1032-00004 · Client 1032 · Pre-Filing

pre-filing-request-letter-treasury.docx DOCUMENT M&A / Corporate

70 / 79 ← → ✕

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO 50 U.S.C. § 4565(c)

CALDERWOOD & HARKNESS LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7800 Facsimile: (202) 554-7801 www.calderwoodharkness.com

June 15, 2023

Office of Investment Security U.S. Department of the Treasury 1500 Pennsylvania Avenue NW Washington, DC 20220

Attention: Staff Chairperson, Committee on Foreign Investment in the United States

Re: Request for Pre-Filing Consultation — Proposed Acquisition of Marlowe Asset Management Photonics Inc. by Halcyon Semiconductor Aktiengesellschaft

Dear Staff Chairperson:

This letter is submitted on behalf of our client, Halcyon Semiconductor Aktiengesellschaft ("HSAG"), a publicly traded semiconductor company organized under the laws of the Federal Republic of Germany and listed on the Frankfurt Stock Exchange (XETRA: HLC), in connection with HSAG's proposed acquisition of one hundred percent (100%) of the outstanding equity interests of Marlowe Asset Management Photonics Inc. ("VPI"), a Delaware C-corporation. Calderwood & Harkness LLP serves as U.S. counsel to HSAG in all matters relating to this transaction, including regulatory filings before the Committee on Foreign Investment in the United States ("CFIUS" or the "Committee"). I am Margaret "Peggy" Ashworth, Of Counsel in the National Security & CFIUS practice of our Washington, DC office, and I am the primary point of contact for HSAG in this proceeding.

The purpose of this letter is to respectfully request an informal pre-filing consultation meeting with the Treasury Department's Office of Investment Security ("OIS"), pursuant to the CFIUS regulations codified at 31 C.F.R. Part 800, in advance of the parties' intended submission of a joint voluntary notice under 31 C.F.R. § 800.501. HSAG and VPI intend to submit such a joint voluntary notice and are requesting this pre-filing consultation to introduce the transaction to the Committee, discuss the key elements of the proposed acquisition and VPI's business activities, identify areas of potential national security concern at an early stage, and facilitate an efficient and thorough review process. We believe that early engagement with the Committee will be beneficial to all parties and will contribute to a constructive and transparent review.

We respectfully propose that the pre-filing consultation meeting be scheduled during the week of June 19, 2023. Our preferred date is Monday, June 19, 2023, though we remain available on any day during that week at the Committee's convenience. Counsel to the seller and the target company, Wethersfield & Gale LLP, represented by Harrison Whitfield, Lead Partner in the Government Contracts & National Security practice, has confirmed that they will participate jointly in the pre-filing consultation and have been copied on this correspondence.

Set forth below is a summary of the transaction, the parties, jurisdictional considerations, HSAG's proposed mitigation approach, and relevant contact information, each designed to provide the Committee with sufficient background to facilitate a productive initial consultation.

I. OVERVIEW OF THE TRANSACTION

A. Transaction Structure

HSAG proposes to acquire one hundred percent (100%) of the outstanding equity interests of VPI through Halcyon US Holdings Inc. ("Halcyon Holdings"), a wholly owned special purpose acquisition vehicle. Halcyon Holdings is a Delaware corporation formed on June 5, 2023, for the sole purpose of consummating this transaction. Halcyon Holdings' registered agent is National Registered Agents of Delaware, located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904. Its Employer Identification Number is 93-2841067. At closing, Halcyon Holdings will become the direct parent of VPI, and VPI will become an indirect, wholly owned subsidiary of HSAG.

The definitive Stock Purchase Agreement (the "SPA") governing the transaction was executed by the parties on June 10, 2023. The acquisition is structured as an all-cash purchase on a cash-free, debt-free basis, with a normalized net working capital target of approximately $34.6 million, subject to a customary post-closing true-up mechanism. The base purchase price for the acquisition is $1.42 billion (one billion four hundred twenty million U.S. dollars). In addition, the SPA provides for an earnout payment of up to $85 million (eighty-five million U.S. dollars), contingent upon VPI's achievement of specified government-contract revenue milestones during calendar years 2024 and 2025. The maximum aggregate consideration payable by HSAG (inclusive of the base purchase price and the full earnout amount) is $1.505 billion (one billion five hundred five million U.S. dollars).

The SPA contains customary representations, warranties, covenants, and indemnification provisions, including regulatory cooperation covenants requiring both parties to use commercially reasonable efforts to obtain all necessary governmental approvals, including CFIUS clearance. The transaction is not subject to an antitrust filing under the Hart-Scott-Rodino Antitrust Improvements Act due to the parties' determination that no applicable filing threshold is triggered. The parties will provide a complete copy of the executed SPA, together with all ancillary transaction documents, as part of the joint voluntary notice.

B. Financing Summary

The acquisition will be financed through a combination of debt and equity, as follows:

Senior Secured Term Loan. HSAG has secured commitments for a $900 million senior secured term loan from a lending syndicate led by Meridian National Bank (serving as administrative agent), with Atlas Commercial Lending AG and Pacific Basin Credit Corp. serving as co-lead arrangers. The term loan bears interest at the Secured Overnight Financing Rate (SOFR) plus 275 basis points, with a maturity of five (5) years and mandatory annual amortization of one percent (1%) of the original principal amount. The term loan is secured by the equity interests of Halcyon Holdings and the assets of VPI post-closing. Committed financing documentation is available for the Committee's review upon request.

Equity Contribution. HSAG will make an equity contribution of approximately $520 million to Halcyon Holdings, funded from a combination of HSAG's existing balance sheet cash reserves and a draw of approximately €300 million on HSAG's existing revolving credit facility maintained with Rheinische Handelsbank AG, a German financial institution. HSAG maintains adequate liquidity to fund this equity contribution without reliance on any non-German or non-U.S. sources of capital.

C. Anticipated Closing Timeline

The parties anticipate closing the transaction promptly upon satisfaction of all conditions precedent set forth in the SPA, including, critically, the receipt of clearance from the Committee on Foreign Investment in the United States. HSAG fully recognizes that the acquisition of VPI — given VPI's involvement in defense-critical technologies, classified government programs, and export-controlled activities — will require thorough review by the Committee, and potentially an extended investigation period. HSAG is committed to full, transparent, and timely cooperation with the Committee throughout the review and, if applicable, investigation process. The SPA includes a regulatory drop-dead date that provides ample time for a complete CFIUS review, including a potential investigation phase and negotiation of a mitigation agreement.

II. DESCRIPTION OF THE ACQUIROR: HALCYON SEMICONDUCTOR AG

A. Corporate Profile

The acquiror's full legal name is Halcyon Semiconductor Aktiengesellschaft. HSAG is an Aktiengesellschaft — a public stock corporation organized under the laws of the Federal Republic of Germany. HSAG's global headquarters are located at Industriestraße 44, 01099 Dresden, Saxony, Germany. The company is registered in the German commercial register (Handelsregister) of the Amtsgericht Dresden under registration number HRB 28416, and its Legal Entity Identifier (LEI) is 5299007KXQ2M4GHILZ38.

HSAG's shares are listed and traded on the Frankfurt Stock Exchange under the XETRA ticker symbol HLC. As of June 1, 2023, HSAG's market capitalization was approximately €14.8 billion (fourteen billion eight hundred million euros). For the fiscal year ended December 31, 2022, HSAG reported consolidated revenues of approximately €6.12 billion and consolidated EBITDA of approximately €1.37 billion.

HSAG is a widely held public company. Based on HSAG's most recent shareholder analysis (as of the record date of April 30, 2023), HSAG's shares are held by a diversified base of institutional investors, retail shareholders, and index funds. No single shareholder holds more than 5% of HSAG's outstanding shares except for certain widely known European institutional asset managers. Critically, no government — foreign or domestic — holds any equity interest in HSAG, and no foreign government entity exercises control or influence over the company, its supervisory board (Aufsichtsrat), or its management board (Vorstand). HSAG is prepared to provide the Committee with a detailed analysis of its shareholder base, including beneficial ownership information for all holders above 3%, as part of the joint voluntary notice.

