintained post-closing, and that Col. (Ret.) Bryce Hendrickson will continue to serve as Facility Security Officer. For classified program contracting officers, this information is critical — the continued validity of the FCL is a prerequisite for classified contract performance, and any uncertainty about the FCL could cause serious disruption to ongoing programs.

(e) Commitment to Uninterrupted Contract Performance. A clear and unequivocal statement that VPI is committed to the uninterrupted performance of all of its government contract obligations, that the acquisition will not adversely affect VPI's technical capabilities, workforce, or delivery schedules, and that all key personnel will remain in their current positions.

(f) Contact Information. Contact information for Col. (Ret.) Hendrickson and for VPI's legal counsel (both Wethersfield & Gale LLP and Calderwood & Harkness LLP) for follow-up inquiries from contracting officers.

A template disclosure letter incorporating all of the above elements is provided in Appendix A to this memorandum.

C. Contract-by-Contract Analysis

The following table summarizes the disclosure and notification actions required for each of VPI's fourteen (14) active DoD contracts. The top five contracts by remaining backlog are specifically identified; the remaining nine contracts are grouped for efficiency, as the same analytical framework applies to each.

† Individual backlog figures for contracts 6–14 are set forth in the detailed contract inventory maintained by VPI's contracts department and provided to Calderwood & Harkness under the data room index. Aggregate backlog for contracts 6–14 is approximately $0.0 million (total portfolio backlog of $193.0 million is accounted for by the top five contracts listed above).

Key observations from the contract-by-contract analysis:

• Eight (8) of the fourteen (14) contracts have been identified as requiring formal FAR 42.12 novation agreements, as analyzed in the companion Government Contracts Novation/Change-of-Name Analysis. For these eight contracts, the DFARS 252.209-7002 disclosure should be coordinated with, and ideally submitted simultaneously with, the novation request packages. Submitting both documents together avoids duplicative submissions, ensures consistency of information provided to the contracting officer, and enables the contracting officer to process both the disclosure and the novation in a single administrative action.

• For the Ironclad subcontract (contract number 4 in the table above), VPI's disclosure obligations run to Ironclad, as the prime contractor, rather than directly to the NAVSEA contracting officer. VPI should provide Ironclad with the same disclosure letter that is being provided to its prime contract contracting officers, with appropriate modifications to reflect the subcontract relationship. In addition, VPI should coordinate with Ironclad to ensure that Ironclad satisfies any notification obligations it may have to the NAVSEA contracting officer regarding the change in its subcontractor's ownership. Calderwood & Harkness has reached out to Ironclad's general counsel, Rebecca Fordham, to initiate this coordination.

• For the six (6) contracts that do not require formal novation — typically because they are smaller in value, are nearing completion, or involve contract types for which novation is not customary — VPI should still provide the DFARS 252.209-7002 disclosure letter. The disclosure obligation under the clause is independent of the novation requirement.

VI. COORDINATION WITH RELATED PROCESSES

A. Coordination with FAR 42.12 Novation Process

The DFARS 252.209-7002 disclosure is a legally distinct obligation from the FAR 42.12 novation requirement, but the two processes are closely related and should be coordinated for both efficiency and consistency. Both are triggered by the same event — the change in VPI's ultimate ownership — and both require communication with the same contracting officers. Submitting the DFARS disclosure separately from the novation request would result in duplicative correspondence, potential inconsistencies in the information provided, and unnecessary administrative burden on both VPI and the contracting officers.

We recommend the following coordination approach:

For the eight (8) contracts requiring novation: The DFARS 252.209-7002 disclosure letter should be included as part of the novation request package submitted to the contracting officer. The disclosure letter can be attached as an enclosure to the novation request cover letter, with a cross-reference in the cover letter noting that the disclosure is being provided simultaneously. This approach ensures that the contracting officer has all relevant information in a single submission and can process both the disclosure and the novation request in a coordinated manner.

For the six (6) contracts not requiring novation: The DFARS 252.209-7002 disclosure letter should be submitted as a standalone communication to the contracting officer. The letter should note that no novation is required for the particular contract and explain the basis for that determination (e.g., VPI retains its legal identity and name; the contract is near completion; or the contract type does not implicate the FAR 42.12 novation requirements).

It is important to note that VPI will retain its legal identity as a Delaware C-corporation post-closing. VPI is not merging into HUSHI or any other entity, and VPI's legal name, CAGE Code (7VK92), DUNS number (07-812-4493), and Employer Identification Number (26-4371885) will remain unchanged. This fact simplifies the novation framework considerably, as the novation is driven by the change in VPI's ultimate parent ownership rather than by a change in the contracting entity's legal identity. FAR 42.1204 expressly recognizes that a change in ownership of the contractor entity — even without a change in the contractor's legal name or identity — triggers novation requirements, because the U.S. government must recognize the new ownership and confirm the new owner's assumption of the contractor's obligations.

B. Coordination with CFIUS National Security Agreement (NSA-2024-0019)

The National Security Agreement negotiated as part of the CFIUS clearance process imposes a comprehensive set of obligations on HSAG and VPI designed to mitigate the national security risks identified during CFIUS's review of the transaction. The NSA is directly relevant to the DFARS 252.209-7002 disclosure process in several respects.

Pre-Notification Requirement. The NSA includes a thirty (30) calendar day pre-notification requirement for material changes to VPI's business, including changes affecting government contracts. While the post-closing DFARS disclosure to contracting officers is not itself a "material change to VPI's business" requiring NSA pre-notification (it is a notification about a change that has already been approved by CFIUS), the NSA's notification provisions should be cross-referenced to ensure that any actions taken in connection with the DFARS disclosure — such as the submission of novation request packages or responses to contracting officer inquiries — are consistent with the NSA's requirements.

Reference to CFIUS Clearance. As discussed in Section V.B above, the existence of the CFIUS clearance and the NSA should be referenced in the DFARS disclosure letters to contracting officers. The CFIUS clearance letter (Case No. CFIUS-023-07-3841, safe harbor issued January 26, 2024) serves as evidence that the U.S. government — through the interagency CFIUS process, which includes the Department of Defense — has reviewed the transaction and determined that the national security risks can be adequately mitigated through the NSA. This is powerful evidence supporting VPI's continued contractor responsibility, and it should be presented to contracting officers proactively.

Technology Control Plan and Governance Provisions. The NSA includes detailed annexes establishing a Technology Control Plan ("TCP") (Annex B) and a Government Security Committee ("GSC") charter (Annex C). The TCP governs VPI's handling of classified and export-controlled information post-closing, ensuring that HSAG's foreign national employees do not have unauthorized access to such information. The GSC — composed of U.S. citizens with active security clearances — provides independent oversight of VPI's compliance with the NSA and its security obligations. These provisions are directly relevant to contracting officers' assessment of VPI's continued capability and responsibility as a DoD contractor. Summaries of the TCP and GSC provisions — consistent with any confidentiality restrictions in the NSA — should be made available to contracting officers upon request.

We recommend that VPI prepare a one- to two-page summary of the NSA's key mitigation measures, suitable for sharing with contracting officers, and that this summary be reviewed by Peggy Ashworth's team for consistency with any confidentiality restrictions in the NSA before distribution. The summary should be available as an attachment to the DFARS disclosure letter for contracting officers who request additional information about the post-acquisition governance structure.

C. Coordination with DCSA and Facility Security Clearance

The Defense Counterintelligence and Security Agency ("DCSA") — the successor to the Defense Security Service ("DSS") — is the cognizant security agency responsible for administering VPI's FCL and for overseeing FOCI mitigation measures. DCSA will be separately notified of the change in VPI's ownership pursuant to the Post-Closing DCSA Notification Letter, which will be submitted by VPI's FSO, Col. (Ret.) Hendrickson, in coordination with Calderwood & Harkness.

VPI's FCL at the SECRET level (CAGE Code 7VK92) is expected to be maintained post-closing under the NSA's FOCI mitigation provisions, which include measures equivalent to a Special Security Agreement ("SSA") under the NISPOM. The SSA-equivalent provisions require, among other things, the establishment of the Government Security Committee, the implementation of the Technology Control Plan, and the maintenance of a cleared facility with access controls appropriate to the classification level of the work being performed.

