joint-voluntary-notice-filed.docx

1032-00004 · Client 1032 · Joint Voluntary Notice

joint-voluntary-notice-filed.docx DOCUMENT M&A / Corporate

40 / 79 ← → ✕

JOINT VOLUNTARY NOTICE

PURSUANT TO SECTION 721 OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, AND 31 C.F.R. PART 800

Filed with:

Committee on Foreign Investment in the United States U.S. Department of the Treasury Office of Investment Security 1500 Pennsylvania Avenue NW Washington, DC 20220

Date of Filing: July 14, 2023

CFIUS Case No.: CFIUS-023-07-3841 (assigned upon acceptance)

Filed on behalf of:

Halcyon Semiconductor Aktiengesellschaft ("HSAG" or the "Buyer"), a publicly traded Aktiengesellschaft organized under the laws of Germany (Saxony), with its registered seat at Industriestraße 44, 01099 Dresden, Saxony, Germany; and its wholly owned indirect subsidiary Halcyon US Holdings Inc., a Delaware corporation formed on June 5, 2023

— and —

Marlowe Asset Management Photonics Inc. ("VPI" or the "U.S. Business"), a Delaware corporation with its principal place of business at 7400 Ridgeline Parkway, Colorado Springs, CO 80919

(HSAG, Halcyon US Holdings Inc., and VPI are referred to collectively as the "Parties")

Counsel for the Buyer:

Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006

Margaret "Peggy" Ashworth, Of Counsel — National Security & CFIUS Practice Beatrice Holloway, Partner — Mergers & Acquisitions Telephone: (202) 555-7400

Counsel for the U.S. Business / Sellers:

Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006

Harrison Whitfield, Partner — Government Contracts & National Security Sandra Niehaus, Partner — Mergers & Acquisitions Telephone: (202) 555-3100

CONFIDENTIALITY LEGEND: This Joint Voluntary Notice, including all exhibits and attachments hereto, contains business proprietary information of the Parties and information subject to the confidentiality protections of Section 721(c) of the Defense Production Act of 1950, as amended (50 U.S.C. § 4565(c)), and the implementing regulations at 31 C.F.R. § 800.702. This notice is submitted solely for the use of the Committee on Foreign Investment in the United States and its member agencies in connection with their review of the transaction described herein. Unauthorized disclosure, reproduction, or distribution of this notice or any portion thereof is strictly prohibited by law.

PART I — INTRODUCTION AND EXECUTIVE SUMMARY

1.1 Purpose of Filing

This Joint Voluntary Notice (this "Notice") is submitted by Halcyon Semiconductor Aktiengesellschaft ("HSAG" or the "Buyer"), through its wholly owned indirect subsidiary Halcyon US Holdings Inc. (the "Acquisition Vehicle"), and Marlowe Asset Management Photonics Inc. ("VPI" or the "U.S. Business") (collectively, the "Parties") 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) (the "DPA"), and the implementing regulations set forth at 31 C.F.R. Part 800 (the "Regulations").

The Parties are filing this Notice voluntarily to seek review of the proposed acquisition by Halcyon US Holdings Inc. of 100% of the outstanding equity of VPI (the "Transaction"), as described more fully in Part IV below. The Parties acknowledge that the Transaction involves a "TID U.S. business" within the meaning of 31 C.F.R. § 800.248, and that a mandatory declaration obligation exists under 31 C.F.R. § 800.401(c)(1) with respect to critical technologies produced, designed, tested, manufactured, fabricated, or developed by VPI. The Parties have elected to submit this full voluntary joint notice under 31 C.F.R. § 800.501 in lieu of filing a short-form declaration under 31 C.F.R. § 800.403, as the Parties believe the complexity of the Transaction, the scope of VPI's classified programs, and the breadth of national security considerations warrant a comprehensive filing for the Committee's review.

Prior to submitting this Notice, the Parties' respective counsel engaged in a pre-filing consultation with the U.S. Department of the Treasury's Office of Investment Security on June 19, 2023. During that consultation, the Parties' counsel provided a preliminary overview of the Transaction, the business activities of both HSAG and VPI, the national security considerations implicated by the Transaction, and the Buyer's willingness to enter into mitigation arrangements. Treasury staff acknowledged receipt of the preliminary materials and provided procedural guidance regarding the format and content of this Notice.

This Notice is submitted jointly by the Buyer and the U.S. Business in accordance with 31 C.F.R. § 800.501(a), and reflects the collaborative efforts of both Parties to provide the Committee with complete and accurate information. Each Party has independently verified the information pertaining to its own operations, as certified in the Certification Declarations attached hereto.

1.2 Summary of the Transaction

Halcyon Semiconductor Aktiengesellschaft, a publicly traded German semiconductor company listed on the Frankfurt Stock Exchange (XETRA: HLC), through its wholly owned indirect U.S. subsidiary Halcyon US Holdings Inc., a Delaware corporation formed on June 5, 2023, proposes to acquire 100% of the outstanding equity interests of Marlowe Asset Management Photonics Inc., a Delaware corporation, from VPI's existing shareholders. The acquisition will be effected on a cash-free, debt-free basis through a direct stock purchase.

The base purchase price for the Transaction is $1,420,000,000, payable in cash at closing. In addition, the existing shareholders of VPI are entitled to receive an earnout payment of up to $85,000,000, payable in two tranches contingent upon VPI's achievement of specified government-contract revenue milestones in calendar years 2024 and 2025. The maximum aggregate consideration payable in connection with the Transaction is therefore $1,505,000,000.

The Transaction is governed by a Stock Purchase Agreement (the "SPA") executed on June 10, 2023, by and among Halcyon US Holdings Inc., as buyer, and the stockholders of VPI identified therein, as sellers, with VPI as a party for certain limited purposes. A copy of the SPA is included in Exhibit A hereto.

The anticipated closing of the Transaction (the "Closing") is subject to the satisfaction or waiver of customary closing conditions, including, importantly, clearance by CFIUS or the expiration of applicable waiting periods under Section 721 of the DPA. The Transaction is also subject to any applicable requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the German foreign investment screening regime under the Außenwirtschaftsgesetz ("AWG") and the Außenwirtschaftsverordnung ("AWV").

Following the Closing, VPI will become a wholly owned indirect subsidiary of HSAG. VPI will continue to operate as a standalone legal entity and will not be merged into or consolidated with any other entity. The Transaction structure is a direct stock acquisition; Halcyon US Holdings Inc. will become the sole stockholder of VPI.

1.3 National Security Relevance

The Parties recognize that the Transaction raises national security considerations that are appropriately subject to review by the Committee. VPI is a leading designer and manufacturer of advanced gallium-nitride (GaN) power amplifier chips used in defense radar systems, satellite communications platforms, and 5G telecommunications infrastructure. VPI's products are integral to multiple U.S. Department of Defense weapon systems and platforms, and VPI maintains active classified and unclassified contracts with several DoD agencies and components.

Specifically, the following factors are relevant to the Committee's national security assessment:

Facility Security Clearance. VPI holds a Facility Security Clearance ("FCL") at the SECRET level, issued and overseen by the Defense Counterintelligence and Security Agency ("DCSA"). VPI's CAGE Code is 7VK92. Classified work is performed at VPI's fabrication facility located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113, specifically in clean room Sections C-7 through C-12.

Classified and Unclassified Government Contracts. VPI holds fourteen (14) active contracts with the U.S. Department of Defense, both as a prime contractor and as a subcontractor. These contracts have an aggregate remaining backlog of approximately $193,000,000. VPI's government customers include the U.S. Army Communications-Electronics Research, Development and Engineering Center ("CERDEC"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), NAVSEA (through Ironclad Defense Systems Inc. as prime contractor), and the Department of Homeland Security Science and Technology Directorate ("DHS S&T").

Export-Controlled Products and Technology. VPI manufactures products that constitute defense articles under the International Traffic in Arms Regulations ("ITAR"), specifically items classified under Category XI(a)(3) of the United States Munitions List. VPI also produces items classified under the Export Administration Regulations ("EAR"), including Electronic Components and Devices classified under Export Control Classification Number ("ECCN") 3A001. VPI is registered with the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), Registration No. M-24817.

Cleared Personnel. VPI employs 212 personnel who hold active U.S. government security clearances at the SECRET and TS/SCI levels, representing approximately 43.6% of VPI's total workforce of 486 employees.

Foreign Buyer. HSAG is a "foreign person" as defined in 31 C.F.R. § 800.224 by virtue of its organization under the laws of Germany. The Transaction therefore constitutes a "covered transaction" under 31 C.F.R. § 800.213 because it involves both (i) a "covered investment" in a "TID U.S. business" within the meaning of 31 C.F.R. § 800.211 and (ii) a "covered control transaction" within the meaning of 31 C.F.R. § 800.210, as HSAG, through the Acquisition Vehicle, will acquire 100% of VPI's equity and thereby obtain "control" of VPI as defined in 31 C.F.R. § 800.208.

1.4 Proposed Mitigation Framework

HSAG is fully committed to working collaboratively with the Committee and its member agencies to address the national security considerations arising from the Transaction. HSAG recognizes the critical importance of VPI's defense programs, classified operations, and export-controlled technology to the national security of the United States, and HSAG is prepared to enter into a National Security Agreement ("NSA") or such other mitigation arrangements as the Committee may require in connection with its clearance of the Transaction.

The Buyer has developed a comprehensive proposed mitigation framework, described in detail in Part VIII of this Notice, which includes the following principal elements:

(a) Board Restructuring and Government Security Committee. VPI's board of directors will be reconstituted to include three "Security Board Members" who are U.S. citizens holding or eligible for TS/SCI clearances, including an independent Security Director. A Government Security Committee ("GSC") composed of the three Security Board Members will exercise exclusive authority over all classified programs, ITAR-controlled activities, personnel security, and facility security matters.

(b) Technology Control Plan. A comprehensive Technology Control Plan ("TCP") will be implemented to prevent the unauthorized transfer of VPI's controlled technical data, including ITAR-controlled defense articles and EAR-controlled technology, to any non-U.S. person, including HSAG personnel, without prior authorization from the applicable U.S. government authority.

(c) Facility Access Restrictions. HSAG personnel will be prohibited from accessing VPI's classified facilities at the Albuquerque fabrication site (clean room Sections C-7 through C-12) without prior approval from DCSA and the GSC. Access to unclassified areas of VPI will be subject to advance notice, escort, and visitor-log protocols.

(d) Data Segregation and Cybersecurity. VPI's IT systems will be physically and logically separated from HSAG's global network. VPI will maintain compliance with NIST SP 800-171 requirements, undergo annual third-party penetration testing, and report cybersecurity incidents to DCSA within 72 hours.

(e) Third-Party Compliance Monitor. An independent third-party monitor, selected subject to CFIUS approval, will conduct annual compliance audits and report to the applicable CFIUS monitoring agencies. The cost of the monitor will be borne by HSAG.

(f) Personnel Continuity. Key VPI personnel, including the CEO, President/COO, and Facility Security Officer, will be retained for a minimum of 24 months following the Closing. Replacements for key personnel will be subject to approval by the GSC and DCSA.

(g) Government Contract Continuity. HSAG commits to maintaining VPI's performance of all active government contracts without interruption. VPI will initiate FAR 42.12 novation proceedings promptly following the Closing and will make all required foreign ownership disclosures under DFARS 252.209-7002.