B. Management. HSAG's senior management includes the following key officers:

• Chief Executive Officer (Vorstandsvorsitzender): Dr. Maximilian Ehrhardt, age 57. Dr. Ehrhardt is a materials physicist by training and has served in various leadership positions at HSAG for eighteen (18) years, including as CEO since 2017. Dr. Ehrhardt is a citizen of the Federal Republic of Germany and holds no other citizenships.

• Chief Financial Officer (Finanzvorstand): Katarina Brückner, age 49. Ms. Brückner has served as HSAG's CFO since 2020 and was previously the company's Senior Vice President of Corporate Finance. Ms. Brückner is a citizen of the Federal Republic of Germany.

• General Counsel (Chefjustitiar): Stefan Lohse, LL.M. (Georgetown University Law Center). Mr. Lohse is admitted to practice law in both the State of New York and in Germany. He is a dual citizen of Germany and the United States and has served as HSAG's General Counsel since 2019. Mr. Lohse's dual U.S. citizenship and familiarity with U.S. regulatory frameworks, including CFIUS, will facilitate HSAG's engagement with the Committee.

Detailed biographical information and personal identifier information for all members of HSAG's management board and supervisory board will be provided in the joint voluntary notice.

C. Existing U.S. Operations

HSAG currently maintains a U.S. operating subsidiary, Halcyon US Inc., a Delaware corporation headquartered at 11501 Alterra Parkway, Suite 300, Austin, Texas 78758 (EIN: 81-3056429). Halcyon US Inc. operates a fabless semiconductor design center employing approximately 320 engineers and support staff. The Austin design center focuses exclusively on commercial semiconductor product development, including mixed-signal integrated circuits and automotive power management devices.

Halcyon US Inc. does not currently perform any classified work for the U.S. government, does not hold any U.S. government contracts or subcontracts, and is not engaged in any activities involving defense articles or services controlled under the International Traffic in Arms Regulations (ITAR) or items requiring export licenses under the Export Administration Regulations (EAR). Halcyon US Inc. does not hold a facility security clearance, and none of its employees hold U.S. government security clearances.

D. Foreign Operations of Note

HSAG maintains global operations spanning Europe, Asia, and North America, with fabrication facilities in Germany (Dresden and Regensburg), design centers in the Netherlands, Israel, the United Kingdom, Japan, South Korea, and the United States (Austin), and sales offices across all major semiconductor markets. We note that HSAG maintains a small subsidiary in the People's Republic of China — Halcyon Semiconductor (Shanghai) Co., Ltd. — which operates a sales and technical support office with approximately 45 employees. The Shanghai subsidiary's activities are limited to customer-facing sales support and field application engineering for HSAG's commercial automotive and industrial product lines. HSAG is fully prepared to provide the Committee with comprehensive details regarding the scope, nature, and personnel of its China-based operations, as well as any other foreign operations the Committee may wish to examine, both in the joint voluntary notice and in response to any questions the Committee may raise during the review process.

III. DESCRIPTION OF THE TARGET: Marlowe Asset Management PHOTONICS INC.

A. Corporate Profile

The target company's full legal name is Marlowe Asset Management Photonics Inc. VPI is a Delaware C-corporation, originally incorporated on February 14, 2009. Its Employer Identification Number is 26-4371885. VPI's corporate headquarters are located at 7400 Ridgeline Parkway, Colorado Springs, Colorado 80919. VPI's primary fabrication facility — a 45,000 square-foot gallium-nitride-on-silicon-carbide (GaN-on-SiC) wafer fabrication facility — is located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113.

For the fiscal year ended December 31, 2022, VPI reported revenues of approximately $287.4 million and EBITDA of approximately $61.2 million. VPI currently employs approximately 486 full-time employees across its Colorado Springs headquarters and Albuquerque fabrication facility, including engineers, technicians, program managers, and administrative personnel.

B. Management. VPI's current senior management team includes the following individuals:

• Founder and Chief Executive Officer: Dr. Nathan Trevorrow, age 52. Dr. Trevorrow holds a Ph.D. in Electrical Engineering from the University of Colorado Boulder and previously served as a program manager at the Defense Advanced Research Projects Agency (DARPA), where he managed research programs in wide-bandgap semiconductor materials. Dr. Trevorrow currently holds an active U.S. government security clearance at the TS/SCI level. He is a United States citizen.

• President and Chief Operating Officer: Marissa Sung-Avila, age 46. Ms. Sung-Avila is a former officer of the United States Army signal corps and previously held positions with defense contractors prior to joining VPI. She currently holds an active U.S. government security clearance at the SECRET level. She is a United States citizen.

• Chief Financial Officer: Derek Wainsborough, CPA. Mr. Wainsborough oversees VPI's financial operations and has served in this role since 2016. He is a United States citizen.

• Vice President, Government Programs and Facility Security Officer: Colonel (Ret.) Bryce Hendrickson, United States Air Force. Col. Hendrickson retired from the U.S. Air Force after a 28-year career in signals intelligence and acquisition program management. He serves as VPI's Facility Security Officer (FSO) under the National Industrial Security Program (NISP) and currently holds an active U.S. government security clearance at the TS/SCI level. He is a United States citizen.

C. Products and Technology

VPI designs and manufactures advanced gallium-nitride (GaN) power amplifier chips and related components used in a range of applications, including defense radar systems, satellite communications platforms, electronic warfare systems, and commercial fifth-generation (5G) wireless infrastructure. GaN semiconductors are a foundational enabling technology for next-generation defense electronics due to their high power density, efficiency, and ability to operate at high frequencies.

VPI's key product lines include the following:

• GaN High-Electron-Mobility Transistor (HEMT) Modules: Discrete and multi-chip modules used in phased array radar systems, electronic countermeasure systems, and satellite communication uplinks.

• mmWave Power Amplifiers: Millimeter-wave power amplifier integrated circuits operating at frequencies above 30 GHz, designed for advanced radar, communications, and sensing applications.

• Transmit/Receive (T/R) Modules: Integrated T/R modules incorporating GaN power amplifiers, low-noise amplifiers, and control circuitry, designed for active electronically scanned array (AESA) radar systems.

VPI's intellectual property portfolio is substantial. The company currently holds 47 issued U.S. patents and has 12 patent applications pending before the United States Patent and Trademark Office, relating to GaN epitaxial growth techniques, HEMT device design and architecture, and mmWave power amplifier circuit topologies. In addition, VPI maintains 31 registered internal trade secrets, the majority of which relate to proprietary GaN epitaxial layer recipes (including aluminum gallium nitride barrier compositions and doping profiles) and die-level reliability screening processes developed over more than a decade of fabrication experience. These trade secrets represent core competitive advantages that are closely guarded and are not disclosed outside of VPI's cleared facilities.

D. Government Contracts

VPI currently holds fourteen (14) active contracts with agencies of the U.S. Department of Defense and the U.S. Department of Homeland Security, serving as both a prime contractor and a subcontractor. The aggregate backlog under these contracts is approximately $193 million. Key contracting agencies and entities include the U.S. Army Program Executive Office for intelligence, Electronic Warfare & Sensors (PEO IEW&S), the U.S. Air Force Research Laboratory (AFRL), the Missile Defense Agency (MDA), the Department of Homeland Security Science and Technology Directorate (DHS S&T), and Ironclad Defense Systems Inc. (as prime contractor to the U.S. Navy Naval Sea Systems Command (NAVSEA)).

The five (5) largest active contracts by remaining backlog are as follows:

Several of these contracts involve classified performance requirements and require VPI personnel to maintain active U.S. government security clearances, as discussed in Section III.F below.