Col. (Ret.) Bryce Hendrickson will continue to serve as VPI's Facility Security Officer. Col. Hendrickson is a retired U.S. Army officer with over twenty-five years of military and intelligence community experience and holds an active TOP SECRET/SCI clearance. His retention as FSO provides continuity and credibility in VPI's security program and is an important element of the post-acquisition mitigation framework.

The DFARS disclosure letters to contracting officers should reference VPI's continued FCL status and FSO retention, as this information is of critical concern to contracting officers on classified programs. For unclassified contracts, the FCL information may be less directly relevant but should still be included for completeness and to demonstrate VPI's overall security posture.

D. Coordination with DDTC (ITAR) Notifications

VPI is registered with the Directorate of Defense Trade Controls ("DDTC") under Registration No. M-24817 as a manufacturer and exporter of defense articles and defense services classified under the United States Munitions List ("USML"). VPI's DDTC registration requires a change-of-ownership notification under ITAR § 122.4(a), which must be submitted within sixty (60) days of the change in ownership. This notification is a parallel but separate process from the DFARS 252.209-7002 disclosure and is addressed in detail in the DDTC Registration Transfer Analysis.

In addition, VPI holds three (3) active DSP-5 export licenses authorizing the export of defense articles to the United Kingdom and Australia in connection with allied defense programs. These licenses will require amendment to reflect the change in VPI's ownership, and the amendment process may require DDTC review and approval before the licenses can be used for new export transactions post-closing. Contracting officers involved in programs with international delivery components — particularly the programs involving deliveries to UK and Australian end-users — should be informed of the license amendment process and expected timeline to ensure that they understand the implications for program execution.

VPI also manufactures and exports items classified under the Export Administration Regulations ("EAR") under Export Control Classification Numbers ("ECCNs") 3A001 (certain microwave and millimeter wave components), 3A991 (electronic components not controlled by 3A001), and 3E001 (technology for the development or production of 3A001-controlled items). The EAR-classified items are relevant to contracting officers' understanding of VPI's export control compliance posture post-acquisition, particularly in light of the HSAG ownership. While EAR compliance is not directly governed by DFARS 252.209-7002, contracting officers may inquire about VPI's export control compliance program as part of their broader assessment of contractor responsibility.

VII. SPECIFIC RECOMMENDATIONS

Based on the analysis set forth above, Calderwood & Harkness recommends the following actions, organized by timing relative to the anticipated closing date of February 9, 2024.

A. Immediate Pre-Closing Actions (Before February 9, 2024)

1. Prepare Template Disclosure Letter. Calderwood & Harkness will prepare a template DFARS 252.209-7002 disclosure letter for adaptation to each of VPI's fourteen (14) contracting officers. The template will follow the content framework outlined in Section V.B above, incorporating both the narrow DFARS 252.209-7002 disclosure and the recommended supplemental information. A draft template is provided in Appendix A to this memorandum. The template should be finalized and approved by VPI management and counsel before closing so that the letters can be distributed promptly after closing without delay.

2. Coordinate with VPI's Counsel. Calderwood & Harkness will coordinate with Harrison Whitfield at Wethersfield & Gale LLP, VPI's counsel of record, on VPI-side review and approval of the disclosure letter template. Mr. Whitfield's team has primary responsibility for VPI's day-to-day government contracts compliance and has established relationships with VPI's contracting officers. Their input on the tone, content, and distribution strategy of the disclosure letters is essential. We anticipate that Mr. Whitfield's review will take approximately five (5) to seven (7) business days and should be initiated no later than two weeks before the anticipated closing date.

3. Compile Contracting Officer Contact List. VPI's government contracts department, under the direction of Col. (Ret.) Hendrickson, should compile a complete and current list of contracting officers for each of VPI's fourteen (14) active contracts. The list should include the contracting officer's name, title, mailing address, email address, and telephone number. For the Ironclad subcontract, the list should include both VPI's point of contact at Ironclad and the NAVSEA prime contract contracting officer. This list should be provided to Calderwood & Harkness no later than January 15, 2024.

4. Prepare Col. Hendrickson for Contracting Officer Communications. Col. (Ret.) Hendrickson, as VP Government Programs and FSO, has existing relationships with VPI's contracting officers and is the most appropriate person to sign and distribute the disclosure letters. He should be prepared to make follow-up telephone calls to key contracting officers after the letters are distributed and to respond to questions or requests for additional information. Calderwood & Harkness will prepare a set of talking points and anticipated Q&A for Col. Hendrickson's use in these communications.

5. Evaluate Pre-Closing Verbal Notification. VPI and Calderwood & Harkness should evaluate whether informal verbal notification to the contracting officers on the three highest-value contracts (U.S. Army CERDEC, AFRL, and MDA) is appropriate before the formal written disclosure. Such verbal notification, if provided, should be limited in scope (consistent with CFIUS confidentiality restrictions during the pendency of the review) and should be coordinated with Peggy Ashworth's team. Post-issuance of the CFIUS safe harbor letter, confidentiality concerns are substantially diminished and more detailed verbal communications would be appropriate.

B. Post-Closing Actions (After February 9, 2024)

1. Distribute DFARS 252.209-7002 Disclosure Letters. Within thirty (30) calendar days of closing (i.e., by approximately March 11, 2024), VPI should distribute the finalized DFARS 252.209-7002 disclosure letters to all fourteen (14) contracting officers (and to Ironclad Defense Systems Inc. for the NAVSEA subcontract). Distribution should be by a traceable method — either certified U.S. mail with return receipt requested, or email with read receipt, or both. Calderwood & Harkness should receive copies of all transmittal records.

2. Submit FAR 42.12 Novation Request Packages. Simultaneously with the DFARS disclosure letters, VPI should submit the FAR 42.12 novation request packages for the eight (8) contracts requiring formal novation. The novation packages should be prepared in accordance with the recommendations in the companion Government Contracts Novation/Change-of-Name Analysis and should include the DFARS 252.209-7002 disclosure letter as an enclosure. Simultaneous submission of the novation and disclosure packages ensures that contracting officers have all relevant information at the same time and can process both matters in a coordinated administrative action.

3. Document All Disclosures and Responses. VPI's government contracts department should maintain a comprehensive log of all DFARS 252.209-7002 disclosures, including the date of each disclosure, the method of delivery, the contracting officer to whom the disclosure was directed, and any responses or follow-up communications received from contracting officers. This documentation is essential for demonstrating compliance with VPI's disclosure obligations and for responding to any subsequent inquiries from contracting officers, DCSA, or the CFIUS monitoring agencies.

4. Provide Copies to Whitmore Compliance Group LLC. Copies of all disclosure letters and contracting officer responses should be provided to Whitmore Compliance Group LLC, the independent third-party compliance monitor appointed under the National Security Agreement (NSA-2024-0019). Whitmore Compliance Group is responsible for conducting annual compliance audits of VPI's adherence to the NSA's terms, and the DFARS disclosure process will be within the scope of the first annual audit. Providing Whitmore with contemporaneous copies of the disclosure correspondence will facilitate a smooth audit process and demonstrate VPI's commitment to transparency and compliance.

5. Monitor and Respond to Contracting Officer Inquiries. Following the distribution of the disclosure letters, VPI should monitor for any requests from contracting officers for additional information, briefings, or formal responsibility determinations. Any such requests should be responded to promptly and in coordination with Calderwood & Harkness. In particular, contracting officers on classified programs may request additional briefings on the NSA governance structure, the Technology Control Plan, and the Government Security Committee charter. Col. (Ret.) Hendrickson should be prepared to provide such briefings, with support from Calderwood & Harkness as needed.

