1032-00004 · Client 1032 · Pre-Filing

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

FROM: Margaret "Peggy" Ashworth, Of Counsel National Security & CFIUS Practice Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006

TO: Beatrice Holloway, Responsible Partner, M&A (New York) Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls (Washington, DC) Priya Venkataraman, Associate, International Trade & Sanctions (Washington, DC) Kenneth Morales, Associate, Corporate/M&A (New York)

CC: James Prentice, Billing Partner, M&A (New York) Omar Siddiqui, Lead Associate, IP (Washington, DC) Christy Bauer, Working Associate, IP (Washington, DC)

Date: June 22, 2023

Re: HSAG / VPI — Assessment of Pre-Filing Consultation and Voluntary Joint Notice Preparation Plan

Client: Halcyon Semiconductor Aktiengesellschaft ("HSAG")

Matter: Acquisition of Marlowe Asset Management Photonics Inc. ("VPI") — CFIUS Filing

Matter Number: 1032-00004

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I. Executive Summary

This memorandum serves two related purposes. First, it summarizes the key takeaways from the pre-filing consultation that was held on June 19, 2023, with the U.S. Department of the Treasury, Office of Investment Security ("OIS"), regarding HSAG's proposed acquisition of VPI. Second, it sets forth a detailed preparation plan for the voluntary joint notice that we intend to file with the Committee on Foreign Investment in the United States ("CFIUS") on July 14, 2023.

The pre-filing consultation, which lasted approximately ninety minutes, was constructive in tone and substantive in content. Treasury staff were engaged and well-prepared, having evidently reviewed the twenty-two-slide briefing deck that we circulated on June 16, 2023, with care. Their questions and comments during the meeting revealed three primary areas of heightened scrutiny that will drive both the content of our notice and the eventual shape of any mitigation agreement:

(1) HSAG's China Operations. Treasury posed detailed questions about Halcyon Semiconductor (Shanghai) Co., Ltd., HSAG's China subsidiary, including its revenue, products, customers, personnel, and any connections to Chinese government entities or military end-users. The staff's line of inquiry made clear that the notice must include granular disclosure regarding this subsidiary.

(2) Post-Closing Cybersecurity Architecture for VPI. Both Treasury and Department of Defense ("DoD") staff expressed concern about the risk that post-closing IT integration could expose VPI's classified and controlled unclassified information to foreign access through HSAG's global network. Treasury signaled that stringent cybersecurity mitigation provisions will be a prerequisite for clearance.

(3) Governance Structure for VPI's Classified and Export-Controlled Programs. Treasury and DoD focused heavily on how VPI's classified programs and ITAR/EAR-controlled activities would be governed post-closing under foreign ownership, with particular attention to the proposed board structure, the role of a Government Security Committee, and the retention of key cleared personnel.

It is important to note that at no point during the meeting did Treasury staff indicate that the transaction is viewed as categorically problematic or that CFIUS would be likely to recommend that the President block the transaction. The overall tone was one of constructive engagement, and the staff's questions were oriented toward understanding how national security concerns could be addressed through appropriate mitigation. That said, Treasury staff signaled clearly that a forty-five-day investigation phase beyond the initial forty-five-day review period should be anticipated, given VPI's classified DoD contracts, its SECRET-level facility clearance, and its portfolio of ITAR- and EAR-controlled product lines.

Based on Treasury's feedback, we continue to believe that a full voluntary joint notice under 31 C.F.R. § 800.501 — rather than a short-form mandatory declaration under 31 C.F.R. § 800.401 — is the correct filing approach. This is consistent with the analysis set forth in our Mandatory vs. Voluntary Filing Analysis Memo, dated May 18, 2023, which concluded that the complexity of VPI's national security profile and the anticipated need for a negotiated mitigation agreement make the voluntary notice the superior vehicle for obtaining CFIUS clearance.

Our recommendation is as follows: We should undertake a twenty-five-day intensive preparation period, culminating in a filing on July 14, 2023. Based on the information gathered during the pre-filing consultation and our experience with comparable semiconductor-sector transactions, we estimate a total timeline through CFIUS clearance of approximately five to seven months — meaning clearance could be achieved in late Q4 2023 or early Q1 2024. This timeline remains aligned with the initial risk assessment we communicated to the client and is consistent with the outside date provisions in the Stock Purchase Agreement ("SPA") and HSAG's overall transaction timetable for a Q1 2024 closing.

The body of this memorandum addresses the pre-filing consultation in detail, sets forth a comprehensive filing timeline with specific milestones and assignments, identifies the supplemental information that must be gathered from both HSAG and VPI, outlines the content and drafting responsibilities for each section of the notice, describes the proposed mitigation framework as refined in light of Treasury's feedback, and identifies open questions and risks that require prompt attention.

II. Summary of Pre-Filing Consultation — June 19, 2023

A. Meeting Logistics

The pre-filing consultation was conducted in person at the U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC, on June 19, 2023. The meeting commenced at approximately 10:00 a.m. EDT and concluded at approximately 11:30 a.m. EDT, lasting approximately ninety minutes.

The following individuals attended on behalf of HSAG and Calderwood & Harkness LLP:

• Margaret "Peggy" Ashworth, Of Counsel, Calderwood & Harkness LLP (in person)

• Beatrice Holloway, Responsible Partner, Calderwood & Harkness LLP (by video from New York)

• Lt. Col. (Ret.) David Caruso, Senior Counsel, Calderwood & Harkness LLP (in person)

• Stefan Lohse, General Counsel, HSAG (by video from Dresden, Germany)

The following individuals attended on behalf of VPI and Wethersfield & Gale LLP:

• Harrison Whitfield, Lead Partner, Government Contracts & National Security, Wethersfield & Gale LLP (in person)

• Dr. Nathan Trevorrow, Chief Executive Officer, VPI (by video from Colorado Springs, Colorado)

On the Treasury side, the meeting was attended by the OIS staff director and two staff attorneys. Consistent with standard practice, we do not identify Treasury participants by name in this memorandum; they are identified by role. In addition, representatives from the DoD and the Department of Energy ("DOE") were present, reflecting the anticipated dual co-lead agency designation for this review. The presence of both DoD and DOE staff at the pre-filing consultation stage confirms our expectation that VPI's defense contracts and its position in the broader semiconductor supply chain are matters of interest to multiple agencies within the CFIUS membership.

Prior to the meeting, Calderwood & Harkness prepared and delivered to Treasury a twenty-two-slide briefing deck, which was circulated to OIS on June 16, 2023, three business days in advance of the meeting. The deck covered the following topics: (i) an overview of the transaction structure, (ii) profiles of both HSAG and VPI, (iii) a summary of VPI's business activities, including its government contracts, classified programs, and regulated products, and (iv) a preliminary outline of the proposed mitigation framework. The briefing deck was clearly marked as attorney-client privileged and was submitted to Treasury subject to our standard reservation of privilege. Harrison Whitfield at Wethersfield & Gale reviewed and approved the VPI-related portions of the deck prior to submission.

B. Treasury's Areas of Inquiry and Concern

During the pre-filing consultation, Treasury staff directed their questions primarily at the three areas identified in the Executive Summary above. In addition, staff posed a number of supplemental questions on related topics, including government contract continuity, supply chain considerations, intellectual property and technology transfer risk, personnel retention, HSAG's existing U.S. operations, and VPI's DDTC registration and export licenses. Each area of inquiry is addressed in turn below.

1. HSAG's China Operations

Treasury staff devoted a significant portion of the meeting to questions about HSAG's China subsidiary, Halcyon Semiconductor (Shanghai) Co., Ltd. The line of questioning was detailed and specific, and it is clear that the China operations issue will be a focal point of the CFIUS review.

Treasury's specific inquiries included the following:

• Revenue: Treasury asked about the revenue attributable to HSAG's China operations. Stefan Lohse confirmed that Halcyon Semiconductor (Shanghai) Co., Ltd. generated revenue of approximately $81.4 million in FY2022, which represents approximately 1.3% of HSAG's total FY2022 revenue of €6.12 billion. Treasury staff took note of this figure and asked for a breakdown by product line and customer segment.

• Nature of Activities: Treasury asked what the Shanghai subsidiary does — specifically, what products it manufactures or designs, whether any of those products involve gallium nitride ("GaN") technology, and whether any activities conducted in China have defense-related or dual-use applications. Mr. Lohse confirmed that the Shanghai subsidiary's activities are limited to consumer-grade power management integrated circuits ("ICs") and that no GaN-based, defense-related, or dual-use semiconductor activities are conducted in China. Treasury asked that this representation be supported with detailed product descriptions in the notice.

• Relationships with Chinese Government Entities: Treasury asked directly whether HSAG or its Shanghai subsidiary has any relationships with Chinese government entities, Chinese military end-users, or entities appearing on the Bureau of Industry and Security ("BIS") Entity List. Mr. Lohse stated that HSAG has no such relationships and that the Shanghai subsidiary's customers are exclusively commercial entities. Treasury requested that the notice include an affirmative attestation to this effect, supported by the underlying data.

• Technology Sharing: Treasury asked whether any technology, technical data, or proprietary information is shared between the Shanghai subsidiary and other HSAG entities — in particular, whether any technology flows between HSAG's German operations and the Shanghai subsidiary. This question is clearly directed at the risk of indirect technology transfer: if HSAG acquires VPI and subsequently integrates any VPI technology into its global R&D infrastructure, any existing technology-sharing arrangements with the Shanghai subsidiary could create an indirect conduit for controlled technology to reach China.

• Other Non-Allied-Nation Operations: Treasury broadened its inquiry to ask whether HSAG has operations in any other nations of concern, such as Russia, Iran, or North Korea. We anticipate that the answer is no, but this must be confirmed in writing by HSAG.

Action Item: We must obtain from HSAG, through Stefan Lohse, a comprehensive China operations package for inclusion in the notice. This package should include the following: (a) the full legal name, address, and organizational details of Halcyon Semiconductor (Shanghai) Co., Ltd.; (b) a revenue breakdown by product line and customer segment; (c) detailed product descriptions confirming that the subsidiary's activities are limited to consumer-grade power management ICs; (d) a customer list (anonymized if necessary for competitive sensitivity, but with sufficient detail to demonstrate the commercial nature of the customer base); (e) an employee headcount and functional breakdown; and (f) a written attestation, signed by an authorized officer of HSAG, confirming that no GaN, defense-related, or dual-use semiconductor activities are conducted in China, and that HSAG has no relationships with Chinese government entities, military end-users, or BIS Entity List entities. This information request is being issued to Stefan Lohse on June 23, 2023.

2. Cybersecurity Architecture and IT Separation

Treasury and DoD staff expressed significant concern regarding the risk of post-closing integration of VPI's information technology systems into HSAG's global IT network. This concern is well-founded: VPI maintains classified and controlled unclassified information on its IT systems, and any post-closing integration that would permit foreign access — whether through shared infrastructure, cloud migration, or inadequate logical separation — would present a direct national security risk.