E. Export-Controlled Items

VPI has been registered with the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) since 2011, under DDTC Registration Number M-24817. VPI's products include defense articles classified under the United States Munitions List (USML), specifically Category XI(a)(3) (military electronics, including radar-related power amplifiers), as well as items classified under the Export Administration Regulations (EAR) Commerce Control List, specifically under Export Control Classification Numbers (ECCNs) 3A001 (electronic components with military or proliferation-sensitive applications), 3A991 (electronic items not controlled by 3A001), and 3E001 (technology for the development or production of items classified under 3A001).

VPI currently holds three (3) active DSP-5 export licenses issued by the DDTC, authorizing the export of specified defense articles to NATO allies, specifically the United Kingdom and Australia. VPI maintains a robust export compliance program overseen by its VP of Government Programs, Col. (Ret.) Bryce Hendrickson, and an experienced export compliance team. HSAG understands that the export-controlled nature of VPI's products is a significant element of the Committee's national security analysis.

F. Facility Security Clearance and Cleared Personnel

VPI's Albuquerque, New Mexico fabrication facility holds a Facility Security Clearance (FCL) at the SECRET level under the National Industrial Security Program (NISP). The facility's CAGE Code is 7VK92, and its DUNS Number is 07-812-4493. The FCL is administered under a DD Form 441 (Department of Defense Security Agreement), and the facility is subject to oversight by the Defense Counterintelligence and Security Agency (DCSA). Col. (Ret.) Bryce Hendrickson serves as the Facility Security Officer.

Of VPI's approximately 486 employees, 212 employees (approximately 43.6% of the workforce) hold active U.S. government security clearances at the SECRET or TS/SCI level. This substantial proportion of cleared personnel reflects the nature of VPI's business, which is heavily oriented toward classified defense programs. HSAG is aware that the maintenance of VPI's facility security clearance and the clearances of its personnel are matters of significant concern to the Committee and to the Department of Defense.

G. Current Ownership

VPI is currently privately held by a group of U.S. persons, including its founders, venture capital investors, employees, and early-stage angel investors. The current ownership structure is as follows:

All existing shareholders of VPI are United States persons. Neither VPI nor any of its equity holders has any foreign ownership, control, or influence (FOCI) as that term is understood under the National Industrial Security Program Operating Manual (NISPOM, 32 C.F.R. Part 117). The proposed transaction would, upon closing, introduce FOCI into VPI's ownership structure by virtue of HSAG's status as a German corporation.

IV. CFIUS JURISDICTIONAL BASIS

HSAG recognizes and acknowledges that the proposed acquisition of VPI constitutes a "covered transaction" within the meaning of 31 C.F.R. § 800.213, as it involves the acquisition of control of a U.S. business by a foreign person. Specifically, HSAG, as a German Aktiengesellschaft, qualifies as a "foreign person" under 31 C.F.R. § 800.224, and VPI qualifies as a "U.S. business" under 31 C.F.R. § 800.252.

Moreover, VPI qualifies as a TID U.S. business (i.e., a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more "critical technologies") within the meaning of 31 C.F.R. § 800.248. Specifically, VPI designs and manufactures advanced gallium-nitride semiconductor devices that are classified as controlled items under both the ITAR (USML Category XI(a)(3)) and the EAR (ECCN 3A001), each of which constitutes a "critical technology" as defined in 31 C.F.R. § 800.215. VPI's active classified programs and substantial portfolio of government contracts with the U.S. Department of Defense and other national security agencies further underscore the transaction's significance to U.S. national security and the appropriateness of thorough Committee review.

HSAG understands that, because VPI is a TID U.S. business engaged in critical technologies, a mandatory declaration may be required under 31 C.F.R. § 800.401 with respect to the proposed transaction. However, rather than filing only a short-form declaration, the parties intend to submit a full joint voluntary notice under 31 C.F.R. § 800.501, which will provide the Committee with comprehensive information regarding the transaction, the parties, VPI's national-security-sensitive activities, and HSAG's proposed mitigation measures. We believe that a full voluntary notice — as opposed to a short-form declaration — will better serve the Committee's informational needs and will facilitate a more efficient and thorough review process. The parties understand that, in the event a mandatory declaration is also required, the filing of a full voluntary notice satisfies that obligation pursuant to 31 C.F.R. § 800.401(f).

Both HSAG and VPI are committed to working collaboratively with the Committee and its member agencies throughout the entire review process, including the initial 45-day review period, any subsequent investigation period, and any mitigation negotiations that may be necessary.

V. HSAG'S PROPOSED MITIGATION APPROACH

HSAG recognizes that the Committee may identify national security concerns arising from a foreign person's acquisition of a U.S. business with VPI's profile — particularly given VPI's involvement in critical defense technologies, its facility security clearance, its substantial cleared workforce, and its active classified and export-controlled programs. HSAG takes these concerns seriously and is prepared to negotiate and enter into a National Security Agreement (NSA) or other mitigation agreement with the Committee and the relevant monitoring agencies to address those concerns comprehensively.

As a starting point for discussion during the pre-filing consultation — and without prejudging the Committee's analysis — HSAG offers the following high-level summary of its proposed mitigation framework. HSAG recognizes that the Committee may require modifications or additional measures beyond those outlined here, and HSAG is prepared to engage constructively on all mitigation topics.

A. Board Governance and Government Security Committee

HSAG proposes to reconstitute VPI's board of directors following the closing to include independent Security Board Members (also sometimes referred to as "proxy holders" or "outside directors") who are U.S. citizens holding or eligible to hold security clearances at the TS/SCI level. These Security Board Members would be selected with the concurrence of the relevant monitoring agencies and would exercise independent authority over matters involving classified and controlled programs.

HSAG further proposes to establish a Government Security Committee (GSC) of VPI's board of directors, composed exclusively of the Security Board Members, with exclusive authority over the following matters: (i) all classified contracts and programs; (ii) all ITAR-controlled and EAR-controlled activities, including export license applications and compliance; (iii) personnel security decisions, including the granting, denial, or revocation of access to classified information; and (iv) facility security matters, including the maintenance of VPI's facility security clearance. HSAG's designees on VPI's board would not have access to classified information and would be excluded from GSC meetings and deliberations.

B. Technology Control Plan

HSAG proposes to implement a comprehensive Technology Control Plan (TCP) designed to prevent the unauthorized transfer, disclosure, or release of VPI's technical data — including all ITAR-controlled technical data, EAR-controlled technology, and proprietary trade secrets — to any non-U.S. person, including HSAG and its affiliates, without prior written authorization from the appropriate U.S. government authority (DDTC, BIS, or other relevant agency). The TCP would include, at a minimum:

• Physical separation of VPI's classified and controlled work areas from areas accessible to HSAG personnel;

• Logical and physical separation of VPI's information technology systems, networks, and data repositories from HSAG's global corporate network;

• Access controls, visitor management procedures, and badging systems to prevent unauthorized access to VPI's controlled facilities;

• Employee training and awareness programs regarding the TCP's requirements; and

• Regular internal audits and compliance assessments.

C. Facility Security Clearance Preservation

HSAG is committed to maintaining VPI's existing Facility Security Clearance at the SECRET level at its Albuquerque, New Mexico fabrication facility. HSAG will cooperate fully with the Defense Counterintelligence and Security Agency (DCSA) in connection with the foreign ownership, control, or influence (FOCI) mitigation process required under 32 C.F.R. Part 117 (NISPOM), and will execute whatever FOCI mitigation instrument (e.g., Special Security Agreement or Proxy Agreement) is determined to be appropriate by DCSA in consultation with the Committee.

HSAG further proposes to retain Col. (Ret.) Bryce Hendrickson in his current role as Facility Security Officer. HSAG personnel — including HSAG board designees, officers, and employees — would be restricted from accessing classified areas of VPI's facilities and would not be granted access to classified information or classified contracts.

D. Personnel Continuity

HSAG recognizes that the continuity of VPI's leadership team and cleared workforce is essential to maintaining VPI's national security capabilities and the integrity of its government programs. HSAG proposes to retain the following key personnel in their current or substantially similar roles for a period to be agreed upon with the Committee:

• Dr. Nathan Trevorrow, Founder and CEO;

• Marissa Sung-Avila, President and COO; and

• Col. (Ret.) Bryce Hendrickson, VP of Government Programs and Facility Security Officer.

