JOINT VOLUNTARY NOTICE PURSUANT TO 31 C.F.R. § 800.501

JOINT VOLUNTARY NOTICE PURSUANT TO 31 C.F.R. § 800.501
INTERNAL REVIEW DRAFT — PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
Acquisition of 100% of the Outstanding Equity of Marlowe Asset Management Photonics Inc. by Halcyon Semiconductor Aktiengesellschaft through Halcyon US Holdings Inc.
Prepared by:
Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006 (On behalf of the Acquiror)
Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006 (On behalf of the Target and Sellers)
Draft Date: July __, 2023 FOR INTERNAL REVIEW ONLY — NOT YET FILED
CIRCULATION: This draft is limited to the Calderwood & Harkness LLP engagement team: Beatrice Holloway, James Prentice, Margaret "Peggy" Ashworth, Lt. Col. (Ret.) David Caruso, Priya Venkataraman, Kenneth Morales, Omar Siddiqui, and Christy Bauer.
NOTE: This draft is being circulated for internal Calderwood & Harkness review prior to transmission to Wethersfield & Gale and client for comment. Please provide all comments by [DATE]. Target filing date: July 14, 2023.
This document is protected by the attorney-client privilege, the work product doctrine, and all other applicable privileges. Any unauthorized disclosure, copying, or distribution of this document is strictly prohibited. If you have received this document in error, please contact Beatrice Holloway immediately at (212) 555-0147.
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SECTION I — INTRODUCTION AND SUMMARY OF THE TRANSACTION
1.1 Purpose of Filing
This Joint Voluntary Notice (this "Notice") is submitted to the Committee on Foreign Investment in the United States ("CFIUS" or the "Committee") pursuant to Section 721 of the Defense Production Act of 1950, as amended, 50 U.S.C. § 4565, and the regulations implementing Section 721 set forth at 31 C.F.R. Part 800 (the "Regulations"). The filing parties respectfully request that the Committee review the proposed acquisition (the "Transaction") by Halcyon Semiconductor Aktiengesellschaft ("HSAG" or the "Acquiror"), acting through its wholly owned indirect subsidiary Halcyon US Holdings Inc. ("Halcyon Holdings" or the "Acquisition Vehicle"), of 100% of the outstanding equity interests of Marlowe Asset Management Photonics Inc. ("VPI" or the "Target" and, together with HSAG and Halcyon Holdings, the "Parties").
The Transaction constitutes a "covered transaction" within the meaning of 31 C.F.R. § 800.213 and, more specifically, a "covered control transaction" under 31 C.F.R. § 800.210, as HSAG, a "foreign person" within the meaning of 31 C.F.R. § 800.224, will acquire "control" of VPI, a "U.S. business" within the meaning of 31 C.F.R. § 800.252, through the purchase of 100% of VPI's outstanding shares of common stock.
The Parties note that a mandatory declaration may be required under 31 C.F.R. § 800.401 given VPI's status as a "TID U.S. business" (as defined in 31 C.F.R. § 800.248) that produces, designs, tests, manufactures, fabricates, and develops "critical technologies" (as defined in 31 C.F.R. § 800.215). Notwithstanding the availability of a short-form declaration under 31 C.F.R. § 800.401(f), the Parties have elected to file a full voluntary joint notice under 31 C.F.R. § 800.501 in lieu of a declaration. This election reflects the Parties' assessment that, given the complexity and national security sensitivity of VPI's classified programs, government contracts, and export-controlled products, a comprehensive notice will better facilitate the Committee's review and enable the Parties to present their proposed mitigation framework in its entirety. The Parties believe that this approach will promote an efficient and thorough review process.
This Notice is being submitted jointly by the Acquiror and the Target/Sellers in accordance with 31 C.F.R. § 800.501(a). All information in this Notice has been provided to the best of the Parties' knowledge, after reasonable inquiry, and is accurate and complete in all material respects as of the date of filing. Each Party has certified the accuracy of its respective portions of this Notice as set forth in the Certifications appended hereto.
1.2 Transaction Summary
HSAG proposes to acquire 100% of the outstanding shares of common stock of VPI from VPI's existing shareholders (the "Sellers") pursuant to the terms of a Stock Purchase Agreement executed on June 10, 2023 (the "SPA"), a complete copy of which is included as part of Exhibit A to this Notice.
The acquisition will be effected through Halcyon US Holdings Inc., a Delaware corporation formed on June 5, 2023, for the sole purpose of serving as the acquisition vehicle for the Transaction. Halcyon Holdings is a direct, wholly owned subsidiary of HSAG. Upon consummation of the Transaction, VPI will become a wholly owned subsidiary of Halcyon Holdings, which is itself a wholly owned subsidiary of HSAG.
The key financial terms of the Transaction are as follows:
•  Base Purchase Price: $1,420,000,000 on a cash-free, debt-free basis, subject to adjustment based on a normalized net working capital target of $34,600,000, as set forth in Section 2.5 of the SPA.
•  Consideration: 100% cash at closing.
•  Escrow Holdback: $71,000,000 (representing 5% of the base purchase price), to be held for a period of eighteen (18) months following the closing date for the satisfaction of indemnification claims pursuant to Article X of the SPA. The escrow agent will be Pinnacle Trust Company, N.A., located at 400 South LaSalle Street, Suite 1100, Chicago, IL 60605.
•  Earnout: Up to $85,000,000 in contingent consideration payable in two tranches: (i) $50,000,000 upon the achievement of a government-contract revenue milestone for calendar year 2024 ("CY2024"), and (ii) $35,000,000 upon the achievement of a government-contract revenue milestone for calendar year 2025 ("CY2025"), as specified in Section 2.8 of the SPA.
•  Maximum Aggregate Consideration: $1,505,000,000 (consisting of the base purchase price plus the maximum earnout payments).
The Transaction is expected to close promptly following the satisfaction of all conditions precedent to closing, including, without limitation, CFIUS clearance (or the expiration of any applicable review or investigation period without action by the Committee), as set forth in Section 7.1(c) of the SPA.
The Transaction will be financed through a combination of (i) a $900,000,000 senior secured term loan from a syndicate of lenders led by Meridian National Bank, as administrative agent, with Atlas Commercial Lending AG and Pacific Basin Credit Corp. as co-lead arrangers, and (ii) a $520,000,000 equity contribution from HSAG, which will be partially funded by a €300,000,000 draw on HSAG's existing revolving credit facility with Rheinische Handelsbank AG. The financing arrangements are described in greater detail in Section VII of this Notice.
1.3 Statement of National Security Relevance
The Parties recognize that the Transaction raises national security considerations warranting review by the Committee. VPI is a U.S. business engaged in the design and manufacture of advanced gallium-nitride ("GaN") power amplifier chips used in defense radar systems, satellite communications, and 5G telecommunications infrastructure. VPI's products are integral to critical U.S. defense programs, and VPI maintains significant relationships with the U.S. Department of Defense ("DoD") and the broader national security establishment.