The specific questions posed by Treasury and DoD staff in this area included the following:

• IT Segregation Plan: Treasury asked how VPI's IT infrastructure would be segregated from HSAG's global network post-closing. Treasury's staff attorney specifically asked whether HSAG intends to maintain VPI's IT systems as a standalone environment or whether any degree of integration is contemplated.

• Cloud Infrastructure: DoD staff asked whether HSAG intends to migrate VPI to shared cloud infrastructure. This question likely reflects recent concerns within the defense community about the use of foreign-controlled cloud platforms by cleared defense contractors.

• HSAG's Cybersecurity Framework: Treasury asked what cybersecurity framework HSAG currently employs. Peggy Ashworth confirmed that HSAG maintains ISO 27001 certification for its enterprise information security management system. Treasury staff noted this but did not indicate whether they view ISO 27001 as adequate in this context.

• VPI's Cybersecurity Framework: Treasury asked what cybersecurity framework VPI currently maintains. David Caruso confirmed that VPI currently maintains compliance with NIST Special Publication 800-171, as required by the Defense Federal Acquisition Regulation Supplement ("DFARS") clause at 252.204-7012 for contractors handling controlled unclassified information ("CUI"). Treasury noted this with apparent satisfaction.

Treasury signaled clearly that any National Security Agreement ("NSA") resulting from this transaction would likely include the following cybersecurity-related provisions:

(a) Physical and logical separation of VPI's IT systems from HSAG's global network;

(b) A prohibition on shared cloud infrastructure between VPI and HSAG;

(d) A requirement for cybersecurity incident reporting to the Defense Counterintelligence and Security Agency ("DCSA") within a specified timeframe, which Treasury indicated would likely be seventy-two hours.

Action Item: We must obtain from HSAG a detailed description of its enterprise cybersecurity program, including its ISO 27001 certification (copy of the certificate and the scope of certification), its data protection practices, and its incident response protocols. We must also obtain from HSAG a description of its proposed measures for IT segregation of VPI systems post-closing. Separately, we must coordinate with VPI, through Wethersfield & Gale, to obtain a current description of VPI's NIST SP 800-171 compliance status, including any Plan of Action & Milestones ("POA&M") items. These requests are being issued on June 23, 2023.

3. Post-Closing Governance of Classified and Export-Controlled Programs

The governance of VPI's classified programs and export-controlled activities under foreign ownership was the most extensively discussed topic during the pre-filing consultation. Treasury and DoD staff devoted approximately thirty minutes of the ninety-minute meeting to this subject, and it is evident that the proposed governance framework will be the central element of any NSA negotiation.

Treasury and DoD's inquiries in this area focused on the following:

• FOCI Mitigation Approach: Treasury referenced the foreign ownership, control, or influence ("FOCI") mitigation framework administered by DCSA and asked whether HSAG intends to propose a Special Security Agreement ("SSA") or a Proxy Agreement approach for the management of VPI's facility security clearance under foreign ownership. We indicated our expectation that the NSA itself would serve as an SSA-equivalent instrument, incorporating the key elements of an SSA — including board restructuring, the establishment of a Government Security Committee ("GSC"), and the adoption of a Technology Control Plan ("TCP") — directly within the CFIUS mitigation framework. Treasury staff appeared receptive to this approach, which is consistent with the manner in which FOCI-related issues have been addressed in recent semiconductor-sector NSAs.

• Proposed Board Composition: Treasury asked for details on the proposed composition of VPI's board of directors post-closing. Specifically, Treasury asked how many board seats HSAG would hold, how many would be held by U.S. citizens with security clearances, and whether any independent directors would be included. We provided a preliminary description of our proposed five-member board structure (described in detail in Section VIII.A below), and Treasury indicated that this framework was within the range of what CFIUS would find acceptable, subject to further review and negotiation.

• Security Board Member Qualifications: Treasury and DoD asked about the qualifications and clearance status of the proposed Security Board Members, including whether they hold active security clearances and whether they have relevant experience in the defense or semiconductor industries. DoD's staff representative was particularly focused on whether the proposed Security Board Members would be truly independent of HSAG and capable of exercising meaningful oversight over VPI's classified programs.

• GSC Authority: Treasury asked about the proposed scope of authority of the Government Security Committee. Specifically, Treasury asked whether the GSC would have exclusive authority over all decisions relating to VPI's classified programs, personnel security, facility security, and export-controlled activities, or whether HSAG designees on the VPI board would retain any authority over these matters. We confirmed that our proposed framework envisions the GSC as having exclusive authority over these domains, with no HSAG designee access to classified information.

• FSO Retention: Both Treasury and DoD expressed specific interest in the retention of Col. (Ret.) Bryce Hendrickson as VPI's Facility Security Officer ("FSO"). Col. Hendrickson holds a TS/SCI clearance and has served as VPI's FSO since 2014. Treasury's emphasis on his retention reflects the reality that the FSO role is critical to the continuity of VPI's facility clearance during the ownership transition, and Col. Hendrickson's institutional knowledge of VPI's classified programs, DCSA relationships, and security procedures would be difficult to replace.

Action Item: We must develop a detailed proposed board governance framework for inclusion in the notice. This framework should include the following elements: (a) the proposed five-member post-closing board composition; (b) biographical information and clearance status for each proposed Security Board Member; (c) a draft outline of the proposed GSC charter, including the scope of GSC authority, meeting cadence, and reporting obligations; and (d) a description of the restrictions on HSAG designees' access to classified information and classified facilities. We must also identify a third candidate for the independent Security Director position, as we currently have only two identified Security Board Member candidates (Col. Hendrickson and Ms. Delacroix). This work should be completed no later than July 7, 2023.

4. Additional Areas of Inquiry

In addition to the three primary areas described above, Treasury and the co-lead agency representatives raised a number of supplemental questions during the pre-filing consultation. These additional areas of inquiry are summarized below.

Government Contract Continuity. Treasury asked about VPI's active DoD contracts, including the aggregate contract backlog and the identity of the contracting agencies. David Caruso provided an overview of VPI's fourteen active DoD contracts, with an aggregate backlog of approximately $193 million. Treasury asked specifically about the five largest contracts:

Treasury inquired whether foreign ownership of VPI could trigger novation requirements under FAR Subpart 42.12 or raise concerns among contracting officers at the relevant agencies. We noted that novation is typically required only when there is a change in the legal identity of the contracting entity, and that our proposed post-closing structure — in which VPI would continue to exist as a separately organized U.S. subsidiary — is designed to avoid the need for novation. However, we acknowledged that contracting officers may seek assurances regarding the continuity of VPI's cleared personnel and its ability to perform under its existing contracts.

Supply Chain. DOE representatives directed several questions at VPI's supply chain for silicon carbide ("SiC") substrates and epitaxial materials. DOE asked specifically whether any critical materials used in VPI's manufacturing processes are sourced from non-allied nations, with particular emphasis on China. DOE's interest in this topic reflects the broader U.S. government focus on semiconductor supply chain resilience, a priority that has been reinforced by the CHIPS and Science Act and by recent executive actions on semiconductor supply chains. We must obtain detailed supply chain information from VPI, including country-of-origin data for all critical materials, to address this line of inquiry in the notice.

IP and Technology Transfer Risk. Treasury asked about HSAG's plans for integrating VPI's technology into HSAG's global product portfolio. This question goes directly to the heart of one of CFIUS's core concerns: whether the acquisition could facilitate the transfer of controlled technology to a foreign person. Treasury specifically asked about the potential for transfer of ITAR-controlled technical data or EAR-controlled technology to non-U.S. persons, including HSAG employees in Germany and elsewhere outside the United States. Treasury also noted that VPI holds forty-seven U.S. patents, of which twenty-three are government-funded patents subject to march-in rights under 35 U.S.C. § 203. The existence of government-funded patents adds an additional layer of complexity, as the government's retained rights in these patents may constrain HSAG's ability to exploit the acquired technology commercially outside the United States.

Personnel Retention. Treasury asked whether key VPI personnel would be retained post-closing, with particular focus on cleared employees. VPI currently employs 486 individuals, of whom 212 — approximately 43.6% — hold active security clearances. Treasury expressed specific concern about the continued employment of the following key personnel:

• Dr. Nathan Trevorrow, CEO (TS/SCI clearance)

• Marissa Sung-Avila, Senior Vice President of Engineering (SECRET clearance)

• Col. (Ret.) Bryce Hendrickson, Facility Security Officer (TS/SCI clearance)

Treasury's emphasis on these individuals underscores the importance of personnel continuity to the national security assessment. Any departure of key cleared personnel during or after the CFIUS review process could create complications, both for the review itself and for the ongoing performance of VPI's classified contracts.

HSAG's Existing U.S. Operations. Treasury noted that HSAG already maintains a U.S. presence through Halcyon US Inc., a fabless design center in Austin, Texas, with approximately 320 employees. Treasury asked whether any integration of VPI's operations into the Austin facility is planned. This question is directed at understanding the degree to which HSAG intends to commingle VPI's defense-oriented activities with HSAG's commercial operations. We must obtain clear guidance from HSAG on its post-closing integration plans to address this question in the notice.

DDTC Registration. Treasury flagged the requirement for VPI to notify the Directorate of Defense Trade Controls ("DDTC") of the change in ownership under ITAR § 122.4(a). Treasury asked about the status of VPI's DDTC Registration No. M-24817 and about VPI's three active DSP-5 export licenses, which authorize the delivery of ITAR-controlled items to NATO allies (specifically the United Kingdom and Australia). The change-in-ownership notification to DDTC is a routine but important administrative step that must be coordinated with Wethersfield & Gale and VPI's Empowered Official.

C. Treasury's Process Guidance

At the conclusion of the substantive discussion, Treasury staff provided the following process guidance:

Filing Vehicle. Treasury confirmed that a voluntary joint notice under 31 C.F.R. § 800.501 is the appropriate and preferred filing vehicle for this transaction, given the complexity of VPI's business and the anticipated need for a negotiated mitigation agreement. This is consistent with our prior analysis. A short-form mandatory declaration under 31 C.F.R. § 800.401 would be inadequate to convey the level of detail that CFIUS will need to assess this transaction.

Co-Lead Agency Designation. Treasury indicated that the filing will trigger the designation of both DoD and DOE as co-lead agencies for the review. The dual co-lead designation reflects (i) VPI's extensive classified DoD contracts and (ii) VPI's position in the semiconductor manufacturing supply chain, which implicates DOE's equities in energy-related technologies and semiconductor supply chain resilience.

Notice Comprehensiveness. Treasury strongly recommended submitting a comprehensive and detailed notice to minimize the need for supplemental information requests. Treasury acknowledged, however, that at least one request for information ("RFI") is likely, given the complexity of the transaction and the number of national security equities involved. This guidance is consistent with standard practice: even the most comprehensive notices typically generate at least one round of supplemental questions from the reviewing agencies.

Review vs. Investigation. Treasury did not commit to a review-only outcome. Staff expressly suggested that an investigation phase — the additional forty-five-day period beyond the initial review — should be anticipated. This is not surprising, given VPI's classified contracts and facility clearance, and it is consistent with our initial timeline estimate.