HSAG further commits to ensuring the continuity of VPI's broader cleared workforce and to not taking any actions — including reductions in force, reassignments, or relocation of functions — that would materially impair VPI's ability to perform its classified and government-contract obligations, without prior consultation with the Committee's monitoring agencies.

E. Cybersecurity. HSAG proposes to maintain VPI's existing compliance with NIST Special Publication 800-171 (Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations) for all VPI information systems that process, store, or transmit Controlled Unclassified Information (CUI) and controlled technical data. HSAG further commits to maintaining strict data segregation between VPI's information systems and HSAG's global corporate network, including but not limited to ensuring that no VPI data — whether classified, controlled, or proprietary — is stored on, transmitted through, or accessible from any HSAG system or network outside of the United States without appropriate U.S. government authorization.

F. Third-Party Compliance Monitoring

HSAG is willing to engage, at its own expense, a qualified third-party compliance monitor to conduct periodic audits of VPI's compliance with the terms of any mitigation agreement, including the TCP, access restrictions, cybersecurity requirements, and personnel continuity commitments. The third-party monitor would be selected with the approval of the Committee and its monitoring agencies, and would submit audit reports directly to the monitoring agencies on at least an annual basis. All costs associated with the third-party monitor, including audit fees and related expenses, would be borne exclusively by HSAG.

VI. COUNSEL AND COORDINATION

A. Buyer's Counsel

HSAG is represented in this matter by Calderwood & Harkness LLP, with offices at the following locations:

1750 K Street NW, Suite 800 Washington, DC 20006

399 Park Avenue, 31st Floor New York, NY 10022

The primary point of contact for all CFIUS-related matters is:

Margaret "Peggy" Ashworth Of Counsel, National Security & CFIUS Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7844

Email: mashworth@calderwoodharkness.com

The following additional attorneys at Calderwood & Harkness are supporting this matter and may participate in communications with the Committee:

• Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls (Washington, DC);

• Beatrice Holloway, Responsible Partner, Mergers & Acquisitions (New York);

• Priya Venkataraman, Associate, International Trade & Sanctions (Washington, DC); and

• Kenneth Morales, Associate, Corporate/M&A (New York).

HSAG's German counsel is Schilling Frey Rechtsanwälte (lead partner: Prof. Dr. Ulrich Schilling), located at Friedrichstraße 68, 10117 Berlin, Germany.

B. Seller's / Target's Counsel

VPI and its selling shareholders are represented in this matter by Wethersfield & Gale LLP, located at:

2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006

The primary point of contact for CFIUS-related matters on behalf of the seller and the target is:

Harrison Whitfield Lead Partner, Government Contracts & National Security Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006 Telephone: (202) 661-4200

Email: hwhitfield@wethersfieldgale.com

Additional Wethersfield & Gale attorneys supporting this matter include Sandra Niehaus (M&A counsel) and Tobias Kwan (Senior Associate).

C. Meeting Logistics

As noted above, we respectfully request that the pre-filing consultation meeting be scheduled during the week of June 19, 2023, with Monday, June 19, 2023 as our preferred date. We are prepared to meet at the Treasury Department's offices in Washington, DC, or by secure videoconference, at the Committee's preference.

The following individuals are proposed to attend the pre-filing consultation on behalf of the buyer:

• Margaret "Peggy" Ashworth, Calderwood & Harkness LLP (lead counsel)

• Lt. Col. (Ret.) David Caruso, Calderwood & Harkness LLP

• Beatrice Holloway, Calderwood & Harkness LLP

• Stefan Lohse, General Counsel, Halcyon Semiconductor AG

The following individuals are proposed to attend on behalf of the seller and the target:

• Harrison Whitfield, Wethersfield & Gale LLP (lead counsel)

• Sandra Niehaus, Wethersfield & Gale LLP

• Dr. Nathan Trevorrow, CEO, Marlowe Asset Management Photonics Inc.

• Col. (Ret.) Bryce Hendrickson, VP Government Programs / FSO, Marlowe Asset Management Photonics Inc.

We propose the following agenda for the pre-filing consultation:

1. Transaction overview and structure;

2. VPI's national-security-sensitive activities, including classified programs, export-controlled products, and facility security clearance;

3. HSAG's proposed mitigation framework;

4. Committee questions and discussion of areas of potential concern; and

5. Discussion of timeline and next steps for the joint voluntary notice filing.

We are, of course, prepared to adjust this agenda to address topics the Committee considers most important.

VII. CONCLUSION AND REQUEST

For the reasons set forth above, HSAG respectfully requests that the Office of Investment Security schedule a pre-filing consultation meeting at its earliest convenience during the week of June 19, 2023. HSAG and VPI believe that such a meeting will provide a valuable opportunity for the parties to introduce the transaction and the target's business to the Committee's staff, to identify areas of potential national security concern at an early stage, and to discuss the steps necessary to prepare a complete and thorough joint voluntary notice.

The parties are prepared to provide any additional information the Committee may require in advance of, or during, the pre-filing consultation. HSAG intends to file the joint voluntary notice promptly following the pre-filing consultation, with a target filing date of July 14, 2023, subject to the Committee's guidance regarding the completeness and sufficiency of the parties' submission.

HSAG wishes to express its commitment to transparency, full cooperation, and constructive engagement with CFIUS throughout every phase of the review process. HSAG understands and respects the Committee's mandate to protect the national security of the United States and is prepared to take all reasonable and appropriate steps to address any concerns the Committee may identify.

Please note that this letter and all information contained herein are submitted on a confidential basis pursuant to 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. § 800.402, and are not to be publicly disclosed without the written consent of the parties.

We thank you for your time and consideration and look forward to meeting with the Committee's staff. Please do not hesitate to contact me at the telephone number or email address listed below with any questions or to arrange a convenient meeting time.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Margaret "Peggy" Ashworth Of Counsel, National Security & CFIUS 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7844

Email: mashworth@calderwoodharkness.com

cc (via email):

Stefan Lohse, Chefjustitiar / General Counsel, Halcyon Semiconductor AG Beatrice Holloway, Partner, Calderwood & Harkness LLP Lt. Col. (Ret.) David Caruso, Senior Counsel, Calderwood & Harkness LLP Harrison Whitfield, Partner, Wethersfield & Gale LLP Sandra Niehaus, Counsel, Wethersfield & Gale LLP

Enclosures: None. Full transaction documents, including the executed Stock Purchase Agreement and all ancillary agreements, will be provided with the joint voluntary notice.

CONFIDENTIAL — Submitted Pursuant to 50 U.S.C. § 4565(c)

Program/Contract Description	Contracting Entity	Remaining Backlog
GaN HEMT modules for next-generation radar	U.S. Army CERDEC / PEO IEW&S	$52.3 million
Next-generation mmWave amplifiers	U.S. Air Force Research Laboratory (AFRL)	$41.7 million
GaN-based T/R modules for missile defense	Missile Defense Agency (MDA)	$38.9 million
GaN power amplifiers (subcontract)	Ironclad Defense Systems / NAVSEA	$34.1 million
Border surveillance RF components	DHS Science & Technology Directorate	$26.0 million
Shareholder	Ownership Percentage
Dr. Nathan Trevorrow and family trusts	22.4%
Marissa Sung-Avila	4.1%
Ridgecrest Ventures Fund III, L.P. (GP: Ridgecrest Ventures Management LLC; Managing Partner: Franklin Yee)	31.7%
Cascadian Capital Partners Growth Fund II, L.P. (GP: Cascadian Capital Partners Management LLC; Managing Director: Olivia Hartmann)	24.3%
Employee option pool (vested and exercised shares)	11.8%
Other angel investors	5.7%

