Contract analysis

I. Executive Summary Halcyon Semiconductor Aktiengesellschaft ("Halcyon," "HSAG," or the "Company"), a German Aktiengesellschaft incorporated and registered in Munich, Bavaria, Federal Republic of Germany (Commercial Register No. HRB 217458, Amtsgericht München), is currently listed on the Frankfurt Stock Exchange (FRA: HCY) in the Prime Standard segment. The Company is pursuing an initial public offering (the "IPO"

II. Legal Framework A. Foreign Private Issuer Status — Overview As noted above, Halcyon qualifies as a foreign private issuer under Rule 3b-4 of the Exchange Act. Rule 3b-4 defines a "foreign private issuer" as any foreign government or any foreign issuer other than a foreign government, except an issuer that meets both of the following conditions: (i) more than 50% of the issuer's outstanding voting securities are d

III. Rule-by-Rule Analysis of Available Exemptions In this Section III, we analyze each Nasdaq corporate governance rule from which Halcyon may claim an exemption as a foreign private issuer, describe the corresponding German home-country practice, and set forth our recommendation. The analysis is organized by Nasdaq rule number. A. Majority of Independent Directors — Nasdaq Rule 5605(b)(1)

1. Nasdaq Requirement Nasdaq Rule 5605(b)(1) requires that a majority of the board of directors of a listed company must be comprised of "independent directors" as defined in Nasdaq Rule 5605(a)(2). For purposes of this rule, "independent director" means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company's board of dir

2. German Home-Country Practice Under the AktG and the Mitbestimmungsgesetz, the composition of the Aufsichtsrat of a German company with more than 2,000 employees is determined by the codetermination requirements described in Section II.C above. These requirements mandate that fifty percent (50%) of the Aufsichtsrat members be elected by the company's employees. Halcyon's twelve-member Aufsichtsrat includes six (6)

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5605(b)(1). The exemption disclosure should explain that Halcyon follows the German two-tier board system with mandatory codetermination under the Mitbestimmungsgesetz; that the composition of the Aufsichtsrat is determined by the AktG and the Mitbestimmungsgesetz and includes both shareholder-elected and employee-elected representatives

1. Nasdaq Requirement Nasdaq Rule 5605(b)(2) requires that the independent directors of a listed company must have regularly scheduled meetings at which only independent directors are present (commonly referred to as "executive sessions"). The purpose of this requirement is to ensure that independent directors have the opportunity to meet and deliberate without the presence of management or non-independent directors,

2. German Home-Country Practice Under the German two-tier board system, the Aufsichtsrat is an inherently separate body from the Vorstand. Members of the Vorstand do not sit on the Aufsichtsrat, and the Aufsichtsrat regularly meets and deliberates without the Vorstand being present. While Vorstand members are frequently invited to attend Aufsichtsrat meetings to present reports and respond to questions from the Aufsi

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5605(b)(2). The exemption disclosure should explain that the German two-tier board system provides for an inherent structural separation between management (Vorstand) and the supervisory body (Aufsichtsrat); that the Aufsichtsrat regularly meets without the Vorstand present; and that this structural separation serves the oversight functi

1. Nasdaq Requirement Nasdaq Rule 5605(d) requires that the compensation of executive officers of a listed company must be determined, or recommended to the board of directors for determination, by a compensation committee composed entirely of independent directors as defined in Nasdaq Rule 5605(a)(2). The rule further requires that the compensation committee have a written charter addressing specified matters, inclu

2. German Home-Country Practice Under AktG § 87, the compensation (Vergütung) of the members of the Vorstand is determined by the full Aufsichtsrat. This is a matter reserved by statute to the Aufsichtsrat and cannot be delegated exclusively to a subcommittee. The Aufsichtsrat determines the overall compensation package for each Vorstand member, including base salary, variable compensation components, long-term incen

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5605(d). The exemption disclosure should explain that compensation of Vorstand members is determined by the full Aufsichtsrat in accordance with AktG § 87, with input from the Personalausschuss; that the Aufsichtsrat and the Personalausschuss include employee representatives under German codetermination requirements; that the Company fol

1. Nasdaq Requirement Nasdaq Rule 5605(e) requires that director nominees must be selected, or recommended for the board's selection, either by a nominations committee composed entirely of independent directors as defined in Nasdaq Rule 5605(a)(2), or by a majority of the independent directors of the board voting in executive session. The rule further requires that the nominations committee (if one exists) adopt a fo

2. German Home-Country Practice Under the German two-tier board system, the process for selecting and electing members of the Aufsichtsrat is fundamentally different from the process for nominating directors under the US unitary board model. The shareholder representatives on the Aufsichtsrat are elected by the shareholders at the Hauptversammlung in accordance with AktG § 101. The employee representatives on the Auf