DCSA Engagement. Treasury recommended that the parties engage with DCSA at an early stage regarding the transition of VPI's facility security clearance under the anticipated FOCI mitigation framework. Treasury's recommendation suggests that early DCSA engagement could help to smooth the path toward a comprehensive NSA that incorporates the FOCI mitigation elements.

Third-Party Compliance Monitor. Treasury noted that the appointment of a third-party compliance monitor would likely be a component of any NSA. This is consistent with semiconductor-sector precedent and with our prior analysis. The monitor would be responsible for verifying compliance with the terms of the NSA on an ongoing basis and for reporting to CFIUS on compliance matters.

III. Refined Filing Timeline and Milestones

A. Target Filing Date: July 14, 2023

Based on the information gathered during the pre-filing consultation and the scope of work required to prepare a comprehensive voluntary joint notice, we are targeting a filing date of July 14, 2023. This date is twenty-five calendar days from today (June 22, 2023), which provides adequate time for information gathering from HSAG and VPI, drafting of the notice and all exhibits, internal review within Calderwood & Harkness, coordination with Wethersfield & Gale on VPI-related content, client review by HSAG and VPI, finalization, and execution of certifications.

A July 14 filing date is also strategically advantageous in that it positions the transaction for potential clearance before the end of 2023 or in early January 2024, which is aligned with the SPA's outside date and HSAG's target closing date of February 2024.

B. Key Milestones

The following table sets forth the key milestones for the notice preparation period:

This schedule is ambitious but achievable, provided that HSAG and VPI deliver the requested information materials by June 30, 2023, as indicated in the timeline. Delays in information delivery from either party will compress the drafting and review period and could jeopardize the July 14 filing date. I will communicate this expectation clearly to both Stefan Lohse and Harrison Whitfield during the information request calls on June 23.

C. Post-Filing Anticipated Timeline

Based on the process guidance received from Treasury and our experience with comparable transactions, the following post-filing timeline is anticipated:

• July 21 (estimated): CFIUS accepts the filing as complete; the forty-five-day review period commences pursuant to 50 U.S.C. § 4565(b)(1)(E).

• Early August (estimated): First RFI received from CFIUS (likely from DoD and/or DOE as co-lead agencies). We anticipate that the RFI will focus on the three primary areas of concern identified during the pre-filing consultation. A supplemental response should be prepared and submitted within fourteen days of receipt.

• Early September (estimated): The forty-five-day review period concludes. Based on Treasury's guidance, we anticipate that the review will not result in clearance during the review phase and that CFIUS will initiate the investigation phase — an additional forty-five-day period pursuant to 50 U.S.C. § 4565(b)(2)(C).

• Late September / Early October: A second RFI is possible during the investigation phase, particularly if the supplemental information provided in response to the first RFI raises additional questions or if the reviewing agencies identify new issues.

• Mid-to-Late October: CFIUS may communicate preliminary national security concerns to the parties. Receipt of a formal communication of concerns is typically the precursor to NSA negotiations.

• November–December: NSA negotiation period. If mitigation is the path — which is the most likely outcome based on our comparative analysis of semiconductor-sector CFIUS cases — the parties will negotiate the terms of the NSA with CFIUS staff during this period. NSA negotiations in transactions of this complexity typically require four to eight weeks.

• Late December 2023 / January 2024: Target for NSA execution and issuance of the CFIUS clearance letter. Upon execution of the NSA and receipt of the clearance letter, the CFIUS condition precedent in the SPA will be satisfied, and the parties may proceed toward closing.

This timeline is consistent with the outside date provisions in the SPA and with HSAG's overall transaction timetable. The SPA provides for a closing date no later than March 31, 2024, with the CFIUS clearance condition set forth in Section 7.1(c). Our target clearance date of late December 2023 or January 2024 would provide a comfortable cushion before the outside date, with the actual closing targeted for February 2024.

It bears noting that this timeline assumes no extraordinary delays, such as an extended RFI response period, a CFIUS request for withdrawal and refiling, or intervention by the President. While none of these outcomes is anticipated based on the information currently available, they represent potential risks that could extend the timeline.

IV. Supplemental Information Requests — Action Items

A. Information to Be Requested from HSAG (via Stefan Lohse)

The following categories of information will be requested from HSAG through Stefan Lohse, General Counsel, in a formal information request letter to be transmitted on June 23, 2023. Mr. Lohse has been informed that we will be issuing this request, and he has indicated HSAG's commitment to a responsive and timely turnaround. We have asked for delivery of all responsive materials by June 30, 2023.

1. China Operations Package

This is the single most important information deliverable from HSAG. As described in Section II.B.1, Treasury's questions about HSAG's China operations were detailed and specific, and the notice must include granular disclosure on the following topics:

• Full legal name, registered address, and organizational details of Halcyon Semiconductor (Shanghai) Co., Ltd., including date of incorporation, registered capital, and legal representative.

• FY2022 revenue for the Shanghai subsidiary ($81.4 million, as previously confirmed by Mr. Lohse), with a breakdown by product line and customer segment.

• Employee headcount and functional breakdown (e.g., manufacturing, engineering, sales, administration).

• Detailed product descriptions, confirming that the subsidiary's activities are limited to consumer-grade power management ICs. The descriptions should be sufficiently detailed to demonstrate that no GaN-based, defense-related, or dual-use semiconductor activities are conducted in China.

• Customer list for the Shanghai subsidiary, anonymized if necessary for competitive sensitivity, but with sufficient detail to demonstrate the commercial nature of the customer base and the absence of Chinese government, military, or BIS Entity List customers.

• Written attestation regarding the absence of any relationships with Chinese government entities, Chinese military end-users, or entities on the BIS Entity List.

• Description of any technology-sharing arrangements between the Shanghai subsidiary and other HSAG entities, including any transfers of technical data, know-how, or intellectual property.

• Identification of any other HSAG operations in non-allied nations (e.g., Russia, Iran, North Korea, Venezuela, Cuba, Belarus). The expected answer is none, but a written confirmation is required.

2. Cybersecurity Program Documentation

Treasury and DoD's focus on cybersecurity requires us to include comprehensive cybersecurity disclosures in the notice. The following materials are needed from HSAG:

• Copy of HSAG's ISO 27001 certification, including the scope of certification and the identity of the certifying body.

• A summary of HSAG's enterprise cybersecurity framework, including governance structure, risk assessment methodology, and key controls.

• HSAG's data protection and privacy policies, including compliance with the EU General Data Protection Regulation ("GDPR") and any other applicable data protection regimes.

• HSAG's incident response plan, including escalation procedures, reporting obligations, and the identity of the incident response team lead.

• A summary of any material cybersecurity incidents affecting HSAG or its subsidiaries in the last three years, including the nature of the incident, the impact, and the remediation measures taken.

• HSAG's proposed plan for IT segregation of VPI systems post-closing, including a description of the proposed physical and logical separation measures.

• Description of HSAG's current use of cloud infrastructure, including the identity of cloud service providers, the location of data centers, and the data residency policies in effect.

3. Corporate Governance and Ownership

The notice must include a complete description of HSAG's corporate governance and ownership structure. The following information is needed:

• Complete HSAG ownership structure, confirming that HSAG is publicly traded on the Frankfurt Stock Exchange (XETRA: HLC), with no government ownership or control. Confirm the market capitalization as of June 1, 2023 (€14.8 billion, per publicly available data).

• Composition and biographical information for the Aufsichtsrat (Supervisory Board), including each member's name, nationality, principal occupation, and any government affiliations.

• Composition and biographical information for the Vorstand (Management Board), including Dr. Maximilian Ehrhardt (CEO), Katarina Brückner (CFO), Stefan Lohse (General Counsel), and any other Vorstand members.

• Description of any German or EU government relationships, including government grants, subsidies, procurement contracts, or regulatory oversight beyond standard corporate supervision (e.g., BaFin, Bundeskartellamt).

• German commercial register information: HRB 28416 (Amtsgericht Dresden); LEI: 5299007KXQ2M4GHILZ38.

4. Post-Closing Integration Plans

HSAG's post-closing plans for VPI are a central issue for the CFIUS review. The following information is needed:

• A description of HSAG's plans for VPI operations post-closing, including whether any operational integration with Halcyon US Inc. (Austin, TX) is contemplated.

• A description of HSAG's plans for technology integration — specifically, whether HSAG intends to incorporate VPI's GaN technology into HSAG's commercial product lines and, if so, by what mechanism and subject to what export-control constraints.

• A description of any planned personnel changes at VPI post-closing, including whether HSAG intends to appoint new management or reduce headcount.

• The proposed composition of VPI's board of directors post-closing, including the names and qualifications of HSAG's proposed designees for the VPI board.

5. Financial Advisor Input

We should coordinate with Ashgrove Capital Group (Philippe Beaumont, Managing Director) on any CFIUS-related materials that may be needed from the financial advisor's perspective. While the financial advisor is not typically a primary source of information for the CFIUS notice, there may be materials in Velthorn's files — such as the confidential information memorandum, management presentations, or market analyses — that would be useful as background for the drafting process. Kenneth Morales should coordinate with Beatrice Holloway to identify any such materials and request them from Velthorn.

B. Information to Be Requested from VPI (via Wethersfield & Gale / Harrison Whitfield)

The following categories of information will be requested from VPI through Harrison Whitfield at Wethersfield & Gale, in a formal information request letter to be transmitted on June 23, 2023. Harrison Whitfield will coordinate the collection of responsive materials from Dr. Nathan Trevorrow and Col. (Ret.) Bryce Hendrickson at VPI. As with the HSAG request, we have asked for delivery of all responsive materials by June 30, 2023.

1. Government Contracts Detail

The notice must include a comprehensive description of VPI's government contracts portfolio. The following information is needed:

• Full list of all fourteen active DoD contracts (both prime contracts and subcontracts), including for each contract: the contract number, the contracting agency, the contract type (e.g., fixed-price, cost-plus), the total contract value, the remaining backlog amount, the period of performance, and the classification level.

• Detailed descriptions of the top five contracts by remaining backlog value:

(a) U.S. Army CERDEC / PEO IEW&S — GaN HEMT modules for the AN/TPS-80 G/ATOR multi-mission radar system. Remaining backlog: $52.3 million. This is VPI's largest active contract and involves the fabrication of GaN high-electron-mobility transistor ("HEMT") modules for the Army's premier ground-based radar program.

(b) Air Force Research Laboratory (AFRL) — Next-generation millimeter-wave ("mmWave") power amplifiers for advanced electronic warfare and communications applications. Remaining backlog: $41.7 million. This contract involves cutting-edge GaN-on-SiC MMIC technology at frequencies above 30 GHz.

(c) Missile Defense Agency (MDA) — GaN-based transmit/receive ("T/R") modules for ballistic missile defense radar systems. Remaining backlog: $38.9 million. This contract involves classified work at the SECRET level.

(d) Ironclad Defense Systems Inc. (subcontract under USN NAVSEA) — GaN power amplifier modules for naval electronic warfare systems. Remaining backlog: $34.1 million. VPI is a Tier 1 subcontractor to Ironclad Defense Systems Inc. under a USN NAVSEA prime contract.