C. Ongoing Obligations

The DFARS 252.209-7002 disclosure is not a one-time event. VPI must continue to monitor its ownership structure on an ongoing basis and provide updated disclosures whenever material changes occur. The following ongoing obligations should be integrated into VPI's government contracts compliance program:

• Monitoring HSAG's Shareholder Base. VPI, through its pare

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION AND/OR REGULATORY PROCEEDINGS NOT FOR DISTRIBUTION OUTSIDE COUNSEL AND AUTHORIZED RECIPIENTS
CALDERWOOD & HARKNESS LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7200 Facsimile: (202) 555-7201
MEMORANDUM
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and/or regulatory proceedings. It is intended solely for the use of the addressees identified above and such other persons as may be specifically authorized by Calderwood & Harkness LLP to receive it. Any dissemination, distribution, or copying of this memorandum or the information contained herein by or to anyone other than authorized recipients is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately at (202) 555-7200.
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I. EXECUTIVE SUMMARY
This memorandum analyzes the obligations of Marlowe Asset Management Photonics Inc. ("VPI") under DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") following the anticipated completion of Halcyon Semiconductor Aktiengesellschaft's ("HSAG") acquisition of one hundred percent (100%) of VPI's outstanding equity. The analysis is provided to assist the parties and their advisors in planning for the orderly disclosure of the ownership change to the relevant Department of Defense ("DoD") contracting officers and in coordinating that disclosure with related regulatory processes, including the FAR 42.12 novation procedure, CFIUS clearance and National Security Agreement compliance, DCSA notification, and DDTC registration transfer.
Transaction Overview. HSAG, a German Aktiengesellschaft publicly traded on the Frankfurt Stock Exchange (XETRA: HLC), is acquiring one hundred percent (100%) of the equity of VPI, a Delaware C-corporation, for a base purchase price of approximately $1.42 billion. The acquisition will be effected through Halcyon US Holdings Inc. ("HUSHI"), a Delaware C-corporation formed on June 5, 2023, as a wholly owned acquisition vehicle of HSAG. Upon completion of the transaction, VPI will become an indirect wholly owned subsidiary of HSAG, operating as a subsidiary of HUSHI.
VPI's Government Contracts Portfolio. VPI currently holds fourteen (14) active DoD contracts — thirteen (13) prime contracts and one (1) subcontract — with an aggregate remaining backlog of approximately $193 million. These contracts involve work for the U.S. Army Program Executive Office for intelligence, Electronic Warfare & Sensors ("PEO IEW&S") and the Communications-Electronics Research, Development and Engineering Center ("CERDEC"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), the U.S. Navy Naval Sea Systems Command ("NAVSEA") (via subcontract to Ironclad Defense Systems Inc.), the Department of Homeland Security Science and Technology Directorate ("DHS S&T"), and other DoD components. VPI's Facility Security Clearance ("FCL") is at the SECRET level (CAGE Code 7VK92), and approximately 212 of VPI's 486 employees hold active U.S. government security clearances at the SECRET or TOP SECRET level.
Key Conclusions. Based on our analysis of DFARS 252.209-7002, HSAG's corporate structure and shareholder base, and the surrounding regulatory framework, we reach the following principal conclusions:
1. DFARS 252.209-7002 requires disclosure of ownership or control by a foreign *government*, not foreign ownership generally. The clause is triggered by a specific nexus between the contractor and a foreign government or foreign government-controlled entity. While the change in VPI's ultimate ownership to a German parent company is plainly a material event requiring disclosure to contracting officers, the scope of the DFARS 252.209-7002 obligation itself is narrower than a general foreign-ownership notification requirement. Nonetheless, the disclosure framework must be navigated carefully, as contracting officers may treat the clause as a basis for broader inquiry into VPI's continued contractor responsibility.
2. HSAG is a publicly traded company with no identified German government ownership or control. Based on our concurrent FOCI Analysis, HSAG's shares are diffusely held among institutional and retail investors, with no German federal or state (Land) government entity holding a direct or indirect ownership interest, no government-appointed board members, and no contractual arrangements with any foreign government that would constitute "control" within the meaning of the DFARS clause. Accordingly, VPI should be able to certify that it is not owned or controlled by a foreign government.
3. Contracting officers will nonetheless expect notification of the foreign ownership change, and VPI must comply with broader DFARS and FAR foreign ownership-related provisions. The absence of a foreign government nexus does not eliminate VPI's obligation to disclose the change in its ultimate ownership to contracting officers. FAR Subpart 9.1 contractor responsibility standards, the FAR 42.12 novation process, DCSA notification requirements, and the general duty of good faith and fair dealing with the U.S. government all require that VPI proactively and transparently notify its contracting officers of the acquisition.
4. Coordination with the FAR 42.12 novation process, the CFIUS National Security Agreement, and DCSA FOCI mitigation procedures is essential. The DFARS 252.209-7002 disclosure should not be made in isolation but rather as part of a coordinated notification strategy that synchronizes with the novation request packages, the National Security Agreement (NSA-2024-0019) notification provisions, the DCSA post-closing notification, and the DDTC change-of-ownership notification under ITAR § 122.4(a).
This memorandum provides detailed analysis supporting each of these conclusions and sets forth specific recommendations for the content, timing, and coordination of VPI's DFARS 252.209-7002 disclosure obligations.
II. SCOPE AND METHODOLOGY
A. Scope of This Memorandum
This memorandum is limited in scope to the analysis of VPI's disclosure obligations under DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") and related DFARS and FAR provisions concerning foreign ownership disclosure in the government contracting context. The analysis addresses the regulatory framework, the applicability of the clause to VPI's existing contracts, the assessment of HSAG's ownership structure for purposes of determining whether foreign government ownership or control exists, the timing and content of required disclosures, and the coordination of those disclosures with related regulatory processes.
This memorandum does not address the following topics, each of which is covered by a separate companion memorandum prepared by Calderwood & Harkness LLP as part of the comprehensive regulatory analysis for this transaction:
• ITAR/EAR Export Control Notifications. The transfer of VPI's DDTC registration and the continuation of active DSP-5 export licenses are addressed in the DDTC Registration Transfer Analysis and the DSP-5 License Continuation Memo, both prepared by Christy Bauer of our International Trade & Sanctions practice. The classification of VPI's products under the ITAR and EAR is addressed in the ITAR/EAR Classification Review Memorandum, also prepared by Ms. Bauer.
• Facility Security Clearance Transition. The procedures for maintaining VPI's FCL during and after the change in ownership, including DCSA notification and the interaction with the NSA's FOCI mitigation provisions, are addressed in the Facility Security Clearance Transition Plan Memo.
• FAR 42.12 Novation Requirements. The requirements for novation of VPI's government contracts following the change in ownership, including the preparation and submission of novation agreement packages, are addressed in the Government Contracts Novation/Change-of-Name Analysis.
• FOCI Analysis. The comprehensive Foreign Ownership, Control, or Influence ("FOCI") analysis required for DCSA and CFIUS purposes is addressed in the FOCI Analysis Memo.
Where relevant, this memorandum cross-references these companion memoranda and identifies points of intersection between the DFARS 252.209-7002 disclosure and the other regulatory processes.
B. Sources Reviewed
In preparing this memorandum, we have reviewed the following sources:
1. VPI's fourteen (14) active DoD contracts (prime and subcontract), including all contract modifications, task orders, and associated solicitation provisions, provided to Calderwood & Harkness by VPI's counsel of record, Harrison Whitfield of Wethersfield & Gale LLP, on August 14, 2023.
2. The text of DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") as incorporated in VPI's contracts, and the current version of the clause as set forth in the Defense Federal Acquisition Regulation Supplement.
3. DFARS Subpart 209.1 (Responsible Prospective Contractors), including DFARS 209.104-1.
4. FAR 52.209-2 (Prohibition on Contracting with Inverted Domestic Corporations) — reviewed for potential applicability and determined to be inapplicable to the present transaction.
5. FAR Subpart 9.1 (Responsible Prospective Contractors), including FAR 9.104-1 (General Standards) and FAR 9.104-4 (Subcontractor Responsibility).
6. 10 U.S.C. § 4874 (formerly 10 U.S.C. § 2536), the statutory basis for the DFARS clause.
7. National Industrial Security Program Operating Manual ("NISPOM") (32 C.F.R. Part 117), including provisions relating to FOCI and facility security clearance requirements.
8. CFIUS-related guidance, including the regulations implementing FIRRMA (31 C.F.R. Parts 800 and 802), and the draft National Security Agreement (NSA-2024-0019) as currently under negotiation between the CFIUS monitoring agencies and the parties.