The following attributes of VPI's business are particularly relevant to the Committee's national security assessment:
•  Defense Applications: VPI designs and manufactures GaN-on-silicon-carbide ("GaN-on-SiC") high-electron-mobility transistor ("HEMT") devices, millimeter-wave ("mmWave") power amplifiers, and transmit/receive ("T/R") modules for phased-array radar and electronic warfare systems. These components are used in multiple defense platforms, including the AN/TPS-80 Ground/Air Task Oriented Radar ("G/ATOR") and missile defense systems.
•  Classified Programs: VPI holds both classified and unclassified contracts with the U.S. Department of Defense. Classified work is performed at VPI's fabrication facility in Albuquerque, New Mexico, which maintains a Facility Security Clearance ("FCL") at the SECRET level.
•  Export Controls: VPI designs and manufactures items subject to the International Traffic in Arms Regulations ("ITAR"), including defense articles classified under Category XI(a)(3) of the United States Munitions List ("USML"), as well as items controlled under the Export Administration Regulations ("EAR") at Export Control Classification Number ("ECCN") 3A001. VPI is registered with the Directorate of Defense Trade Controls ("DDTC") and holds active export licenses for deliveries to NATO allies.
•  Facility Security Clearance: VPI maintains a Facility Security Clearance at the SECRET level under CAGE Code 7VK92, issued and monitored by the Defense Counterintelligence and Security Agency ("DCSA").
•  Cleared Personnel: VPI employs 212 personnel holding active U.S. government security clearances, including individuals holding clearances at the TOP SECRET/Sensitive Compartmented Information ("TS/SCI") level.
The Parties have engaged proactively with the Committee's staff in advance of this filing. On June 19, 2023, counsel for the Parties participated in a pre-filing consultation with the U.S. Department of the Treasury, Office of Investment Security ("OIS"), to introduce the Transaction, discuss VPI's national security profile, and preview the Parties' proposed mitigation framework. The Parties propose a comprehensive set of mitigation measures, described in detail in Section XI of this Notice, designed to address potential national security concerns arising from the acquisition of VPI by a foreign person.
1.4 Contact Information for Filing Parties
All communications regarding this Notice should be directed to the following individuals:
For the Acquiror (Halcyon Semiconductor Aktiengesellschaft):
Margaret "Peggy" Ashworth Of Counsel Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-0234
Email: mashworth@calderwoodharkness.com
Beatrice Holloway Partner Calderwood & Harkness LLP 399 Park Avenue, 31st Floor New York, NY 10022 Telephone: (212) 555-0147
Email: bholloway@calderwoodharkness.com
Stefan Lohse General Counsel (Chefjustitiar) Halcyon Semiconductor Aktiengesellschaft Industriestraße 44 01099 Dresden, Germany Telephone: +49 351 555 0190
Email: stefan.lohse@halcyon-semi.de
For the Target and Sellers (Marlowe Asset Management Photonics Inc.):
Harrison Whitfield Partner Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006 Telephone: (202) 555-0391
Email: hwhitfield@wethersfieldgale.com
Dr. Nathan Trevorrow Chief Executive Officer Marlowe Asset Management Photonics Inc. 7400 Ridgeline Parkway Colorado Springs, CO 80919 Telephone: (719) 555-0278
Email: ntrevorrow@vanguardphotonics.com
SECTION II — INFORMATION REGARDING THE FOREIGN PERSON (ACQUIROR)
2.1 Identity of the Foreign Person
The "foreign person" in this Transaction is Halcyon Semiconductor Aktiengesellschaft ("HSAG"), a publicly traded semiconductor company organized as an Aktiengesellschaft (public stock corporation) under the laws of the Federal Republic of Germany. The relevant identifying information for HSAG is set forth below:
•  Full Legal Name: Halcyon Semiconductor Aktiengesellschaft
•  Entity Type: Aktiengesellschaft (AG) — a public stock corporation organized under the Aktiengesetz (German Stock Corporation Act) of the Federal Republic of Germany
•  Jurisdiction of Organization: Federal Republic of Germany
•  German Commercial Register: HRB 28416, registered with the Amtsgericht (Local Court) Dresden
•  Legal Entity Identifier (LEI): 5299007KXQ2M4GHILZ38
•  Headquarters Address: Industriestraße 44, 01099 Dresden, Saxony, Germany
•  Stock Exchange Listing: Listed on the Frankfurt Stock Exchange under the ticker symbol XETRA: HLC
•  Market Capitalization: Approximately €14,800,000,000 as of June 1, 2023
HSAG is one of Europe's leading semiconductor manufacturers, with a global presence spanning design, manufacturing, and distribution operations across multiple continents. HSAG's shares are widely held by institutional and retail investors, and the company is subject to comprehensive regulatory oversight by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin") and the Frankfurt Stock Exchange.
2.2 Principal Business Activities of HSAG
HSAG is a global semiconductor company specializing in the design, manufacture, and sale of power semiconductors, automotive semiconductor solutions, and industrial control integrated circuits ("ICs"). Founded in 1993 following the reunification of Germany, HSAG has grown to become one of the top ten European semiconductor companies by revenue.
The following summarizes HSAG's key financial and operational metrics for the fiscal year ended December 31, 2022 ("FY2022"):
•  Revenue (FY2022): €6,120,000,000
•  EBITDA (FY2022): €1,370,000,000
•  Net Income (FY2022): €843,000,000
•  Total Employees: Approximately 28,000 globally [C&H Note: headcount to be confirmed with client; FY2022 annual report states 27,814 — Priya to follow up with Stefan Lohse]
•  Manufacturing Facilities: Eight wafer fabrication plants located in Germany (3), Austria (1), Portugal (1), Malaysia (1), Singapore (1), and China (1)
•  Design Centers: Twelve design centers across Europe, Asia, and the United States
HSAG's primary end markets include:
(a) Automotive: Power semiconductors for electric vehicle ("EV") powertrains, advanced driver-assistance systems ("ADAS"), and in-vehicle networking. Automotive accounted for approximately 42% of FY2022 revenue.
(b) Industrial: Industrial control ICs, power modules for renewable energy inverters, and motor drive systems. Industrial accounted for approximately 28% of FY2022 revenue.
(c) Consumer Electronics: Power management ICs and audio amplifiers for smartphones, tablets, and home appliances. Consumer electronics accounted for approximately 18% of FY2022 revenue.
(d) Telecommunications: RF power transistors and base station components for wireless infrastructure. Telecommunications accounted for approximately 12% of FY2022 revenue.