(e) DHS Science & Technology Directorate — RF components for border surveillance radar and sensor systems. Remaining backlog: $26.0 million. This contract involves unclassified but export-controlled technology.

• Total backlog for the top five contracts: $193.0 million.

• Information regarding any pending contract awards or outstanding proposals, including estimated contract values and anticipated award dates.

• Information regarding any contracts with foreign governments or NATO allies.

2. Facility Security Clearance Documentation

The notice must include a detailed description of VPI's facility security clearance and related security infrastructure. The following information is needed:

• Current facility clearance level ("FCL"): SECRET, as adjudicated by DCSA.

• CAGE Code: 7VK92.

• FSO: Col. (Ret.) Bryce Hendrickson (TS/SCI clearance).

• Physical details of the cleared facility: VPI's primary manufacturing facility is located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113. The facility includes an approximately 45,000-square-foot GaN-on-SiC fabrication facility, with classified areas in clean room Sections C-7 through C-12.

• Results of the most recent DCSA vulnerability assessment.

• History of any prior FOCI actions or determinations relating to VPI.

3. ITAR/EAR Compliance Program

Given Treasury's focus on export control compliance and the DDTC notification requirement, the following information is needed:

• DDTC Registration No. M-24817 (registered since 2011). Confirm current registration status and the identity of the Empowered Official.

• List of all VPI products classified under ITAR Category XI(a)(3), with descriptions and end-use applications.

• List of all VPI products classified under Export Administration Regulations ("EAR") Export Control Classification Numbers ("ECCNs") 3A001, 3A991, and 3E001, with descriptions and end-use applications.

• Details on VPI's three active DSP-5 export licenses, including the license numbers, the authorized destinations (UK and Australia), the authorized items, the authorized end-users, and the expiration dates.

• A description of VPI's export compliance program, including the identity of the Empowered Official, compliance procedures, training protocols, record-keeping practices, and internal audit procedures.

• Information regarding any compliance violations, voluntary disclosures to DDTC or BIS, or enforcement actions in the last five years. We anticipate that VPI has a clean compliance record, but this must be confirmed.

4. Cleared Personnel Data

The notice must include a summary of VPI's cleared personnel, consistent with classification and privacy constraints. The following information is needed:

• An anonymized summary of VPI's 212 cleared employees, broken down by clearance level (SECRET and TS/SCI) and program affiliation.

• Biographical information for key cleared personnel:

• Dr. Nathan Trevorrow, CEO — TS/SCI clearance. Co-founder of VPI. Ph.D. in Electrical Engineering, University of Colorado at Boulder. Twenty-two years of experience in III-V compound semiconductor design and fabrication.

• Marissa Sung-Avila, Senior Vice President of Engineering — SECRET clearance. Lead engineer for VPI's GaN-on-SiC HEMT fabrication process.

• Col. (Ret.) Bryce Hendrickson, Facility Security Officer — TS/SCI clearance. Retired U.S. Army Military intelligence officer. Served as VPI's FSO since 2014.

• Adrienne Delacroix, Independent Board Member — SECRET clearance. Former Deputy Assistant Secretary of Defense for Industrial Policy.

• Confirmation regarding whether VPI employs any foreign national employees. We expect that no foreign nationals hold cleared positions, but Treasury will want confirmation regarding all VPI personnel.

5. Supply Chain Information

DOE's questions about VPI's supply chain require us to include a detailed supply chain description in the notice. The following information is needed:

• Identification of VPI's suppliers of SiC substrates, epitaxial materials (including GaN-on-SiC epitaxial wafers), and semiconductor packaging materials and services.

• Country of origin for each critical material and component.

• Identification of any dependencies on non-allied-nation suppliers, with particular attention to Chinese suppliers.

• Identification of any sole-source or single-source supply dependencies, including the nature of the dependency and any mitigation measures in place (e.g., qualification of alternate sources, strategic inventory).

6. Intellectual Property

The notice must include a comprehensive description of VPI's intellectual property portfolio. The following information is needed:

• Complete patent portfolio list, including all forty-seven granted U.S. patents and twelve pending patent applications, with patent numbers, titles, filing dates, issue dates, and brief descriptions.

• Identification of the twenty-three government-funded patents that are subject to march-in rights under 35 U.S.C. § 203 and the DFARS patent rights clause at 252.227-7038. For each government-funded patent, identify the funding agency, the contract under which the patent was developed, and the nature of the government's retained rights.

• Trade secret inventory: VPI maintains thirty-one registered internal trade secrets, including GaN epitaxial growth recipes, die-level reliability screening protocols, and proprietary process parameters. A summary description of these trade secrets, sufficient to convey their nature and significance without disclosing the underlying confidential information, is needed.

• Information regarding any IP licensing arrangements with third parties, including the identity of the licensee, the scope of the license, and the territory.

This IP information will be coordinated with Omar Siddiqui and Christy Bauer in the IP group, who will assist with the preparation of Exhibit E (Regulated Products) and the IP-related disclosures in the notice.

7. Corporate Information

The notice must include complete corporate information for VPI. The following information is needed:

• Current shareholder table:

• Current board composition:

• Dr. Nathan Trevorrow (Chair)

MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
FROM: Margaret "Peggy" Ashworth, Of Counsel National Security & CFIUS Practice Calderwood & Harkness LLP 1750 K Street NW, Suite 800 Washington, DC 20006
TO: Beatrice Holloway, Responsible Partner, M&A (New York) Lt. Col. (Ret.) David Caruso, Senior Counsel, Government Contracts & Export Controls (Washington, DC) Priya Venkataraman, Associate, International Trade & Sanctions (Washington, DC) Kenneth Morales, Associate, Corporate/M&A (New York)
CC: James Prentice, Billing Partner, M&A (New York) Omar Siddiqui, Lead Associate, IP (Washington, DC) Christy Bauer, Working Associate, IP (Washington, DC)
Date: June 22, 2023
Re: HSAG / VPI — Assessment of Pre-Filing Consultation and Voluntary Joint Notice Preparation Plan
Client: Halcyon Semiconductor Aktiengesellschaft ("HSAG")
Matter: Acquisition of Marlowe Asset Management Photonics Inc. ("VPI") — CFIUS Filing
Matter Number: 1032-00004
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I. Executive Summary
This memorandum serves two related purposes. First, it summarizes the key takeaways from the pre-filing consultation that was held on June 19, 2023, with the U.S. Department of the Treasury, Office of Investment Security ("OIS"), regarding HSAG's proposed acquisition of VPI. Second, it sets forth a detailed preparation plan for the voluntary joint notice that we intend to file with the Committee on Foreign Investment in the United States ("CFIUS") on July 14, 2023.
The pre-filing consultation, which lasted approximately ninety minutes, was constructive in tone and substantive in content. Treasury staff were engaged and well-prepared, having evidently reviewed the twenty-two-slide briefing deck that we circulated on June 16, 2023, with care. Their questions and comments during the meeting revealed three primary areas of heightened scrutiny that will drive both the content of our notice and the eventual shape of any mitigation agreement:
(1) HSAG's China Operations. Treasury posed detailed questions about Halcyon Semiconductor (Shanghai) Co., Ltd., HSAG's China subsidiary, including its revenue, products, customers, personnel, and any connections to Chinese government entities or military end-users. The staff's line of inquiry made clear that the notice must include granular disclosure regarding this subsidiary.
(2) Post-Closing Cybersecurity Architecture for VPI. Both Treasury and Department of Defense ("DoD") staff expressed concern about the risk that post-closing IT integration could expose VPI's classified and controlled unclassified information to foreign access through HSAG's global network. Treasury signaled that stringent cybersecurity mitigation provisions will be a prerequisite for clearance.
(3) Governance Structure for VPI's Classified and Export-Controlled Programs. Treasury and DoD focused heavily on how VPI's classified programs and ITAR/EAR-controlled activities would be governed post-closing under foreign ownership, with particular attention to the proposed board structure, the role of a Government Security Committee, and the retention of key cleared personnel.
It is important to note that at no point during the meeting did Treasury staff indicate that the transaction is viewed as categorically problematic or that CFIUS would be likely to recommend that the President block the transaction. The overall tone was one of constructive engagement, and the staff's questions were oriented toward understanding how national security concerns could be addressed through appropriate mitigation. That said, Treasury staff signaled clearly that a forty-five-day investigation phase beyond the initial forty-five-day review period should be anticipated, given VPI's classified DoD contracts, its SECRET-level facility clearance, and its portfolio of ITAR- and EAR-controlled product lines.
Based on Treasury's feedback, we continue to believe that a full voluntary joint notice under 31 C.F.R. § 800.501 — rather than a short-form mandatory declaration under 31 C.F.R. § 800.401 — is the correct filing approach. This is consistent with the analysis set forth in our Mandatory vs. Voluntary Filing Analysis Memo, dated May 18, 2023, which concluded that the complexity of VPI's national security profile and the anticipated need for a negotiated mitigation agreement make the voluntary notice the superior vehicle for obtaining CFIUS clearance.
Our recommendation is as follows: We should undertake a twenty-five-day intensive preparation period, culminating in a filing on July 14, 2023. Based on the information gathered during the pre-filing consultation and our experience with comparable semiconductor-sector transactions, we estimate a total timeline through CFIUS clearance of approximately five to seven months — meaning clearance could be achieved in late Q4 2023 or early Q1 2024. This timeline remains aligned with the initial risk assessment we communicated to the client and is consistent with the outside date provisions in the Stock Purchase Agreement ("SPA") and HSAG's overall transaction timetable for a Q1 2024 closing.
The body of this memorandum addresses the pre-filing consultation in detail, sets forth a comprehensive filing timeline with specific milestones and assignments, identifies the supplemental information that must be gathered from both HSAG and VPI, outlines the content and drafting responsibilities for each section of the notice, describes the proposed mitigation framework as refined in light of Treasury's feedback, and identifies open questions and risks that require prompt attention.
II. Summary of Pre-Filing Consultation — June 19, 2023
A. Meeting Logistics
The pre-filing consultation was conducted in person at the U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC, on June 19, 2023. The meeting commenced at approximately 10:00 a.m. EDT and concluded at approximately 11:30 a.m. EDT, lasting approximately ninety minutes.
The following individuals attended on behalf of HSAG and Calderwood & Harkness LLP:
•  Margaret "Peggy" Ashworth, Of Counsel, Calderwood & Harkness LLP (in person)
•  Beatrice Holloway, Responsible Partner, Calderwood & Harkness LLP (by video from New York)
•  Lt. Col. (Ret.) David Caruso, Senior Counsel, Calderwood & Harkness LLP (in person)
•  Stefan Lohse, General Counsel, HSAG (by video from Dresden, Germany)
The following individuals attended on behalf of VPI and Wethersfield & Gale LLP:
•  Harrison Whitfield, Lead Partner, Government Contracts & National Security, Wethersfield & Gale LLP (in person)
•  Dr. Nathan Trevorrow, Chief Executive Officer, VPI (by video from Colorado Springs, Colorado)
On the Treasury side, the meeting was attended by the OIS staff director and two staff attorneys. Consistent with standard practice, we do not identify Treasury participants by name in this memorandum; they are identified by role. In addition, representatives from the DoD and the Department of Energy ("DOE") were present, reflecting the anticipated dual co-lead agency designation for this review. The presence of both DoD and DOE staff at the pre-filing consultation stage confirms our expectation that VPI's defense contracts and its position in the broader semiconductor supply chain are matters of interest to multiple agencies within the CFIUS membership.
Prior to the meeting, Calderwood & Harkness prepared and delivered to Treasury a twenty-two-slide briefing deck, which was circulated to OIS on June 16, 2023, three business days in advance of the meeting. The deck covered the following topics: (i) an overview of the transaction structure, (ii) profiles of both HSAG and VPI, (iii) a summary of VPI's business activities, including its government contracts, classified programs, and regulated products, and (iv) a preliminary outline of the proposed mitigation framework. The briefing deck was clearly marked as attorney-client privileged and was submitted to Treasury subject to our standard reservation of privilege. Harrison Whitfield at Wethersfield & Gale reviewed and approved the VPI-related portions of the deck prior to submission.
B. Treasury's Areas of Inquiry and Concern
During the pre-filing consultation, Treasury staff directed their questions primarily at the three areas identified in the Executive Summary above. In addition, staff posed a number of supplemental questions on related topics, including government contract continuity, supply chain considerations, intellectual property and technology transfer risk, personnel retention, HSAG's existing U.S. operations, and VPI's DDTC registration and export licenses. Each area of inquiry is addressed in turn below.
1. HSAG's China Operations
Treasury staff devoted a significant portion of the meeting to questions about HSAG's China subsidiary, Halcyon Semiconductor (Shanghai) Co., Ltd. The line of questioning was detailed and specific, and it is clear that the China operations issue will be a focal point of the CFIUS review.
Treasury's specific inquiries included the following:
•  Revenue: Treasury asked about the revenue attributable to HSAG's China operations. Stefan Lohse confirmed that Halcyon Semiconductor (Shanghai) Co., Ltd. generated revenue of approximately $81.4 million in FY2022, which represents approximately 1.3% of HSAG's total FY2022 revenue of €6.12 billion. Treasury staff took note of this figure and asked for a breakdown by product line and customer segment.
•  Nature of Activities: Treasury asked what the Shanghai subsidiary does — specifically, what products it manufactures or designs, whether any of those products involve gallium nitride ("GaN") technology, and whether any activities conducted in China have defense-related or dual-use applications. Mr. Lohse confirmed that the Shanghai subsidiary's activities are limited to consumer-grade power management integrated circuits ("ICs") and that no GaN-based, defense-related, or dual-use semiconductor activities are conducted in China. Treasury asked that this representation be supported with detailed product descriptions in the notice.
•  Relationships with Chinese Government Entities: Treasury asked directly whether HSAG or its Shanghai subsidiary has any relationships with Chinese government entities, Chinese military end-users, or entities appearing on the Bureau of Industry and Security ("BIS") Entity List. Mr. Lohse stated that HSAG has no such relationships and that the Shanghai subsidiary's customers are exclusively commercial entities. Treasury requested that the notice include an affirmative attestation to this effect, supported by the underlying data.
•  Technology Sharing: Treasury asked whether any technology, technical data, or proprietary information is shared between the Shanghai subsidiary and other HSAG entities — in particular, whether any technology flows between HSAG's German operations and the Shanghai subsidiary. This question is clearly directed at the risk of indirect technology transfer: if HSAG acquires VPI and subsequently integrates any VPI technology into its global R&D infrastructure, any existing technology-sharing arrangements with the Shanghai subsidiary could create an indirect conduit for controlled technology to reach China.
•  Other Non-Allied-Nation Operations: Treasury broadened its inquiry to ask whether HSAG has operations in any other nations of concern, such as Russia, Iran, or North Korea. We anticipate that the answer is no, but this must be confirmed in writing by HSAG.
Action Item: We must obtain from HSAG, through Stefan Lohse, a comprehensive China operations package for inclusion in the notice. This package should include the following: (a) the full legal name, address, and organizational details of Halcyon Semiconductor (Shanghai) Co., Ltd.; (b) a revenue breakdown by product line and customer segment; (c) detailed product descriptions confirming that the subsidiary's activities are limited to consumer-grade power management ICs; (d) a customer list (anonymized if necessary for competitive sensitivity, but with sufficient detail to demonstrate the commercial nature of the customer base); (e) an employee headcount and functional breakdown; and (f) a written attestation, signed by an authorized officer of HSAG, confirming that no GaN, defense-related, or dual-use semiconductor activities are conducted in China, and that HSAG has no relationships with Chinese government entities, military end-users, or BIS Entity List entities. This information request is being issued to Stefan Lohse on June 23, 2023.
2. Cybersecurity Architecture and IT Separation
Treasury and DoD staff expressed significant concern regarding the risk of post-closing integration of VPI's information technology systems into HSAG's global IT network. This concern is well-founded: VPI maintains classified and controlled unclassified information on its IT systems, and any post-closing integration that would permit foreign access — whether through shared infrastructure, cloud migration, or inadequate logical separation — would present a direct national security risk.
The specific questions posed by Treasury and DoD staff in this area included the following:
•  IT Segregation Plan: Treasury asked how VPI's IT infrastructure would be segregated from HSAG's global network post-closing. Treasury's staff attorney specifically asked whether HSAG intends to maintain VPI's IT systems as a standalone environment or whether any degree of integration is contemplated.
•  Cloud Infrastructure: DoD staff asked whether HSAG intends to migrate VPI to shared cloud infrastructure. This question likely reflects recent concerns within the defense community about the use of foreign-controlled cloud platforms by cleared defense contractors.
•  HSAG's Cybersecurity Framework: Treasury asked what cybersecurity framework HSAG currently employs. Peggy Ashworth confirmed that HSAG maintains ISO 27001 certification for its enterprise information security management system. Treasury staff noted this but did not indicate whether they view ISO 27001 as adequate in this context.
•  VPI's Cybersecurity Framework: Treasury asked what cybersecurity framework VPI currently maintains. David Caruso confirmed that VPI currently maintains compliance with NIST Special Publication 800-171, as required by the Defense Federal Acquisition Regulation Supplement ("DFARS") clause at 252.204-7012 for contractors handling controlled unclassified information ("CUI"). Treasury noted this with apparent satisfaction.
Treasury signaled clearly that any National Security Agreement ("NSA") resulting from this transaction would likely include the following cybersecurity-related provisions:
(a) Physical and logical separation of VPI's IT systems from HSAG's global network;
(b) A prohibition on shared cloud infrastructure between VPI and HSAG;
(c) A requirement for annual third-party penetration testing of VPI's IT systems;