9. HSAG's public filings with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin"), including annual reports, shareholder notifications, and securities filings.
10. Due diligence materials provided by HSAG and VPI, including HSAG's corporate organizational chart, VPI's government contracts inventory, VPI's security clearance roster, and VPI's facility security documentation.
C. Assumptions. This memorandum is based on the following assumptions, which have been confirmed by VPI's management and counsel unless otherwise noted:
• The closing of the acquisition is anticipated to occur on or about February 9, 2024, subject to the completion of CFIUS review and the execution of the National Security Agreement.
• VPI will retain its legal identity as a Delaware C-corporation following closing. It will not merge into HUSHI or any other entity. VPI's name, CAGE Code, DUNS number, and EIN will remain unchanged.
• VPI's existing management team, including CEO Dr. Nathan Trevorrow, President and COO Marissa Sung-Avila, and VP Government Programs and Facility Security Officer Col. (Ret.) Bryce Hendrickson, will remain in their current positions following closing, subject to the personnel continuity provisions of the NSA.
• HSAG's shareholder structure as described in Section IV below is accurate as of the date of this memorandum and will not materially change prior to closing.
III. REGULATORY BACKGROUND: DFARS 252.209-7002
A. Statutory and Regulatory Framework
1. Statutory Basis: 10 U.S.C. § 4874. The disclosure obligations arising under DFARS 252.209-7002 find their statutory foundation in 10 U.S.C. § 4874 (formerly codified at 10 U.S.C. § 2536, and recently recodified as part of the reorganization of Title 10, Subtitle A, Part V). This provision prohibits the Department of Defense from entering into, or maintaining, a contract with an entity controlled by a foreign government if that contract requires access to proscribed information, unless a waiver is granted by the Secretary of Defense (or designee). The statute reflects Congress's concern that foreign government-controlled entities could exploit access to sensitive defense-related information or technologies to the detriment of U.S. national security.
The statute defines "proscribed information" to include certain categories of classified information and other sensitive technical data. Critically, the statutory prohibition is directed at entities controlled by a foreign government, and not at all entities with foreign ownership. This distinction is carried through into the implementing regulation.
It is important to note that 10 U.S.C. § 4874 operates as a prohibition subject to waiver, whereas DFARS 252.209-7002 functions primarily as a disclosure mechanism designed to enable contracting officers to determine whether the statutory prohibition applies. The clause requires the contractor to provide information that the contracting officer needs to assess whether the contractor is, in fact, owned or controlled by a foreign government, and whether a waiver or other action is necessary.
2. DFARS Subpart 209.104-1: Responsible Prospective Contractors. DFARS Subpart 209.1 implements DoD-specific standards for the determination of contractor responsibility, supplementing the general FAR standards found in FAR 9.104-1. DFARS 209.104-1 provides, in relevant part, that the contracting officer shall consider foreign ownership, control, or influence as a factor in determining whether a prospective contractor meets the general standards for contractor responsibility. This provision operates in conjunction with DFARS 252.209-7002 to create a framework in which contracting officers are both informed of, and empowered to act upon, foreign ownership circumstances that may affect a contractor's ability to perform its obligations to the U.S. government.
The responsibility determination under FAR 9.104-1 and DFARS 209.104-1 is broader in scope than the DFARS 252.209-7002 disclosure itself. A contracting officer may consider any aspect of foreign ownership, control, or influence — not only foreign government ownership or control — in assessing whether a contractor has the necessary organizational capability, financial capacity, performance record, and integrity to be deemed a responsible contractor. This broader authority is a significant consideration for VPI, as discussed in Section VIII (Risk Assessment) below.
3. DFARS 252.209-7002: Text and Operation. DFARS 252.209-7002 ("Disclosure of Ownership or Control by a Foreign Government") is a contract clause prescribed for use in all DoD solicitations and contracts, including those for commercial items. The clause serves as the primary mechanism through which DoD implements the disclosure requirements necessary to enforce the prohibition in 10 U.S.C. § 4874.
The clause, as set forth in full in Appendix C to this memorandum, requires the offeror or contractor to disclose whether it is "owned or controlled" by a foreign government. If the answer is affirmative, the offeror or contractor must provide the following information:
(a) The name of the foreign government;
(b) The nature and extent of the foreign government's ownership or control, including whether the ownership or control is direct or indirect;
(c) Whether the foreign government's ownership or control is through a parent corporation, subsidiary, partnership, or other entity; and
(d) Any additional information that the contracting officer may request to assess the nature and extent of foreign government ownership or control.
The clause applies at two distinct points in time. First, it applies at the time of offer submission, when prospective contractors must include the required disclosures as part of their proposal. Second, and of particular relevance to the present transaction, the clause imposes a continuing obligation on existing contractors to notify the contracting officer of any changes in foreign government ownership or control during the period of contract performance. This continuing obligation is the primary mechanism by which VPI's disclosure requirements are triggered as a result of the HSAG acquisition.
4. Key Defined Terms. The critical definitional inquiry under DFARS 252.209-7002 is whether a contractor is "owned or controlled" by a foreign government. The clause does not provide an exhaustive definition of this phrase, but it is generally understood — consistent with the implementing statute, DoD guidance, and DCSA interpretive practice — to encompass situations in which:
• A foreign government holds a majority ownership interest (direct or indirect) in the contractor;
• A foreign government has the power to appoint or remove a majority of the contractor's board of directors or equivalent governing body;
• A foreign government has the power, through ownership, contractual arrangements, or other means, to direct or decide matters affecting the management and policies of the contractor; or
• An entity that is itself owned or controlled by a foreign government holds a controlling interest in, or exercises control over, the contractor.
The definition focuses on de facto control, not merely formal ownership. A foreign government might exercise control through contractual arrangements, special share rights (e.g., "golden shares"), veto rights, or other mechanisms that give it the ability to direct the contractor's affairs, even absent a majority equity stake.
Critically, the clause targets foreign government ownership or control specifically. It does not, on its face, require disclosure of foreign ownership by private entities, foreign nationals, or foreign corporations that are not themselves owned or controlled by a foreign government. This distinction is central to the analysis of HSAG's ownership structure in Section IV below.
B. Applicability to VPI's Existing Contracts
1. Inclusion in VPI's Contracts. We have reviewed all fourteen (14) of VPI's active DoD contracts and confirmed that DFARS 252.209-7002 is included in each of the thirteen (13) prime contracts, either by full text incorporation or by reference to the DFARS clause matrix applicable to the solicitation. The clause is a standard inclusion in DoD solicitations and contracts and its presence in VPI's contract portfolio is expected and unremarkable.
For VPI's single subcontract — the subcontract with Ironclad Defense Systems Inc. under the Ironclad/NAVSEA prime contract (remaining backlog of $34.1 million) — the flowdown analysis confirms that DFARS 252.209-7002 flows down to subcontractors. Ironclad's subcontract terms and conditions include a flowdown provision requiring VPI, as subcontractor, to comply with the disclosure obligations of the clause and to notify both Ironclad and the prime contract contracting officer of any changes in foreign government ownership or control. Accordingly, VPI has the same substantive disclosure obligation with respect to the Ironclad subcontract as it does with respect to its prime contracts, although the notification mechanics differ — VPI must notify Ironclad, which in turn has the obligation to notify the NAVSEA contracting officer.
2. Continuing Obligation. As noted above, the DFARS 252.209-7002 clause imposes a continuing disclosure obligation on contractors during the period of contract performance. This obligation is not limited to the time of initial offer submission but extends throughout the life of the contract. Any change in the contractor's ownership structure that results in foreign government ownership or control — or that could reasonably be interpreted as potentially resulting in such ownership or control — triggers the contractor's obligation to notify the contracting officer.