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO 50 U.S.C. § 4565(c)
CALDERWOOD & HARKNESS LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7800 Facsimile: (202) 554-7801 www.calderwoodharkness.com
June 15, 2023
Office of Investment Security U.S. Department of the Treasury 1500 Pennsylvania Avenue NW Washington, DC 20220
Attention: Staff Chairperson, Committee on Foreign Investment in the United States
Re: Request for Pre-Filing Consultation — Proposed Acquisition of Marlowe Asset Management Photonics Inc. by Halcyon Semiconductor Aktiengesellschaft
Dear Staff Chairperson:
This letter is submitted on behalf of our client, Halcyon Semiconductor Aktiengesellschaft ("HSAG"), a publicly traded semiconductor company organized under the laws of the Federal Republic of Germany and listed on the Frankfurt Stock Exchange (XETRA: HLC), in connection with HSAG's proposed acquisition of one hundred percent (100%) of the outstanding equity interests of Marlowe Asset Management Photonics Inc. ("VPI"), a Delaware C-corporation. Calderwood & Harkness LLP serves as U.S. counsel to HSAG in all matters relating to this transaction, including regulatory filings before the Committee on Foreign Investment in the United States ("CFIUS" or the "Committee"). I am Margaret "Peggy" Ashworth, Of Counsel in the National Security & CFIUS practice of our Washington, DC office, and I am the primary point of contact for HSAG in this proceeding.
The purpose of this letter is to respectfully request an informal pre-filing consultation meeting with the Treasury Department's Office of Investment Security ("OIS"), pursuant to the CFIUS regulations codified at 31 C.F.R. Part 800, in advance of the parties' intended submission of a joint voluntary notice under 31 C.F.R. § 800.501. HSAG and VPI intend to submit such a joint voluntary notice and are requesting this pre-filing consultation to introduce the transaction to the Committee, discuss the key elements of the proposed acquisition and VPI's business activities, identify areas of potential national security concern at an early stage, and facilitate an efficient and thorough review process. We believe that early engagement with the Committee will be beneficial to all parties and will contribute to a constructive and transparent review.
We respectfully propose that the pre-filing consultation meeting be scheduled during the week of June 19, 2023. Our preferred date is Monday, June 19, 2023, though we remain available on any day during that week at the Committee's convenience. Counsel to the seller and the target company, Wethersfield & Gale LLP, represented by Harrison Whitfield, Lead Partner in the Government Contracts & National Security practice, has confirmed that they will participate jointly in the pre-filing consultation and have been copied on this correspondence.
Set forth below is a summary of the transaction, the parties, jurisdictional considerations, HSAG's proposed mitigation approach, and relevant contact information, each designed to provide the Committee with sufficient background to facilitate a productive initial consultation.
I. OVERVIEW OF THE TRANSACTION
A. Transaction Structure
HSAG proposes to acquire one hundred percent (100%) of the outstanding equity interests of VPI through Halcyon US Holdings Inc. ("Halcyon Holdings"), a wholly owned special purpose acquisition vehicle. Halcyon Holdings is a Delaware corporation formed on June 5, 2023, for the sole purpose of consummating this transaction. Halcyon Holdings' registered agent is National Registered Agents of Delaware, located at 160 Greentree Drive, Suite 101, Dover, Delaware 19904. Its Employer Identification Number is 93-2841067. At closing, Halcyon Holdings will become the direct parent of VPI, and VPI will become an indirect, wholly owned subsidiary of HSAG.
The definitive Stock Purchase Agreement (the "SPA") governing the transaction was executed by the parties on June 10, 2023. The acquisition is structured as an all-cash purchase on a cash-free, debt-free basis, with a normalized net working capital target of approximately $34.6 million, subject to a customary post-closing true-up mechanism. The base purchase price for the acquisition is $1.42 billion (one billion four hundred twenty million U.S. dollars). In addition, the SPA provides for an earnout payment of up to $85 million (eighty-five million U.S. dollars), contingent upon VPI's achievement of specified government-contract revenue milestones during calendar years 2024 and 2025. The maximum aggregate consideration payable by HSAG (inclusive of the base purchase price and the full earnout amount) is $1.505 billion (one billion five hundred five million U.S. dollars).
The SPA contains customary representations, warranties, covenants, and indemnification provisions, including regulatory cooperation covenants requiring both parties to use commercially reasonable efforts to obtain all necessary governmental approvals, including CFIUS clearance. The transaction is not subject to an antitrust filing under the Hart-Scott-Rodino Antitrust Improvements Act due to the parties' determination that no applicable filing threshold is triggered. The parties will provide a complete copy of the executed SPA, together with all ancillary transaction documents, as part of the joint voluntary notice.
B. Financing Summary
The acquisition will be financed through a combination of debt and equity, as follows:
Senior Secured Term Loan. HSAG has secured commitments for a $900 million senior secured term loan from a lending syndicate led by Meridian National Bank (serving as administrative agent), with Atlas Commercial Lending AG and Pacific Basin Credit Corp. serving as co-lead arrangers. The term loan bears interest at the Secured Overnight Financing Rate (SOFR) plus 275 basis points, with a maturity of five (5) years and mandatory annual amortization of one percent (1%) of the original principal amount. The term loan is secured by the equity interests of Halcyon Holdings and the assets of VPI post-closing. Committed financing documentation is available for the Committee's review upon request.
Equity Contribution. HSAG will make an equity contribution of approximately $520 million to Halcyon Holdings, funded from a combination of HSAG's existing balance sheet cash reserves and a draw of approximately €300 million on HSAG's existing revolving credit facility maintained with Rheinische Handelsbank AG, a German financial institution. HSAG maintains adequate liquidity to fund this equity contribution without reliance on any non-German or non-U.S. sources of capital.
C. Anticipated Closing Timeline
The parties anticipate closing the transaction promptly upon satisfaction of all conditions precedent set forth in the SPA, including, critically, the receipt of clearance from the Committee on Foreign Investment in the United States. HSAG fully recognizes that the acquisition of VPI — given VPI's involvement in defense-critical technologies, classified government programs, and export-controlled activities — will require thorough review by the Committee, and potentially an extended investigation period. HSAG is committed to full, transparent, and timely cooperation with the Committee throughout the review and, if applicable, investigation process. The SPA includes a regulatory drop-dead date that provides ample time for a complete CFIUS review, including a potential investigation phase and negotiation of a mitigation agreement.
II. DESCRIPTION OF THE ACQUIROR: HALCYON SEMICONDUCTOR AG
A. Corporate Profile
The acquiror's full legal name is Halcyon Semiconductor Aktiengesellschaft. HSAG is an Aktiengesellschaft — a public stock corporation organized under the laws of the Federal Republic of Germany. HSAG's global headquarters are located at Industriestraße 44, 01099 Dresden, Saxony, Germany. The company is registered in the German commercial register (Handelsregister) of the Amtsgericht Dresden under registration number HRB 28416, and its Legal Entity Identifier (LEI) is 5299007KXQ2M4GHILZ38.
HSAG's shares are listed and traded on the Frankfurt Stock Exchange under the XETRA ticker symbol HLC. As of June 1, 2023, HSAG's market capitalization was approximately €14.8 billion (fourteen billion eight hundred million euros). For the fiscal year ended December 31, 2022, HSAG reported consolidated revenues of approximately €6.12 billion and consolidated EBITDA of approximately €1.37 billion.
HSAG is a widely held public company. Based on HSAG's most recent shareholder analysis (as of the record date of April 30, 2023), HSAG's shares are held by a diversified base of institutional investors, retail shareholders, and index funds. No single shareholder holds more than 5% of HSAG's outstanding shares except for certain widely known European institutional asset managers. Critically, no government — foreign or domestic — holds any equity interest in HSAG, and no foreign government entity exercises control or influence over the company, its supervisory board (Aufsichtsrat), or its management board (Vorstand). HSAG is prepared to provide the Committee with a detailed analysis of its shareholder base, including beneficial ownership information for all holders above 3%, as part of the joint voluntary notice.