(d) A requirement for cybersecurity incident reporting to the Defense Counterintelligence and Security Agency ("DCSA") within a specified timeframe, which Treasury indicated would likely be seventy-two hours.
Action Item: We must obtain from HSAG a detailed description of its enterprise cybersecurity program, including its ISO 27001 certification (copy of the certificate and the scope of certification), its data protection practices, and its incident response protocols. We must also obtain from HSAG a description of its proposed measures for IT segregation of VPI systems post-closing. Separately, we must coordinate with VPI, through Wethersfield & Gale, to obtain a current description of VPI's NIST SP 800-171 compliance status, including any Plan of Action & Milestones ("POA&M") items. These requests are being issued on June 23, 2023.
3. Post-Closing Governance of Classified and Export-Controlled Programs
The governance of VPI's classified programs and export-controlled activities under foreign ownership was the most extensively discussed topic during the pre-filing consultation. Treasury and DoD staff devoted approximately thirty minutes of the ninety-minute meeting to this subject, and it is evident that the proposed governance framework will be the central element of any NSA negotiation.
Treasury and DoD's inquiries in this area focused on the following:
•  FOCI Mitigation Approach: Treasury referenced the foreign ownership, control, or influence ("FOCI") mitigation framework administered by DCSA and asked whether HSAG intends to propose a Special Security Agreement ("SSA") or a Proxy Agreement approach for the management of VPI's facility security clearance under foreign ownership. We indicated our expectation that the NSA itself would serve as an SSA-equivalent instrument, incorporating the key elements of an SSA — including board restructuring, the establishment of a Government Security Committee ("GSC"), and the adoption of a Technology Control Plan ("TCP") — directly within the CFIUS mitigation framework. Treasury staff appeared receptive to this approach, which is consistent with the manner in which FOCI-related issues have been addressed in recent semiconductor-sector NSAs.
•  Proposed Board Composition: Treasury asked for details on the proposed composition of VPI's board of directors post-closing. Specifically, Treasury asked how many board seats HSAG would hold, how many would be held by U.S. citizens with security clearances, and whether any independent directors would be included. We provided a preliminary description of our proposed five-member board structure (described in detail in Section VIII.A below), and Treasury indicated that this framework was within the range of what CFIUS would find acceptable, subject to further review and negotiation.
•  Security Board Member Qualifications: Treasury and DoD asked about the qualifications and clearance status of the proposed Security Board Members, including whether they hold active security clearances and whether they have relevant experience in the defense or semiconductor industries. DoD's staff representative was particularly focused on whether the proposed Security Board Members would be truly independent of HSAG and capable of exercising meaningful oversight over VPI's classified programs.
•  GSC Authority: Treasury asked about the proposed scope of authority of the Government Security Committee. Specifically, Treasury asked whether the GSC would have exclusive authority over all decisions relating to VPI's classified programs, personnel security, facility security, and export-controlled activities, or whether HSAG designees on the VPI board would retain any authority over these matters. We confirmed that our proposed framework envisions the GSC as having exclusive authority over these domains, with no HSAG designee access to classified information.
•  FSO Retention: Both Treasury and DoD expressed specific interest in the retention of Col. (Ret.) Bryce Hendrickson as VPI's Facility Security Officer ("FSO"). Col. Hendrickson holds a TS/SCI clearance and has served as VPI's FSO since 2014. Treasury's emphasis on his retention reflects the reality that the FSO role is critical to the continuity of VPI's facility clearance during the ownership transition, and Col. Hendrickson's institutional knowledge of VPI's classified programs, DCSA relationships, and security procedures would be difficult to replace.
Action Item: We must develop a detailed proposed board governance framework for inclusion in the notice. This framework should include the following elements: (a) the proposed five-member post-closing board composition; (b) biographical information and clearance status for each proposed Security Board Member; (c) a draft outline of the proposed GSC charter, including the scope of GSC authority, meeting cadence, and reporting obligations; and (d) a description of the restrictions on HSAG designees' access to classified information and classified facilities. We must also identify a third candidate for the independent Security Director position, as we currently have only two identified Security Board Member candidates (Col. Hendrickson and Ms. Delacroix). This work should be completed no later than July 7, 2023.
4. Additional Areas of Inquiry
In addition to the three primary areas described above, Treasury and the co-lead agency representatives raised a number of supplemental questions during the pre-filing consultation. These additional areas of inquiry are summarized below.
Government Contract Continuity. Treasury asked about VPI's active DoD contracts, including the aggregate contract backlog and the identity of the contracting agencies. David Caruso provided an overview of VPI's fourteen active DoD contracts, with an aggregate backlog of approximately $193 million. Treasury asked specifically about the five largest contracts:
Treasury inquired whether foreign ownership of VPI could trigger novation requirements under FAR Subpart 42.12 or raise concerns among contracting officers at the relevant agencies. We noted that novation is typically required only when there is a change in the legal identity of the contracting entity, and that our proposed post-closing structure — in which VPI would continue to exist as a separately organized U.S. subsidiary — is designed to avoid the need for novation. However, we acknowledged that contracting officers may seek assurances regarding the continuity of VPI's cleared personnel and its ability to perform under its existing contracts.
Supply Chain. DOE representatives directed several questions at VPI's supply chain for silicon carbide ("SiC") substrates and epitaxial materials. DOE asked specifically whether any critical materials used in VPI's manufacturing processes are sourced from non-allied nations, with particular emphasis on China. DOE's interest in this topic reflects the broader U.S. government focus on semiconductor supply chain resilience, a priority that has been reinforced by the CHIPS and Science Act and by recent executive actions on semiconductor supply chains. We must obtain detailed supply chain information from VPI, including country-of-origin data for all critical materials, to address this line of inquiry in the notice.
IP and Technology Transfer Risk. Treasury asked about HSAG's plans for integrating VPI's technology into HSAG's global product portfolio. This question goes directly to the heart of one of CFIUS's core concerns: whether the acquisition could facilitate the transfer of controlled technology to a foreign person. Treasury specifically asked about the potential for transfer of ITAR-controlled technical data or EAR-controlled technology to non-U.S. persons, including HSAG employees in Germany and elsewhere outside the United States. Treasury also noted that VPI holds forty-seven U.S. patents, of which twenty-three are government-funded patents subject to march-in rights under 35 U.S.C. § 203. The existence of government-funded patents adds an additional layer of complexity, as the government's retained rights in these patents may constrain HSAG's ability to exploit the acquired technology commercially outside the United States.
Personnel Retention. Treasury asked whether key VPI personnel would be retained post-closing, with particular focus on cleared employees. VPI currently employs 486 individuals, of whom 212 — approximately 43.6% — hold active security clearances. Treasury expressed specific concern about the continued employment of the following key personnel:
•  Dr. Nathan Trevorrow, CEO (TS/SCI clearance)
•  Marissa Sung-Avila, Senior Vice President of Engineering (SECRET clearance)
•  Col. (Ret.) Bryce Hendrickson, Facility Security Officer (TS/SCI clearance)
Treasury's emphasis on these individuals underscores the importance of personnel continuity to the national security assessment. Any departure of key cleared personnel during or after the CFIUS review process could create complications, both for the review itself and for the ongoing performance of VPI's classified contracts.
HSAG's Existing U.S. Operations. Treasury noted that HSAG already maintains a U.S. presence through Halcyon US Inc., a fabless design center in Austin, Texas, with approximately 320 employees. Treasury asked whether any integration of VPI's operations into the Austin facility is planned. This question is directed at understanding the degree to which HSAG intends to commingle VPI's defense-oriented activities with HSAG's commercial operations. We must obtain clear guidance from HSAG on its post-closing integration plans to address this question in the notice.
DDTC Registration. Treasury flagged the requirement for VPI to notify the Directorate of Defense Trade Controls ("DDTC") of the change in ownership under ITAR § 122.4(a). Treasury asked about the status of VPI's DDTC Registration No. M-24817 and about VPI's three active DSP-5 export licenses, which authorize the delivery of ITAR-controlled items to NATO allies (specifically the United Kingdom and Australia). The change-in-ownership notification to DDTC is a routine but important administrative step that must be coordinated with Wethersfield & Gale and VPI's Empowered Official.
C. Treasury's Process Guidance
At the conclusion of the substantive discussion, Treasury staff provided the following process guidance:
Filing Vehicle. Treasury confirmed that a voluntary joint notice under 31 C.F.R. § 800.501 is the appropriate and preferred filing vehicle for this transaction, given the complexity of VPI's business and the anticipated need for a negotiated mitigation agreement. This is consistent with our prior analysis. A short-form mandatory declaration under 31 C.F.R. § 800.401 would be inadequate to convey the level of detail that CFIUS will need to assess this transaction.
Co-Lead Agency Designation. Treasury indicated that the filing will trigger the designation of both DoD and DOE as co-lead agencies for the review. The dual co-lead designation reflects (i) VPI's extensive classified DoD contracts and (ii) VPI's position in the semiconductor manufacturing supply chain, which implicates DOE's equities in energy-related technologies and semiconductor supply chain resilience.
Notice Comprehensiveness. Treasury strongly recommended submitting a comprehensive and detailed notice to minimize the need for supplemental information requests. Treasury acknowledged, however, that at least one request for information ("RFI") is likely, given the complexity of the transaction and the number of national security equities involved. This guidance is consistent with standard practice: even the most comprehensive notices typically generate at least one round of supplemental questions from the reviewing agencies.
Review vs. Investigation. Treasury did not commit to a review-only outcome. Staff expressly suggested that an investigation phase — the additional forty-five-day period beyond the initial review — should be anticipated. This is not surprising, given VPI's classified contracts and facility clearance, and it is consistent with our initial timeline estimate.
DCSA Engagement. Treasury recommended that the parties engage with DCSA at an early stage regarding the transition of VPI's facility security clearance under the anticipated FOCI mitigation framework. Treasury's recommendation suggests that early DCSA engagement could help to smooth the path toward a comprehensive NSA that incorporates the FOCI mitigation elements.
Third-Party Compliance Monitor. Treasury noted that the appointment of a third-party compliance monitor would likely be a component of any NSA. This is consistent with semiconductor-sector precedent and with our prior analysis. The monitor would be responsible for verifying compliance with the terms of the NSA on an ongoing basis and for reporting to CFIUS on compliance matters.
III. Refined Filing Timeline and Milestones
A. Target Filing Date: July 14, 2023
Based on the information gathered during the pre-filing consultation and the scope of work required to prepare a comprehensive voluntary joint notice, we are targeting a filing date of July 14, 2023. This date is twenty-five calendar days from today (June 22, 2023), which provides adequate time for information gathering from HSAG and VPI, drafting of the notice and all exhibits, internal review within Calderwood & Harkness, coordination with Wethersfield & Gale on VPI-related content, client review by HSAG and VPI, finalization, and execution of certifications.
A July 14 filing date is also strategically advantageous in that it positions the transaction for potential clearance before the end of 2023 or in early January 2024, which is aligned with the SPA's outside date and HSAG's target closing date of February 2024.
B. Key Milestones
The following table sets forth the key milestones for the notice preparation period:
This schedule is ambitious but achievable, provided that HSAG and VPI deliver the requested information materials by June 30, 2023, as indicated in the timeline. Delays in information delivery from either party will compress the drafting and review period and could jeopardize the July 14 filing date. I will communicate this expectation clearly to both Stefan Lohse and Harrison Whitfield during the information request calls on June 23.
C. Post-Filing Anticipated Timeline
Based on the process guidance received from Treasury and our experience with comparable transactions, the following post-filing timeline is anticipated:
•  July 21 (estimated): CFIUS accepts the filing as complete; the forty-five-day review period commences pursuant to 50 U.S.C. § 4565(b)(1)(E).
•  Early August (estimated): First RFI received from CFIUS (likely from DoD and/or DOE as co-lead agencies). We anticipate that the RFI will focus on the three primary areas of concern identified during the pre-filing consultation. A supplemental response should be prepared and submitted within fourteen days of receipt.