In VPI's case, the acquisition by HSAG constitutes a material change in VPI's ultimate ownership. Even though, as discussed in Section IV below, HSAG does not appear to be owned or controlled by a foreign government, the change from U.S.-person ownership to foreign corporate ownership is the type of event that should prompt disclosure under the clause. This is because the contracting officer cannot assess whether foreign government ownership or control exists without being informed of the change in ownership in the first instance.
IV. ANALYSIS: HSAG'S OWNERSHIP STRUCTURE AND FOREIGN GOVERNMENT NEXUS
A. HSAG Corporate Structure
Halcyon Semiconductor Aktiengesellschaft is a German Aktiengesellschaft (stock corporation) organized under the laws of the Federal Republic of Germany and publicly listed on the Frankfurt Stock Exchange under the ticker symbol XETRA: HLC. As of June 1, 2023, HSAG's market capitalization was approximately €14.8 billion. For fiscal year 2022, HSAG reported revenue of approximately €6.12 billion and EBITDA of approximately €1.37 billion.
HSAG is headquartered at Industriestraße 44, 01099 Dresden, Saxony, Germany. It is registered with the German commercial register (Handelsregister) maintained by the Amtsgericht (local court) Dresden under registration number HRB 28416. Its Legal Entity Identifier ("LEI") is 5299007KXQ2M4GHILZ38.
HSAG's management board (Vorstand) is composed of the following individuals:
• Dr. Maximilian Ehrhardt — Chief Executive Officer (Vorstandsvorsitzender). Dr. Ehrhardt has served as CEO since 2019 and previously held senior positions at Sundial Holdings and Marlowe Holdings
• Katarina Brückner — Chief Financial Officer (Finanzvorstand). Ms. Brückner joined HSAG in 2020 after serving as CFO of a mid-cap German technology company. She holds an MBA from INSEAD and is a member of the German Chartered Accountants Association (Wirtschaftsprüferkammer).
• Stefan Lohse — General Counsel and Chief Legal Officer (Chefjustitiar). Mr. Lohse holds an LL.M. from Georgetown University Law Center and is admitted to practice law in both New York and Germany. He serves as the lead client contact for this engagement.
HSAG's supervisory board (Aufsichtsrat) is composed of twelve (12) members, six (6) elected by shareholders at the annual general meeting and six (6) elected by employees pursuant to the German Co-Determination Act (Mitbestimmungsgesetz). No member of the supervisory board is a representative of, or has been appointed by, any German federal or state government entity.
HSAG's existing U.S. operations consist of Halcyon US Inc. ("HUI"), a Delaware corporation headquartered in Austin, Texas. HUI operates as a fabless semiconductor design center with approximately 320 employees. HUI does not engage in classified work, does not hold a facility security clearance, and does not maintain any active DoD contracts. HUI's Employer Identification Number is 81-3056429.
The acquisition of VPI will be effected through Halcyon US Holdings Inc. ("HUSHI"), a newly formed Delaware C-corporation established on June 5, 2023, as a wholly owned subsidiary of HSAG. HUSHI has been formed for the sole purpose of serving as the acquisition vehicle and direct parent of VPI post-closing. Post-closing, VPI will be a wholly owned subsidiary of HUSHI, which in turn is a wholly owned subsidiary of HSAG.
B. Assessment of Foreign Government Ownership or Control
The central question for purposes of DFARS 252.209-7002 is whether HSAG is "owned or controlled" by a foreign government, such that VPI — as a subsidiary of HSAG through HUSHI — would be subject to foreign government ownership or control.
Based on the FOCI Analysis Memo prepared concurrently by this team, the due diligence materials provided by HSAG, HSAG's public securities filings with BaFin, and information available through shareholder disclosure databases, we have reached the following conclusions:
No direct or indirect German government ownership. No German federal government entity, no German state (Land) government entity, and no entity owned or controlled by any German government body holds a direct or indirect ownership interest in HSAG's shares. HSAG's shares are publicly traded on the Frankfurt Stock Exchange with a diffuse shareholder base composed primarily of institutional investors (including U.S., European, and Asian asset managers and pension funds) and retail investors. Based on the most recently available major shareholder notifications filed with BaFin pursuant to the German Securities Trading Act (Wertpapierhandelsgesetz, "WpHG"), no single shareholder holds more than approximately 7.2% of HSAG's outstanding shares.
No government-appointed board members or special share rights. The German government (at the federal or state level) does not have the right to appoint any members of HSAG's management board (Vorstand) or supervisory board (Aufsichtsrat). HSAG has not issued any "golden shares" or special shares conferring veto or other governance rights on any government entity. The employee representatives on the supervisory board are elected by HSAG's employees under the Co-Determination Act and are not government appointees.
No government subsidies or contractual arrangements constituting control. While HSAG has, like many German semiconductor companies, received certain European Union and German federal and state research and development grants and subsidies in the ordinary course of its business (including, for example, participation in the EU Important Projects of Common European Interest ("IPCEI") semiconductor initiative), these grants and subsidies do not confer any ownership interest, board representation, or contractual control rights on any government entity. They are standard industrial policy instruments available to qualified applicants in the European semiconductor industry and do not create a "control" relationship within the meaning of DFARS 252.209-7002.
No other foreign government nexus. We have not identified any other facts or circumstances that would suggest that HSAG is owned or controlled by a foreign government, including any controlling interest held by a sovereign wealth fund, state-owned enterprise, or foreign government-affiliated investment vehicle.
Conclusion: HSAG does not appear to be "owned or controlled" by a foreign government within the meaning of DFARS 252.209-7002. VPI should be able to certify, following the acquisition, that it is not owned or controlled by a foreign government.
Caveat and Ongoing Diligence. This conclusion is based on the current ownership structure of HSAG as of the date of this memorandum. HSAG's shares are publicly traded, and its shareholder base can change at any time. It is possible — though we have no reason to believe it is likely — that a foreign government-affiliated entity could in the future acquire a significant stake in HSAG, either through open-market purchases, a negotiated block transaction, or otherwise. Any such development would potentially trigger a new disclosure obligation under DFARS 252.209-7002 and could have significant implications for VPI's FCL, its government contracts, and the NSA governance structure. We strongly recommend that HSAG and VPI establish a monitoring protocol under which HSAG's shareholder register is reviewed on at least a quarterly basis for the appearance of any sovereign wealth fund, state-owned enterprise, or government-affiliated investor holding a material position. Any material changes should be promptly reported to Calderwood & Harkness for analysis.
C. Distinction: Foreign Ownership vs. Foreign Government Ownership
While the analysis above establishes that HSAG is not owned or controlled by a foreign government, it is equally clear that HSAG is a foreign entity. It is a German corporation, incorporated under German law, with its principal place of business in Dresden, Germany. Its management and supervisory boards are predominantly composed of German and other European nationals. The acquisition of VPI by HSAG thus constitutes a change from domestic (U.S.) ownership to foreign ownership — a material fact that has significant implications under multiple regulatory regimes, even though the specific DFARS 252.209-7002 disclosure obligation is limited to foreign government ownership or control.
The distinction between foreign ownership generally and foreign government ownership or control specifically is a critical one for purposes of this memorandum. Under DFARS 252.209-7002, VPI can — and should — certify that it is not owned or controlled by a foreign government. This certification is straightforward and should not create controversy with contracting officers, provided it is supported by adequate documentation of HSAG's ownership structure.
However, the change in VPI's ownership from U.S. persons — specifically, Dr. Nathan Trevorrow (co-founder and CEO), Marissa Sung-Avila (co-founder, President and COO), Ridgecrest Ventures Fund III, L.P. (a U.S.-based venture capital fund), Cascadian Capital Partners Growth Fund II, L.P. (a U.S.-based growth equity fund), employee option holders, and a group of U.S.-based angel investors — to a German parent company remains a material change that triggers notification and disclosure obligations under other regulatory provisions, including:
• FAR 42.12 (Novation and Change-of-Name Agreements): The change in VPI's ultimate ownership triggers the novation requirements of FAR 42.12, which requires the successor in interest to execute novation agreements with the U.S. government for affected contracts. This process is analyzed in detail in the companion Government Contracts Novation/Change-of-Name Analysis.
• DCSA FOCI Notification: VPI's change in ownership triggers FOCI notification requirements under the NISPOM and DCSA implementing guidance. This is addressed in the Facility Security Clearance Transition Plan Memo.
• DDTC Registration Transfer: VPI's change in ownership requires notification to DDTC under ITAR § 122.4(a) and may require amendment of existing export licenses. This is addressed in the DDTC Registration Transfer Analysis.