The proposed mitigation measures are described in full in Part VIII of this Notice.

PART II — INFORMATION REGARDING THE FOREIGN PERSON (BUYER)

2.1 Identity and Basic Information — Halcyon Semiconductor Aktiengesellschaft

The following information is provided with respect to the foreign person that is a party to the Transaction, pursuant to 31 C.F.R. § 800.502(b)(1):

Full Legal Name: Halcyon Semiconductor Aktiengesellschaft

Short Names / Trade Names: HSAG; Halcyon

Entity Type: Aktiengesellschaft (public stock corporation) organized under the laws of the Federal Republic of Germany, as governed by the German Stock Corporation Act (Aktiengesetz)

Jurisdiction of Organization: Germany (Free State of Saxony)

German Commercial Register (Handelsregister): HRB 28416, registered with the Amtsgericht (Local Court) Dresden

Legal Entity Identifier (LEI): 5299007KXQ2M4GHILZ38

Headquarters Address: Industriestraße 44, 01099 Dresden, Saxony, Germany

Telephone: +49 (0)351 555 0000

Website: www.halcyon-semi.de

Publicly Traded: Yes. HSAG's ordinary shares (Stammaktien) are listed on the Frankfurt Stock Exchange and traded on the XETRA electronic trading platform under the ticker symbol HLC. HSAG is also included in the MDAX index of mid-cap German companies.

Market Capitalization: As of June 1, 2023, HSAG's market capitalization was approximately €14,800,000,000 (approximately $16.1 billion at prevailing exchange rates).

FY2022 Revenue: €6,120,000,000 (approximately $6.44 billion at average 2022 exchange rates)

FY2022 EBITDA: €1,370,000,000 (approximately $1.44 billion at average 2022 exchange rates)

Number of Employees: Approximately 22,400 worldwide as of December 31, 2022, including approximately 14,200 in Germany, 3,100 in other European Union member states, 320 in the United States (through Halcyon US Inc.), 2,800 in Southeast Asia, and 2,000 in other locations including China, Japan, and South Korea.

Principal Business: HSAG is a global semiconductor company engaged in the design, manufacture, and sale of a broad portfolio of semiconductor products, including power semiconductors (silicon IGBT and MOSFET devices), mixed-signal integrated circuits, sensors (pressure, acceleration, magnetic field), and automotive-grade semiconductor solutions. HSAG's products serve the automotive, industrial, consumer electronics, and telecommunications end markets. HSAG operates wafer fabrication facilities in Dresden (Germany), Villach (Austria), and Penang (Malaysia), as well as assembly and test facilities in Melaka (Malaysia), Wuxi (China), and Batangas (Philippines).

Government Ownership or Control: HSAG is a widely held public company. No single shareholder holds more than 5% of HSAG's outstanding ordinary shares. There is no government ownership, control, or equity interest in HSAG by the Federal Republic of Germany, any German state (Land), or any other foreign government entity. HSAG is not subject to any government direction, control, or influence with respect to its corporate governance, management, or business operations.

2.2 HSAG Management and Board of Directors

HSAG is governed by a two-tier board structure in accordance with German corporate law. The Management Board (Vorstand) is responsible for the day-to-day management of HSAG, while the Supervisory Board (Aufsichtsrat) oversees the Management Board and appoints its members.

Management Board (Vorstand):

Dr. Maximilian Ehrhardt — Chief Executive Officer (Vorstandsvorsitzender) Age: 57. Citizenship: German. Dr. Ehrhardt holds a doctorate in materials physics from the Technische Universität Dresden and has served as CEO of HSAG since 2012. He joined HSAG in 2005 as Vice President of Research and Development, was appointed to the Vorstand in 2008, and became Vorstandsvorsitzender in 2012. Prior to joining HSAG, Dr. Ehrhardt held senior research positions at the Fraunhofer Institute for Integrated Systems and Device Technology in Erlangen, Germany. Dr. Ehrhardt does not hold a U.S. government security clearance.

Katarina Brückner — Chief Financial Officer (Finanzvorstand) Age: 49. Citizenship: German. Ms. Brückner is a German Certified Public Accountant (Wirtschaftsprüfer) and holds a Diplom-Kauffrau degree from the Ludwig-Maximilians-Universität München. She joined HSAG as CFO in 2017. Prior to joining HSAG, Ms. Brückner served as Group Treasurer and subsequently CFO of Nordstern Elektronik GmbH, a German industrial electronics company. Ms. Brückner does not hold a U.S. government security clearance.

Stefan Lohse — General Counsel (Chefjustitiar) Age: 53. Citizenship: German and United States (dual citizen). Mr. Lohse holds a law degree (Erstes Juristisches Staatsexamen) from the Universität Heidelberg, a Zweites Juristisches Staatsexamen (qualifying him as Rechtsanwalt), and an LL.M. from Georgetown University Law Center. He is admitted to the bar in the State of New York and is a member of the Rechtsanwaltskammer Frankfurt am Main. Mr. Lohse joined HSAG as General Counsel in 2015. Prior to joining HSAG, Mr. Lohse was a partner in the corporate and M&A practice of an international law firm based in Frankfurt am Main. Mr. Lohse does not hold a U.S. government security clearance. As a U.S.-German dual citizen, Mr. Lohse may be eligible for a U.S. security clearance if required.

Supervisory Board (Aufsichtsrat):

HSAG's Supervisory Board consists of twelve (12) members in accordance with the German Codetermination Act (Mitbestimmungsgesetz). Six members are elected by the shareholders at the annual general meeting (Hauptversammlung), and six members are elected by HSAG's employees in accordance with applicable German labor law. The Supervisory Board is chaired by Dr. Annalise Fromm, a former CEO of Rheinische Handelsbank AG, who serves as the shareholder-elected chairwoman.

A complete list of all Supervisory Board members, including their names, nationalities, principal occupations, and tenure, has been provided to the Committee under separate cover. No member of the Supervisory Board is a citizen or resident of a country subject to comprehensive U.S. sanctions or a country of special concern for CFIUS purposes. No member of the Supervisory Board holds a position in any foreign government.

2.3 Acquisition Vehicle — Halcyon US Holdings Inc.

Full Legal Name: Halcyon US Holdings Inc.

Entity Type: Corporation organized under the laws of the State of Delaware

Date of Formation: June 5, 2023

Employer Identification Number (EIN): 93-2841067

Registered Agent: National Registered Agents of Delaware, 160 Greentree Drive, Suite 101, Dover, DE 19904

Principal Office: c/o Calderwood & Harkness LLP, 1750 K Street NW, Suite 800, Washington, DC 20006 (pending establishment of a permanent office)

Sole Purpose: Halcyon US Holdings Inc. was formed as a single-purpose entity for the sole purpose of serving as the acquisition vehicle for the purchase of VPI. Halcyon US Holdings Inc. has no operations, employees, revenues, or assets other than those related to the Transaction.

Ownership Chain: Halcyon US Holdings Inc. is a wholly owned indirect subsidiary of HSAG. The chain of ownership is as follows:

(i) HSAG (Germany) holds 100% of the outstanding shares of Halcyon International Holdings B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands, with its registered seat in Amsterdam (the "Dutch Holding Company");

(ii) The Dutch Holding Company holds 100% of the outstanding shares of Halcyon US Holdings Inc. (Delaware).

The Dutch Holding Company is a holding entity used by HSAG for its international operations outside Europe. The Dutch Holding Company has no material operations, employees, or business activities in the United States other than its holding interest in Halcyon US Holdings Inc.

Directors and Officers of Halcyon US Holdings Inc.:

Director and President: Stefan Lohse (HSAG General Counsel) Secretary and Treasurer: Katarina Brückner (HSAG CFO)

2.4 Existing U.S. Operations — Halcyon US Inc.

Full Legal Name: Halcyon US Inc.

Entity Type: Corporation organized under the laws of the State of Delaware

Employer Identification Number (EIN): 81-3056429

Office Address: 11501 Alterra Parkway, Suite 300, Austin, TX 78758

Number of Employees: Approximately 320

Business Activities: Halcyon US Inc. operates as a fabless semiconductor design center focused on commercial automotive and industrial semiconductor applications. Halcyon US Inc.'s design activities are directed toward silicon-based power management integrated circuits, automotive-grade microcontrollers, and sensor interface ICs for the North American automotive and industrial markets. All products designed by Halcyon US Inc. are commercial-grade and intended for civilian applications.

Security Clearances and Government Work: Halcyon US Inc. does not hold a Facility Security Clearance. Halcyon US Inc. does not perform any classified work and does not hold any contracts with the U.S. Department of Defense or any other U.S. government agency. Halcyon US Inc. is not registered with DDTC and does not engage in any ITAR-regulated activities. Halcyon US Inc.'s products are either EAR99 (no license required) or classified under low-control ECCNs for which License Exception eligibility exists for virtually all destinations.

Relationship to VPI Post-Closing: Following the Closing, Halcyon US Inc. and VPI will both be indirect subsidiaries of HSAG. However, the Parties do not contemplate any operational integration between Halcyon US Inc. and VPI in the near term. VPI's classified and export-controlled activities will be maintained entirely separate from Halcyon US Inc.'s commercial operations, consistent with the proposed mitigation measures described in Part VIII.

2.5 HSAG Global Operations and Foreign Government Relationships

Global Operations. HSAG maintains manufacturing, research and development, and sales operations worldwide. HSAG's principal manufacturing facilities include:

(a) Dresden, Germany (Headquarters). HSAG's headquarters campus includes a 200mm and 300mm wafer fabrication facility, a research and development center, and corporate offices. Approximately 8,200 employees are located at the Dresden facility.

(b) Villach, Austria. HSAG operates a 300mm wafer fabrication facility focused on power semiconductor devices. Approximately 3,600 employees are located in Villach.

(c) Penang, Malaysia. HSAG operates a wafer fabrication facility focused on 200mm silicon wafer processing for sensor and mixed-signal products. Approximately 1,400 employees are located in Penang.

(d) Melaka, Malaysia; Batangas, Philippines. HSAG operates semiconductor assembly and test facilities at these locations. Combined headcount is approximately 2,200.

(e) Wuxi, China. HSAG operates a semiconductor assembly and test facility in Wuxi. This facility is engaged exclusively in back-end assembly and testing of commercial-grade products. Approximately 800 employees are located in Wuxi.

HSAG also maintains sales offices in Tokyo (Japan), Seoul (South Korea), Taipei (Taiwan), Singapore, and various locations in Europe and the Americas.

Foreign Government Ownership, Control, or Influence. HSAG is not owned, controlled, or influenced by any foreign government. No foreign government holds any equity stake in HSAG. HSAG is not a state-owned enterprise, and no foreign government entity has the power to appoint or remove members of HSAG's Management Board or Supervisory Board.

Government Research Grants and Subsidies. HSAG has received standard research collaboration grants from the German Federal Ministry of Education and Research (Bundesministerium für Bildung und Forschung, or "BMBF") in connection with multi-partner EU-funded research consortia focused on civilian semiconductor process technology. These grants are non-defense in nature, do not convey any ownership or governance rights to the German government, and are typical of the type of public research funding available to European semiconductor companies. HSAG has also received regional economic development incentives from the Free State of Saxony in connection with facility expansions in Dresden. None of these grants or incentives involve any defense-related work or create any obligation to provide the German government with access to HSAG's proprietary technology.