•  Early September (estimated): The forty-five-day review period concludes. Based on Treasury's guidance, we anticipate that the review will not result in clearance during the review phase and that CFIUS will initiate the investigation phase — an additional forty-five-day period pursuant to 50 U.S.C. § 4565(b)(2)(C).
•  Late September / Early October: A second RFI is possible during the investigation phase, particularly if the supplemental information provided in response to the first RFI raises additional questions or if the reviewing agencies identify new issues.
•  Mid-to-Late October: CFIUS may communicate preliminary national security concerns to the parties. Receipt of a formal communication of concerns is typically the precursor to NSA negotiations.
•  November–December: NSA negotiation period. If mitigation is the path — which is the most likely outcome based on our comparative analysis of semiconductor-sector CFIUS cases — the parties will negotiate the terms of the NSA with CFIUS staff during this period. NSA negotiations in transactions of this complexity typically require four to eight weeks.
•  Late December 2023 / January 2024: Target for NSA execution and issuance of the CFIUS clearance letter. Upon execution of the NSA and receipt of the clearance letter, the CFIUS condition precedent in the SPA will be satisfied, and the parties may proceed toward closing.
This timeline is consistent with the outside date provisions in the SPA and with HSAG's overall transaction timetable. The SPA provides for a closing date no later than March 31, 2024, with the CFIUS clearance condition set forth in Section 7.1(c). Our target clearance date of late December 2023 or January 2024 would provide a comfortable cushion before the outside date, with the actual closing targeted for February 2024.
It bears noting that this timeline assumes no extraordinary delays, such as an extended RFI response period, a CFIUS request for withdrawal and refiling, or intervention by the President. While none of these outcomes is anticipated based on the information currently available, they represent potential risks that could extend the timeline.
IV. Supplemental Information Requests — Action Items
A. Information to Be Requested from HSAG (via Stefan Lohse)
The following categories of information will be requested from HSAG through Stefan Lohse, General Counsel, in a formal information request letter to be transmitted on June 23, 2023. Mr. Lohse has been informed that we will be issuing this request, and he has indicated HSAG's commitment to a responsive and timely turnaround. We have asked for delivery of all responsive materials by June 30, 2023.
1. China Operations Package
This is the single most important information deliverable from HSAG. As described in Section II.B.1, Treasury's questions about HSAG's China operations were detailed and specific, and the notice must include granular disclosure on the following topics:
•  Full legal name, registered address, and organizational details of Halcyon Semiconductor (Shanghai) Co., Ltd., including date of incorporation, registered capital, and legal representative.
•  FY2022 revenue for the Shanghai subsidiary ($81.4 million, as previously confirmed by Mr. Lohse), with a breakdown by product line and customer segment.
•  Employee headcount and functional breakdown (e.g., manufacturing, engineering, sales, administration).
•  Detailed product descriptions, confirming that the subsidiary's activities are limited to consumer-grade power management ICs. The descriptions should be sufficiently detailed to demonstrate that no GaN-based, defense-related, or dual-use semiconductor activities are conducted in China.
•  Customer list for the Shanghai subsidiary, anonymized if necessary for competitive sensitivity, but with sufficient detail to demonstrate the commercial nature of the customer base and the absence of Chinese government, military, or BIS Entity List customers.
•  Written attestation regarding the absence of any relationships with Chinese government entities, Chinese military end-users, or entities on the BIS Entity List.
•  Description of any technology-sharing arrangements between the Shanghai subsidiary and other HSAG entities, including any transfers of technical data, know-how, or intellectual property.
•  Identification of any other HSAG operations in non-allied nations (e.g., Russia, Iran, North Korea, Venezuela, Cuba, Belarus). The expected answer is none, but a written confirmation is required.
2. Cybersecurity Program Documentation
Treasury and DoD's focus on cybersecurity requires us to include comprehensive cybersecurity disclosures in the notice. The following materials are needed from HSAG:
•  Copy of HSAG's ISO 27001 certification, including the scope of certification and the identity of the certifying body.
•  A summary of HSAG's enterprise cybersecurity framework, including governance structure, risk assessment methodology, and key controls.
•  HSAG's data protection and privacy policies, including compliance with the EU General Data Protection Regulation ("GDPR") and any other applicable data protection regimes.
•  HSAG's incident response plan, including escalation procedures, reporting obligations, and the identity of the incident response team lead.
•  A summary of any material cybersecurity incidents affecting HSAG or its subsidiaries in the last three years, including the nature of the incident, the impact, and the remediation measures taken.
•  HSAG's proposed plan for IT segregation of VPI systems post-closing, including a description of the proposed physical and logical separation measures.
•  Description of HSAG's current use of cloud infrastructure, including the identity of cloud service providers, the location of data centers, and the data residency policies in effect.
3. Corporate Governance and Ownership
The notice must include a complete description of HSAG's corporate governance and ownership structure. The following information is needed:
•  Complete HSAG ownership structure, confirming that HSAG is publicly traded on the Frankfurt Stock Exchange (XETRA: HLC), with no government ownership or control. Confirm the market capitalization as of June 1, 2023 (€14.8 billion, per publicly available data).
•  Composition and biographical information for the Aufsichtsrat (Supervisory Board), including each member's name, nationality, principal occupation, and any government affiliations.
•  Composition and biographical information for the Vorstand (Management Board), including Dr. Maximilian Ehrhardt (CEO), Katarina Brückner (CFO), Stefan Lohse (General Counsel), and any other Vorstand members.
•  Description of any German or EU government relationships, including government grants, subsidies, procurement contracts, or regulatory oversight beyond standard corporate supervision (e.g., BaFin, Bundeskartellamt).
•  German commercial register information: HRB 28416 (Amtsgericht Dresden); LEI: 5299007KXQ2M4GHILZ38.
4. Post-Closing Integration Plans
HSAG's post-closing plans for VPI are a central issue for the CFIUS review. The following information is needed:
•  A description of HSAG's plans for VPI operations post-closing, including whether any operational integration with Halcyon US Inc. (Austin, TX) is contemplated.
•  A description of HSAG's plans for technology integration — specifically, whether HSAG intends to incorporate VPI's GaN technology into HSAG's commercial product lines and, if so, by what mechanism and subject to what export-control constraints.
•  A description of any planned personnel changes at VPI post-closing, including whether HSAG intends to appoint new management or reduce headcount.
•  The proposed composition of VPI's board of directors post-closing, including the names and qualifications of HSAG's proposed designees for the VPI board.
5. Financial Advisor Input
We should coordinate with Ashgrove Capital Group (Philippe Beaumont, Managing Director) on any CFIUS-related materials that may be needed from the financial advisor's perspective. While the financial advisor is not typically a primary source of information for the CFIUS notice, there may be materials in Velthorn's files — such as the confidential information memorandum, management presentations, or market analyses — that would be useful as background for the drafting process. Kenneth Morales should coordinate with Beatrice Holloway to identify any such materials and request them from Velthorn.
B. Information to Be Requested from VPI (via Wethersfield & Gale / Harrison Whitfield)
The following categories of information will be requested from VPI through Harrison Whitfield at Wethersfield & Gale, in a formal information request letter to be transmitted on June 23, 2023. Harrison Whitfield will coordinate the collection of responsive materials from Dr. Nathan Trevorrow and Col. (Ret.) Bryce Hendrickson at VPI. As with the HSAG request, we have asked for delivery of all responsive materials by June 30, 2023.
1. Government Contracts Detail
The notice must include a comprehensive description of VPI's government contracts portfolio. The following information is needed:
•  Full list of all fourteen active DoD contracts (both prime contracts and subcontracts), including for each contract: the contract number, the contracting agency, the contract type (e.g., fixed-price, cost-plus), the total contract value, the remaining backlog amount, the period of performance, and the classification level.
•  Detailed descriptions of the top five contracts by remaining backlog value:
(a) U.S. Army CERDEC / PEO IEW&S — GaN HEMT modules for the AN/TPS-80 G/ATOR multi-mission radar system. Remaining backlog: $52.3 million. This is VPI's largest active contract and involves the fabrication of GaN high-electron-mobility transistor ("HEMT") modules for the Army's premier ground-based radar program.
(b) Air Force Research Laboratory (AFRL) — Next-generation millimeter-wave ("mmWave") power amplifiers for advanced electronic warfare and communications applications. Remaining backlog: $41.7 million. This contract involves cutting-edge GaN-on-SiC MMIC technology at frequencies above 30 GHz.
(c) Missile Defense Agency (MDA) — GaN-based transmit/receive ("T/R") modules for ballistic missile defense radar systems. Remaining backlog: $38.9 million. This contract involves classified work at the SECRET level.
(d) Ironclad Defense Systems Inc. (subcontract under USN NAVSEA) — GaN power amplifier modules for naval electronic warfare systems. Remaining backlog: $34.1 million. VPI is a Tier 1 subcontractor to Ironclad Defense Systems Inc. under a USN NAVSEA prime contract.
(e) DHS Science & Technology Directorate — RF components for border surveillance radar and sensor systems. Remaining backlog: $26.0 million. This contract involves unclassified but export-controlled technology.
•  Total backlog for the top five contracts: $193.0 million.
•  Information regarding any pending contract awards or outstanding proposals, including estimated contract values and anticipated award dates.
•  Information regarding any contracts with foreign governments or NATO allies.
2. Facility Security Clearance Documentation
The notice must include a detailed description of VPI's facility security clearance and related security infrastructure. The following information is needed:
•  Current facility clearance level ("FCL"): SECRET, as adjudicated by DCSA.
•  CAGE Code: 7VK92.
•  FSO: Col. (Ret.) Bryce Hendrickson (TS/SCI clearance).
•  Physical details of the cleared facility: VPI's primary manufacturing facility is located at 9200 Innovation Boulevard, Albuquerque, New Mexico 87113. The facility includes an approximately 45,000-square-foot GaN-on-SiC fabrication facility, with classified areas in clean room Sections C-7 through C-12.
•  Results of the most recent DCSA vulnerability assessment.
•  History of any prior FOCI actions or determinations relating to VPI.
3. ITAR/EAR Compliance Program
Given Treasury's focus on export control compliance and the DDTC notification requirement, the following information is needed:
•  DDTC Registration No. M-24817 (registered since 2011). Confirm current registration status and the identity of the Empowered Official.
•  List of all VPI products classified under ITAR Category XI(a)(3), with descriptions and end-use applications.
•  List of all VPI products classified under Export Administration Regulations ("EAR") Export Control Classification Numbers ("ECCNs") 3A001, 3A991, and 3E001, with descriptions and end-use applications.
•  Details on VPI's three active DSP-5 export licenses, including the license numbers, the authorized destinations (UK and Australia), the authorized items, the authorized end-users, and the expiration dates.
•  A description of VPI's export compliance program, including the identity of the Empowered Official, compliance procedures, training protocols, record-keeping practices, and internal audit procedures.
•  Information regarding any compliance violations, voluntary disclosures to DDTC or BIS, or enforcement actions in the last five years. We anticipate that VPI has a clean compliance record, but this must be confirmed.
4. Cleared Personnel Data
The notice must include a summary of VPI's cleared personnel, consistent with classification and privacy constraints. The following information is needed:
•  An anonymized summary of VPI's 212 cleared employees, broken down by clearance level (SECRET and TS/SCI) and program affiliation.
•  Biographical information for key cleared personnel:
•  Dr. Nathan Trevorrow, CEO — TS/SCI clearance. Co-founder of VPI. Ph.D. in Electrical Engineering, University of Colorado at Boulder. Twenty-two years of experience in III-V compound semiconductor design and fabrication.
•  Marissa Sung-Avila, Senior Vice President of Engineering — SECRET clearance. Lead engineer for VPI's GaN-on-SiC HEMT fabrication process.
•  Col. (Ret.) Bryce Hendrickson, Facility Security Officer — TS/SCI clearance. Retired U.S. Army Military intelligence officer. Served as VPI's FSO since 2014.
•  Adrienne Delacroix, Independent Board Member — SECRET clearance. Former Deputy Assistant Secretary of Defense for Industrial Policy.
•  Confirmation regarding whether VPI employs any foreign national employees. We expect that no foreign nationals hold cleared positions, but Treasury will want confirmation regarding all VPI personnel.
5. Supply Chain Information
DOE's questions about VPI's supply chain require us to include a detailed supply chain description in the notice. The following information is needed:
•  Identification of VPI's suppliers of SiC substrates, epitaxial materials (including GaN-on-SiC epitaxial wafers), and semiconductor packaging materials and services.
•  Country of origin for each critical material and component.
•  Identification of any dependencies on non-allied-nation suppliers, with particular attention to Chinese suppliers.
•  Identification of any sole-source or single-source supply dependencies, including the nature of the dependency and any mitigation measures in place (e.g., qualification of alternate sources, strategic inventory).