• Contracting Officer Responsibility Determinations: Even in the absence of a foreign government nexus, contracting officers retain the authority under FAR 9.104-1 and DFARS 209.104-1 to consider foreign ownership as a factor in contractor responsibility determinations. A contracting officer who learns of the change in VPI's ownership may request additional information, convene a responsibility review, or take other actions within the scope of the contracting officer's authority.
For these reasons, while VPI's DFARS 252.209-7002 disclosure can properly certify the absence of foreign government ownership or control, the accompanying notification to contracting officers should be transparent and comprehensive regarding the change in foreign ownership generally. The recommended content of such notification is discussed in Section V.B below.
V. DISCLOSURE OBLIGATIONS AND TIMING
A. Timing of Disclosure under DFARS 252.209-7002
1. Trigger Events. The DFARS 252.209-7002 clause requires disclosure "at the time of offer" for new contracts and solicitation responses. For existing contracts, the clause imposes a continuing obligation to notify the contracting officer of changes in the contractor's ownership or control status. The trigger event for VPI's disclosure obligation is the completion of the acquisition — i.e., the closing of the transaction, at which point VPI's ownership will change from U.S. persons to HUSHI (and, through HUSHI, to HSAG).
Based on the current transaction timeline and subject to the completion of CFIUS review, we anticipate the following sequence of events:
• January 19, 2024 (estimated): Execution of the National Security Agreement (NSA-2024-0019) between HSAG, VPI, and the CFIUS monitoring agencies.
• January 26, 2024 (estimated): Issuance of CFIUS safe harbor letter (Case No. CFIUS-023-07-3841), confirming that CFIUS has concluded its review and that the transaction may proceed subject to the terms of the NSA.
• February 9, 2024 (estimated): Closing of the acquisition. Transfer of 100% of VPI's outstanding equity from existing shareholders to HUSHI.
The closing date — February 9, 2024 — is the trigger event for VPI's DFARS 252.209-7002 disclosure obligation. Upon closing, VPI's ownership will have changed, and the continuing obligation to notify contracting officers of changes in foreign government ownership or control status is activated.
2. Recommended Timing: 30 Calendar Days Post-Closing. Neither DFARS 252.209-7002 nor its implementing guidance specifies a precise deadline for post-closing notification to contracting officers. The clause states that the contractor must disclose the required information but does not prescribe a specific number of days within which the disclosure must be made following a change in ownership.
We recommend that VPI provide written notice to each contracting officer within thirty (30) calendar days of closing — i.e., by approximately March 11, 2024. This timeline is based on the following considerations:
• Consistency with the NSA. The National Security Agreement (NSA-2024-0019) as currently drafted contains a thirty (30) calendar day pre-notification requirement for material changes to VPI's business, including changes affecting government contracts. While the NSA pre-notification provision operates prospectively (i.e., notice before making changes rather than notice after a change has occurred), aligning the DFARS disclosure timeline with the NSA's thirty-day framework creates administrative consistency and reduces the risk of conflicting timelines.
• Consistency with FAR 42.12 Novation Notification. The FAR 42.12 novation process also contemplates prompt notification to the contracting officer following a change in the contractor's ownership. While FAR 42.12 does not specify a precise deadline, industry practice and GAO interpretive guidance suggest that notification within thirty (30) days is considered timely.
• Practical Considerations. A thirty-day window provides sufficient time for VPI and its counsel to (a) confirm that closing has occurred and all transaction-related documentation is finalized; (b) finalize and tailor the disclosure letters for each of the fourteen (14) contracts; (c) coordinate with Col. (Ret.) Hendrickson on the distribution strategy; and (d) coordinate with the FAR 42.12 novation request packages so that the disclosures and novation requests can be submitted simultaneously where appropriate.
3. Pre-Closing Notification Considerations. Consideration should be given to providing advance informational notice to key contracting officers before the closing date, particularly for VPI's highest-value contracts. The three largest contracts by remaining backlog are:
• U.S. Army CERDEC / PEO IEW&S — GaN HEMT modules for the AN/TPS-80 Multi-Mission Radar — $52.3 million remaining backlog;
• AFRL — Next-generation mmWave power amplifiers — $41.7 million remaining backlog; and
• MDA — GaN-based T/R (Transmit/Receive) modules for missile defense applications — $38.9 million remaining backlog.
Together, these three contracts represent approximately $132.9 million, or approximately 68.8%, of VPI's total government contracts backlog. The contracting officers responsible for these programs have a significant interest in being informed of the ownership change as early as possible, as the change may affect their own internal reporting requirements and program management decisions.
A proactive approach — providing advance notice before closing, rather than waiting until after the fact — can facilitate smoother post-closing interactions with contracting officers, reduce the risk of surprise or adverse reaction, and demonstrate VPI's good faith and transparency. Contracting officers who feel blindsided by a change in contractor ownership may be more inclined to request formal responsibility determinations or take other protective actions.
However, any pre-closing disclosure must be carefully coordinated with CFIUS counsel to ensure that it does not conflict with CFIUS confidentiality requirements during the review process. While there is no blanket prohibition on disclosing the existence of a pending CFIUS review, the parties have committed in their CFIUS filing to maintain confidentiality regarding certain aspects of the review process. We recommend that pre-closing notification be limited to general statements that VPI's ownership is expected to change and that a CFIUS review is underway, without disclosing specific details of the NSA or the CFIUS deliberations. Post-clearance — i.e., after the CFIUS safe harbor letter is issued — confidentiality concerns are substantially diminished, and more detailed notifications can be provided.
Peggy Ashworth's team is best positioned to advise on the precise scope of permissible pre-closing disclosure in light of the CFIUS confidentiality framework, and we recommend close coordination with her on this question.
B. Content of Disclosure
1. Narrow Disclosure under DFARS 252.209-7002. The disclosure required by DFARS 252.209-7002 is relatively narrow in scope. The clause requires the contractor to disclose:
(a) Whether it is owned or controlled by a foreign government;
(b) If so, the identity of the foreign government, the nature and extent of the ownership or control, and whether it is direct or indirect; and
(c) Any additional information requested by the contracting officer.
In VPI's case, the narrow DFARS 252.209-7002 disclosure would state that:
• VPI has been acquired by Halcyon US Holdings Inc. ("HUSHI"), a Delaware C-corporation and wholly owned subsidiary of Halcyon Semiconductor Aktiengesellschaft ("HSAG"), a publicly traded German Aktiengesellschaft;
• HSAG is not owned or controlled by any foreign government; and
• Accordingly, VPI is not owned or controlled by a foreign government within the meaning of DFARS 252.209-7002.
This narrow disclosure, standing alone, would technically satisfy the requirements of the clause. However, for the reasons discussed below, we recommend that VPI supplement the narrow disclosure with additional information.
2. Recommended Supplemental Information. Although not strictly required by the narrow text of DFARS 252.209-7002, we strongly recommend that VPI include the following supplemental information in its disclosure letters to contracting officers:
(a) Identification of the Acquiring Entity. Full identification of HSAG, including its legal name, country of incorporation, principal place of business (Dresden, Germany), nature of business (semiconductor design and manufacturing), stock exchange listing (XETRA: HLC), and general description of its size and scope of operations. This information provides context for the contracting officer and demonstrates VPI's transparency.
(b) Acquisition Structure. A brief description of the acquisition structure — i.e., that the acquisition was effected through HUSHI, a newly formed Delaware C-corporation, and that VPI retains its legal identity, CAGE Code, DUNS number, and EIN post-closing.
(c) CFIUS Clearance and National Security Agreement. Reference to the CFIUS clearance (Case No. CFIUS-023-07-3841), including the date of the safe harbor letter (January 26, 2024), and the existence of the National Security Agreement (NSA-2024-0019). The fact that the U.S. government — through the CFIUS interagency process — has reviewed and approved the transaction, subject to mitigation measures, is a powerful indicator that the acquisition does not pose an unacceptable national security risk. Contracting officers will find this information reassuring and it may preempt requests for additional information or formal responsibility determinations.
(d) Continuation of Facility Security Clearance and FSO. Confirmation that VPI's FCL at the SECRET level (CAGE Code 7VK92) will be maintained post-closing, and that Col. (Ret.) Bryce Hendrickson will continue to serve as Facility Security Officer. For classified program contracting officers, this information is critical — the continued validity of the FCL is a prerequisite for classified contract performance, and any uncertainty about the FCL could cause serious disruption to ongoing programs.
