Contract analysis

Section 1.1 — Defined Terms As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article I shall have the meanings ascribed to them elsewhere in this Agreement. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes

Section 1.2 — Interpretation (a) Unless the context otherwise requires, references to Articles, Sections, and Appendices are references to Articles and Sections of, and Appendices to, this Agreement. (b) The headings and captions contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (c) References to any statute, regulation, rule,

Section 2.1 — License Grant Subject to the terms and conditions of this Agreement, HSAG hereby grants to HSI, and HSI hereby accepts, a non-exclusive, non-transferable (except as expressly provided in Section 2.3), royalty-bearing license to use the Licensed Intangibles (comprising the Process Technology and the Design Libraries, as further described in Section 2.2 and Appendix A) in connection with HSI's distributio

Section 2.2 — Scope of Licensed Intangibles The Licensed Intangibles consist of the following categories of proprietary intellectual property owned by HSAG: (a) Process Technology. HSAG's proprietary semiconductor fabrication process technology, including: (i) the 7nm process node technology, encompassing all sub-variants, derivatives, and enhancements thereof (including low-power, high-performance, and ultra-low-lea

Section 2.3 — Restrictions on Sublicensing and Transfer HSI shall not sublicense, assign, pledge, encumber, or otherwise transfer the Licensed Intangibles, or any rights therein or thereto, to any third party or Affiliate without the prior written consent of HSAG. Notwithstanding the foregoing, HSI may sublicense the Licensed Intangibles to any wholly owned subsidiary of HSI organized under the laws of a state of the

Section 2.4 — Retained Rights HSAG retains all rights, title, and interest in and to the Licensed Intangibles, including without limitation all patent rights, copyrights, trade secret rights, and other intellectual property rights embodied therein. Nothing in this Agreement shall be construed as a transfer or assignment of ownership of any intangible property from HSAG to HSI. HSAG expressly retains the right to: (a)

Section 3.1 — Original Effective Date The Original License Agreement was effective as of January 1, 2019, and governed the licensing of the Licensed Intangibles from HSAG to HSI from that date until superseded by this Agreement.

Section 3.2 — Amended and Restated Effective Date This Amended and Restated Agreement shall become effective upon execution by both Parties (the "Effective Date"), which execution is anticipated to occur upon conclusion of the bilateral APA between the IRS and the BZSt. Upon execution, this Agreement shall supersede and replace the Original License Agreement in its entirety. Retroactive Application. The amended Royal

Section 3.3 — Term and Renewal The initial term of this Agreement shall be coterminous with the APA Term, commencing on January 1, 2025 and ending on December 31, 2029 (the "Initial Term"), unless earlier terminated in accordance with Section 3.4. Upon expiration of the Initial Term, this Agreement shall automatically renew for successive one-year periods (each, a "Renewal Term"), unless either Party provides the oth

Section 3.4 — Early Termination Either Party may terminate this Agreement upon twelve (12) months' prior written notice to the other Party, delivered in accordance with Section 12.4; provided, however, that termination of this Agreement during the APA Term may constitute a change in critical assumptions under the APA and may trigger reporting obligations to the IRS and BZSt. In the event of any proposed termination d

ARTICLE IV — ROYALTY COMPUTATION

Section 4.1 — Royalty Rate HSI shall pay HSAG a running Royalty equal to six percent (6.0%) of IP-Attributable Revenues for each Fiscal Year (or portion thereof) during the term of this Agreement, including the Rollback Period if rollback is granted. The 6.0% Royalty rate has been determined to be an arm's-length rate based on the CUT Analysis, which identified eight (8) comparable uncontrolled license agreements for

Section 4.2 — Determination of IP-Attributable Revenues IP-Attributable Revenues for each Fiscal Year shall be determined by applying the IP-Attributable Share to HSI's Net US Revenues for such Fiscal Year. The IP-Attributable Share represents the portion of HSI's Net US Revenues that is attributable to the Licensed Intangibles, as distinguished from revenues generated through: (a) HSI's own distribution functions, m

