Contract analysis

ARTICLE 1 — DEFINITIONS AND INTERPRETATION

Section 1.1 — Definitions As used in this Agreement, the following terms shall have the meanings set forth below: "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 of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the

Section 1.2 — Interpretation (a) The headings and titles of Articles, Sections, and Schedules in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. (b) Unless the context otherwise requires, references in this Agreement to Articles, Sections, and Schedules are references to the Articles, Sections, and Schedules of this Agreement. (c) All referenc

Section 1.3 — Schedules The following Schedules are attached hereto and incorporated herein by reference: • Schedule A — Covered Products (description of semiconductor wafers and die by process node, product codes, and specifications) • Schedule B — Pricing Mechanism and Illustrative Calculations • Schedule C — Year-End True-Up Computation Template • Schedule D — Critical Assumptions • Schedule E — Delivery Terms and

ARTICLE 2 — SCOPE AND COVERED PRODUCTS

Section 2.1 — Scope of Agreement This Agreement governs the sale and purchase of Covered Products from HSAG to HSI, constituting the tangible goods component of the controlled transactions between the Parties that are subject to the APA. The transactions covered by this Agreement relate exclusively to the intercompany sale of semiconductor wafers and singulated die manufactured by HSAG and resold by HSI to third-part

Section 2.2 — Covered Products The Covered Products subject to this Agreement consist of: (a) Semiconductor wafers manufactured by HSAG at its fabrication facilities, including Fab 1 and Fab 2 in Dresden, Germany, and Fab 3 in Chemnitz, Germany, utilizing advanced-node process technologies (7nm, 5nm, and 3nm nodes); (b) Singulated die derived from such manufactured wafers; and (c) All product categories manufactured

Section 2.3 — Exclusivity HSI serves as the exclusive distribution, marketing, and design-support entity for Halcyon-branded semiconductor products in North America, including the United States and Canada. During the Term of this Agreement, HSAG shall not sell Covered Products directly to unrelated customers in the United States or Canada, or appoint any other entity as a distributor of Covered Products in such terri

Section 2.4 — Excluded Transactions The following categories of transactions are expressly excluded from the scope of this Agreement and are not governed by its terms: (a) Sales of semiconductor products by HSAG to other Affiliates, including Halcyon Semiconductor Japan K.K. ("HSJ"), with its registered office in Tokyo, Japan, and Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSC"), with its registered office in Shang

ARTICLE 3 — PURCHASE ORDERS AND FORECASTING

Section 3.1 — Purchase Orders (a) HSI shall submit purchase orders to HSAG from time to time during the Term, specifying: (i) the product type and applicable process node; (ii) the quantity of wafers or singulated die ordered; (iii) the requested delivery date; (iv) the designated destination for delivery; and (v) any special packaging, labeling, or handling requirements. (b) Each purchase order shall be submitted in

Section 3.2 — Demand Forecasting (a) HSI shall provide HSAG with rolling twelve-month demand forecasts for Covered Products, broken down by product category, process node, and application type, updated on a quarterly basis. Each forecast shall be delivered to HSAG no later than the fifteenth (15th) day of the first month of each calendar quarter (i.e., January 15, April 15, July 15, and October 15). (b) Demand foreca

Section 3.3 — Order Acceptance and Confirmation (a) Upon acceptance of a purchase order by HSAG, HSAG shall issue an order acknowledgment to HSI confirming the product type, quantity, delivery date, and applicable provisional transfer price. The order acknowledgment shall constitute a binding commitment by HSAG to deliver the confirmed quantity of Covered Products by the confirmed delivery date, subject to the provis

ARTICLE 4 — DELIVERY, TITLE, AND RISK OF LOSS

Section 4.1 — Delivery Terms (a) Unless otherwise specified in the applicable purchase order, delivery of Covered Products shall be made Ex Works (EXW Incoterms® 2020) at HSAG's designated fabrication facility. The applicable fabrication facility for each order shall be as follows: (i) For products manufactured at Fab 1 or Fab 2: Industriepark Klotzsche, Zur Wetterwarte 50, 01109 Dresden, Saxony, Germany; and (ii) Fo