China Operations — Halcyon Semiconductor (Shanghai) Co., Ltd. HSAG operates a wholly owned subsidiary in Shanghai, China: Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSAG Shanghai"). HSAG Shanghai functions as a sales, marketing, and applications engineering office serving HSAG's commercial customers in the People's Republic of China. HSAG Shanghai's FY2022 revenue was approximately $81.4 million, representing approximately 1.3% of HSAG's total consolidated revenue. HSAG Shanghai's activities are strictly limited to the sale and support of consumer-grade power management integrated circuits for the Chinese consumer electronics market. HSAG Shanghai does not engage in any GaN semiconductor activities, defense-related work, dual-use semiconductor manufacturing, or activities involving items controlled under ITAR or subject to heightened EAR controls. HSAG Shanghai does not have access to any HSAG technology that is classified, controlled for export, or related to defense or military applications.

Sanctioned Jurisdictions. HSAG does not maintain any operations, subsidiaries, joint ventures, or business relationships in countries subject to comprehensive U.S. sanctions, including but not limited to Iran, North Korea, Syria, Cuba, and the Crimea, Donetsk, and Luhansk regions of Ukraine. HSAG does not transact business with any persons or entities listed on the U.S. Department of the Treasury's Specially Designated Nationals and blocked Persons List, the U.S. Department of Commerce's Entity List or Denied Persons List, or the U.S. Department of State's Debarred Parties List.

2.6 Financing of the Transaction

The Transaction will be financed through a combination of equity and debt, as described below. All financing sources are from financial institutions organized in the United States, Germany, or allied nations. No financing for the Transaction is being provided, directly or indirectly, by any government, government-controlled entity, sovereign wealth fund, or any person or entity located in a country of special concern.

Equity Contribution from HSAG. HSAG will contribute equity of approximately $520,000,000 to fund a portion of the Transaction. This equity will be sourced from (i) HSAG's balance sheet cash, and (ii) a draw of approximately €300,000,000 on HSAG's existing revolving credit facility with Rheinische Handelsbank AG, Taunusanlage 15, 60325 Frankfurt am Main, Germany. The revolving credit facility is an existing, unsecured corporate revolving facility that was in place prior to the Transaction and is not specific to this acquisition.

Senior Secured Term Loan. Halcyon US Holdings Inc. will enter into a senior secured term loan facility in the principal amount of $900,000,000. The term loan will be provided by a syndicate of lenders led by:

Administrative Agent: Meridian National Bank, 277 Park Avenue, New York, NY 10172 (a national bank chartered under the laws of the United States)

Co-Lead Arrangers:

• Atlas Commercial Lending AG, Mainzer Landstraße 27, 60329 Frankfurt am Main, Germany (a German bank supervised by BaFin)

• Pacific Basin Credit Corp., 555 California Street, Suite 3200, San Francisco, CA 94104 (a U.S. bank holding company subsidiary)

The principal terms of the term loan facility are as follows:

• Principal Amount: $900,000,000

• Maturity: 5 years from closing

• Interest Rate: SOFR + 275 basis points per annum

• Amortization: 1.0% per annum (quarterly installments), with the remaining balance due at maturity (bullet payment)

• Security: Pledges of the equity interests of Halcyon US Holdings Inc. and VPI, together with liens on substantially all assets of VPI (subject to customary carve-outs for classified assets and government-contract-related restrictions)

• Commitment Date: June 8, 2023; funding to occur at Closing

A copy of the credit agreement commitment letter, dated June 8, 2023, is included in Exhibit A hereto.

Bridge Commitment (Expired). Meridian National Bank had previously provided a $200,000,000 bridge facility commitment to backstop a portion of the financing. This bridge commitment expired unfunded and was replaced by the $900,000,000 term loan facility described above. The bridge commitment is no longer outstanding.

Escrow Holdback. An amount of $71,000,000, representing 5% of the base purchase price, will be deposited into an escrow account at Closing and held for a period of 18 months to secure potential indemnification claims under the SPA. The escrow agent is Pinnacle Trust Company, N.A., 400 South LaSalle Street, Suite 1100, Chicago, IL 60605, a nationally chartered trust company. The escrow agreement is attached as part of Exhibit A.

Source-of-Funds Certification. The Parties hereby certify that all financing sources for the Transaction are from financial institutions organized in the United States, Germany, or allied nations that are members of the North Atlantic Treaty Organization. No financing for the Transaction originates from, is guaranteed by, or has been arranged by any person or entity in the People's Republic of China, the Russian Federation, or any other country of particular concern for CFIUS purposes. None of the lenders is a foreign government-owned or government-controlled financial institution.

2.7 Foreign Person's Advisors

The Buyer and the Acquisition Vehicle are advised by the following firms and individuals in connection with the Transaction and this Notice:

Buyer's U.S. Counsel (M&A, CFIUS, and Export Controls):

Calderwood & Harkness LLP

New York Office: 399 Park Avenue, 31st Floor New York, NY 10022 Telephone: (212) 555-8900

Washington, DC Office: 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7400

Principal Contacts:

• Beatrice Holloway, Partner — Mergers & Acquisitions (Responsible Partner for the Transaction)

• Margaret "Peggy" Ashworth, Of Counsel — National Security & CFIUS Practice (Lead CFIUS Counsel)

• Lt. Col. (Ret.) David Caruso, USAF, Senior Counsel — Government Contracts & Export Controls

Buyer's German Counsel:

Schilling Frey Rechtsanwälte Friedrichstraße 68 10117 Berlin, Germany Telephone: +49 (0)30 555 6000

Principal Contact:

• Prof. Dr. Ulrich Schilling, Senior Partner — Corporate / M&A and German Foreign Investment Review

Buyer's Financial Advisor:

Ashgrove Capital Group 450 Lexington Avenue, 38th Floor New York, NY 10017 Telephone: (212) 555-2100

Principal Contact:

• Philippe Beaumont, Managing Director — Technology, Media & Telecommunications

Buyer's Auditor:

Leinberger & Hess Wirtschaftsprüfungsgesellschaft Bockenheimer Landstraße 42 60323 Frankfurt am Main, Germany Telephone: +49 (0)69 555 3300

Transaction Tax Advisor:

Pemberton Kline LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 Telephone: (212) 555-4800

Principal Contact:

• Richard Pemberton, Partner — Transactional Tax

PART III — INFORMATION REGARDING THE U.S. BUSINESS (TARGET)

3.1 Identity and Basic Information — Marlowe Asset Management Photonics Inc.

The following information is provided with respect to the U.S. business that is the subject of the Transaction, pursuant to 31 C.F.R. § 800.502(b)(2):

Full Legal Name: Marlowe Asset Management Photonics Inc.

Short Name: VPI

Entity Type: Corporation organized under the laws of the State of Delaware

Date of Incorporation: February 14, 2009

Employer Identification Number (EIN): 26-4371885

Data Universal Numbering System (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

The Albuquerque facility is a 45,000-square-foot GaN-on-SiC (gallium nitride on silicon carbide) semiconductor fabrication facility. The facility includes both unclassified and classified production areas, with classified clean room areas designated as Sections C-7 through C-12. The Albuquerque facility holds a Facility Security Clearance up to the SECRET level.

Telephone: (719) 555-0200 (Colorado Springs headquarters); (505) 555-0300 (Albuquerque fabrication facility)

Website: www.vanguardphotonics.com (note: portions of the website require CAC authentication or authorized login for government customers)

FY2022 Revenue: $287,400,000

FY2022 EBITDA: $61,200,000

FY2022 Net Income: $38,700,000

Number of Employees: 486 as of July 1, 2023, of whom 212 hold active U.S. government security clearances

State of Delaware Franchise Tax Status: Current; all franchise taxes paid through the current period

3.2 VPI Management and Board of Directors

VPI's executive management team and board of directors are composed entirely of U.S. citizens. The following individuals serve in the indicated capacities:

Executive Officers:

Dr. Nathan Trevorrow — Founder, Chief Executive Officer, and Board Chair Age: 52. Citizenship: United States. Education: Ph.D., Electrical Engineering, Stanford University; B.S., Electrical Engineering, University of Colorado Boulder. Dr. Trevorrow is the founder of VPI and has served as CEO and Board Chair since the company's incorporation in 2009. Prior to founding VPI, Dr. Trevorrow served as a Program Manager at the Defense Advanced Research Projects Agency ("DARPA"), where he managed advanced semiconductor device programs within the microsystems Technology Office. Dr. Trevorrow holds an active TS/SCI security clearance. He is the named inventor on 19 of VPI's 47 U.S. patents.

Marissa Sung-Avila — President and Chief Operating Officer Age: 46. Citizenship: United States. Education: M.S., Electrical Engineering, Massachusetts Institute of Technology; B.S., Electrical Engineering, United States Military Academy at West Point. Ms. Sung-Avila co-founded VPI with Dr. Trevorrow in 2009 and has served as President and COO since 2014. Prior to co-founding VPI, Ms. Sung-Avila served as an officer in the U.S. Army signal corps, attaining the rank of Captain, with assignments including communications systems development at the U.S. Army Research Laboratory. Ms. Sung-Avila holds an active SECRET security clearance.

Derek Wainsborough, CPA — Chief Financial Officer Age: 44. Citizenship: United States. Education: M.B.A., University of Denver; B.S., Accounting, Colorado State University. Mr. Wainsborough joined VPI as CFO in 2016. Previously, he served as Vice President of Finance at two venture-backed technology companies in the Colorado Front Range area. Mr. Wainsborough is a Certified Public Accountant licensed in the State of Colorado. Mr. Wainsborough does not hold a U.S. government security clearance.

Col. (Ret.) Bryce Hendrickson, USAF — Vice President, Government Programs and Facility Security Officer Age: 58. Citizenship: United States. Education: M.S., Systems Engineering, Air Force Institute of Technology; B.S., Computer Science, U.S. Air Force Academy. Col. Hendrickson joined VPI in 2015 after retiring from the U.S. Air Force, where he served for 26 years with assignments including Director of Special Programs, Electronic Systems Center, Hanscom AFB, Massachusetts. Col. Hendrickson serves as VPI's designated Facility Security Officer ("FSO") under the National Industrial Security Program Operating Manual ("NISPOM"). Col. Hendrickson holds an active TS/SCI security clearance.

Board of Directors:

VPI's board of directors currently consists of five (5) members:

Ms. Delacroix is a former senior executive of a major U.S. defense prime contractor and holds an active SECRET security clearance. Mr. Yee is a Managing Partner of Ridgecrest Ventures Management LLC. Ms. Hartmann is a Managing Director of Cascadian Capital Partners Management LLC.

3.3 VPI Business Description

A detailed business description of VPI is attached as Exhibit B to this Notice. The following is a summary of VPI's business and operations.

VPI designs and manufactures advanced gallium-nitride (GaN) power amplifier chips and related semiconductor devices for defense, satellite communications, and 5G telecommunications applications. Founded in 2009 by Dr. Nathan Trevorrow and Marissa Sung-Avila, VPI has grown from a DARPA-funded startup into one of the premier domestic suppliers of high-power, high-frequency GaN semiconductor devices for U.S. defense platforms.