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5605(e). The exemption disclosure should explain that members of the Aufsichtsrat are elected by shareholders and employees, respectively, in accordance with the AktG and the Mitbestimmungsgesetz; that the Company maintains a Nominierungsausschuss for the identification and recommendation of shareholder representative candidates; that th

1. Nasdaq Requirement Nasdaq Rule 5635 sets forth a series of shareholder approval requirements applicable to listed companies. Specifically: (a) Related-Party Transactions (Rule 5635(a)). Shareholder approval is required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company if any director, officer, or substantial shareholder of the listed company has a 5% o

2. German Home-Country Practice The AktG provides its own comprehensive framework for shareholder approval of capital issuances and related transactions, which — while structurally different from the Nasdaq framework — provides robust shareholder protections. The principal elements of this framework are: Authorized Capital (*Genehmigtes Kapital*). Under AktG §§ 202-204, the Hauptversammlung may authorize the Vorstand

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5635 in its entirety (Rules 5635(a) through (d)). The exemption disclosure should explain that Halcyon follows the AktG framework for shareholder approval of capital issuances, including the authorized capital (genehmigtes Kapital) mechanism, the statutory pre-emptive rights (Bezugsrechte) regime, and the related-party transaction approv

1. Nasdaq Requirement Nasdaq Rule 5620(c) requires that a listed company provide for a quorum of not less than 33⅓% of the outstanding shares of the company's common voting stock for any meeting of the holders of such common stock. This quorum requirement is intended to ensure that shareholder action is taken only when a meaningful proportion of the company's shareholders participate in the decision-making process.

2. German Home-Country Practice The AktG does not impose a general quorum requirement for the Hauptversammlung. Unless the company's Satzung (articles of association) provides otherwise, a Hauptversammlung may be convened and may adopt resolutions regardless of the number of shares represented at the meeting. This is the standard practice for German Aktiengesellschaften, and Halcyon's Satzung does not impose a genera

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5620(c). The exemption disclosure should explain that German law does not require a minimum quorum for general meetings of shareholders (Hauptversammlungen); that Halcyon follows the standard German practice of not imposing a general quorum requirement; and that German law provides alternative shareholder protections through supermajorit

1. Nasdaq Requirement Nasdaq Rule 5620(b) requires that listed companies solicit proxies and provide proxy statements for all meetings of shareholders, and that the solicitation be conducted in compliance with applicable SEC rules. For domestic US issuers, this includes compliance with the detailed proxy solicitation requirements of Regulation 14A under the Exchange Act, which mandates the preparation and distributio

2. German Home-Country Practice German law requires that the Hauptversammlung be convened by publication of notice in the Federal Gazette (Bundesanzeiger) and on the company's website, with a minimum notice period of 30 days before the meeting date (AktG § 123). The convening notice must include specified information about the agenda items, the conditions for attendance and voting, and the shareholders' rights. Share

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5620(b). The exemption disclosure should explain that Halcyon follows German statutory procedures for convening and conducting the Hauptversammlung, including the publication of the convening notice in the Bundesanzeiger and on the Company's website; that ADS holders will receive meeting notices and voting instructions through the Deposi

1. Nasdaq Requirement Nasdaq Rule 5620(a) requires that listed companies provide advance notice of shareholder meetings and set record dates consistent with Nasdaq rules, which are in turn designed to coordinate with the SEC proxy solicitation requirements and the requirements of domestic US corporate law (e.g., Delaware General Corporation Law § 213 regarding record dates).

2. German Home-Country Practice AktG § 123 sets forth the requirements for convening the Hauptversammlung, including a minimum notice period of 30 days before the date of the meeting. The convening notice must be published in the Bundesanzeiger and must include the full text of the agenda, the proposals for resolution, and information regarding the conditions for attendance and exercise of voting rights. The record d

3. Recommendation. We recommend that Halcyon claim an exemption from Nasdaq Rule 5620(a) to the extent that the Nasdaq requirements are inconsistent with German statutory requirements. The exemption disclosure should explain that Halcyon follows the AktG requirements for convening the Hauptversammlung, including the 30-day minimum notice period and the registration date (Nachweisstichtag) prescribed by AktG § 123; an

IV. Mandatory Nasdaq Requirements Applicable Despite FPI Status As noted in Section II.B, certain Nasdaq corporate governance requirements apply to all listed companies, including foreign private issuers, and cannot be exempted under Nasdaq Rule 5615(a)(3). This Section IV analyzes each of those mandatory requirements and describes the steps Halcyon must take to achieve compliance. A. Audit Committee — Nasdaq Rule 56

V. Procedural Requirements for Filing the Exemption Notice A. Written Notification to Nasdaq In connection with its listing application, Halcyon must submit to Nasdaq a written statement (the "Corporate Governance Exemption Notice") identifying each Nasdaq listing requirement from which it claims an exemption under Nasdaq Rule 5615(a)(3) and describing the alternative home-country practice it follows in lieu of the e