(e) Commitment to Uninterrupted Contract Performance. A clear and unequivocal statement that VPI is committed to the uninterrupted performance of all of its government contract obligations, that the acquisition will not adversely affect VPI's technical capabilities, workforce, or delivery schedules, and that all key personnel will remain in their current positions.
(f) Contact Information. Contact information for Col. (Ret.) Hendrickson and for VPI's legal counsel (both Wethersfield & Gale LLP and Calderwood & Harkness LLP) for follow-up inquiries from contracting officers.
A template disclosure letter incorporating all of the above elements is provided in Appendix A to this memorandum.
C. Contract-by-Contract Analysis
The following table summarizes the disclosure and notification actions required for each of VPI's fourteen (14) active DoD contracts. The top five contracts by remaining backlog are specifically identified; the remaining nine contracts are grouped for efficiency, as the same analytical framework applies to each.
† Individual backlog figures for contracts 6–14 are set forth in the detailed contract inventory maintained by VPI's contracts department and provided to Calderwood & Harkness under the data room index. Aggregate backlog for contracts 6–14 is approximately $0.0 million (total portfolio backlog of $193.0 million is accounted for by the top five contracts listed above).
Key observations from the contract-by-contract analysis:
• Eight (8) of the fourteen (14) contracts have been identified as requiring formal FAR 42.12 novation agreements, as analyzed in the companion Government Contracts Novation/Change-of-Name Analysis. For these eight contracts, the DFARS 252.209-7002 disclosure should be coordinated with, and ideally submitted simultaneously with, the novation request packages. Submitting both documents together avoids duplicative submissions, ensures consistency of information provided to the contracting officer, and enables the contracting officer to process both the disclosure and the novation in a single administrative action.
• For the Ironclad subcontract (contract number 4 in the table above), VPI's disclosure obligations run to Ironclad, as the prime contractor, rather than directly to the NAVSEA contracting officer. VPI should provide Ironclad with the same disclosure letter that is being provided to its prime contract contracting officers, with appropriate modifications to reflect the subcontract relationship. In addition, VPI should coordinate with Ironclad to ensure that Ironclad satisfies any notification obligations it may have to the NAVSEA contracting officer regarding the change in its subcontractor's ownership. Calderwood & Harkness has reached out to Ironclad's general counsel, Rebecca Fordham, to initiate this coordination.
• For the six (6) contracts that do not require formal novation — typically because they are smaller in value, are nearing completion, or involve contract types for which novation is not customary — VPI should still provide the DFARS 252.209-7002 disclosure letter. The disclosure obligation under the clause is independent of the novation requirement.
VI. COORDINATION WITH RELATED PROCESSES
A. Coordination with FAR 42.12 Novation Process
The DFARS 252.209-7002 disclosure is a legally distinct obligation from the FAR 42.12 novation requirement, but the two processes are closely related and should be coordinated for both efficiency and consistency. Both are triggered by the same event — the change in VPI's ultimate ownership — and both require communication with the same contracting officers. Submitting the DFARS disclosure separately from the novation request would result in duplicative correspondence, potential inconsistencies in the information provided, and unnecessary administrative burden on both VPI and the contracting officers.
We recommend the following coordination approach:
For the eight (8) contracts requiring novation: The DFARS 252.209-7002 disclosure letter should be included as part of the novation request package submitted to the contracting officer. The disclosure letter can be attached as an enclosure to the novation request cover letter, with a cross-reference in the cover letter noting that the disclosure is being provided simultaneously. This approach ensures that the contracting officer has all relevant information in a single submission and can process both the disclosure and the novation request in a coordinated manner.
For the six (6) contracts not requiring novation: The DFARS 252.209-7002 disclosure letter should be submitted as a standalone communication to the contracting officer. The letter should note that no novation is required for the particular contract and explain the basis for that determination (e.g., VPI retains its legal identity and name; the contract is near completion; or the contract type does not implicate the FAR 42.12 novation requirements).
It is important to note that VPI will retain its legal identity as a Delaware C-corporation post-closing. VPI is not merging into HUSHI or any other entity, and VPI's legal name, CAGE Code (7VK92), DUNS number (07-812-4493), and Employer Identification Number (26-4371885) will remain unchanged. This fact simplifies the novation framework considerably, as the novation is driven by the change in VPI's ultimate parent ownership rather than by a change in the contracting entity's legal identity. FAR 42.1204 expressly recognizes that a change in ownership of the contractor entity — even without a change in the contractor's legal name or identity — triggers novation requirements, because the U.S. government must recognize the new ownership and confirm the new owner's assumption of the contractor's obligations.
B. Coordination with CFIUS National Security Agreement (NSA-2024-0019)
The National Security Agreement negotiated as part of the CFIUS clearance process imposes a comprehensive set of obligations on HSAG and VPI designed to mitigate the national security risks identified during CFIUS's review of the transaction. The NSA is directly relevant to the DFARS 252.209-7002 disclosure process in several respects.
Pre-Notification Requirement. The NSA includes a thirty (30) calendar day pre-notification requirement for material changes to VPI's business, including changes affecting government contracts. While the post-closing DFARS disclosure to contracting officers is not itself a "material change to VPI's business" requiring NSA pre-notification (it is a notification about a change that has already been approved by CFIUS), the NSA's notification provisions should be cross-referenced to ensure that any actions taken in connection with the DFARS disclosure — such as the submission of novation request packages or responses to contracting officer inquiries — are consistent with the NSA's requirements.
Reference to CFIUS Clearance. As discussed in Section V.B above, the existence of the CFIUS clearance and the NSA should be referenced in the DFARS disclosure letters to contracting officers. The CFIUS clearance letter (Case No. CFIUS-023-07-3841, safe harbor issued January 26, 2024) serves as evidence that the U.S. government — through the interagency CFIUS process, which includes the Department of Defense — has reviewed the transaction and determined that the national security risks can be adequately mitigated through the NSA. This is powerful evidence supporting VPI's continued contractor responsibility, and it should be presented to contracting officers proactively.
Technology Control Plan and Governance Provisions. The NSA includes detailed annexes establishing a Technology Control Plan ("TCP") (Annex B) and a Government Security Committee ("GSC") charter (Annex C). The TCP governs VPI's handling of classified and export-controlled information post-closing, ensuring that HSAG's foreign national employees do not have unauthorized access to such information. The GSC — composed of U.S. citizens with active security clearances — provides independent oversight of VPI's compliance with the NSA and its security obligations. These provisions are directly relevant to contracting officers' assessment of VPI's continued capability and responsibility as a DoD contractor. Summaries of the TCP and GSC provisions — consistent with any confidentiality restrictions in the NSA — should be made available to contracting officers upon request.
We recommend that VPI prepare a one- to two-page summary of the NSA's key mitigation measures, suitable for sharing with contracting officers, and that this summary be reviewed by Peggy Ashworth's team for consistency with any confidentiality restrictions in the NSA before distribution. The summary should be available as an attachment to the DFARS disclosure letter for contracting officers who request additional information about the post-acquisition governance structure.
C. Coordination with DCSA and Facility Security Clearance
The Defense Counterintelligence and Security Agency ("DCSA") — the successor to the Defense Security Service ("DSS") — is the cognizant security agency responsible for administering VPI's FCL and for overseeing FOCI mitigation measures. DCSA will be separately notified of the change in VPI's ownership pursuant to the Post-Closing DCSA Notification Letter, which will be submitted by VPI's FSO, Col. (Ret.) Hendrickson, in coordination with Calderwood & Harkness.
VPI's FCL at the SECRET level (CAGE Code 7VK92) is expected to be maintained post-closing under the NSA's FOCI mitigation provisions, which include measures equivalent to a Special Security Agreement ("SSA") under the NISPOM. The SSA-equivalent provisions require, among other things, the establishment of the Government Security Committee, the implementation of the Technology Control Plan, and the maintenance of a cleared facility with access controls appropriate to the classification level of the work being performed.