B. Management. HSAG's senior management includes the following key officers:
• Chief Executive Officer (Vorstandsvorsitzender): Dr. Maximilian Ehrhardt, age 57. Dr. Ehrhardt is a materials physicist by training and has served in various leadership positions at HSAG for eighteen (18) years, including as CEO since 2017. Dr. Ehrhardt is a citizen of the Federal Republic of Germany and holds no other citizenships.
• Chief Financial Officer (Finanzvorstand): Katarina Brückner, age 49. Ms. Brückner has served as HSAG's CFO since 2020 and was previously the company's Senior Vice President of Corporate Finance. Ms. Brückner is a citizen of the Federal Republic of Germany.
• General Counsel (Chefjustitiar): Stefan Lohse, LL.M. (Georgetown University Law Center). Mr. Lohse is admitted to practice law in both the State of New York and in Germany. He is a dual citizen of Germany and the United States and has served as HSAG's General Counsel since 2019. Mr. Lohse's dual U.S. citizenship and familiarity with U.S. regulatory frameworks, including CFIUS, will facilitate HSAG's engagement with the Committee.
Detailed biographical information and personal identifier information for all members of HSAG's management board and supervisory board will be provided in the joint voluntary notice.
C. Existing U.S. Operations
HSAG currently maintains a U.S. operating subsidiary, Halcyon US Inc., a Delaware corporation headquartered at 11501 Alterra Parkway, Suite 300, Austin, Texas 78758 (EIN: 81-3056429). Halcyon US Inc. operates a fabless semiconductor design center employing approximately 320 engineers and support staff. The Austin design center focuses exclusively on commercial semiconductor product development, including mixed-signal integrated circuits and automotive power management devices.
Halcyon US Inc. does not currently perform any classified work for the U.S. government, does not hold any U.S. government contracts or subcontracts, and is not engaged in any activities involving defense articles or services controlled under the International Traffic in Arms Regulations (ITAR) or items requiring export licenses under the Export Administration Regulations (EAR). Halcyon US Inc. does not hold a facility security clearance, and none of its employees hold U.S. government security clearances.
D. Foreign Operations of Note
HSAG maintains global operations spanning Europe, Asia, and North America, with fabrication facilities in Germany (Dresden and Regensburg), design centers in the Netherlands, Israel, the United Kingdom, Japan, South Korea, and the United States (Austin), and sales offices across all major semiconductor markets. We note that HSAG maintains a small subsidiary in the People's Republic of China — Halcyon Semiconductor (Shanghai) Co., Ltd. — which operates a sales and technical support office with approximately 45 employees. The Shanghai subsidiary's activities are limited to customer-facing sales support and field application engineering for HSAG's commercial automotive and industrial product lines. HSAG is fully prepared to provide the Committee with comprehensive details regarding the scope, nature, and personnel of its China-based operations, as well as any other foreign operations the Committee may wish to examine, both in the joint voluntary notice and in response to any questions the Committee may raise during the review process.
III. DESCRIPTION OF THE TARGET: Marlowe Asset Management PHOTONICS INC.
A. Corporate Profile
The target company's full legal name is Marlowe Asset Management Photonics Inc. VPI is a Delaware C-corporation, originally incorporated on February 14, 2009. Its Employer Identification Number is 26-4371885. VPI's corporate headquarters are located at 7400 Ridgeline Parkway, Colorado Springs, Colorado 80919. VPI's primary fabrication facility — a 45,000 square-foot gallium-nitride-on-silicon-carbide (GaN-on-SiC) wafer fabrication facility — is located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113.
For the fiscal year ended December 31, 2022, VPI reported revenues of approximately $287.4 million and EBITDA of approximately $61.2 million. VPI currently employs approximately 486 full-time employees across its Colorado Springs headquarters and Albuquerque fabrication facility, including engineers, technicians, program managers, and administrative personnel.
B. Management. VPI's current senior management team includes the following individuals:
• Founder and Chief Executive Officer: Dr. Nathan Trevorrow, age 52. Dr. Trevorrow holds a Ph.D. in Electrical Engineering from the University of Colorado Boulder and previously served as a program manager at the Defense Advanced Research Projects Agency (DARPA), where he managed research programs in wide-bandgap semiconductor materials. Dr. Trevorrow currently holds an active U.S. government security clearance at the TS/SCI level. He is a United States citizen.
• President and Chief Operating Officer: Marissa Sung-Avila, age 46. Ms. Sung-Avila is a former officer of the United States Army signal corps and previously held positions with defense contractors prior to joining VPI. She currently holds an active U.S. government security clearance at the SECRET level. She is a United States citizen.
• Chief Financial Officer: Derek Wainsborough, CPA. Mr. Wainsborough oversees VPI's financial operations and has served in this role since 2016. He is a United States citizen.
• Vice President, Government Programs and Facility Security Officer: Colonel (Ret.) Bryce Hendrickson, United States Air Force. Col. Hendrickson retired from the U.S. Air Force after a 28-year career in signals intelligence and acquisition program management. He serves as VPI's Facility Security Officer (FSO) under the National Industrial Security Program (NISP) and currently holds an active U.S. government security clearance at the TS/SCI level. He is a United States citizen.
C. Products and Technology
VPI designs and manufactures advanced gallium-nitride (GaN) power amplifier chips and related components used in a range of applications, including defense radar systems, satellite communications platforms, electronic warfare systems, and commercial fifth-generation (5G) wireless infrastructure. GaN semiconductors are a foundational enabling technology for next-generation defense electronics due to their high power density, efficiency, and ability to operate at high frequencies.
VPI's key product lines include the following:
• GaN High-Electron-Mobility Transistor (HEMT) Modules: Discrete and multi-chip modules used in phased array radar systems, electronic countermeasure systems, and satellite communication uplinks.
• mmWave Power Amplifiers: Millimeter-wave power amplifier integrated circuits operating at frequencies above 30 GHz, designed for advanced radar, communications, and sensing applications.
• Transmit/Receive (T/R) Modules: Integrated T/R modules incorporating GaN power amplifiers, low-noise amplifiers, and control circuitry, designed for active electronically scanned array (AESA) radar systems.
VPI's intellectual property portfolio is substantial. The company currently holds 47 issued U.S. patents and has 12 patent applications pending before the United States Patent and Trademark Office, relating to GaN epitaxial growth techniques, HEMT device design and architecture, and mmWave power amplifier circuit topologies. In addition, VPI maintains 31 registered internal trade secrets, the majority of which relate to proprietary GaN epitaxial layer recipes (including aluminum gallium nitride barrier compositions and doping profiles) and die-level reliability screening processes developed over more than a decade of fabrication experience. These trade secrets represent core competitive advantages that are closely guarded and are not disclosed outside of VPI's cleared facilities.
D. Government Contracts
VPI currently holds fourteen (14) active contracts with agencies of the U.S. Department of Defense and the U.S. Department of Homeland Security, serving as both a prime contractor and a subcontractor. The aggregate backlog under these contracts is approximately $193 million. Key contracting agencies and entities include the U.S. Army Program Executive Office for intelligence, Electronic Warfare & Sensors (PEO IEW&S), the U.S. Air Force Research Laboratory (AFRL), the Missile Defense Agency (MDA), the Department of Homeland Security Science and Technology Directorate (DHS S&T), and Ironclad Defense Systems Inc. (as prime contractor to the U.S. Navy Naval Sea Systems Command (NAVSEA)).
The five (5) largest active contracts by remaining backlog are as follows:
Several of these contracts involve classified performance requirements and require VPI personnel to maintain active U.S. government security clearances, as discussed in Section III.F below.
E. Export-Controlled Items
VPI has been registered with the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) since 2011, under DDTC Registration Number M-24817. VPI's products include defense articles classified under the United States Munitions List (USML), specifically Category XI(a)(3) (military electronics, including radar-related power amplifiers), as well as items classified under the Export Administration Regulations (EAR) Commerce Control List, specifically under Export Control Classification Numbers (ECCNs) 3A001 (electronic components with military or proliferation-sensitive applications), 3A991 (electronic items not controlled by 3A001), and 3E001 (technology for the development or production of items classified under 3A001).