Core Technology. VPI's core technology centers on GaN-on-SiC (gallium nitride on silicon carbide) semiconductor processes. GaN-on-SiC technology offers significant advantages over legacy semiconductor materials (such as gallium arsenide) for high-power, high-frequency applications, including greater power density, higher operating temperatures, wider bandwidth, and improved thermal management. VPI has developed proprietary expertise in three key technology areas:

(a) GaN-on-SiC Epitaxial Growth Process: VPI's proprietary epitaxial growth recipes enable the deposition of highly uniform, defect-minimized GaN layers on silicon carbide substrates, resulting in devices with industry-leading power density and reliability.

(b) High-Electron-Mobility Transistor (HEMT) Design: VPI has developed optimized HEMT gate structures that achieve superior gain, linearity, and noise performance across a wide frequency range, including Ku-band, Ka-band, and W-band frequencies.

(c) Millimeter-Wave (mmWave) Power Amplifier Architectures: VPI designs broadband matching networks and multi-stage power amplifier architectures optimized for millimeter-wave frequencies, supporting defense radar, satellite communications, and emerging 5G applications.

Primary End Markets. VPI's products serve three primary end markets:

(i) Defense Radar Systems: VPI supplies GaN power amplifier chips and transmit/receive (T/R) modules for active electronically scanned array (AESA) radar systems used by the U.S. Army, U.S. Air Force, and U.S. Navy. VPI's products are incorporated into the AN/TPS-80 Ground/Air Task Oriented Radar (G/ATOR) and are under development for next-generation missile defense radar systems.

(ii) Satellite Communications: VPI designs and manufactures GaN power amplifiers for satellite communication uplink terminals and on-orbit payloads, supporting both military and commercial satellite operators.

(iii) 5G Telecommunications Infrastructure: VPI produces GaN power amplifiers for 5G base station infrastructure, specifically for mmWave frequency bands. This commercial business represents a growing segment of VPI's revenue.

Manufacturing. VPI operates a 45,000-square-foot GaN-on-SiC semiconductor fabrication facility at 9200 Innovation Boulevard, Albuquerque, NM 87113. The Albuquerque facility is equipped with state-of-the-art epitaxial growth reactors, photolithography tools, plasma etch systems, metal deposition systems, and on-wafer RF test equipment. The facility includes both unclassified and classified clean room areas. Classified work is performed in clean room Sections C-7 through C-12, which are secured in accordance with NISPOM requirements and DCSA oversight.

Customers. VPI serves both U.S. government (defense and intelligence) customers and commercial customers. VPI's U.S. government customers include the U.S. Army Program Executive Office for intelligence, Electronic Warfare, and Sensors ("PEO IEW&S"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), the U.S. Navy through NAVSEA (via Ironclad Defense Systems Inc. as prime contractor), and the Department of Homeland Security Science and Technology Directorate ("DHS S&T"). VPI's commercial customers include major satellite communication equipment manufacturers and 5G base station OEMs.