Section 4.3 — Royalty Computation Example (FY 2024 Illustrative) For illustrative purposes only, the Royalty computation for Fiscal Year 2024 is as follows: (a) HSI Net US Revenues: $4,120,000,000 (b) IP-Attributable Share: 18.1% (c) IP-Attributable Revenues: $4,120,000,000 × 18.1% = $745,720,000 (approximately $745.7 million) (d) Royalty Rate: 6.0% (e) Annual Royalty (USD equivalent): $745,720,000 × 6.0% = $44,743,2

Section 4.4 — Currency Denomination and Conversion All Royalty payments under this Agreement shall be denominated and invoiced in EUR. HSAG shall issue quarterly invoices to HSI in EUR in accordance with the payment schedule set forth in Section 4.5. For purposes of computing IP-Attributable Revenues (which are initially reported in USD, consistent with HSI's US GAAP financial statements), the conversion from USD to

Section 4.5 — Payment Schedule Royalties shall be payable quarterly in arrears. Within thirty (30) days following the end of each calendar quarter (i.e., April 30, July 30, October 30, and January 30 of the following year), HSI shall pay to HSAG the Royalty amount attributable to such quarter, calculated on the basis of HSI's estimated IP-Attributable Revenues for the quarter as determined in good faith by HSI. A yea

Section 4.6 — Withholding Tax To the extent that any Royalty payments under this Agreement are subject to withholding tax imposed by the United States, HSI shall deduct and withhold the applicable withholding tax from such payments and remit the withheld amounts to the appropriate taxing authority in accordance with applicable law. Provided, however, that in accordance with Article 12 (Royalties) of the Treaty, royal

Section 4.7 — Interaction with APA and Compensating Adjustments The Parties acknowledge that the Royalty rate and computation mechanics set forth in this Article IV are intended to conform with the transfer pricing methodology proposed in the APA application and to be confirmed by the bilateral APA upon its conclusion. To the extent that the bilateral APA, as finally executed by the competent authorities of the Unite

ARTICLE V — RELATIONSHIP TO OTHER INTERCOMPANY AGREEMENTS

Section 5.1 — Master Intercompany Supply Agreement HSAG and HSI are parties to the Master Intercompany Supply Agreement (effective January 1, 2019; amended July 1, 2022), which governs the purchase and sale of semiconductor wafers, die, and related tangible goods between HSAG (as manufacturer and seller) and HSI (as distributor and buyer). For Fiscal Year 2024, the intercompany tangible goods purchased by HSI from HS

Section 5.2 — Qualified Cost Sharing Arrangement HSAG and HSI are parties to the Qualified Cost Sharing Arrangement effective July 15, 2018, pursuant to which the Parties share the costs and risks of developing next-generation 2nm and sub-2nm semiconductor process technologies and related intangible property. Under the CSA: (a) HSI's cost-sharing percentage is 22.5%, corresponding to HSI's reasonably anticipated bene

Section 5.3 — No Double Counting The Parties shall ensure that the Royalty computation under this Agreement does not result in any double counting of cost-sharing payments made under the CSA or transfer prices paid under the Supply Agreement. Specifically: (a) To the extent that revenues attributable to intangible property developed under the CSA are included within HSI's Net US Revenues, the IP-Attributable Share us

ARTICLE VI — REPRESENTATIONS AND WARRANTIES

Section 6.1 — HSAG Representations and Warranties HSAG hereby represents and warrants to HSI as follows: (a) Organization and Standing. HSAG is duly organized and validly existing as an Aktiengesellschaft under the laws of the Federal Republic of Germany and is in good standing under all applicable German corporate and tax laws. HSAG has the corporate power and authority to own its assets, carry on its business, and

Section 6.2 — HSI Representations and Warranties HSI hereby represents and warrants to HSAG as follows: (a) Organization and Standing. HSI is duly organized and validly existing as a corporation under the laws of the State of Delaware, United States of America, and is in good standing under all applicable state and federal laws. HSI has the corporate power and authority to own its assets, carry on its business, and p