VPI currently holds three (3) active DSP-5 export licenses issued by the DDTC, authorizing the export of specified defense articles to NATO allies, specifically the United Kingdom and Australia. VPI maintains a robust export compliance program overseen by its VP of Government Programs, Col. (Ret.) Bryce Hendrickson, and an experienced export compliance team. HSAG understands that the export-controlled nature of VPI's products is a significant element of the Committee's national security analysis.
F. Facility Security Clearance and Cleared Personnel
VPI's Albuquerque, New Mexico fabrication facility holds a Facility Security Clearance (FCL) at the SECRET level under the National Industrial Security Program (NISP). The facility's CAGE Code is 7VK92, and its DUNS Number is 07-812-4493. The FCL is administered under a DD Form 441 (Department of Defense Security Agreement), and the facility is subject to oversight by the Defense Counterintelligence and Security Agency (DCSA). Col. (Ret.) Bryce Hendrickson serves as the Facility Security Officer.
Of VPI's approximately 486 employees, 212 employees (approximately 43.6% of the workforce) hold active U.S. government security clearances at the SECRET or TS/SCI level. This substantial proportion of cleared personnel reflects the nature of VPI's business, which is heavily oriented toward classified defense programs. HSAG is aware that the maintenance of VPI's facility security clearance and the clearances of its personnel are matters of significant concern to the Committee and to the Department of Defense.
G. Current Ownership
VPI is currently privately held by a group of U.S. persons, including its founders, venture capital investors, employees, and early-stage angel investors. The current ownership structure is as follows:
All existing shareholders of VPI are United States persons. Neither VPI nor any of its equity holders has any foreign ownership, control, or influence (FOCI) as that term is understood under the National Industrial Security Program Operating Manual (NISPOM, 32 C.F.R. Part 117). The proposed transaction would, upon closing, introduce FOCI into VPI's ownership structure by virtue of HSAG's status as a German corporation.
IV. CFIUS JURISDICTIONAL BASIS
HSAG recognizes and acknowledges that the proposed acquisition of VPI constitutes a "covered transaction" within the meaning of 31 C.F.R. § 800.213, as it involves the acquisition of control of a U.S. business by a foreign person. Specifically, HSAG, as a German Aktiengesellschaft, qualifies as a "foreign person" under 31 C.F.R. § 800.224, and VPI qualifies as a "U.S. business" under 31 C.F.R. § 800.252.
Moreover, VPI qualifies as a TID U.S. business (i.e., a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more "critical technologies") within the meaning of 31 C.F.R. § 800.248. Specifically, VPI designs and manufactures advanced gallium-nitride semiconductor devices that are classified as controlled items under both the ITAR (USML Category XI(a)(3)) and the EAR (ECCN 3A001), each of which constitutes a "critical technology" as defined in 31 C.F.R. § 800.215. VPI's active classified programs and substantial portfolio of government contracts with the U.S. Department of Defense and other national security agencies further underscore the transaction's significance to U.S. national security and the appropriateness of thorough Committee review.
HSAG understands that, because VPI is a TID U.S. business engaged in critical technologies, a mandatory declaration may be required under 31 C.F.R. § 800.401 with respect to the proposed transaction. However, rather than filing only a short-form declaration, the parties intend to submit a full joint voluntary notice under 31 C.F.R. § 800.501, which will provide the Committee with comprehensive information regarding the transaction, the parties, VPI's national-security-sensitive activities, and HSAG's proposed mitigation measures. We believe that a full voluntary notice — as opposed to a short-form declaration — will better serve the Committee's informational needs and will facilitate a more efficient and thorough review process. The parties understand that, in the event a mandatory declaration is also required, the filing of a full voluntary notice satisfies that obligation pursuant to 31 C.F.R. § 800.401(f).
Both HSAG and VPI are committed to working collaboratively with the Committee and its member agencies throughout the entire review process, including the initial 45-day review period, any subsequent investigation period, and any mitigation negotiations that may be necessary.
V. HSAG'S PROPOSED MITIGATION APPROACH
HSAG recognizes that the Committee may identify national security concerns arising from a foreign person's acquisition of a U.S. business with VPI's profile — particularly given VPI's involvement in critical defense technologies, its facility security clearance, its substantial cleared workforce, and its active classified and export-controlled programs. HSAG takes these concerns seriously and is prepared to negotiate and enter into a National Security Agreement (NSA) or other mitigation agreement with the Committee and the relevant monitoring agencies to address those concerns comprehensively.
As a starting point for discussion during the pre-filing consultation — and without prejudging the Committee's analysis — HSAG offers the following high-level summary of its proposed mitigation framework. HSAG recognizes that the Committee may require modifications or additional measures beyond those outlined here, and HSAG is prepared to engage constructively on all mitigation topics.
A. Board Governance and Government Security Committee
HSAG proposes to reconstitute VPI's board of directors following the closing to include independent Security Board Members (also sometimes referred to as "proxy holders" or "outside directors") who are U.S. citizens holding or eligible to hold security clearances at the TS/SCI level. These Security Board Members would be selected with the concurrence of the relevant monitoring agencies and would exercise independent authority over matters involving classified and controlled programs.
HSAG further proposes to establish a Government Security Committee (GSC) of VPI's board of directors, composed exclusively of the Security Board Members, with exclusive authority over the following matters: (i) all classified contracts and programs; (ii) all ITAR-controlled and EAR-controlled activities, including export license applications and compliance; (iii) personnel security decisions, including the granting, denial, or revocation of access to classified information; and (iv) facility security matters, including the maintenance of VPI's facility security clearance. HSAG's designees on VPI's board would not have access to classified information and would be excluded from GSC meetings and deliberations.
B. Technology Control Plan
HSAG proposes to implement a comprehensive Technology Control Plan (TCP) designed to prevent the unauthorized transfer, disclosure, or release of VPI's technical data — including all ITAR-controlled technical data, EAR-controlled technology, and proprietary trade secrets — to any non-U.S. person, including HSAG and its affiliates, without prior written authorization from the appropriate U.S. government authority (DDTC, BIS, or other relevant agency). The TCP would include, at a minimum:
• Physical separation of VPI's classified and controlled work areas from areas accessible to HSAG personnel;
• Logical and physical separation of VPI's information technology systems, networks, and data repositories from HSAG's global corporate network;
• Access controls, visitor management procedures, and badging systems to prevent unauthorized access to VPI's controlled facilities;
• Employee training and awareness programs regarding the TCP's requirements; and
• Regular internal audits and compliance assessments.
C. Facility Security Clearance Preservation
HSAG is committed to maintaining VPI's existing Facility Security Clearance at the SECRET level at its Albuquerque, New Mexico fabrication facility. HSAG will cooperate fully with the Defense Counterintelligence and Security Agency (DCSA) in connection with the foreign ownership, control, or influence (FOCI) mitigation process required under 32 C.F.R. Part 117 (NISPOM), and will execute whatever FOCI mitigation instrument (e.g., Special Security Agreement or Proxy Agreement) is determined to be appropriate by DCSA in consultation with the Committee.
HSAG further proposes to retain Col. (Ret.) Bryce Hendrickson in his current role as Facility Security Officer. HSAG personnel — including HSAG board designees, officers, and employees — would be restricted from accessing classified areas of VPI's facilities and would not be granted access to classified information or classified contracts.
D. Personnel Continuity
HSAG recognizes that the continuity of VPI's leadership team and cleared workforce is essential to maintaining VPI's national security capabilities and the integrity of its government programs. HSAG proposes to retain the following key personnel in their current or substantially similar roles for a period to be agreed upon with the Committee:
• Dr. Nathan Trevorrow, Founder and CEO;
• Marissa Sung-Avila, President and COO; and
• Col. (Ret.) Bryce Hendrickson, VP of Government Programs and Facility Security Officer.
HSAG further commits to ensuring the continuity of VPI's broader cleared workforce and to not taking any actions — including reductions in force, reassignments, or relocation of functions — that would materially impair VPI's ability to perform its classified and government-contract obligations, without prior consultation with the Committee's monitoring agencies.
E. Cybersecurity. HSAG proposes to maintain VPI's existing compliance with NIST Special Publication 800-171 (Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations) for all VPI information systems that process, store, or transmit Controlled Unclassified Information (CUI) and controlled technical data. HSAG further commits to maintaining strict data segregation between VPI's information systems and HSAG's global corporate network, including but not limited to ensuring that no VPI data — whether classified, controlled, or proprietary — is stored on, transmitted through, or accessible from any HSAG system or network outside of the United States without appropriate U.S. government authorization.
F. Third-Party Compliance Monitoring
HSAG is willing to engage, at its own expense, a qualified third-party compliance monitor to conduct periodic audits of VPI's compliance with the terms of any mitigation agreement, including the TCP, access restrictions, cybersecurity requirements, and personnel continuity commitments. The third-party monitor would be selected with the approval of the Committee and its monitoring agencies, and would submit audit reports directly to the monitoring agencies on at least an annual basis. All costs associated with the third-party monitor, including audit fees and related expenses, would be borne exclusively by HSAG.
VI. COUNSEL AND COORDINATION
A. Buyer's Counsel
HSAG is represented in this matter by Calderwood & Harkness LLP, with offices at the following locations:
1750 K Street NW, Suite 800 Washington, DC 20006
399 Park Avenue, 31st Floor New York, NY 10022
The primary point of contact for all CFIUS-related matters is:
Margaret "Peggy" Ashworth Of Counsel, National Security & CFIUS Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7844
Email: mashworth@calderwoodharkness.com
The following additional attorneys at Calderwood & Harkness are supporting this matter and may participate in communications with the Committee:
• Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls (Washington, DC);
• Beatrice Holloway, Responsible Partner, Mergers & Acquisitions (New York);
• Priya Venkataraman, Associate, International Trade & Sanctions (Washington, DC); and
• Kenneth Morales, Associate, Corporate/M&A (New York).
HSAG's German counsel is Schilling Frey Rechtsanwälte (lead partner: Prof. Dr. Ulrich Schilling), located at Friedrichstraße 68, 10117 Berlin, Germany.
B. Seller's / Target's Counsel
VPI and its selling shareholders are represented in this matter by Wethersfield & Gale LLP, located at:
2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006
The primary point of contact for CFIUS-related matters on behalf of the seller and the target is:
Harrison Whitfield Lead Partner, Government Contracts & National Security Wethersfield & Gale LLP 2000 Pennsylvania Avenue NW, Suite 600 Washington, DC 20006 Telephone: (202) 661-4200
Email: hwhitfield@wethersfieldgale.com
Additional Wethersfield & Gale attorneys supporting this matter include Sandra Niehaus (M&A counsel) and Tobias Kwan (Senior Associate).
C. Meeting Logistics
As noted above, we respectfully request that the pre-filing consultation meeting be scheduled during the week of June 19, 2023, with Monday, June 19, 2023 as our preferred date. We are prepared to meet at the Treasury Department's offices in Washington, DC, or by secure videoconference, at the Committee's preference.
The following individuals are proposed to attend the pre-filing consultation on behalf of the buyer:
• Margaret "Peggy" Ashworth, Calderwood & Harkness LLP (lead counsel)
• Lt. Col. (Ret.) David Caruso, Calderwood & Harkness LLP
• Beatrice Holloway, Calderwood & Harkness LLP
• Stefan Lohse, General Counsel, Halcyon Semiconductor AG
The following individuals are proposed to attend on behalf of the seller and the target:
• Harrison Whitfield, Wethersfield & Gale LLP (lead counsel)
• Sandra Niehaus, Wethersfield & Gale LLP
• Dr. Nathan Trevorrow, CEO, Marlowe Asset Management Photonics Inc.
• Col. (Ret.) Bryce Hendrickson, VP Government Programs / FSO, Marlowe Asset Management Photonics Inc.
We propose the following agenda for the pre-filing consultation:
1. Transaction overview and structure;
2. VPI's national-security-sensitive activities, including classified programs, export-controlled products, and facility security clearance;
3. HSAG's proposed mitigation framework;
4. Committee questions and discussion of areas of potential concern; and
5. Discussion of timeline and next steps for the joint voluntary notice filing.
We are, of course, prepared to adjust this agenda to address topics the Committee considers most important.
VII. CONCLUSION AND REQUEST
For the reasons set forth above, HSAG respectfully requests that the Office of Investment Security schedule a pre-filing consultation meeting at its earliest convenience during the week of June 19, 2023. HSAG and VPI believe that such a meeting will provide a valuable opportunity for the parties to introduce the transaction and the target's business to the Committee's staff, to identify areas of potential national security concern at an early stage, and to discuss the steps necessary to prepare a complete and thorough joint voluntary notice.
The parties are prepared to provide any additional information the Committee may require in advance of, or during, the pre-filing consultation. HSAG intends to file the joint voluntary notice promptly following the pre-filing consultation, with a target filing date of July 14, 2023, subject to the Committee's guidance regarding the completeness and sufficiency of the parties' submission.
HSAG wishes to express its commitment to transparency, full cooperation, and constructive engagement with CFIUS throughout every phase of the review process. HSAG understands and respects the Committee's mandate to protect the national security of the United States and is prepared to take all reasonable and appropriate steps to address any concerns the Committee may identify.
Please note that this letter and all information contained herein are submitted on a confidential basis pursuant to 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. § 800.402, and are not to be publicly disclosed without the written consent of the parties.
We thank you for your time and consideration and look forward to meeting with the Committee's staff. Please do not hesitate to contact me at the telephone number or email address listed below with any questions or to arrange a convenient meeting time.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Margaret "Peggy" Ashworth Of Counsel, National Security & CFIUS 1750 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 554-7844
Email: mashworth@calderwoodharkness.com
cc (via email):
Stefan Lohse, Chefjustitiar / General Counsel, Halcyon Semiconductor AG Beatrice Holloway, Partner, Calderwood & Harkness LLP Lt. Col. (Ret.) David Caruso, Senior Counsel, Calderwood & Harkness LLP Harrison Whitfield, Partner, Wethersfield & Gale LLP Sandra Niehaus, Counsel, Wethersfield & Gale LLP
Enclosures: None. Full transaction documents, including the executed Stock Purchase Agreement and all ancillary agreements, will be provided with the joint voluntary notice.
CONFIDENTIAL — Submitted Pursuant to 50 U.S.C. § 4565(c)
Program/Contract Description | Contracting Entity | Remaining Backlog
GaN HEMT modules for next-generation radar | U.S. Army CERDEC / PEO IEW&S | $52.3 million
Next-generation mmWave amplifiers | U.S. Air Force Research Laboratory (AFRL) | $41.7 million
GaN-based T/R modules for missile defense | Missile Defense Agency (MDA) | $38.9 million
GaN power amplifiers (subcontract) | Ironclad Defense Systems / NAVSEA | $34.1 million
Border surveillance RF components | DHS Science & Technology Directorate | $26.0 million
Shareholder | Ownership Percentage
Dr. Nathan Trevorrow and family trusts | 22.4%
Marissa Sung-Avila | 4.1%
Ridgecrest Ventures Fund III, L.P. (GP: Ridgecrest Ventures Management LLC; Managing Partner: Franklin Yee) | 31.7%
Cascadian Capital Partners Growth Fund II, L.P. (GP: Cascadian Capital Partners Management LLC; Managing Director: Olivia Hartmann) | 24.3%
Employee option pool (vested and exercised shares) | 11.8%
Other angel investors | 5.7%

CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO 50 U.S.C. § 4565(c)

I. OVERVIEW OF THE TRANSACTION

II. DESCRIPTION OF THE ACQUIROR: HALCYON SEMICONDUCTOR AG

IV. CFIUS JURISDICTIONAL BASIS

V. HSAG'S PROPOSED MITIGATION APPROACH

VI. COUNSEL AND COORDINATION

VII. CONCLUSION AND REQUEST

CALDERWOOD & HARKNESS LLP

Record

Parties

Dates

Amounts