3.4 VPI Ownership Structure (Pre-Transaction)

BUSINESS CONFIDENTIAL — This notice contains business proprietary information and information subject to the confidentiality protections of 50 U.S.C. § 4565(c) and 31 C.F.R. § 800.702. Unauthorized disclosure is prohibited.
JOINT VOLUNTARY NOTICE
PURSUANT TO SECTION 721 OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, AND 31 C.F.R. PART 800
Filed with:
Committee on Foreign Investment in the United States U.S. Department of the Treasury Office of Investment Security 1500 Pennsylvania Avenue NW Washington, DC 20220
Date of Filing: July 14, 2023
CFIUS Case No.: CFIUS-023-07-3841 (assigned upon acceptance)
Filed on behalf of:
Halcyon Semiconductor Aktiengesellschaft ("HSAG" or the "Buyer"), a publicly traded Aktiengesellschaft organized under the laws of Germany (Saxony), with its registered seat at Industriestraße 44, 01099 Dresden, Saxony, Germany; and its wholly owned indirect subsidiary Halcyon US Holdings Inc., a Delaware corporation formed on June 5, 2023
— and —
Marlowe Asset Management Photonics Inc. ("VPI" or the "U.S. Business"), a Delaware corporation with its principal place of business at 7400 Ridgeline Parkway, Colorado Springs, CO 80919
(HSAG, Halcyon US Holdings Inc., and VPI are referred to collectively as the "Parties")
Counsel for the Buyer:
Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006
Margaret "Peggy" Ashworth, Of Counsel — National Security & CFIUS Practice Beatrice Holloway, Partner — Mergers & Acquisitions Telephone: (202) 555-7400
Counsel for the U.S. Business / Sellers:
Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006
Harrison Whitfield, Partner — Government Contracts & National Security Sandra Niehaus, Partner — Mergers & Acquisitions Telephone: (202) 555-3100
CONFIDENTIALITY LEGEND: This Joint Voluntary Notice, including all exhibits and attachments hereto, contains business proprietary information of the Parties and information subject to the confidentiality protections of Section 721(c) of the Defense Production Act of 1950, as amended (50 U.S.C. § 4565(c)), and the implementing regulations at 31 C.F.R. § 800.702. This notice is submitted solely for the use of the Committee on Foreign Investment in the United States and its member agencies in connection with their review of the transaction described herein. Unauthorized disclosure, reproduction, or distribution of this notice or any portion thereof is strictly prohibited by law.
PART I — INTRODUCTION AND EXECUTIVE SUMMARY
1.1 Purpose of Filing
This Joint Voluntary Notice (this "Notice") is submitted by Halcyon Semiconductor Aktiengesellschaft ("HSAG" or the "Buyer"), through its wholly owned indirect subsidiary Halcyon US Holdings Inc. (the "Acquisition Vehicle"), and Marlowe Asset Management Photonics Inc. ("VPI" or the "U.S. Business") (collectively, the "Parties") 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) (the "DPA"), and the implementing regulations set forth at 31 C.F.R. Part 800 (the "Regulations").
The Parties are filing this Notice voluntarily to seek review of the proposed acquisition by Halcyon US Holdings Inc. of 100% of the outstanding equity of VPI (the "Transaction"), as described more fully in Part IV below. The Parties acknowledge that the Transaction involves a "TID U.S. business" within the meaning of 31 C.F.R. § 800.248, and that a mandatory declaration obligation exists under 31 C.F.R. § 800.401(c)(1) with respect to critical technologies produced, designed, tested, manufactured, fabricated, or developed by VPI. The Parties have elected to submit this full voluntary joint notice under 31 C.F.R. § 800.501 in lieu of filing a short-form declaration under 31 C.F.R. § 800.403, as the Parties believe the complexity of the Transaction, the scope of VPI's classified programs, and the breadth of national security considerations warrant a comprehensive filing for the Committee's review.
Prior to submitting this Notice, the Parties' respective counsel engaged in a pre-filing consultation with the U.S. Department of the Treasury's Office of Investment Security on June 19, 2023. During that consultation, the Parties' counsel provided a preliminary overview of the Transaction, the business activities of both HSAG and VPI, the national security considerations implicated by the Transaction, and the Buyer's willingness to enter into mitigation arrangements. Treasury staff acknowledged receipt of the preliminary materials and provided procedural guidance regarding the format and content of this Notice.
This Notice is submitted jointly by the Buyer and the U.S. Business in accordance with 31 C.F.R. § 800.501(a), and reflects the collaborative efforts of both Parties to provide the Committee with complete and accurate information. Each Party has independently verified the information pertaining to its own operations, as certified in the Certification Declarations attached hereto.
1.2 Summary of the Transaction
Halcyon Semiconductor Aktiengesellschaft, a publicly traded German semiconductor company listed on the Frankfurt Stock Exchange (XETRA: HLC), through its wholly owned indirect U.S. subsidiary Halcyon US Holdings Inc., a Delaware corporation formed on June 5, 2023, proposes to acquire 100% of the outstanding equity interests of Marlowe Asset Management Photonics Inc., a Delaware corporation, from VPI's existing shareholders. The acquisition will be effected on a cash-free, debt-free basis through a direct stock purchase.
The base purchase price for the Transaction is $1,420,000,000, payable in cash at closing. In addition, the existing shareholders of VPI are entitled to receive an earnout payment of up to $85,000,000, payable in two tranches contingent upon VPI's achievement of specified government-contract revenue milestones in calendar years 2024 and 2025. The maximum aggregate consideration payable in connection with the Transaction is therefore $1,505,000,000.
The Transaction is governed by a Stock Purchase Agreement (the "SPA") executed on June 10, 2023, by and among Halcyon US Holdings Inc., as buyer, and the stockholders of VPI identified therein, as sellers, with VPI as a party for certain limited purposes. A copy of the SPA is included in Exhibit A hereto.
The anticipated closing of the Transaction (the "Closing") is subject to the satisfaction or waiver of customary closing conditions, including, importantly, clearance by CFIUS or the expiration of applicable waiting periods under Section 721 of the DPA. The Transaction is also subject to any applicable requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the German foreign investment screening regime under the Außenwirtschaftsgesetz ("AWG") and the Außenwirtschaftsverordnung ("AWV").
Following the Closing, VPI will become a wholly owned indirect subsidiary of HSAG. VPI will continue to operate as a standalone legal entity and will not be merged into or consolidated with any other entity. The Transaction structure is a direct stock acquisition; Halcyon US Holdings Inc. will become the sole stockholder of VPI.
1.3 National Security Relevance
The Parties recognize that the Transaction raises national security considerations that are appropriately subject to review by the Committee. VPI is a leading designer and manufacturer of advanced gallium-nitride (GaN) power amplifier chips used in defense radar systems, satellite communications platforms, and 5G telecommunications infrastructure. VPI's products are integral to multiple U.S. Department of Defense weapon systems and platforms, and VPI maintains active classified and unclassified contracts with several DoD agencies and components.
Specifically, the following factors are relevant to the Committee's national security assessment:
Facility Security Clearance. VPI holds a Facility Security Clearance ("FCL") at the SECRET level, issued and overseen by the Defense Counterintelligence and Security Agency ("DCSA"). VPI's CAGE Code is 7VK92. Classified work is performed at VPI's fabrication facility located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113, specifically in clean room Sections C-7 through C-12.
Classified and Unclassified Government Contracts. VPI holds fourteen (14) active contracts with the U.S. Department of Defense, both as a prime contractor and as a subcontractor. These contracts have an aggregate remaining backlog of approximately $193,000,000. VPI's government customers include the U.S. Army Communications-Electronics Research, Development and Engineering Center ("CERDEC"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), NAVSEA (through Ironclad Defense Systems Inc. as prime contractor), and the Department of Homeland Security Science and Technology Directorate ("DHS S&T").
Export-Controlled Products and Technology. VPI manufactures products that constitute defense articles under the International Traffic in Arms Regulations ("ITAR"), specifically items classified under Category XI(a)(3) of the United States Munitions List. VPI also produces items classified under the Export Administration Regulations ("EAR"), including Electronic Components and Devices classified under Export Control Classification Number ("ECCN") 3A001. VPI is registered with the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), Registration No. M-24817.
Cleared Personnel. VPI employs 212 personnel who hold active U.S. government security clearances at the SECRET and TS/SCI levels, representing approximately 43.6% of VPI's total workforce of 486 employees.
Foreign Buyer. HSAG is a "foreign person" as defined in 31 C.F.R. § 800.224 by virtue of its organization under the laws of Germany. The Transaction therefore constitutes a "covered transaction" under 31 C.F.R. § 800.213 because it involves both (i) a "covered investment" in a "TID U.S. business" within the meaning of 31 C.F.R. § 800.211 and (ii) a "covered control transaction" within the meaning of 31 C.F.R. § 800.210, as HSAG, through the Acquisition Vehicle, will acquire 100% of VPI's equity and thereby obtain "control" of VPI as defined in 31 C.F.R. § 800.208.
1.4 Proposed Mitigation Framework
HSAG is fully committed to working collaboratively with the Committee and its member agencies to address the national security considerations arising from the Transaction. HSAG recognizes the critical importance of VPI's defense programs, classified operations, and export-controlled technology to the national security of the United States, and HSAG is prepared to enter into a National Security Agreement ("NSA") or such other mitigation arrangements as the Committee may require in connection with its clearance of the Transaction.
The Buyer has developed a comprehensive proposed mitigation framework, described in detail in Part VIII of this Notice, which includes the following principal elements:
(a) Board Restructuring and Government Security Committee. VPI's board of directors will be reconstituted to include three "Security Board Members" who are U.S. citizens holding or eligible for TS/SCI clearances, including an independent Security Director. A Government Security Committee ("GSC") composed of the three Security Board Members will exercise exclusive authority over all classified programs, ITAR-controlled activities, personnel security, and facility security matters.
(b) Technology Control Plan. A comprehensive Technology Control Plan ("TCP") will be implemented to prevent the unauthorized transfer of VPI's controlled technical data, including ITAR-controlled defense articles and EAR-controlled technology, to any non-U.S. person, including HSAG personnel, without prior authorization from the applicable U.S. government authority.
(c) Facility Access Restrictions. HSAG personnel will be prohibited from accessing VPI's classified facilities at the Albuquerque fabrication site (clean room Sections C-7 through C-12) without prior approval from DCSA and the GSC. Access to unclassified areas of VPI will be subject to advance notice, escort, and visitor-log protocols.
(d) Data Segregation and Cybersecurity. VPI's IT systems will be physically and logically separated from HSAG's global network. VPI will maintain compliance with NIST SP 800-171 requirements, undergo annual third-party penetration testing, and report cybersecurity incidents to DCSA within 72 hours.
(e) Third-Party Compliance Monitor. An independent third-party monitor, selected subject to CFIUS approval, will conduct annual compliance audits and report to the applicable CFIUS monitoring agencies. The cost of the monitor will be borne by HSAG.
(f) Personnel Continuity. Key VPI personnel, including the CEO, President/COO, and Facility Security Officer, will be retained for a minimum of 24 months following the Closing. Replacements for key personnel will be subject to approval by the GSC and DCSA.
(g) Government Contract Continuity. HSAG commits to maintaining VPI's performance of all active government contracts without interruption. VPI will initiate FAR 42.12 novation proceedings promptly following the Closing and will make all required foreign ownership disclosures under DFARS 252.209-7002.
The proposed mitigation measures are described in full in Part VIII of this Notice.
PART II — INFORMATION REGARDING THE FOREIGN PERSON (BUYER)
2.1 Identity and Basic Information — Halcyon Semiconductor Aktiengesellschaft
The following information is provided with respect to the foreign person that is a party to the Transaction, pursuant to 31 C.F.R. § 800.502(b)(1):
Full Legal Name: Halcyon Semiconductor Aktiengesellschaft
Short Names / Trade Names: HSAG; Halcyon
Entity Type: Aktiengesellschaft (public stock corporation) organized under the laws of the Federal Republic of Germany, as governed by the German Stock Corporation Act (Aktiengesetz)
Jurisdiction of Organization: Germany (Free State of Saxony)
German Commercial Register (Handelsregister): HRB 28416, registered with the Amtsgericht (Local Court) Dresden
Legal Entity Identifier (LEI): 5299007KXQ2M4GHILZ38
Headquarters Address: Industriestraße 44, 01099 Dresden, Saxony, Germany
Telephone: +49 (0)351 555 0000
Website: www.halcyon-semi.de
Publicly Traded: Yes. HSAG's ordinary shares (Stammaktien) are listed on the Frankfurt Stock Exchange and traded on the XETRA electronic trading platform under the ticker symbol HLC. HSAG is also included in the MDAX index of mid-cap German companies.
Market Capitalization: As of June 1, 2023, HSAG's market capitalization was approximately €14,800,000,000 (approximately $16.1 billion at prevailing exchange rates).
FY2022 Revenue: €6,120,000,000 (approximately $6.44 billion at average 2022 exchange rates)
FY2022 EBITDA: €1,370,000,000 (approximately $1.44 billion at average 2022 exchange rates)