6. Intellectual Property
The notice must include a comprehensive description of VPI's intellectual property portfolio. The following information is needed:
•  Complete patent portfolio list, including all forty-seven granted U.S. patents and twelve pending patent applications, with patent numbers, titles, filing dates, issue dates, and brief descriptions.
•  Identification of the twenty-three government-funded patents that are subject to march-in rights under 35 U.S.C. § 203 and the DFARS patent rights clause at 252.227-7038. For each government-funded patent, identify the funding agency, the contract under which the patent was developed, and the nature of the government's retained rights.
•  Trade secret inventory: VPI maintains thirty-one registered internal trade secrets, including GaN epitaxial growth recipes, die-level reliability screening protocols, and proprietary process parameters. A summary description of these trade secrets, sufficient to convey their nature and significance without disclosing the underlying confidential information, is needed.
•  Information regarding any IP licensing arrangements with third parties, including the identity of the licensee, the scope of the license, and the territory.
This IP information will be coordinated with Omar Siddiqui and Christy Bauer in the IP group, who will assist with the preparation of Exhibit E (Regulated Products) and the IP-related disclosures in the notice.
7. Corporate Information
The notice must include complete corporate information for VPI. The following information is needed:
•  Current shareholder table:
•  Current board composition:
•  Dr. Nathan Trevorrow (Chair)
•  Marissa Sung-Avila
•  Franklin Yee (Ridgecrest Ventures designee)
•  Olivia Hartmann (Cascadian Capital Partners designee)
•  Adrienne Delacroix (independent)
•  VPI EIN: 26-4371885
•  VPI DUNS Number: 07-812-4493
•  State and date of incorporation: Delaware, February 14, 2009
•  FY2022 financial summary: Revenue of $287.4 million; EBITDA of $61.2 million; 486 employees
V. Notice Content Outline and Drafting Assignments
A. Main Body of Joint Voluntary Notice — Section Assignments
The main body of the Joint Voluntary Notice will be organized in accordance with the requirements of 31 C.F.R. § 800.501 and Treasury's published guidance for voluntary joint notices. The notice will consist of six principal sections, plus supporting exhibits. Drafting assignments for each section are as follows:
Section 1: Information About the Transaction. This section will describe the proposed transaction in full, including: (a) a description of the 100% equity acquisition of VPI by HSAG; (b) the purchase price of $1.42 billion (all cash at closing, plus potential earnout consideration of up to $85 million); (c) the acquisition vehicle — Halcyon US Holdings Inc., a Delaware C-corporation formed on June 5, 2023 (EIN: 93-2841067), as a wholly owned subsidiary of HSAG for the purpose of effecting the acquisition; (d) the SPA execution date (June 10, 2023) and key terms; and (e) the proposed post-closing corporate structure, showing VPI as an indirect wholly owned subsidiary of HSAG through Halcyon US Holdings Inc. Assigned to: Morales.
Section 2: Information About the Foreign Person (HSAG). This section will provide a complete corporate profile of HSAG, including: (a) corporate organization, ownership structure, and governance; (b) board and management composition; (c) global operations, with particular attention to HSAG's operations in allied and non-allied nations; (d) the comprehensive China operations disclosure regarding Halcyon Semiconductor (Shanghai) Co., Ltd.; and (e) HSAG's existing U.S. presence through Halcyon US Inc. in Austin, Texas. Assigned to: Morales, Venkataraman.
Section 3: Information About the U.S. Business (VPI). This section will provide a complete description of VPI's business, including: (a) corporate information and ownership; (b) products and services, including GaN-on-SiC semiconductor devices for defense and commercial applications; (c) customers, including DoD agencies and prime defense contractors; (d) government contracts, including the fourteen active DoD contracts; (e) classified programs and facility security clearance; (f) ITAR- and EAR-controlled items; (g) intellectual property, including patents, trade secrets, and government-funded IP; and (h) employees, including cleared personnel. Assigned to: Caruso, Venkataraman.
Section 4: Transaction-Related Documents. This section will compile the SPA and all ancillary transaction documents, including the disclosure schedules, transition services agreement, and any other agreements relevant to the CFIUS analysis. Assigned to: Morales, coordinating with Holloway and the M&A team.
Section 5: Information Regarding National Security. This section will set forth HSAG's assessment of the national security considerations raised by the transaction and will describe the proposed mitigation framework in detail. This section is the most strategically important portion of the notice, as it provides the parties' affirmative case for why the transaction should be cleared subject to appropriate mitigation. Assigned to: Ashworth.
Section 6: Certifications. This section will include the certifications required under 31 C.F.R. § 800.502, to be executed by Dr. Maximilian Ehrhardt (on behalf of HSAG) and Dr. Nathan Trevorrow (on behalf of VPI). Each certification must attest, under penalty of perjury, that the information contained in the notice is true, correct, and complete to the best of the certifying officer's knowledge and belief. Assigned to: Ashworth, Morales.
B. Exhibits
The following exhibits will be prepared and appended to the Joint Voluntary Notice:
Exhibit A — Transaction Documents. Complete compilation of the SPA and all ancillary agreements. Assigned to: Morales.
Exhibit B — VPI Business Description. Detailed business description of VPI, including products, customers, operations, and financials. Assigned to: Caruso, Venkataraman.
Exhibit C — HSAG Business Description. Detailed business description of HSAG, including global operations, China operations disclosure, and U.S. presence. Assigned to: Morales, Venkataraman.
Exhibit D — Organizational Charts. Pre- and post-closing corporate structure charts showing the full ownership chain from HSAG to VPI. Assigned to: Morales.
Exhibit E — Regulated Products. Comprehensive list of VPI products classified under ITAR (Category XI(a)(3)) and EAR (ECCNs 3A001, 3A991, 3E001), with descriptions and jurisdictional determinations. Assigned to: Venkataraman, with IP support from Bauer.
Exhibit F — Government Contracts Summary. Summary table of VPI's fourteen active DoD contracts, with key terms for each. Assigned to: Caruso.
Exhibit G — Cleared Personnel Summary. Anonymized summary of VPI's 212 cleared employees by clearance level and program affiliation, with biographical information for key cleared personnel. Assigned to: Caruso.
VI. Coordination with Seller's Counsel — Wethersfield & Gale
Peggy Ashworth will serve as the primary point of coordination with Harrison Whitfield at Wethersfield & Gale LLP (2000 Pennsylvania Avenue NW, Suite 600, Washington, DC 20006). Harrison Whitfield is leading Wethersfield & Gale's CFIUS engagement as part of that firm's representation of VPI and its shareholders in the transaction.
The allocation of notice preparation responsibilities between buyer's counsel and seller's counsel was addressed in the pre-filing coordination letter that was transmitted to Wethersfield & Gale prior to the pre-filing consultation. The agreed allocation is as follows:
Seller's counsel (Wethersfield & Gale) is responsible for:
•  Providing VPI's business description materials, including product descriptions, financial information, and operational details.
•  Providing government contracts information, including contract summaries, classification levels, and performance details.
•  Coordinating with Dr. Trevorrow and Col. Hendrickson on classified program details that cannot be shared with buyer's counsel absent appropriate clearances.
•  Reviewing and commenting on all VPI-related sections of the notice to ensure accuracy and completeness.
•  Obtaining Dr. Trevorrow's executed certification declaration under 31 C.F.R. § 800.502.
Buyer's counsel (Calderwood & Harkness) is responsible for:
•  Drafting and finalizing the main body of the notice, including all six principal sections.
•  Preparing all HSAG-related sections and exhibits, including the China operations disclosure and post-closing governance framework.
•  Overall coordination, quality control, and consistency review across all sections and exhibits.
•  Filing logistics, including electronic submission through the CFIUS Case Management System.
Weekly coordination calls will be scheduled for the following dates: June 26, July 3, and July 10. These calls will serve as checkpoints for tracking progress on information gathering, drafting, and review. Ashworth will lead each call, with participation from Caruso, Venkataraman, and Morales as needed. On the Wethersfield & Gale side, Harrison Whitfield and his team will participate.
In addition to the weekly calls, Ashworth and Whitfield will communicate as needed by email and telephone on an ad hoc basis to address issues that arise between calls.
It is important to maintain clear lines of communication with Wethersfield & Gale while also preserving the boundaries of each party's privilege. Materials shared between buyer's counsel and seller's counsel in connection with the CFIUS filing are protected by the common interest doctrine, but care should be taken to ensure that privileged communications between Calderwood & Harkness and HSAG are not inadvertently disclosed. This memorandum, in particular, is not to be shared with Wethersfield & Gale or VPI without prior approval from Beatrice Holloway or Peggy Ashworth.
VII. Coordination with German Counsel
Schilling Frey Rechtsanwälte, HSAG's German corporate counsel, must be consulted on several matters relevant to the CFIUS filing. The lead partner at Schilling Frey is Prof. Dr. Ulrich Schilling, whose offices are located at Friedrichstraße 68, 10117 Berlin, Germany. Peggy Ashworth will initiate this consultation no later than June 26, 2023.
The specific matters on which Schilling Frey's input is required include the following:
German Regulatory Implications of CFIUS Disclosure Requirements. The CFIUS notice will require HSAG to disclose detailed information about its corporate governance, ownership structure, government relationships, and global operations. We should confirm with Schilling Frey that these disclosures do not implicate any German law restrictions on the disclosure of corporate information to a foreign government, and that no German regulatory notification or consent is required in connection with the CFIUS filing.
German Foreign Investment Review (AWV) Process. We should confirm with Schilling Frey that no parallel German approval is required for HSAG's outbound acquisition of a U.S. target. The German Außenwirtschaftsverordnung ("AWV") primarily regulates inbound foreign direct investment into Germany and certain outbound transactions involving critical technologies. Because this transaction involves a German acquirer purchasing a U.S. target, the AWV's inbound investment review provisions should not apply. However, Schilling Frey should confirm this analysis and advise whether any outbound investment notification is required under German or EU law.
HSAG Corporate Governance Disclosures. Schilling Frey can assist in compiling the HSAG corporate governance materials needed for the notice, including Aufsichtsrat and Vorstand composition, biographical information, and any government affiliations.
Confirmation of No German Government Ownership or Control. Schilling Frey should provide a written confirmation that HSAG has no German government ownership or control, and that no German government entity holds a significant equity interest in HSAG or exercises any special governance rights (e.g., golden shares, veto rights).
VIII. Proposed Mitigation Framework — Refinements Based on Treasury Feedback
Based on the feedback received during the pre-filing consultation, we have refined our proposed mitigation framework as described below. This framework will be presented in Section 5 of the Joint Voluntary Notice as HSAG's proposal for addressing the national security considerations raised by the transaction. We expect that this framework will serve as the starting point for NSA negotiations with CFIUS, which will likely take place during November and December 2023.
A. Board Governance
We propose a five-member reconstituted VPI board of directors, structured as follows:
•  Three Security Board Members, each of whom must be a U.S. citizen, holding or eligible for a TS/SCI security clearance, and approved by CFIUS prior to appointment. One of the three Security Board Members will be designated as the Security Director, who will serve as the chair of the Government Security Committee and as the primary point of contact with DCSA and CFIUS on all security-related matters. The Security Director must be independent of both HSAG and VPI.
•  Two HSAG Designees, who may be non-U.S. persons and who may not hold or access classified information. The HSAG designees will participate in VPI board decisions relating to unclassified business operations, financial matters, and commercial strategy, but will be excluded from all decisions relating to classified programs, ITAR/EAR-controlled activities, personnel security, and facility security.
A Government Security Committee (GSC) will be established, composed of the three Security Board Members. The GSC will have exclusive authority over the following matters:
(a) All decisions relating to VPI's classified programs, including the acceptance, performance, and modification of classified contracts;
(b) Personnel security, including the hiring, termination, and reassignment of cleared employees;
(c) Facility security, including access to classified areas and compliance with DCSA requirements;
(d) Export control compliance, including ITAR and EAR licensing decisions and DDTC registration matters;
(e) Safeguarding of classified and controlled unclassified information; and
(f) Compliance with the terms of the NSA.
The proposed Security Board Members are as follows (preliminary, subject to further vetting and CFIUS approval):
•  Col. (Ret.) Bryce Hendrickson — Current FSO at VPI. Holds a TS/SCI clearance. Retired U.S. Army Military intelligence officer. Extensive experience in industrial security and FOCI mitigation. Col. Hendrickson is the natural choice to serve as one of the Security Board Members given his institutional knowledge of VPI's classified programs a

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