Section 4.2 — Title and Risk of Loss (a) Title to Covered Products shall pass from HSAG to HSI at the Delivery Point, as specified in Section 4.1 above or as otherwise agreed in the applicable purchase order. (b) Risk of loss or damage to Covered Products shall transfer from HSAG to HSI at the Delivery Point. From and after the transfer of risk, HSI shall bear all risk of loss or damage to the Covered Products during

Section 4.3 — Shipping and Customs (a) HSAG shall be responsible for preparing and providing all export documentation required for the export of Covered Products from Germany, including but not limited to commercial invoices, packing lists, certificates of origin, and export declarations, in compliance with applicable German and European Union export control laws and regulations. (b) HSI shall be responsible for all

Section 4.4 — Inspection and Acceptance (a) HSI shall have the right to inspect Covered Products within [●] days of receipt at HSI's receiving facility. Such inspection shall be conducted in accordance with the quality standards and testing protocols set forth in Schedule F hereto. (b) If HSI determines upon inspection that any Covered Products do not conform to the specifications set forth in Schedule F or are other

ARTICLE 5 — TRANSFER PRICING METHODOLOGY AND PRICING

Section 5.1 — Transfer Pricing Method (a) The Intercompany Price for Covered Products sold by HSAG to HSI under this Agreement shall be determined using the Comparable Profits Method ("CPM") as described in Treasury Regulation § 1.482-5, which is equivalent to the Transactional Net Margin Method ("TNMM") as described in Chapter II of the OECD Guidelines, as specified in the APA. (b) HSI is designated as the Tested Pa

Section 5.2 — Arm's-Length Range (a) The Arm's-Length Range for purposes of this Agreement is the interquartile range of operating margins derived from the Benchmarking Study prepared by Meridian Economics GmbH: (b) The Arm's-Length Range is based on a benchmark set of 17 comparable North American semiconductor distributors, selected through a systematic search and screening process from publicly available financial

Section 5.3 — Target Operating Margin (a) The Parties shall set the Intercompany Price for each Contract Year such that HSI's anticipated HSI Operating Margin falls at or near the Target Operating Margin of [●]%. The initial proposal submitted to the competent authorities is the Median of 4.4%, which the Parties believe represents the most appropriate arm's-length result for HSI's limited-risk distributor functions.

Section 5.4 — Provisional Pricing (a) For each Contract Year, HSAG shall invoice HSI for Covered Products using provisional transfer prices established at the beginning of such Contract Year (or, for partial years, at the beginning of the applicable period). Provisional transfer prices shall be designed to yield an anticipated HSI Operating Margin at or near the Target Operating Margin, based on: (i) HSI's budgeted f

Section 5.5 — Benchmarking Updates (a) The Benchmarking Study shall be refreshed by Meridian Economics GmbH (or a successor economic consulting firm mutually agreed upon by the Parties) at least once during the APA Term, as required by the APA or as agreed between the competent authorities of the United States and Germany. If the APA prescribes specific intervals for benchmarking refreshes (e.g., triennially), those

Section 5.6 — Intercompany Pricing for Rollback Period (a) For the Rollback Period (January 1, 2022 through December 31, 2024), the transfer pricing methodology described in this Article 5 shall be applied retroactively to the intercompany tangible goods transactions between HSAG and HSI for each of the three Rollback Period years, subject to competent authority agreement under the APA. (b) Any compensating adjustmen

ARTICLE 6 — YEAR-END TRUE-UP AND COMPENSATING ADJUSTMENTS

Section 6.1 — Year-End True-Up Computation (a) Within ninety (90) days after the end of each Contract Year (i.e., by no later than March 31 of the following calendar year), HSI shall compute its actual HSI Operating Margin for the completed Contract Year based on audited financial statements or, if audited financial statements are not yet available, management-approved financial data that is reasonably expected to be

Section 6.2 — Determination of True-Up Payment (a) If HSI's actual Operating Margin for a Contract Year falls within the Arm's-Length Range of 2.8% to 6.1%, and the APA does not require adjustment to a specific Target Operating Margin, no True-Up Payment shall be required for such Contract Year. (b) If the APA specifies a Target Operating Margin (or a narrower target range within the Arm's-Length Range), and HSI's ac