Number of Employees: Approximately 22,400 worldwide as of December 31, 2022, including approximately 14,200 in Germany, 3,100 in other European Union member states, 320 in the United States (through Halcyon US Inc.), 2,800 in Southeast Asia, and 2,000 in other locations including China, Japan, and South Korea.
Principal Business: HSAG is a global semiconductor company engaged in the design, manufacture, and sale of a broad portfolio of semiconductor products, including power semiconductors (silicon IGBT and MOSFET devices), mixed-signal integrated circuits, sensors (pressure, acceleration, magnetic field), and automotive-grade semiconductor solutions. HSAG's products serve the automotive, industrial, consumer electronics, and telecommunications end markets. HSAG operates wafer fabrication facilities in Dresden (Germany), Villach (Austria), and Penang (Malaysia), as well as assembly and test facilities in Melaka (Malaysia), Wuxi (China), and Batangas (Philippines).
Government Ownership or Control: HSAG is a widely held public company. No single shareholder holds more than 5% of HSAG's outstanding ordinary shares. There is no government ownership, control, or equity interest in HSAG by the Federal Republic of Germany, any German state (Land), or any other foreign government entity. HSAG is not subject to any government direction, control, or influence with respect to its corporate governance, management, or business operations.
2.2 HSAG Management and Board of Directors
HSAG is governed by a two-tier board structure in accordance with German corporate law. The Management Board (Vorstand) is responsible for the day-to-day management of HSAG, while the Supervisory Board (Aufsichtsrat) oversees the Management Board and appoints its members.
Management Board (Vorstand):
Dr. Maximilian Ehrhardt — Chief Executive Officer (Vorstandsvorsitzender) Age: 57. Citizenship: German. Dr. Ehrhardt holds a doctorate in materials physics from the Technische Universität Dresden and has served as CEO of HSAG since 2012. He joined HSAG in 2005 as Vice President of Research and Development, was appointed to the Vorstand in 2008, and became Vorstandsvorsitzender in 2012. Prior to joining HSAG, Dr. Ehrhardt held senior research positions at the Fraunhofer Institute for Integrated Systems and Device Technology in Erlangen, Germany. Dr. Ehrhardt does not hold a U.S. government security clearance.
Katarina Brückner — Chief Financial Officer (Finanzvorstand) Age: 49. Citizenship: German. Ms. Brückner is a German Certified Public Accountant (Wirtschaftsprüfer) and holds a Diplom-Kauffrau degree from the Ludwig-Maximilians-Universität München. She joined HSAG as CFO in 2017. Prior to joining HSAG, Ms. Brückner served as Group Treasurer and subsequently CFO of Nordstern Elektronik GmbH, a German industrial electronics company. Ms. Brückner does not hold a U.S. government security clearance.
Stefan Lohse — General Counsel (Chefjustitiar) Age: 53. Citizenship: German and United States (dual citizen). Mr. Lohse holds a law degree (Erstes Juristisches Staatsexamen) from the Universität Heidelberg, a Zweites Juristisches Staatsexamen (qualifying him as Rechtsanwalt), and an LL.M. from Georgetown University Law Center. He is admitted to the bar in the State of New York and is a member of the Rechtsanwaltskammer Frankfurt am Main. Mr. Lohse joined HSAG as General Counsel in 2015. Prior to joining HSAG, Mr. Lohse was a partner in the corporate and M&A practice of an international law firm based in Frankfurt am Main. Mr. Lohse does not hold a U.S. government security clearance. As a U.S.-German dual citizen, Mr. Lohse may be eligible for a U.S. security clearance if required.
Supervisory Board (Aufsichtsrat):
HSAG's Supervisory Board consists of twelve (12) members in accordance with the German Codetermination Act (Mitbestimmungsgesetz). Six members are elected by the shareholders at the annual general meeting (Hauptversammlung), and six members are elected by HSAG's employees in accordance with applicable German labor law. The Supervisory Board is chaired by Dr. Annalise Fromm, a former CEO of Rheinische Handelsbank AG, who serves as the shareholder-elected chairwoman.
A complete list of all Supervisory Board members, including their names, nationalities, principal occupations, and tenure, has been provided to the Committee under separate cover. No member of the Supervisory Board is a citizen or resident of a country subject to comprehensive U.S. sanctions or a country of special concern for CFIUS purposes. No member of the Supervisory Board holds a position in any foreign government.
2.3 Acquisition Vehicle — Halcyon US Holdings Inc.
Full Legal Name: Halcyon US Holdings Inc.
Entity Type: Corporation organized under the laws of the State of Delaware
Date of Formation: June 5, 2023
Employer Identification Number (EIN): 93-2841067
Registered Agent: National Registered Agents of Delaware, 160 Greentree Drive, Suite 101, Dover, DE 19904
Principal Office: c/o Calderwood & Harkness LLP, 1750 K Street NW, Suite 800, Washington, DC 20006 (pending establishment of a permanent office)
Sole Purpose: Halcyon US Holdings Inc. was formed as a single-purpose entity for the sole purpose of serving as the acquisition vehicle for the purchase of VPI. Halcyon US Holdings Inc. has no operations, employees, revenues, or assets other than those related to the Transaction.
Ownership Chain: Halcyon US Holdings Inc. is a wholly owned indirect subsidiary of HSAG. The chain of ownership is as follows:
(i) HSAG (Germany) holds 100% of the outstanding shares of Halcyon International Holdings B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of the Netherlands, with its registered seat in Amsterdam (the "Dutch Holding Company");
(ii) The Dutch Holding Company holds 100% of the outstanding shares of Halcyon US Holdings Inc. (Delaware).
The Dutch Holding Company is a holding entity used by HSAG for its international operations outside Europe. The Dutch Holding Company has no material operations, employees, or business activities in the United States other than its holding interest in Halcyon US Holdings Inc.
Directors and Officers of Halcyon US Holdings Inc.:
Director and President: Stefan Lohse (HSAG General Counsel) Secretary and Treasurer: Katarina Brückner (HSAG CFO)
2.4 Existing U.S. Operations — Halcyon US Inc.
Full Legal Name: Halcyon US Inc.
Entity Type: Corporation organized under the laws of the State of Delaware
Employer Identification Number (EIN): 81-3056429
Office Address: 11501 Alterra Parkway, Suite 300, Austin, TX 78758
Number of Employees: Approximately 320
Business Activities: Halcyon US Inc. operates as a fabless semiconductor design center focused on commercial automotive and industrial semiconductor applications. Halcyon US Inc.'s design activities are directed toward silicon-based power management integrated circuits, automotive-grade microcontrollers, and sensor interface ICs for the North American automotive and industrial markets. All products designed by Halcyon US Inc. are commercial-grade and intended for civilian applications.
Security Clearances and Government Work: Halcyon US Inc. does not hold a Facility Security Clearance. Halcyon US Inc. does not perform any classified work and does not hold any contracts with the U.S. Department of Defense or any other U.S. government agency. Halcyon US Inc. is not registered with DDTC and does not engage in any ITAR-regulated activities. Halcyon US Inc.'s products are either EAR99 (no license required) or classified under low-control ECCNs for which License Exception eligibility exists for virtually all destinations.
Relationship to VPI Post-Closing: Following the Closing, Halcyon US Inc. and VPI will both be indirect subsidiaries of HSAG. However, the Parties do not contemplate any operational integration between Halcyon US Inc. and VPI in the near term. VPI's classified and export-controlled activities will be maintained entirely separate from Halcyon US Inc.'s commercial operations, consistent with the proposed mitigation measures described in Part VIII.
2.5 HSAG Global Operations and Foreign Government Relationships
Global Operations. HSAG maintains manufacturing, research and development, and sales operations worldwide. HSAG's principal manufacturing facilities include:
(a) Dresden, Germany (Headquarters). HSAG's headquarters campus includes a 200mm and 300mm wafer fabrication facility, a research and development center, and corporate offices. Approximately 8,200 employees are located at the Dresden facility.
(b) Villach, Austria. HSAG operates a 300mm wafer fabrication facility focused on power semiconductor devices. Approximately 3,600 employees are located in Villach.
(c) Penang, Malaysia. HSAG operates a wafer fabrication facility focused on 200mm silicon wafer processing for sensor and mixed-signal products. Approximately 1,400 employees are located in Penang.
(d) Melaka, Malaysia; Batangas, Philippines. HSAG operates semiconductor assembly and test facilities at these locations. Combined headcount is approximately 2,200.
(e) Wuxi, China. HSAG operates a semiconductor assembly and test facility in Wuxi. This facility is engaged exclusively in back-end assembly and testing of commercial-grade products. Approximately 800 employees are located in Wuxi.
HSAG also maintains sales offices in Tokyo (Japan), Seoul (South Korea), Taipei (Taiwan), Singapore, and various locations in Europe and the Americas.
Foreign Government Ownership, Control, or Influence. HSAG is not owned, controlled, or influenced by any foreign government. No foreign government holds any equity stake in HSAG. HSAG is not a state-owned enterprise, and no foreign government entity has the power to appoint or remove members of HSAG's Management Board or Supervisory Board.
Government Research Grants and Subsidies. HSAG has received standard research collaboration grants from the German Federal Ministry of Education and Research (Bundesministerium für Bildung und Forschung, or "BMBF") in connection with multi-partner EU-funded research consortia focused on civilian semiconductor process technology. These grants are non-defense in nature, do not convey any ownership or governance rights to the German government, and are typical of the type of public research funding available to European semiconductor companies. HSAG has also received regional economic development incentives from the Free State of Saxony in connection with facility expansions in Dresden. None of these grants or incentives involve any defense-related work or create any obligation to provide the German government with access to HSAG's proprietary technology.
China Operations — Halcyon Semiconductor (Shanghai) Co., Ltd. HSAG operates a wholly owned subsidiary in Shanghai, China: Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSAG Shanghai"). HSAG Shanghai functions as a sales, marketing, and applications engineering office serving HSAG's commercial customers in the People's Republic of China. HSAG Shanghai's FY2022 revenue was approximately $81.4 million, representing approximately 1.3% of HSAG's total consolidated revenue. HSAG Shanghai's activities are strictly limited to the sale and support of consumer-grade power management integrated circuits for the Chinese consumer electronics market. HSAG Shanghai does not engage in any GaN semiconductor activities, defense-related work, dual-use semiconductor manufacturing, or activities involving items controlled under ITAR or subject to heightened EAR controls. HSAG Shanghai does not have access to any HSAG technology that is classified, controlled for export, or related to defense or military applications.
Sanctioned Jurisdictions. HSAG does not maintain any operations, subsidiaries, joint ventures, or business relationships in countries subject to comprehensive U.S. sanctions, including but not limited to Iran, North Korea, Syria, Cuba, and the Crimea, Donetsk, and Luhansk regions of Ukraine. HSAG does not transact business with any persons or entities listed on the U.S. Department of the Treasury's Specially Designated Nationals and blocked Persons List, the U.S. Department of Commerce's Entity List or Denied Persons List, or the U.S. Department of State's Debarred Parties List.
2.6 Financing of the Transaction
The Transaction will be financed through a combination of equity and debt, as described below. All financing sources are from financial institutions organized in the United States, Germany, or allied nations. No financing for the Transaction is being provided, directly or indirectly, by any government, government-controlled entity, sovereign wealth fund, or any person or entity located in a country of special concern.
Equity Contribution from HSAG. HSAG will contribute equity of approximately $520,000,000 to fund a portion of the Transaction. This equity will be sourced from (i) HSAG's balance sheet cash, and (ii) a draw of approximately €300,000,000 on HSAG's existing revolving credit facility with Rheinische Handelsbank AG, Taunusanlage 15, 60325 Frankfurt am Main, Germany. The revolving credit facility is an existing, unsecured corporate revolving facility that was in place prior to the Transaction and is not specific to this acquisition.
Senior Secured Term Loan. Halcyon US Holdings Inc. will enter into a senior secured term loan facility in the principal amount of $900,000,000. The term loan will be provided by a syndicate of lenders led by:
Administrative Agent: Meridian National Bank, 277 Park Avenue, New York, NY 10172 (a national bank chartered under the laws of the United States)
Co-Lead Arrangers:
• Atlas Commercial Lending AG, Mainzer Landstraße 27, 60329 Frankfurt am Main, Germany (a German bank supervised by BaFin)
• Pacific Basin Credit Corp., 555 California Street, Suite 3200, San Francisco, CA 94104 (a U.S. bank holding company subsidiary)
The principal terms of the term loan facility are as follows:
• Principal Amount: $900,000,000
• Maturity: 5 years from closing
• Interest Rate: SOFR + 275 basis points per annum
• Amortization: 1.0% per annum (quarterly installments), with the remaining balance due at maturity (bullet payment)
• Security: Pledges of the equity interests of Halcyon US Holdings Inc. and VPI, together with liens on substantially all assets of VPI (subject to customary carve-outs for classified assets and government-contract-related restrictions)
• Commitment Date: June 8, 2023; funding to occur at Closing
A copy of the credit agreement commitment letter, dated June 8, 2023, is included in Exhibit A hereto.
Bridge Commitment (Expired). Meridian National Bank had previously provided a $200,000,000 bridge facility commitment to backstop a portion of the financing. This bridge commitment expired unfunded and was replaced by the $900,000,000 term loan facility described above. The bridge commitment is no longer outstanding.