Col. (Ret.) Bryce Hendrickson will continue to serve as VPI's Facility Security Officer. Col. Hendrickson is a retired U.S. Army officer with over twenty-five years of military and intelligence community experience and holds an active TOP SECRET/SCI clearance. His retention as FSO provides continuity and credibility in VPI's security program and is an important element of the post-acquisition mitigation framework.
The DFARS disclosure letters to contracting officers should reference VPI's continued FCL status and FSO retention, as this information is of critical concern to contracting officers on classified programs. For unclassified contracts, the FCL information may be less directly relevant but should still be included for completeness and to demonstrate VPI's overall security posture.
D. Coordination with DDTC (ITAR) Notifications
VPI is registered with the Directorate of Defense Trade Controls ("DDTC") under Registration No. M-24817 as a manufacturer and exporter of defense articles and defense services classified under the United States Munitions List ("USML"). VPI's DDTC registration requires a change-of-ownership notification under ITAR § 122.4(a), which must be submitted within sixty (60) days of the change in ownership. This notification is a parallel but separate process from the DFARS 252.209-7002 disclosure and is addressed in detail in the DDTC Registration Transfer Analysis.
In addition, VPI holds three (3) active DSP-5 export licenses authorizing the export of defense articles to the United Kingdom and Australia in connection with allied defense programs. These licenses will require amendment to reflect the change in VPI's ownership, and the amendment process may require DDTC review and approval before the licenses can be used for new export transactions post-closing. Contracting officers involved in programs with international delivery components — particularly the programs involving deliveries to UK and Australian end-users — should be informed of the license amendment process and expected timeline to ensure that they understand the implications for program execution.
VPI also manufactures and exports items classified under the Export Administration Regulations ("EAR") under Export Control Classification Numbers ("ECCNs") 3A001 (certain microwave and millimeter wave components), 3A991 (electronic components not controlled by 3A001), and 3E001 (technology for the development or production of 3A001-controlled items). The EAR-classified items are relevant to contracting officers' understanding of VPI's export control compliance posture post-acquisition, particularly in light of the HSAG ownership. While EAR compliance is not directly governed by DFARS 252.209-7002, contracting officers may inquire about VPI's export control compliance program as part of their broader assessment of contractor responsibility.
VII. SPECIFIC RECOMMENDATIONS
Based on the analysis set forth above, Calderwood & Harkness recommends the following actions, organized by timing relative to the anticipated closing date of February 9, 2024.
A. Immediate Pre-Closing Actions (Before February 9, 2024)
1. Prepare Template Disclosure Letter. Calderwood & Harkness will prepare a template DFARS 252.209-7002 disclosure letter for adaptation to each of VPI's fourteen (14) contracting officers. The template will follow the content framework outlined in Section V.B above, incorporating both the narrow DFARS 252.209-7002 disclosure and the recommended supplemental information. A draft template is provided in Appendix A to this memorandum. The template should be finalized and approved by VPI management and counsel before closing so that the letters can be distributed promptly after closing without delay.
2. Coordinate with VPI's Counsel. Calderwood & Harkness will coordinate with Harrison Whitfield at Wethersfield & Gale LLP, VPI's counsel of record, on VPI-side review and approval of the disclosure letter template. Mr. Whitfield's team has primary responsibility for VPI's day-to-day government contracts compliance and has established relationships with VPI's contracting officers. Their input on the tone, content, and distribution strategy of the disclosure letters is essential. We anticipate that Mr. Whitfield's review will take approximately five (5) to seven (7) business days and should be initiated no later than two weeks before the anticipated closing date.
3. Compile Contracting Officer Contact List. VPI's government contracts department, under the direction of Col. (Ret.) Hendrickson, should compile a complete and current list of contracting officers for each of VPI's fourteen (14) active contracts. The list should include the contracting officer's name, title, mailing address, email address, and telephone number. For the Ironclad subcontract, the list should include both VPI's point of contact at Ironclad and the NAVSEA prime contract contracting officer. This list should be provided to Calderwood & Harkness no later than January 15, 2024.
4. Prepare Col. Hendrickson for Contracting Officer Communications. Col. (Ret.) Hendrickson, as VP Government Programs and FSO, has existing relationships with VPI's contracting officers and is the most appropriate person to sign and distribute the disclosure letters. He should be prepared to make follow-up telephone calls to key contracting officers after the letters are distributed and to respond to questions or requests for additional information. Calderwood & Harkness will prepare a set of talking points and anticipated Q&A for Col. Hendrickson's use in these communications.
5. Evaluate Pre-Closing Verbal Notification. VPI and Calderwood & Harkness should evaluate whether informal verbal notification to the contracting officers on the three highest-value contracts (U.S. Army CERDEC, AFRL, and MDA) is appropriate before the formal written disclosure. Such verbal notification, if provided, should be limited in scope (consistent with CFIUS confidentiality restrictions during the pendency of the review) and should be coordinated with Peggy Ashworth's team. Post-issuance of the CFIUS safe harbor letter, confidentiality concerns are substantially diminished and more detailed verbal communications would be appropriate.
B. Post-Closing Actions (After February 9, 2024)
1. Distribute DFARS 252.209-7002 Disclosure Letters. Within thirty (30) calendar days of closing (i.e., by approximately March 11, 2024), VPI should distribute the finalized DFARS 252.209-7002 disclosure letters to all fourteen (14) contracting officers (and to Ironclad Defense Systems Inc. for the NAVSEA subcontract). Distribution should be by a traceable method — either certified U.S. mail with return receipt requested, or email with read receipt, or both. Calderwood & Harkness should receive copies of all transmittal records.
2. Submit FAR 42.12 Novation Request Packages. Simultaneously with the DFARS disclosure letters, VPI should submit the FAR 42.12 novation request packages for the eight (8) contracts requiring formal novation. The novation packages should be prepared in accordance with the recommendations in the companion Government Contracts Novation/Change-of-Name Analysis and should include the DFARS 252.209-7002 disclosure letter as an enclosure. Simultaneous submission of the novation and disclosure packages ensures that contracting officers have all relevant information at the same time and can process both matters in a coordinated administrative action.
3. Document All Disclosures and Responses. VPI's government contracts department should maintain a comprehensive log of all DFARS 252.209-7002 disclosures, including the date of each disclosure, the method of delivery, the contracting officer to whom the disclosure was directed, and any responses or follow-up communications received from contracting officers. This documentation is essential for demonstrating compliance with VPI's disclosure obligations and for responding to any subsequent inquiries from contracting officers, DCSA, or the CFIUS monitoring agencies.
4. Provide Copies to Whitmore Compliance Group LLC. Copies of all disclosure letters and contracting officer responses should be provided to Whitmore Compliance Group LLC, the independent third-party compliance monitor appointed under the National Security Agreement (NSA-2024-0019). Whitmore Compliance Group is responsible for conducting annual compliance audits of VPI's adherence to the NSA's terms, and the DFARS disclosure process will be within the scope of the first annual audit. Providing Whitmore with contemporaneous copies of the disclosure correspondence will facilitate a smooth audit process and demonstrate VPI's commitment to transparency and compliance.
5. Monitor and Respond to Contracting Officer Inquiries. Following the distribution of the disclosure letters, VPI should monitor for any requests from contracting officers for additional information, briefings, or formal responsibility determinations. Any such requests should be responded to promptly and in coordination with Calderwood & Harkness. In particular, contracting officers on classified programs may request additional briefings on the NSA governance structure, the Technology Control Plan, and the Government Security Committee charter. Col. (Ret.) Hendrickson should be prepared to provide such briefings, with support from Calderwood & Harkness as needed.
C. Ongoing Obligations
The DFARS 252.209-7002 disclosure is not a one-time event. VPI must continue to monitor its ownership structure on an ongoing basis and provide updated disclosures whenever material changes occur. The following ongoing obligations should be integrated into VPI's government contracts compliance program:
• Monitoring HSAG's Shareholder Base. VPI, through its pare

MEMORANDUM

I. EXECUTIVE SUMMARY

II. SCOPE AND METHODOLOGY

III. REGULATORY BACKGROUND: DFARS 252.209-7002

IV. ANALYSIS: HSAG'S OWNERSHIP STRUCTURE AND FOREIGN GOVERNMENT NEXUS

V. DISCLOSURE OBLIGATIONS AND TIMING

VI. COORDINATION WITH RELATED PROCESSES

VII. SPECIFIC RECOMMENDATIONS

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