It is important to note for purposes of this Notice that HSAG does not currently engage in defense-related semiconductor manufacturing, does not hold any facility security clearances in any jurisdiction, and does not maintain any contracts with military or intelligence agencies of any nation. HSAG's interest in VPI is driven by commercial considerations relating to the expansion of its GaN technology capabilities and its entry into the high-growth GaN power semiconductor market, as described further in Section VIII of this Notice.
2.3 Ownership Structure of HSAG
HSAG is a publicly traded company listed on the Frankfurt Stock Exchange. Based on the most recent Stimmrechtsmitteilungen (voting rights notifications) filed with BaFin and reviewed by HSAG's legal department, no single shareholder holds more than 5% of HSAG's outstanding ordinary shares. [C&H Note: This requires confirmation from the client. Kenneth Morales to request the most recent shareholder register extract and BaFin Stimmrechtsmitteilungen from Stefan Lohse. If any shareholder exceeds 5%, we will need to provide detailed identity information pursuant to 31 C.F.R. § 800.501(c)(3).]
The following ownership-related representations are made based on HSAG's current knowledge and reasonable inquiry:
•  No Foreign Government Ownership or Control: No government of any foreign country, including the Federal Republic of Germany or any German state (Land), holds any ownership interest in, or exercises any control over, HSAG. HSAG is not a state-owned enterprise, and no government entity has the right to appoint members of HSAG's management or supervisory boards.
•  No Ownership by Entities from Countries of Special Concern: To HSAG's knowledge, no entity or individual from the People's Republic of China, the Russian Federation, the Islamic Republic of Iran, or the Democratic People's Republic of North Korea holds a material ownership interest in HSAG. HSAG's shares are traded on a public exchange, and individual retail holdings below applicable disclosure thresholds cannot be fully verified; however, HSAG is not aware of any concentrated holdings by persons or entities from countries of special concern.
•  No German Federal or State Government Ownership Stake: Neither the Federal Republic of Germany nor any German state (Land) holds any ownership interest in HSAG, whether directly or through any government-controlled investment vehicle.
The composition of HSAG's Board of Directors (Aufsichtsrat) and Management Board (Vorstand) is described in Section 2.4 below, and a complete listing of all members with biographical details is provided in Exhibit C.
2.4 Officers and Directors of HSAG
Management Board (Vorstand):
The members of HSAG's Management Board (Vorstand) are as follows:
Dr. Maximilian Ehrhardt — Chief Executive Officer (Vorstandsvorsitzender) Age: 57. German citizen. Dr. Ehrhardt holds a doctorate in materials physics from the Technical University of Dresden and an MBA from INSEAD. He has served as CEO of HSAG since 2012 and has been employed by the company for 18 years, having previously served as Chief Technology Officer. Dr. Ehrhardt does not hold and has never held a U.S. government security clearance.
Katarina Brückner — Chief Financial Officer (Finanzvorstand) Age: 49. German citizen. Ms. Brückner holds a degree in business administration (Betriebswirtschaftslehre) from the University of Mannheim and is a certified German tax advisor (Steuerberater). She has served as CFO of HSAG since 2018, having previously held senior finance positions at Calderon Savings Bank and Sundial Holdings. Ms. Brückner does not hold and has never held a U.S. government security clearance.
Stefan Lohse — General Counsel (Chefjustitiar) Age: 44. Dual German and U.S. citizen. Mr. Lohse holds a law degree (Erstes Staatsexamen) from Humboldt University of Berlin and an LL.M. from Georgetown University Law Center. He is admitted to the practice of law in both New York and Germany (Rechtsanwalt). Mr. Lohse has served as General Counsel of HSAG since 2019 and previously practiced corporate and M&A law at Hale & Buchanan LLP in Frankfurt. Mr. Lohse does not hold and has never held a U.S. government security clearance.
[C&H Note: Additional Vorstand members to be confirmed. The 2022 annual report lists two additional Vorstand members (CTO and COO). Peggy Ashworth to obtain full bios from Stefan Lohse.]
Supervisory Board (Aufsichtsrat):
The full composition of HSAG's Supervisory Board (Aufsichtsrat) is set forth in Exhibit C. The Aufsichtsrat consists of twelve members, six of whom are elected by shareholders and six of whom are elected by employees in accordance with the German Codetermination Act (Mitbestimmungsgesetz). The Chairman of the Aufsichtsrat is [to be confirmed]. [C&H Note: Full Aufsichtsrat member list, including nationalities, biographies, and affiliations, must be obtained from client and included in Exhibit C.]
2.5 HSAG's Existing U.S. Operations
HSAG currently maintains one U.S. subsidiary:
Halcyon US Inc.
•  Address: 11501 Alterra Parkway, Suite 300, Austin, TX 78758
•  Entity Type: Delaware C-corporation
•  EIN: 81-3056429
•  Date of Incorporation: August 12, 2016
•  Employees: Approximately 320
•  Principal Activities: Fabless semiconductor design center focused on consumer and automotive semiconductor applications, including power management ICs for smartphones and ADAS sensor interface chips for automotive OEMs
•  Government Contracts: None
•  Classified Work: None
•  Facility Security Clearance: None
•  ITAR/EAR-Controlled Products: None. All products designed by Halcyon US Inc. are classified as EAR99 (not subject to any specific export control classification)
Halcyon US Inc. operates independently from VPI and is engaged in wholly different product lines and end markets. The Parties do not contemplate any integration, merger, or operational consolidation of Halcyon US Inc. and VPI following the closing of the Transaction. The two entities will continue to operate as separate legal entities with separate management teams, separate IT systems and infrastructure, separate facilities, and separate customer relationships.
2.6 Acquisition Vehicle
The Transaction will be effected through a newly formed acquisition vehicle:
Halcyon US Holdings Inc.
•  Entity Type: Delaware C-corporation
•  Date of Incorporation: June 5, 2023
•  EIN: 93-2841067
•  Registered Agent: National Registered Agents of Delaware, 160 Greentree Drive, Suite 101, Dover, DE 19904
•  Registered Address: 160 Greentree Drive, Suite 101, Dover, DE 19904
•  Purpose: Halcyon Holdings was formed for the sole purpose of serving as the acquisition vehicle for the purchase of 100% of the outstanding equity interests of VPI. It has no other operations, assets, employees, or business activities.
•  Ownership: 100% owned by HSAG
•  Sole Director: [C&H Note: To be confirmed — likely Stefan Lohse or Dr. Maximilian Ehrhardt. Omar Siddiqui to confirm with client.]
Upon consummation of the Transaction, VPI will become a direct, wholly owned subsidiary of Halcyon Holdings. Halcyon Holdings will serve as an intermediate holding company between HSAG (the ultimate parent) and VPI (the operating company). This structure is intended to facilitate the implementation of the proposed mitigation measures described in Section XI, including the establishment of a governance framework that separates HSAG's oversight of VPI's classified and export-controlled programs from its oversight of VPI's commercial operations.