Section 6.3 — Payment Mechanics (a) True-Up Payments shall be made within thirty (30) days of the issuance of the applicable debit note or credit note by HSAG. (b) All True-Up Payments shall be made in USD by wire transfer of immediately available funds to the designated bank account of the receiving Party. (c) HSI's banking relationship for purposes of intercompany payments is maintained with Ridgeline National Bank

Section 6.4 — Compensating Adjustments for Rollback Period (a) If the APA includes a rollback for the Rollback Period (January 1, 2022 through December 31, 2024), compensating adjustments for each of the three Rollback Period years shall be computed using the same methodology set forth in Sections 6.1 and 6.2 above, applied retroactively to HSI's actual financial results for each such year. (b) Rollback compensating

Section 6.5 — Documentation of True-Up Payments (a) Each True-Up Payment shall be supported by a computation schedule substantially in the form of Schedule C hereto, setting forth in reasonable detail the derivation of the adjustment amount and the underlying financial data. (b) All records and documentation supporting True-Up Payments shall be maintained as part of the contemporaneous transfer pricing documentation

Section 6.6 — Currency and Exchange Rate Conventions (a) Intercompany invoices for Covered Products shall be denominated in EUR, consistent with HSAG's functional currency. (b) Year-end true-up computations shall be based on HSI's USD-denominated financial statements, as HSI's functional currency is USD. (c) For purposes of reconciling EUR-denominated intercompany invoices with HSI's USD-denominated financial stateme

ARTICLE 7 — CRITICAL ASSUMPTIONS

Section 7.1 — Definition of Critical Assumptions (a) The validity and continued applicability of the APA—and, consequently, the pricing mechanism set forth in this Agreement—depends on certain critical assumptions remaining true and accurate throughout the APA Term. The critical assumptions are set forth in detail in Schedule D hereto and include, without limitation, the following: (i) HSAG remains the manufacturer a

Section 7.2 — Notification of Changes (a) Each Party shall promptly notify the other Party in writing if any critical assumption enumerated in Section 7.1 or Schedule D becomes inaccurate or if a material change occurs (or is reasonably expected to occur) that could affect the validity or continued applicability of any critical assumption. (b) Such notification shall include a detailed description of the change or an

Section 7.3 — Consequences of Breach (a) If a critical assumption is breached (i.e., becomes inaccurate or ceases to be true), the Parties shall consult promptly and in good faith to determine whether the breach is material and whether the transfer pricing methodology under this Agreement remains appropriate. (b) If the Parties determine in good faith that the breach is material and may affect the continued validity

ARTICLE 8 — APA COMPLIANCE AND ANNUAL REPORTING

Section 8.1 — Annual Compliance Reports (a) HSI shall prepare and timely file annual compliance reports as required by the terms of the APA and in accordance with the requirements of Revenue Procedure 2015-41, Section 7, for each year of the APA Term. (b) Each annual compliance report shall include, at a minimum: (i) Tested party financial data, including HSI's audited or management-approved Net Revenue, Cost of Good

Section 8.2 — Coordination with Tax Counsel (a) The preparation of annual APA compliance reports shall be coordinated by Calderwood & Harkness LLP (responsible partner: Leonard Cross; lead associate: Leila Nazari) in consultation with HSI's VP, Tax, Priya Raghavan, and HSAG's SVP, Group Tax, Dr. Erwin Fassbinder. (b) To the extent that parallel compliance obligations exist under German tax law (including documentatio

Section 8.3 — Record Retention (a) Both Parties shall maintain complete and accurate records supporting the transfer pricing methodology, the Arm's-Length Range, the annual compliance reports, and all True-Up Payment computations and Compensating Adjustments for a period of not less than seven (7) years from the end of the relevant Contract Year. (b) HSAG's records shall be maintained in a manner consistent with Germ

ARTICLE 9 — REPRESENTATIONS AND WARRANTIES

Section 9.1 — Mutual Representations Each Party hereby represents and warrants to the other Party as of the Execution Date as follows: (a) Organization and Good Standing. Such Party is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as pr

Section 9.2 — HSAG Representations HSAG hereby additionally represents and warrants to HSI as of the Execution Date as follows: (a) Organization. HSAG is a duly organized Aktiengesellschaft under the laws of the Federal Republic of Germany, with its shares publicly listed on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and traded on the XETRA electronic trading plat