Escrow Holdback. An amount of $71,000,000, representing 5% of the base purchase price, will be deposited into an escrow account at Closing and held for a period of 18 months to secure potential indemnification claims under the SPA. The escrow agent is Pinnacle Trust Company, N.A., 400 South LaSalle Street, Suite 1100, Chicago, IL 60605, a nationally chartered trust company. The escrow agreement is attached as part of Exhibit A.
Source-of-Funds Certification. The Parties hereby certify that all financing sources for the Transaction are from financial institutions organized in the United States, Germany, or allied nations that are members of the North Atlantic Treaty Organization. No financing for the Transaction originates from, is guaranteed by, or has been arranged by any person or entity in the People's Republic of China, the Russian Federation, or any other country of particular concern for CFIUS purposes. None of the lenders is a foreign government-owned or government-controlled financial institution.
2.7 Foreign Person's Advisors
The Buyer and the Acquisition Vehicle are advised by the following firms and individuals in connection with the Transaction and this Notice:
Buyer's U.S. Counsel (M&A, CFIUS, and Export Controls):
Calderwood & Harkness LLP
New York Office: 399 Park Avenue, 31st Floor New York, NY 10022 Telephone: (212) 555-8900
Washington, DC Office: 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7400
Principal Contacts:
• Beatrice Holloway, Partner — Mergers & Acquisitions (Responsible Partner for the Transaction)
• Margaret "Peggy" Ashworth, Of Counsel — National Security & CFIUS Practice (Lead CFIUS Counsel)
• Lt. Col. (Ret.) David Caruso, USAF, Senior Counsel — Government Contracts & Export Controls
Buyer's German Counsel:
Schilling Frey Rechtsanwälte Friedrichstraße 68 10117 Berlin, Germany Telephone: +49 (0)30 555 6000
Principal Contact:
• Prof. Dr. Ulrich Schilling, Senior Partner — Corporate / M&A and German Foreign Investment Review
Buyer's Financial Advisor:
Ashgrove Capital Group 450 Lexington Avenue, 38th Floor New York, NY 10017 Telephone: (212) 555-2100
Principal Contact:
• Philippe Beaumont, Managing Director — Technology, Media & Telecommunications
Buyer's Auditor:
Leinberger & Hess Wirtschaftsprüfungsgesellschaft Bockenheimer Landstraße 42 60323 Frankfurt am Main, Germany Telephone: +49 (0)69 555 3300
Transaction Tax Advisor:
Pemberton Kline LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 Telephone: (212) 555-4800
Principal Contact:
• Richard Pemberton, Partner — Transactional Tax
PART III — INFORMATION REGARDING THE U.S. BUSINESS (TARGET)
3.1 Identity and Basic Information — Marlowe Asset Management Photonics Inc.
The following information is provided with respect to the U.S. business that is the subject of the Transaction, pursuant to 31 C.F.R. § 800.502(b)(2):
Full Legal Name: Marlowe Asset Management Photonics Inc.
Short Name: VPI
Entity Type: Corporation organized under the laws of the State of Delaware
Date of Incorporation: February 14, 2009
Employer Identification Number (EIN): 26-4371885
Data Universal Numbering System (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
The Albuquerque facility is a 45,000-square-foot GaN-on-SiC (gallium nitride on silicon carbide) semiconductor fabrication facility. The facility includes both unclassified and classified production areas, with classified clean room areas designated as Sections C-7 through C-12. The Albuquerque facility holds a Facility Security Clearance up to the SECRET level.
Telephone: (719) 555-0200 (Colorado Springs headquarters); (505) 555-0300 (Albuquerque fabrication facility)
Website: www.vanguardphotonics.com (note: portions of the website require CAC authentication or authorized login for government customers)
FY2022 Revenue: $287,400,000
FY2022 EBITDA: $61,200,000
FY2022 Net Income: $38,700,000
Number of Employees: 486 as of July 1, 2023, of whom 212 hold active U.S. government security clearances
State of Delaware Franchise Tax Status: Current; all franchise taxes paid through the current period
3.2 VPI Management and Board of Directors
VPI's executive management team and board of directors are composed entirely of U.S. citizens. The following individuals serve in the indicated capacities:
Executive Officers:
Dr. Nathan Trevorrow — Founder, Chief Executive Officer, and Board Chair Age: 52. Citizenship: United States. Education: Ph.D., Electrical Engineering, Stanford University; B.S., Electrical Engineering, University of Colorado Boulder. Dr. Trevorrow is the founder of VPI and has served as CEO and Board Chair since the company's incorporation in 2009. Prior to founding VPI, Dr. Trevorrow served as a Program Manager at the Defense Advanced Research Projects Agency ("DARPA"), where he managed advanced semiconductor device programs within the microsystems Technology Office. Dr. Trevorrow holds an active TS/SCI security clearance. He is the named inventor on 19 of VPI's 47 U.S. patents.
Marissa Sung-Avila — President and Chief Operating Officer Age: 46. Citizenship: United States. Education: M.S., Electrical Engineering, Massachusetts Institute of Technology; B.S., Electrical Engineering, United States Military Academy at West Point. Ms. Sung-Avila co-founded VPI with Dr. Trevorrow in 2009 and has served as President and COO since 2014. Prior to co-founding VPI, Ms. Sung-Avila served as an officer in the U.S. Army signal corps, attaining the rank of Captain, with assignments including communications systems development at the U.S. Army Research Laboratory. Ms. Sung-Avila holds an active SECRET security clearance.
Derek Wainsborough, CPA — Chief Financial Officer Age: 44. Citizenship: United States. Education: M.B.A., University of Denver; B.S., Accounting, Colorado State University. Mr. Wainsborough joined VPI as CFO in 2016. Previously, he served as Vice President of Finance at two venture-backed technology companies in the Colorado Front Range area. Mr. Wainsborough is a Certified Public Accountant licensed in the State of Colorado. Mr. Wainsborough does not hold a U.S. government security clearance.
Col. (Ret.) Bryce Hendrickson, USAF — Vice President, Government Programs and Facility Security Officer Age: 58. Citizenship: United States. Education: M.S., Systems Engineering, Air Force Institute of Technology; B.S., Computer Science, U.S. Air Force Academy. Col. Hendrickson joined VPI in 2015 after retiring from the U.S. Air Force, where he served for 26 years with assignments including Director of Special Programs, Electronic Systems Center, Hanscom AFB, Massachusetts. Col. Hendrickson serves as VPI's designated Facility Security Officer ("FSO") under the National Industrial Security Program Operating Manual ("NISPOM"). Col. Hendrickson holds an active TS/SCI security clearance.
Board of Directors:
VPI's board of directors currently consists of five (5) members:
Ms. Delacroix is a former senior executive of a major U.S. defense prime contractor and holds an active SECRET security clearance. Mr. Yee is a Managing Partner of Ridgecrest Ventures Management LLC. Ms. Hartmann is a Managing Director of Cascadian Capital Partners Management LLC.
3.3 VPI Business Description
A detailed business description of VPI is attached as Exhibit B to this Notice. The following is a summary of VPI's business and operations.
VPI designs and manufactures advanced gallium-nitride (GaN) power amplifier chips and related semiconductor devices for defense, satellite communications, and 5G telecommunications applications. Founded in 2009 by Dr. Nathan Trevorrow and Marissa Sung-Avila, VPI has grown from a DARPA-funded startup into one of the premier domestic suppliers of high-power, high-frequency GaN semiconductor devices for U.S. defense platforms.
Core Technology. VPI's core technology centers on GaN-on-SiC (gallium nitride on silicon carbide) semiconductor processes. GaN-on-SiC technology offers significant advantages over legacy semiconductor materials (such as gallium arsenide) for high-power, high-frequency applications, including greater power density, higher operating temperatures, wider bandwidth, and improved thermal management. VPI has developed proprietary expertise in three key technology areas:
(a) GaN-on-SiC Epitaxial Growth Process: VPI's proprietary epitaxial growth recipes enable the deposition of highly uniform, defect-minimized GaN layers on silicon carbide substrates, resulting in devices with industry-leading power density and reliability.
(b) High-Electron-Mobility Transistor (HEMT) Design: VPI has developed optimized HEMT gate structures that achieve superior gain, linearity, and noise performance across a wide frequency range, including Ku-band, Ka-band, and W-band frequencies.
(c) Millimeter-Wave (mmWave) Power Amplifier Architectures: VPI designs broadband matching networks and multi-stage power amplifier architectures optimized for millimeter-wave frequencies, supporting defense radar, satellite communications, and emerging 5G applications.
Primary End Markets. VPI's products serve three primary end markets:
(i) Defense Radar Systems: VPI supplies GaN power amplifier chips and transmit/receive (T/R) modules for active electronically scanned array (AESA) radar systems used by the U.S. Army, U.S. Air Force, and U.S. Navy. VPI's products are incorporated into the AN/TPS-80 Ground/Air Task Oriented Radar (G/ATOR) and are under development for next-generation missile defense radar systems.
(ii) Satellite Communications: VPI designs and manufactures GaN power amplifiers for satellite communication uplink terminals and on-orbit payloads, supporting both military and commercial satellite operators.
(iii) 5G Telecommunications Infrastructure: VPI produces GaN power amplifiers for 5G base station infrastructure, specifically for mmWave frequency bands. This commercial business represents a growing segment of VPI's revenue.
Manufacturing. VPI operates a 45,000-square-foot GaN-on-SiC semiconductor fabrication facility at 9200 Innovation Boulevard, Albuquerque, NM 87113. The Albuquerque facility is equipped with state-of-the-art epitaxial growth reactors, photolithography tools, plasma etch systems, metal deposition systems, and on-wafer RF test equipment. The facility includes both unclassified and classified clean room areas. Classified work is performed in clean room Sections C-7 through C-12, which are secured in accordance with NISPOM requirements and DCSA oversight.
Customers. VPI serves both U.S. government (defense and intelligence) customers and commercial customers. VPI's U.S. government customers include the U.S. Army Program Executive Office for intelligence, Electronic Warfare, and Sensors ("PEO IEW&S"), the U.S. Air Force Research Laboratory ("AFRL"), the Missile Defense Agency ("MDA"), the U.S. Navy through NAVSEA (via Ironclad Defense Systems Inc. as prime contractor), and the Department of Homeland Security Science and Technology Directorate ("DHS S&T"). VPI's commercial customers include major satellite communication equipment manufacturers and 5G base station OEMs.
3.4 VPI Ownership Structure (Pre-Transaction)
Prior to the Closing, VPI is owned by the following shareholders. All existing shareholders are U.S. persons within the meaning of 31 C.F.R. § 800.252. There is no foreign ownership, control, or influence over VPI at the present time.
Ridgecrest Ventures Fund III, L.P. is a Delaware limited partnership. Its general partner is Ridgecrest Ventures Management LLC, a Delaware limited liability company. The managing member and principal of Ridgecrest Ventures Management LLC is Franklin Yee, Managing Partner. Ridgecrest Ventures' offices are located at 3300 Sand Hill Road, Suite 220, Menlo Park, CA 94025. Ridgecrest Ventures Fund III, L.P. led VPI's Series B financing round in 2013. All limited partners of Ridgecrest Ventures Fund III, L.P. are U.S. persons.
Cascadian Capital Partners Growth Fund II, L.P. is a Delaware limited partnership. Its general partner is Cascadian Capital Partners Management LLC, a Delaware limited liability company. The managing member and principal of Cascadian Capital Partners Management LLC is Olivia Hartmann, Managing Director. Cascadian Capital Partners' offices are located at 1201 Third Avenue, Suite 4400, Seattle, WA 98101. Cascadian Capital Partners Growth Fund II, L.P. led VPI's Series C financing round in 2017. All limited partners of Cascadian Capital Partners Growth Fund II, L.P. are U.S. persons.
The employee option pool (11.8%) represents shares held by VPI employees who have exercised vested stock options pursuant to VPI's 2009 Equity Incentive Plan, as amended. The "Other angel investors" (5.7%) represent individual U.S. investors who participated in VPI's seed and Series A financing rounds between 2009 and 2012.
3.5 VPI Products and Services Subject to U.S. Government Regulation
VPI designs and manufactures products that are subject to U.S. government regulation under both the International Traffic in Arms Regulations ("ITAR"), administered by the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), and the Export Administration Regulations ("EAR"), administered by the U.S. Department of Commerce, Bureau of Industry and Security ("BIS"). A detailed listing of VPI's regulated products and services is provided in Exhibit E to this Notice. The following is a summary:
ITAR-Controlled Defense Articles. VPI manufactures items classified as defense articles under Category XI(a)(3) of the United States Munitions List ("USML"), which encompasses military electronics, including specifically designed GaN power amplifier modules for defense radar systems (including the AN/TPS-80 and related platforms), transmit/receive modules designed for missile defense applications, and military-grade communications amplifiers. These items are manufactured, in whole or in part, in the classified clean room areas of VPI's Albuquerque fabrication facility and are provided exclusively to the U.S. Department of Defense and to approved allied-nation customers pursuant to valid export licenses.
EAR-Classified Items. VPI manufactures and designs items classified under the following Export Control Classification Numbers:
• ECCN 3A001: Certain GaN high-electron-mobility transistor (HEMT) devices and microwave/millimeter-wave electronic components with specified performance characteristics exceeding EAR control thresholds.
• ECCN 3A991: Related electronic components that fall below the control thresholds of 3A001 but are nonetheless classified for anti-terrorism (AT) reasons.
• ECCN 3E001: Technology (including design data, process specifications, manufacturing know-how, and engineering drawings) for the development or production of items classified under ECCN 3A001.