2.7 HSAG's Non-U.S. Operations Relevant to the Transaction
HSAG maintains a global network of subsidiaries and operations spanning Europe, Asia, and the Americas. For purposes of this Notice, the Parties provide the following summary of HSAG's non-U.S. operations, with particular attention to operations in countries of special concern under the CFIUS framework.
Operations in Allied Nations:
HSAG maintains significant manufacturing, design, and sales operations in the following allied and partner nations:
•  Germany: Three wafer fabrication facilities (Dresden, Regensburg, and Hamburg); corporate headquarters in Dresden; approximately 14,000 employees in Germany
•  Austria: One wafer fabrication facility (Villach); approximately 3,200 employees
•  Portugal: One back-end assembly and testing facility (Porto); approximately 1,800 employees
•  Japan: Sales and application engineering office (Tokyo); approximately 150 employees
•  South Korea: Sales and application engineering office (Seoul); approximately 120 employees
•  Singapore: One wafer fabrication facility (Woodlands); approximately 2,400 employees
•  Malaysia: One back-end assembly and testing facility (Penang); approximately 2,800 employees
•  United Kingdom: Sales office (Reading); approximately 80 employees
•  France: Sales office (Paris); approximately 60 employees
•  Italy: Sales and design office (Milan); approximately 110 employees
Operations in the People's Republic of China:
HSAG maintains one subsidiary in the People's Republic of China:
Halcyon Semiconductor (Shanghai) Co., Ltd.
•  Address: Zhangjiang Hi-Tech Park, Pudong New District, Shanghai 201203, China
•  Entity Type: Wholly foreign-owned enterprise (WFOE) organized under the laws of the PRC
•  Revenue (FY2022): $81,400,000 (approximately 1.3% of HSAG's total consolidated revenue)
•  Employees: Approximately 280
•  Principal Activities: Design, testing, and sales of consumer-grade power management ICs for the Chinese domestic market, including power management ICs for smartphones and consumer electronics
•  GaN Activities: None. Halcyon Semiconductor (Shanghai) does not engage in any GaN semiconductor research, development, design, or manufacturing
•  Defense or Dual-Use Activities: None. All products designed and sold by the Shanghai subsidiary are consumer-grade power management ICs classified as EAR99 and not subject to ITAR controls
•  Relationship with PRC Government: The Shanghai subsidiary operates as a commercial enterprise and does not have any ownership relationships with, board representation by, or material contractual arrangements with the PRC government, the Chinese Communist Party, the People's Liberation Army, or any PRC military or intelligence entity. The subsidiary participates in standard commercial programs available to all semiconductor companies operating in China, including certain local tax incentives, but does not receive any preferential government treatment or strategic subsidies
Operations in Other Countries of Special Concern:
HSAG does not maintain any subsidiaries, offices, employees, manufacturing facilities, or material business operations in the Russian Federation, the Islamic Republic of Iran, or the Democratic People's Republic of North Korea. HSAG does not engage in any business activities with entities or individuals in these countries.
2.8 HSAG Relationships with Foreign Governments
HSAG has undertaken a comprehensive review of its relationships with foreign governments for purposes of this Notice. The results of that review are summarized as follows:
•  Government Research Grants: HSAG receives certain research and development grants from the European Union (under the Horizon Europe program and predecessor programs) and from the German federal government (through the Federal Ministry of Education and Research (BMBF)). These grants are provided on standard commercial and academic terms applicable to all qualifying semiconductor companies and research institutions, do not confer any ownership or control rights on any government entity, and do not impose any obligations that would be inconsistent with the proposed mitigation framework. [C&H Note: Specific grant amounts and program details to be confirmed with client. Priya Venkataraman to follow up.]
•  No Government Ownership, Board Seats, or Control: No foreign government holds any ownership interest in HSAG or exercises any form of control over HSAG's management, operations, or strategic direction. No government official or representative serves on HSAG's Management Board (Vorstand) or Supervisory Board (Aufsichtsrat).
•  No Contracts with Foreign Military or intelligence Agencies: HSAG does not hold any contracts with the military or intelligence agencies of any foreign government, including the Federal Republic of Germany. HSAG's products are commercial and industrial semiconductors sold to commercial customers and do not include defense or intelligence applications.
•  No Formal or Informal Ties to the People's Republic of China Government: Beyond the normal commercial operations of Halcyon Semiconductor (Shanghai) Co., Ltd. described in Section 2.7 above, HSAG has no formal or informal ties to the government of the People's Republic of China, the Chinese Communist Party, the People's Liberation Army, or any PRC military, intelligence, or state-security entity.
2.9 HSAG's Advisors
The following advisors are engaged by HSAG in connection with the Transaction:
•  Legal Counsel (U.S.): Calderwood & Harkness LLP, New York, NY and Washington, DC (Beatrice Holloway, Partner; Margaret "Peggy" Ashworth, Of Counsel; James Prentice, Associate)
•  Legal Counsel (Germany): Schilling Frey Rechtsanwälte, Berlin, Germany (Prof. Dr. Ulrich Schilling, Partner)
•  Financial Advisor: Ashgrove Capital Group, New York, NY (Philippe Beaumont, Managing Director)
•  Auditor: Leinberger & Hess Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, Germany (Dr. Markus Hess, Partner)
•  Transaction Tax Advisor: Pemberton Kline LLP, New York, NY (Richard Pemberton, Partner)
•  Lead Lender: Meridian National Bank, New York, NY (Thomas Nyström, Senior Vice President, Acquisition Finance Group)
SECTION III — INFORMATION REGARDING THE U.S. BUSINESS (TARGET)
3.1 Identity of the U.S. Business
The U.S. business that is the subject of the Transaction is Marlowe Asset Management Photonics Inc. ("VPI"), a Delaware C-corporation engaged in the design and manufacture of advanced gallium-nitride power amplifier semiconductors. The relevant identifying information for VPI is set forth below:
•  Full Legal Name: Marlowe Asset Management Photonics Inc.
•  Entity Type: C-corporation organized under the laws of the State of Delaware
•  Date of Incorporation: February 14, 2009
•  Employer Identification Number (EIN): 26-4371885
•  DUNS Number: 07-812-4493
•  CAGE Code: 7VK92
•  Headquarters Address: 7400 Ridgeline Parkway, Colorado Springs, CO 80919
•  Fabrication Facility Address: 9200 Innovation Boulevard, Albuquerque, NM 87113
VPI's headquarters in Colorado Springs houses the company's executive offices, commercial engineering teams, business development and sales functions, and unclassified research and development laboratories. VPI's fabrication facility in Albuquerque comprises a 45,000-square-foot GaN-on-SiC wafer fabrication plant, including clean room Sections C-7 through C-12, which are dedicated to classified work performed under VPI's Facility Security Clearance at the SECRET level.