Section 7.1 — Confidentiality Obligations Each Party acknowledges that the Licensed Intangibles, the terms and conditions of this Agreement, and all financial and commercial information exchanged between the Parties in connection with this Agreement (collectively, "Confidential Information") constitute valuable proprietary and confidential information. Each Party agrees to: (a) maintain the strict confidentiality of

Section 7.2 — Survival The confidentiality obligations set forth in this Article VII shall survive the termination or expiration of this Agreement for a period of five (5) years following the effective date of such termination or expiration. Notwithstanding the foregoing, obligations of confidentiality with respect to trade secrets constituting Licensed Intangibles shall survive for so long as such information contin

ARTICLE VIII — BOOKS, RECORDS, AND AUDIT RIGHTS

Section 8.1 — Recordkeeping Each Party shall maintain complete, accurate, and detailed books and records relating to the computation of Royalties, IP-Attributable Revenues, Net US Revenues, the IP-Attributable Share, and all other financial data relevant to the performance of this Agreement. Such books and records shall include, without limitation: (a) revenue records, sales reports, and customer invoices supporting

Section 8.2 — Licensor Audit Rights HSAG (or a designated independent accounting firm or other representative appointed by HSAG) shall have the right, upon not less than thirty (30) days' prior written notice to HSI, to audit and inspect HSI's books and records related to the Royalty computation, including records of Net US Revenues, the IP-Attributable Share, and Royalty payments. Such audit right may be exercised n

Section 8.3 — Licensee Verification Rights HSI shall have the right, upon reasonable written request, to receive from HSAG documentation supporting the scope, ownership, and maintenance of the Licensed Intangibles, including: (a) evidence of HSAG's continued ownership of the Licensed Intangibles (including patent registrations, trade secret protocols, and copyright registrations, as applicable); (b) descriptions of a

Section 8.4 — Tax Authority Access Both Parties acknowledge and agree that the IRS, BZSt, and other tax authorities of competent jurisdictions may request access to books and records relating to this Agreement in connection with the APA application and review process, transfer pricing audits, tax examinations, or other regulatory proceedings. The Parties shall cooperate in good faith in responding to such requests, i

Section 9.1 — HSAG Indemnification HSAG shall indemnify, defend, and hold harmless HSI and its directors, officers, employees, and agents from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to any third-party claim, suit, or proceeding alleging that the Licensed Intangibles, or HSI's use thereof in accordance with the terms o

Section 9.2 — HSI Indemnification HSI shall indemnify, defend, and hold harmless HSAG and its directors, officers, employees, and agents from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to: (a) HSI's misuse of the Licensed Intangibles or any use thereof outside the scope authorized by Article II; (b) any breach by HSI of t

Section 9.3 — Limitation of Liability IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL NOT APPLY TO (A) DA

ARTICLE X — COMPLIANCE WITH TAX LAWS AND TRANSFER PRICING REGULATIONS

Section 10.1 — Arm's-Length Standard The Parties acknowledge and agree that the Royalty rate and computation mechanics under this Agreement are intended to comply with, and have been determined in accordance with, the arm's-length standard as set forth in: (a) Section 482 of the Internal Revenue Code and the Treasury Regulations promulgated thereunder, including specifically Treasury Regulations §§ 1.482-1 (general p

Section 10.2 — Contemporaneous Documentation HSI shall prepare and maintain contemporaneous transfer pricing documentation for each covered Fiscal Year in accordance with the requirements of: (a) Treasury Regulations § 1.6662-6 (documentation requirements for substantial and gross valuation misstatement penalties); (b) IRC §§ 6662(e) (substantial valuation misstatement) and 6662(h) (gross valuation misstatement); and

Section 10.3 — APA Compliance During the APA Term (and the Rollback Period, if applicable), the Parties shall comply with all terms and conditions of the bilateral APA, including: (a) annual compliance reporting obligations under Revenue Procedure 2015-41, Section 7, including the timely filing of Annual Reports with the IRS demonstrating compliance with the APA terms; (b) maintenance of the critical assumptions unde