DDTC Registration. VPI has been registered with DDTC since 2011 as a manufacturer and exporter of defense articles. VPI's DDTC Registration Number is M-24817. VPI's registration is current and in good standing.
Active Export Licenses. VPI holds three (3) active DSP-5 export licenses authorizing the export of specific ITAR-controlled items to the United Kingdom and Australia, both of which are NATO allies and close defense partners of the United States. These licenses were obtained in the ordinary course of VPI's business and relate to allied-nation radar and communications programs.
Commodity Jurisdiction Determinations. VPI has on file with DDTC multiple commodity jurisdiction determinations confirming the USML classification of certain VPI products. These determinations are available for review by the Committee upon request.
3.6 VPI Government Contracts
VPI holds fourteen (14) active contracts with the U.S. Department of Defense, both as a prime contractor and as a subcontractor. A detailed summary of all active government contracts is provided in Exhibit F to this Notice. The aggregate remaining backlog on these contracts is approximately $193,000,000.
The following table summarizes VPI's top five contracts by remaining backlog:
The remaining nine (9) contracts have a combined remaining backlog of approximately $193,000,000 less the sum of the top five contracts ($193,000,000). Individual details for all fourteen contracts are set forth in Exhibit F, including contract numbers, contracting agencies, contract types (prime or subcontract), total contract values, remaining backlog, periods of performance, classification levels, and small business set-aside status (if applicable).
VPI's principal contracting relationships are with the U.S. Army PEO IEW&S, AFRL, MDA, NAVSEA (through Ironclad Defense Systems Inc.), and DHS S&T. VPI has performed on DoD contracts continuously since 2011 and has maintained a strong performance record with no terminations for default or material contract disputes.
3.7 VPI Facility Security Clearance and Cleared Personnel
VPI holds a Facility Security Clearance ("FCL") at the SECRET level, issued and overseen by the Defense Counterintelligence and Security Agency ("DCSA"), formerly known as the Defense Security Service. VPI's CAGE Code is 7VK92. An anonymized summary of VPI's cleared personnel is provided in Exhibit G to this Notice.
Facility Security Officer. VPI's designated Facility Security Officer is Col. (Ret.) Bryce Hendrickson, USAF, who holds an active TS/SCI security clearance. Col. Hendrickson has served as VPI's FSO since 2015 and is responsible for all aspects of VPI's industrial security program, including personnel security processing, classified material control, visitor control, and compliance with NISPOM requirements.
Cleared Personnel. VPI employs 212 personnel who hold active U.S. government security clearances, representing approximately 43.6% of VPI's total workforce of 486 employees. Cleared personnel are distributed across VPI's Colorado Springs headquarters and Albuquerque fabrication facility.
A breakdown of cleared personnel by clearance level is provided in Exhibit G. Due to the sensitive nature of this information, individual identities of cleared personnel (other than the FSO and executive officers identified elsewhere in this Notice) have been withheld and are presented in anonymized form. The Committee may request individual identifying information through appropriate secure channels.
Classified Work Areas. All classified work is performed at VPI's Albuquerque fabrication facility, specifically in clean room Sections C-7 through C-12. These sections are physically separated from VPI's unclassified production areas by access-controlled barriers, are equipped with intrusion detection systems, and are subject to regular DCSA security inspections.
3.8 VPI intellectual Property
VPI maintains a substantial portfolio of intellectual property related to its GaN semiconductor technology. The following is a summary of VPI's intellectual property holdings:
U.S. Patents. VPI holds forty-seven (47) granted U.S. patents and has twelve (12) U.S. patent applications currently pending before the U.S. Patent and Trademark Office. VPI's patent portfolio is organized around three key patent families:
(a) GaN-on-SiC Epitaxial Growth Process (U.S. Patent Nos. 9,XXX,001 through 9,XXX,008): This family of 8 patents covers VPI's proprietary metal-organic chemical vapor deposition (MOCVD) processes for growing high-quality GaN epitaxial layers on silicon carbide substrates. The earliest priority date in this family is 2012.
(b) HEMT Gate Structure Optimization (U.S. Patent Nos. 10,XXX,101 through 10,XXX,119): This family of 19 patents covers VPI's proprietary techniques for optimizing the gate structure of GaN high-electron-mobility transistors, including gate recess geometry, barrier layer composition, and passivation methods. The earliest priority date in this family is 2015.
(c) mmWave Broadband Matching Network (U.S. Patent Nos. 11,XXX,201 through 11,XXX,220): This family of 20 patents covers VPI's proprietary broadband impedance matching networks for millimeter-wave power amplifiers, enabling wideband operation across Ka-band and W-band frequencies. The earliest priority date in this family is 2018.
Trade Secrets. VPI maintains thirty-one (31) registered internal trade secrets, encompassing proprietary GaN epitaxial growth recipes (including specific precursor gas flow rates, growth temperatures, chamber pressures, and multi-layer heterostructure sequences) and die-level reliability screening processes (including burn-in profiles, high-temperature reverse bias test protocols, and statistical screening criteria). These trade secrets are maintained under VPI's formal trade secret protection program, which includes access controls, non-disclosure agreements, and classification of documents in accordance with VPI's internal information security policy.
Government-Funded Inventions. Twenty-three (23) of VPI's 47 U.S. patents were developed, in whole or in part, under U.S. government-funded contracts. These inventions are subject to the Bayh-Dole Act (35 U.S.C. §§ 200–212), which provides the U.S. government with a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the invention on behalf of the United States. Additionally, these inventions are subject to the government's march-in rights under 35 U.S.C. § 203 and the applicable provisions of DFARS 252.227-7038 (Patent Rights — Ownership by the Contractor). VPI has complied with all invention disclosure, election, and reporting requirements under the Bayh-Dole Act with respect to these inventions.
3.9 VPI's Advisors
VPI and its selling shareholders are advised by the following firms and individuals in connection with the Transaction and this Notice:
Seller's / Target's Counsel:
Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006 Telephone: (202) 555-3100
Principal Contacts:
• Harrison Whitfield, Partner — Government Contracts & National Security (Lead Partner for CFIUS Filing)
• Sandra Niehaus, Partner — Mergers & Acquisitions (Lead M&A Partner)
• Tobias Kwan, Senior Associate — National Security & CFIUS Practice
Seller's Financial Advisor:
Ridgeway Bancorp LLC 101 California Street, Suite 2800 San Francisco, CA 94111 Telephone: (415) 555-6200
Principal Contact:
• Catherine Okafor, Managing Director — Technology Investment Banking
VPI Auditor:
Arbor & Greenfield LLP 1700 Lincoln Street, Suite 3200 Denver, CO 80203 Telephone: (303) 555-4400
Engagement Partner:
• Joan Greenfield, CPA — Audit Partner
PART IV — DESCRIPTION OF THE TRANSACTION
4.1 Transaction Structure
The Transaction is structured as a direct stock purchase. Halcyon US Holdings Inc. (the "Acquisition Vehicle"), a wholly owned indirect subsidiary of HSAG formed on June 5, 2023, will acquire 100% of the outstanding equity interests of Marlowe Asset Management Photonics Inc. from VPI's existing shareholders identified in Section 3.4 above (collectively, the "Sellers"). The acquisition will be effected pursuant to the Stock Purchase Agreement (the "SPA") executed on June 10, 2023.
Upon completion of the Transaction, VPI will become a wholly owned indirect subsidiary of HSAG. The chain of ownership, from top to bottom, will be: HSAG (Germany) → Halcyon International Holdings B.V. (Netherlands) → Halcyon US Holdings Inc. (Delaware) → Marlowe Asset Management Photonics Inc. (Delaware). Organizational charts depicting VPI's pre-closing and post-closing corporate structures are attached as Exhibit D.
VPI will continue to operate as a standalone legal entity following the Closing. No merger or consolidation of VPI with or into any other entity is contemplated. VPI will retain its separate corporate existence, its name, its Delaware corporate charter, its EIN, its CAGE Code, and its Facility Security Clearance. VPI's day-to-day operations will continue from its existing locations in Colorado Springs, Colorado and Albuquerque, New Mexico.
4.2 Transaction Documents
The Transaction is governed by the following transaction documents, copies of which are attached as Exhibit A to this Notice:
(a) Stock Purchase Agreement, dated June 10, 2023, by and among Halcyon US Holdings Inc. (as Buyer), the Sellers listed on Schedule I thereto, and Marlowe Asset Management Photonics Inc. (for certain limited purposes);
(b) Escrow Agreement, dated as of the Closing Date, by and among Halcyon US Holdings Inc., the Sellers' Representative, and Pinnacle Trust Company, N.A. (as Escrow Agent);
(c) Key Employee Retention and Employment Agreements with Dr. Nathan Trevorrow, Marissa Sung-Avila, and Col. (Ret.) Bryce Hendrickson;
(d) Credit Agreement (term loan commitment), dated June 8, 2023, among Halcyon US Holdings Inc. (as Borrower), Meridian National Bank (as Administrative Agent), Atlas Commercial Lending AG, and Pacific Basin Credit Corp. (as Co-Lead Arrangers);
(e) Representations and Warranties Insurance Policy Binder, issued by Graystone Specialty Insurance Company, Policy No. GSI-RW-2023-04821;
(f) Certificate of Incorporation and Bylaws of Marlowe Asset Management Photonics Inc. (as currently in effect);
(g) Certificate of Incorporation and Bylaws of Halcyon US Holdings Inc. (as currently in effect); and
(h) Satzung (Articles of Association) of Halcyon Semiconductor Aktiengesellschaft (English translation provided).
4.3 Purchase Price and Economic Terms
The principal economic terms of the Transaction are as follows:
Base Purchase Price. The base purchase price for 100% of the outstanding equity of VPI is $1,420,000,000, calculated on a cash-free, debt-free basis, with a normalized net working capital target of $34,600,000, as set forth in Section 2.5 of the SPA. The base purchase price is subject to a customary post-closing true-up adjustment based on actual net working capital, cash, indebtedness, and transaction expenses of VPI as of the Closing Date.
Consideration. The purchase price is payable in 100% cash at the Closing. No equity or equity-linked consideration is being issued by HSAG or any of its affiliates to the Sellers.
Escrow Holdback. An amount equal to $71,000,000, representing 5% of the base purchase price, will be deposited into an escrow account at the Closing and held for a period of 18 months to secure VPI's and the Sellers' indemnification obligations under Article VIII of the SPA. The escrow agent is Pinnacle Trust Company, N.A., 400 South LaSalle Street, Suite 1100, Chicago, IL 60605.
Earnout. In addition to the base purchase price, the Sellers are entitled to receive an earnout payment of up to $85,000,000, payable in two tranches tied to VPI's achievement of specified government-contract revenue milestones:
• Tranche 1: Up to $50,000,000, payable in the first quarter of calendar year 2025, contingent upon VPI's achievement of specified government-contract revenue targets during calendar year 2024;
• Tranche 2: Up to $35,000,000, payable in the first quarter of calendar year 2026, contingent upon VPI's achievement of specified government-contract revenue targets during calendar year 2025.
The specific revenue milestones, measurement methodology, and payment mechanics are set forth in Exhibit 2.6 to the SPA. The earnout is designed to align the interests of the Sellers with the continued successful performance of VPI's government contract portfolio following the Closing.
Maximum Aggregate Consideration. The maximum aggregate consideration payable in connection with the Transaction is $1,505,000,000 ($1,420,000,000 base purchase price plus $85,000,000 maximum earnout).
Representations and Warranties Insurance. The Buyer has procured a buy-side representations and warranties insurance policy from Graystone Specialty Insurance Company, Policy No. GSI-RW-2023-04821, with the following terms:
• Policy Limit: $142,000,000 (10% of base purchase price)
• Retention (Deductible): $14,200,000 (1% of base purchase price)
• Premium: $4,970,000 (3.5% of policy limit)
• Insurer: Graystone Specialty Insurance Company
• Broker: Ashford Gallagher & Co.
Implied Valuation Multiples. Based on VPI's FY2022 financial results, the Transaction implies the following valuation multiples:
• Implied EV/Revenue: approximately 4.94x ($1,420,000,000 ÷ $287,400,000)
• Implied EV/EBITDA: approximately 23.2x ($1,420,000,000 ÷ $61,200,000)
These multiples are consistent with valuations observed in recent transactions involving U.S. compound semiconductor companies with significant defense-related revenue and proprietary technology.
4.4 Conditions to Closing
The obligation of each party to consummate the Transaction is subject to the satisfaction or waiver of the following conditions precedent, as set forth in Article VI of the SPA:
(a) CFIUS Clearance. The Committee shall have either (i) notified the Parties in writing that the Committee has concluded its review or investigation of the Transaction and determined that there are no unresolved national security concerns (with or without a mitigation agreement), (ii) notified the Parties that the Committee has concluded action under Section 721 of the DPA, or (iii) the applicable waiting period under Section 721 shall have expired without action by the Committee.
(b) HSR Act Clearance. If applicable, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have expired or been terminated, or the Parties shall have received early termination of the waiting period.
(c) German/EU Foreign Investment Review. If applicable, the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz, or "BMWK") shall have either cleared the Transaction or the applicable review period shall have expired without a prohibition order or conditions under the AWG/AWV.
(d) Representations and Warranties. The representations and warranties of the Sellers shall be true and co

JOINT VOLUNTARY NOTICE

Record

Parties

Dates

Amounts