3.2 Principal Business Activities of VPI
VPI is a leading U.S. designer and manufacturer of advanced gallium-nitride power amplifier chips and related semiconductor devices. Founded in 2009 by Dr. Nathan Trevorrow, a former program manager at the Defense Advanced Research Projects Agency ("DARPA"), VPI has established itself as a critical supplier to the U.S. defense industrial base and a pioneer in GaN-on-SiC semiconductor technology.
VPI's core technology and product capabilities include:
(a) GaN-on-SiC High-Electron-Mobility Transistor (HEMT) Devices: VPI designs and fabricates GaN-on-SiC HEMT devices optimized for high-power, high-frequency applications. These devices form the foundation for VPI's power amplifier and radar component product lines.
(b) mmWave Broadband Power Amplifiers: VPI produces millimeter-wave broadband power amplifiers for satellite communications ("SATCOM") applications, operating at frequencies up to 44 GHz. These amplifiers are used in both government and commercial satellite communication systems.
(c) Transmit/Receive (T/R) Modules: VPI designs and manufactures T/R modules for phased-array radar and electronic warfare systems. These modules integrate VPI's GaN HEMT devices with custom RF front-end circuitry to provide complete T/R solutions for next-generation radar platforms.
(d) Custom RF Front-End Modules for Government Programs: VPI designs and delivers custom RF front-end modules to meet specific requirements of classified and unclassified government programs, including programs managed by U.S. Army PEO IEW&S, the U.S. Air Force Research Laboratory ("AFRL"), and the Missile Defense Agency ("MDA").
(e) 5G Infrastructure Components: VPI leverages its GaN HEMT technology platform to produce power amplifiers for commercial 5G base station and wireless infrastructure applications.
VPI's key financial and operational metrics for FY2022 are as follows:
•  Revenue (FY2022): $287,400,000
•  EBITDA (FY2022): $61,200,000
•  Total Employees: 486 (as of June 1, 2023)
•  Cleared Employees: 212 (43.6% of total workforce) holding active U.S. government security clearances
•  Active DoD Contracts: 14 (prime and subcontract)
•  Aggregate Contract Backlog: $193,000,000
•  Implied EV/Revenue Multiple (Transaction): Approximately 4.94x
•  Implied EV/EBITDA Multiple (Transaction): Approximately 23.2x
The premium transaction multiples reflect VPI's strategic importance to the U.S. defense industrial base, its proprietary GaN-on-SiC technology platform, and the high barriers to entry in the GaN semiconductor market.
3.3 Officers and Directors of VPI
The current officers and directors of VPI are as follows:
Officers:
Dr. Nathan Trevorrow — Founder, Chief Executive Officer, and Chairman of the Board Age: 52. U.S. citizen. Dr. Trevorrow holds a Ph.D. in Electrical Engineering from Stanford University and a B.S. in Physics from the U.S. Air Force Academy. Prior to founding VPI in 2009, Dr. Trevorrow served as a program manager at the Defense Advanced Research Projects Agency (DARPA), where he managed the Wide Bandgap Semiconductor Technology Initiative. Dr. Trevorrow holds an active TS/SCI security clearance.
Marissa Sung-Avila — President and Chief Operating Officer Age: 46. U.S. citizen. Ms. Sung-Avila holds an M.S. in Electrical Engineering from the Massachusetts Institute of Technology and a B.S. in Electrical Engineering from the University of Virginia. Prior to joining VPI as a co-founder in 2009, she served as an officer in the U.S. Army signal corps, attaining the rank of Captain. Ms. Sung-Avila holds an active SECRET security clearance.
Derek Wainsborough, CPA — Chief Financial Officer Age: 44. U.S. citizen. Mr. Wainsborough holds a B.B.A. in Accounting from the University of Texas at Austin and is a Certified Public Accountant licensed in Colorado. He joined VPI in 2016 after serving as CFO of a publicly traded defense electronics company. Mr. Wainsborough does not hold a U.S. government security clearance.
Col. (Ret.) Bryce Hendrickson, USAF — Vice President, Government Programs and Facility Security Officer U.S. citizen. Col. Hendrickson retired from the U.S. Air Force after 26 years of service, during which he served in senior acquisition and program management positions, including assignments with Air Force Materiel Command and the Air Force Life Cycle Management Center. Col. Hendrickson holds an active TS/SCI security clearance and serves as VPI's designated Facility Security Officer ("FSO") under the NISPOM.
Board of Directors:
•  Dr. Nathan Trevorrow — Chairman (see biography above)
•  Marissa Sung-Avila — Director (see biography above)
•  Franklin Yee — Director (designee of Ridgecrest Ventures Fund III, L.P.). Mr. Yee is the Managing Partner of Ridgecrest Ventures Management LLC, the general partner of Ridgecrest Ventures Fund III, L.P. He is a U.S. citizen and does not hold a U.S. government security clearance.
•  Olivia Hartmann — Director (designee of Cascadian Capital Partners Growth Fund II, L.P.). Ms. Hartmann is the Managing Director of Cascadian Capital Partners Management LLC, the general partner of Cascadian Capital Partners Growth Fund II, L.P. She is a U.S. citizen and does not hold a U.S. government security clearance.
•  Adrienne Delacroix — Independent Director. Ms. Delacroix is a former senior executive of a major defense prime contractor and serves on the boards of several defense and technology companies. She is a U.S. citizen and holds an active SECRET security clearance.
3.4 Ownership Structure of VPI (Pre-Transaction)
As of the date of this Notice, the ownership structure of VPI is as follows:
The following provides additional detail regarding VPI's institutional investors:
Ridgecrest Ventures Fund III, L.P. — A Delaware limited partnership. General Partner: Ridgecrest Ventures Management LLC. Principal: Franklin Yee, Managing Partner. Address: 3300 Sand Hill Road, Suite 220, Menlo Park, CA 94025. Ridgecrest Ventures is a U.S.-based venture capital firm focused on defense technology, cybersecurity, and advanced manufacturing investments. All limited partners of Ridgecrest Ventures Fund III, L.P. are U.S. persons.
Cascadian Capital Partners Growth Fund II, L.P. — A Delaware limited partnership. General Partner: Cascadian Capital Partners Management LLC. Principal: Olivia Hartmann, Managing Director. Address: 1201 Third Avenue, Suite 4400, Seattle, WA 98101. Cascadian Capital Partners is a U.S.-based growth equity firm investing in technology-enabled businesses across the defense, aerospace, and infrastructure sectors. All limited partners of Cascadian Capital Partners Growth Fund II, L.P. are U.S. persons.
All shareholders of VPI are U.S. persons. There is no foreign ownership of VPI prior to the proposed Transaction. The Transaction will result in 100% foreign ownership of VPI by HSAG (through Halcyon Holdings), which is the basis for the covered control transaction analysis and the FOCI assessment described in Section IX of this Notice.
3.5 VPI's Advisors
The following advisors are engaged by VPI and/or the Sellers in connection with the Transaction:
•  Legal Counsel: Wethersfield & Gale LLP, Washington, DC (Harrison Whitfield, Partner; Sandra Niehaus, Partner; Tobias Kwan, Associate)
•  Financial Advisor: Ridgeway Bancorp LLC, San Francisco, CA (Catherine Okafor, Managing Director)
•  Auditor: Arbor & Greenfield LLP, Denver, CO (Joan Greenfield, Partner)
SECTION IV — PRODUCTS AND SERVICES OF THE U.S. BUSINESS
4.1 Product Lines Overview
VPI's product portfolio encompasses five principal product lines, each of which leverages the company's proprietary GaN-on-SiC semiconductor technology platform:
(a) GaN-on-SiC Power Amplifier Chips for Defense Radar Applications. VPI designs and manufactures high-power, high-frequency GaN-on-SiC power amplifier chips optimized for defense radar systems. These chips are used as critical components in the AN/TPS-80 Ground/Air Task Oriented Radar (G/ATOR) program and in T/R modules for missile defense radar arrays. VPI's radar-grade GaN power amplifiers operate at frequencies ranging from S-band (2–4 GHz) through X-band (8–12 GHz) and deliver output power levels of up to 100 watts per chip in pulsed-mode operation. These products are designed to meet stringent military reliability standards, including MIL-STD-883 and MIL-PRF-38534.
(b) mmWave Broadband Power Amplifiers for Satellite Communications. VPI produces broadband power amplifiers operating at millimeter-wave frequencies (26.5–44 GHz) for satellite communications applications. These amplifiers are used in both government and commercial SATCOM terminals and are designed for high-linearity operation to support advanced modulation formats used in next-generation satellite communication links. Applications include military SATCOM systems, commercial broadband satellite constellations, and ground-based gateway amplifiers.
(c) GaN HEMT Devices for 5G Base Station and Infrastructure Applications. VPI manufactures GaN HEMT power transistors optimized for 5G wireless infrastructure, including sub-6 GHz and mmWave base station applications. These devices provide high power density and high efficiency, enabling 5G base station manufacturers to achieve increased coverage and capacity while reducing power consumption and thermal management requirements. VPI's 5G products are sold to commercial telecommunications equipment manufacturers and are designed to comply with 3GPP New Radio (NR) standards.
(d) Transmit/Receive (T/R) Modules for Phased-Array Radar and Electronic Warfare Systems. VPI designs and manufactures integrated T/R modules that combine GaN HEMT power amplifiers, low-noise amplifiers, phase shifters, and control circuitry in a compact, hermetically sealed package. These modules are designed for active electronically scanned array ("AESA") radar systems and electronic warfare platforms. T/R modules are among VPI's most technologically advanced and strategically significant products, as they enable next-generation radar capabilities including simultaneous multi-function operation, rapid beam steering, and low probability of intercept.
(e) Custom RF Front-End Modules for Government Programs. VPI designs and delivers custom RF front-end modules to meet the specific requirements of classified and unclassified government programs. These modules are typically developed under cost-plus or time-and-materials contracts and are tailored to the unique performance specifications of individual defense platforms. Custom modules may incorporate proprietary VPI GaN HEMT devices along with commercially available passive components and control electronics.
4.2 Classified Products and Programs
VPI produces components for multiple classified defense programs under contracts with the U.S. Department of Defense. Classified work is performed exclusively at VPI's fabrication facility in Albuquerque, New Mexico (9200 Innovation Boulevard, Albuquerque, NM 87113), within dedicated clean room Sections C-7 through C-12. These sections of the facility are subject to physical security controls, access restrictions, and information handling procedures in accordance with the NISPOM and VPI's Facility Security Clearance at the SECRET level.
VPI's classified programs include contracts and subcontracts with the following DoD organizations:
•  U.S. Army Program Executive Office for intelligence, Electronic Warfare & Sensors ("PEO IEW&S")
•  U.S. Air Force Research Laboratory ("AFRL")
•  Missile Defense Agency ("MDA")
•  U.S. Navy Naval Sea Systems Command ("NAVSEA"), via subcontract to Ironclad Defense Systems Inc.
The specific details of VPI's classified programs, including program names, contract numbers, performance specifications, and classification levels, are sensitive in nature. Certain program details can be described at the unclassified level in this Notice and in the summary of government contracts provided in Section V and Exhibit F. To the extent that additional classified information is required for the Committee's review, the Parties are prepared to provide a classified annex or supplement to this Notice at the appropriate classification level, or to make classified information available through secure channels as directed by the Committee's staff. [C&H Note: Determine whether a classified supplement is required for certain program details, or whether unclassified descriptions suffice for the initial notice. Discuss with Lt. Col. (Ret.) Caruso and coordinate with Harrison Whitfield at Wethersfield & Gale. Review prior CFIUS filings for precedent on handling classified program details.]
4.3 Products Subject to U.S. Government Export Controls
VPI designs and manufactures products that are subject to U.S. government export controls under both the International Traffic in Arms Regulations ("ITAR") and the Export Administration Regulations ("EAR"). The export control classification of VPI's products is a significant factor in the CFIUS analysis and underpins the mandatory filing obligation under 31 C.F.R. § 800.401.
ITAR-Controlled Defense Articles:
VPI's military-grade GaN power amplifiers and T/R modules designed or modified for defense applications are classified as defense articles under Category XI(a)(3) of the United States Munitions List ("USML"), which covers electronic equipment specifically designed or modified for military applications, including radar components and electronic warfare equipment.
VPI has been registered with the Directorate of Defense Trade Controls ("DDTC") of the U.S. Department of State since 2011. VPI's DDTC Registration Number is M-24817. VPI's registration has been maintained continuously without lapse and is currently in good standing.
VPI holds three (3) active DSP-5 export licenses authorizing the export of defense articles to NATO allies. These licenses cover deliveries of specific GaN power amplifier products and T/R module subassemblies to end-users in the United Kingdom and Australia. [C&H Note: Specific license numbers, expiration dates, and authorized end-users to be provided by VPI/Wethersfield & Gale. Christy Bauer to coordinate with Tobias Kwan.]
EAR-Controlled Dual-Use Items:
In addition to its ITAR-controlled defense articles, VPI produces items subject to the Export Administration Regulations at the following Export Control Classification Numbers ("ECCNs"):
•  ECCN 3A001: Electronic components designed or rated for operation at ambient temperatures above 398 K (125°C) or with military or space applications, including monolithic microwave integrated circuits ("MMICs"), microwave transistors, and discrete semiconductor devices. VPI's GaN HEMT devices and certain mmWave power amplifier products fall within this classification.
•  ECCN 3A991: Electronic devices and components not controlled by 3A001 but nonetheless subject to export licensing requirements for certain destinations. Certain of VPI's commercial-grade 5G infrastructure components may fall within this classification.
•  ECCN 3E001: Technology for the development or production of items controlled under ECCN 3A001. VPI's proprietary design data, manufacturing process specifications, and technical data packages for GaN-on-SiC HEMT fabrication constitute controlled technology under this ECCN.
A detailed product-by-product listing of VPI's export-controlled products, including specific model numbers, USML categories, ECCN designations, product descriptions, and applicable license requirements, is provided in Exhibit E.
4.4 Critical Technology Designation
VPI's products qualify as "critical technologies" within the meaning of 31 C.F.R. § 800.215 because they include:
(a) Defense articles and defense services included on the USML set forth in the ITAR (22 C.F.R. Parts 120–130) — specifically, military-grade GaN power amplifiers and T/R modules classified under USML Category XI(a)(3); and
(b) Items included on the Commerce Control List set forth in Supplement No. 1 to Part 774 of the EAR (15 C.F.R. Parts 730–774) that are controlled pursuant to multilateral regimes and for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology — specifically, GaN HEMT devices and related technology classified at ECCN 3A001 and ECCN 3E001.
This critical technology designation is the basis upon which VPI qualifies as a "TID U.S. business" under 31 C.F.R. § 800.248, and it triggers the mandatory filing obligation under 31 C.F.R. § 800.401 for transactions involving the acquisition of a TID U.S. business by a foreign person where the foreign acquiror would require a U.S. regulatory authorization (e.g., an export license) to receive the critical technology. As described in Section 10.2, HSAG, as a German entity, would require ITAR and EAR licenses for deemed exports of VPI's controlled technology to German nationals, confirming the applicability of the mandatory filing requirement.
4.5 Customer Base
VPI's revenue is derived from the following customer segments (based on FY2022 revenue):
[C&H Note: Exact revenue percentages by customer segment to be confirmed with VPI/Wethersfield & Gale. The ranges provided are based on preliminary data from the VPI CIM received during due diligence.]
VPI's heavy reliance on U.S. government and defense-related revenue underscores the strategic importance of the proposed mitigation framework to ensure continuity of VPI's government programs and to protect classified information and controlled technology.
SECTION V — GOVERNMENT CONTRACTS
5.1 Overview
VPI is a significant participant in the U.S. defense industrial base, holding fourteen (14) active contracts with the U.S. Department of Defense, both as a prime contractor and as a subcontractor to prime defense contractors. VPI's aggregate contract backlog as of June 1, 2023 is $193,000,000.
VPI's government contract portfolio spans multiple DoD agencies and programs, including ground-based radar systems, satellite communications, missile defense, naval radar, and border surveillance. VPI's contracts include both classified and unclassified work, and the company employs a substantial workforce of cleared personnel to perform classified obligations under these contracts.
The following subsections provide a summary of VPI's active government contracts, facility security clearance, personnel security clearances, and compliance history. A complete listing of all active government contracts with detailed terms and conditions is provided in Exhibit F.
5.2 Summary of Active Government Contracts
The following table summarizes VPI's five largest active government contracts by remaining backlog:
Total top-five contract backlog: $193,000,000.
VPI holds an additional nine (9) active contracts with various DoD agencies and prime contractors, with contract values and remaining backlogs that, in the aggregate, make up the balance of VPI's total backlog. [C&H Note: The top-five contracts account for the full $193M aggregate backlog as stated. Need to confirm with VPI whether there are additional smaller contracts that would increase the total, or whether the $193M figure is limited to these five. Also need to obtain complete contract listings with contract numbers, contracting officers, and performance periods from VPI/Wethersfield & Gale for inclusion in Exhibit F. Christy Bauer to coordinate.]
A complete contract listing with contract numbers, contracting officers, performance periods, contract types (FFP, CPFF, T&M, etc.), funding status, and associated security requirements is provided in Exhibit F.
5.3 Facility Security Clearance
VPI maintains a Facility Security Clearance ("FCL") at the SECRET level, which authorizes VPI to access, store, and process classified national security information up to and including the SECRET level at its Albuquerque, New Mexico fabrication facility. The relevant details of VPI's FCL are as follows:
•  Facility: 9200 Innovation Boulevard, Albuquerque, NM 87113
•  CAGE Code: 7VK92
•  FCL Level: SECRET
•  Facility Security Officer: Col. (Ret.) Bryce Hendrickson, USAF (TS/SCI)
•  Issuing/Monitoring Agency: Defense Counterintelligence and Security Agency ("DCSA")
VPI's FCL is essential to the performance of its classified government contracts and must be maintained without interruption throughout and following the Transaction. The change in ownership resulting from the Transaction will introduce Foreign Ownership, Control, or Influence ("FOCI") over VPI, which must be mitigated to DCSA's satisfaction for VPI's FCL to remain in effect. The proposed FOCI mitigation measures are described in Section IX and Section XI of this Notice and are designed to satisfy DCSA requirements and preserve VPI's ability to perform classified work.
The Parties intend to coordinate directly with DCSA regarding the FCL transition process, including the submission of a revised SF 328 (Certificate Pertaining to Foreign Interests) and the establishment of appropriate FOCI mitigation instruments. The Parties anticipate that DCSA will participate in or be consulted by the Committee regarding the FOCI mitigation framework.
5.4 Personnel Security Clearances
VPI employs 212 personnel holding active U.S. government security clearances, representing approximately 43.6% of VPI's total workforce of 486 employees. These cleared personnel are essential to VPI's performance of classified government contracts and its maintenance of the FCL at the Albuquerque facility.
The distribution of cleared personnel by clearance level is summarized below:
[C&H Note: Breakdown by clearance level to be obtained from VPI/Wethersfield & Gale. Col. Hendrickson's office should be able to provide this from VPI's personnel security records.]
The following key personnel of VPI hold active U.S. government security clearances:
•  Dr. Nathan Trevorrow, CEO — TS/SCI
•  Col. (Ret.) Bryce Hendrickson, VP Government Programs / FSO — TS/SCI
•  Marissa Sung-Avila, President & COO — SECRET
•  Adrienne Delacroix, Independent Director — SECRET
None of HSAG's personnel (including Dr. Maximilian Ehrhardt, Katarina Brückner, and Stefan Lohse) hold or are eligible for U.S. government security clearances. The proposed mitigation framework described in Section XI is designed to ensure that HSAG personnel do not have access to classified information or classified facilities, and that all personnel security decisions for VPI employees remain under the authority of VPI's Government Security Committee.
An anonymized summary table of cleared employees by clearance level, program affiliation (to the extent unclassified descriptions are permissible), and geographic distribution is provided in Exhibit G.
5.5 Government Contract Compliance History
VPI has maintained an excellent record of compliance with its government contract obligations since the company's inception. The following summarizes VPI's compliance history:
•  Contract Disputes: VPI has no history of material contract disputes, claims under the Contract Disputes Act (41 U.S.C. §§ 7101–7109), or adverse contracting officer final decisions.
•  Suspensions and Debarments: VPI has never been suspended or debarred from government contracting under FAR Subpart 9.4.
•  DCSA Compliance Inspections: VPI has been subject to regular compliance inspections by DCSA (and its predecessor, the Defense Security Service). VPI has received satisfactory ratings on all DCSA inspections and has not been cited for any material security violations. VPI has promptly addressed all minor observations and recommendations from DCSA inspectors through its corrective action program.
•  Contract Performance: VPI has met or exceeded performance requirements on all government contracts, with no history of termination for default, cure notices, or show cause letters.
•  Government Audit History: VPI's incurred cost submissions and indirect rate structures have been reviewed by the Defense Contract Audit Agency ("DCAA"). VPI has no unresolved audit findings or pending DCAA disputes.
SECTION VI — INTELLECTUAL PROPERTY
6.1 Patent Portfolio
VPI maintains a substantial patent portfolio that protects its proprietary GaN-on-SiC semiconductor technology. As of the date of this Notice, VPI holds forty-seven (47) granted U.S. patents and twelve (12) pending U.S. patent applications. VPI's patent portfolio is organized into three principal patent families:
(a) GaN-on-SiC Epitaxial Growth Process: U.S. Patent Nos. 9,XXX,001 through 9,XXX,008 (eight patents). Earliest priority date: 2012. These patents cover VPI's proprietary metal-organic chemical vapor deposition ("MOCVD") epitaxial growth process for GaN-on-SiC wafers, including innovations in buffer layer engineering, dislocation density reduction, and uniformity control across 150mm SiC substrates. This epitaxial growth technology is the foundation of VPI's manufacturing process and provides significant performance advantages in terms of device reliability, power density, and yield.
(b) HEMT Gate Structure Optimization: U.S. Patent Nos. 10,XXX,101 through 10,XXX,119 (nineteen patents). Earliest priority date: 2015. These patents cover VPI's proprietary gate structure designs for GaN HEMT devices, including innovations in field plate geometries, gate recess profiles, and passivation techniques that optimize device breakdown voltage, gain flatness, and thermal performance. These gate structure innovations enable VPI's devices to achieve industry-leading power-added efficiency ("PAE") and reliability at high operating temperatures.
(c) mmWave Broadband Matching Network: U.S. Patent Nos. 11,XXX,201 through 11,XXX,220 (twenty patents). Earliest priority date: 2018. These patents cover VPI's proprietary broadband impedance matching network designs for millimeter-wave power amplifiers, including novel distributed matching topologies and on-chip transformer balun structures that achieve broad bandwidth operation (26.5–44 GHz) with minimal insertion loss. These matching network innovations are key enablers of VPI's SATCOM and 5G mmWave product lines.
VPI actively manages and prosecutes its patent portfolio through its intellectual property counsel and regularly evaluates opportunities for additional patent filings to protect new innovations arising from both internally funded and government-funded research and development activities.
6.2 Government-Funded intellectual Property
Twenty-three (23) of VPI's forty-seven (47) granted U.S. patents were developed, in whole or in part, under U.S. government-funded contracts. These government-funded patents are subject to the following government rights and obligations:
(a) Government License Rights: Pursuant to 35 U.S.C. § 202 (the Bayh-Dole Act) and the applicable contract clauses (DFARS 252.227-7038 and FAR 52.227-11), the U.S. government retains a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced each government-funded invention on behalf of the United States throughout the world.
(b) March-In Rights: The U.S. government retains march-in authority under 35 U.S.C. § 203, which permits the government to require VPI (or its successors or assignees) to grant licenses to responsible applicants in certain circumstances, including when the contractor has not taken effective steps to achieve practical application of the invention or when action is necessary to alleviate health or safety needs or to meet requirements for public use specified by federal regulations.
(c) Domestic Manufacturing Preference: Under DFARS 252.227-7038, VPI is required to manufacture substantially in the United States any inventions made under DoD-funded contracts.
(d) Invention Disclosure and Reporting: VPI has complied with its obligations to disclose, elect title to, and report government-funded inventions through the Interagency Edison (iEdison) reporting system. All iEdison reporting obligations for government-funded inventions are current as of the date of this Notice.
The existence of government license rights, march-in authority, and domestic manufacturing preferences in VPI's patent portfolio is a relevant consideration for the CFIUS analysis, as these government rights provide the U.S. government with certain protections that will survive the change of ownership.
6.3 Trade Secrets
In addition to its patent portfolio, VPI maintains a portfolio of thirty-one (31) registered internal trade secrets under its formal trade secret management program. VPI's trade secrets relate primarily to the following areas:
(a) Proprietary GaN epitaxial growth recipes, including specific MOCVD precursor chemistries, growth temperatures, pressures, and gas flow rates;
(b) Die-level reliability screening processes, including proprietary burn-in protocols and parametric testing procedures that enable VPI to achieve exceptionally high reliability in its military-grade products;
(c) Manufacturing process control parameters for critical fabrication steps, including lithographic alignment specifications, plasma etch recipes, and metallization deposition conditions; and
(d) Design libraries and simulation models for GaN HEMT devices and matching networks, including proprietary large-signal transistor models calibrated to VPI's specific fabrication process.
VPI's trade secrets are managed under a comprehensive formal program that includes physical access controls, need-to-know protocols, electronic data classification and access management systems, employee confidentiality and non-disclosure agreements, and exit interview procedures for departing employees. Trade secrets are classified internally by sensitivity level and are subject to periodic review by VPI's intellectual property committee.
6.4 Technology Transfer Considerations
VPI's technical data and intellectual property include substantial quantities of ITAR-controlled defense information and EAR-controlled technology. The transfer of such data to non-U.S. persons — including HSAG personnel who are foreign nationals — would constitute a "deemed export" under both the ITAR (22 C.F.R. § 120.56) and the EAR (15 C.F.R. § 734.13), and would require prior authorization from the relevant U.S. government authority.
Specifically:
(a) ITAR-Controlled Technical Data: Transfer of USML Category XI(a)(3) technical data to HSAG's German national employees would require a State Department-approved license (DSP-5) or Technical Assistance Agreement ("TAA") from DDTC.
(b) EAR-Controlled Technology: Transfer of ECCN 3A001/3E001 technology to HSAG's German national employees would require a Bure