MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the addressee and the individuals copied herein. Any dissemination, distribution, or copying of this memorandum or its contents to any person not authorized to receive it is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately.
TO: Wilhelm Ostermann, General Counsel (Chefjustitiar), Halcyon Semiconductor Aktiengesellschaft
CC: Dr. Friedrich Wendt, CEO (Vorstandsvorsitzender); Katarina Dalmqvist, CFO (Finanzvorstand); Dr. Christoph Maurelban, Partner, Bähr Stein Rechtsanwälte PartGmbB; Johanna Weiß, Senior Associate, Bähr Stein Rechtsanwälte PartGmbB
FROM: Vivienne St. Claire, Partner, Calderwood & Harkness LLP; Claire Dempsey, Associate, Calderwood & Harkness LLP
DATE: February 18, 2026
RE: German Corporate Law Considerations for Issuance of 30,000,000 New Ordinary Shares in Connection with Prospective US IPO via Level III ADR Program
MATTER NO.: 1032-00003
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I. Executive Summary and Purpose
This memorandum has been prepared by Calderwood & Harkness LLP ("C&H"), as United States securities counsel to Halcyon Semiconductor Aktiengesellschaft ("Halcyon," "HSAG," or the "Company"), in coordination with Bähr Stein Rechtsanwälte PartGmbB ("Bähr Stein"), German legal counsel to Halcyon, to analyze the requirements under the German Stock Corporation Act (Aktiengesetz, "AktG") for the issuance of 30,000,000 new ordinary shares (Stammaktien) without par value (Stückaktien) in connection with Halcyon's contemplated initial public offering in the United States through a Level III American Depositary Receipt program (the "US IPO" or the "Offering").
The Offering is structured as a combined primary and secondary offering targeting aggregate gross proceeds of approximately $900,000,000. The primary component of the Offering involves the issuance by the Company of 30,000,000 new ordinary shares, which will be deposited with a German custodian bank and represented by 15,000,000 American Depositary Shares ("ADSs") at a ratio of one (1) ADS to two (2) ordinary shares. The ADSs will be issued under a deposit agreement to be entered into among the Company, Meridian Trust Company, N.A., as depositary bank, and holders of ADSs from time to time. In addition to the primary offering, certain existing shareholders will sell existing ordinary shares in the form of ADSs, as described further in Section XIII below.
Additional ADSs may be issued upon exercise of the overallotment option granted to the underwriters, comprising up to 3,210,000 additional ADSs, representing up to 6,420,000 additional ordinary shares (the "Greenshoe Shares"). The total number of new ordinary shares to be issued under the authorized capital, including the full exercise of the overallotment option, would be up to 36,420,000 shares.
Following the completion of the Offering (before any greenshoe exercise), the Company's total outstanding ordinary shares will increase from 215,000,000 to 245,000,000. If the overallotment option is exercised in full and the Greenshoe Shares are sourced entirely from new share issuances, the total outstanding ordinary shares would increase to 251,420,000.
This memorandum addresses the following key issues under German corporate law arising in connection with the proposed new share issuance:
(a) the availability of authorized capital (genehmigtes Kapital) under Halcyon's articles of association (Satzung) to support the issuance of up to 36,420,000 new ordinary shares;
(b) the requirements for adoption of a formal resolution by the Management Board (Vorstand) and the consent of the Supervisory Board (Aufsichtsrat);
(c) the exclusion of statutory pre-emptive rights (Bezugsrechtsausschluss) and the legal requirements for such exclusion under the AktG and applicable case law;
(d) whether any further shareholder approval by the general meeting (Hauptversammlung) is required;
(e) the commercial register (Handelsregister) filings necessary to effectuate the capital increase and the timing constraints associated therewith; and
(f) the coordination of the German corporate authorization process with the SEC registration process and the US offering timeline.
This memorandum relies upon the German law analysis provided by Bähr Stein and integrates that analysis with the US securities and transactional framework within C&H's purview. The German law conclusions set forth herein are based upon advice received from Bähr Stein and are subject to Bähr Stein's formal written confirmation, which is a critical-path deliverable as discussed in Section XIV below.
With respect to the timeline for the Offering, the current target dates are as follows: confidential submission of the Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission (the "SEC") on April 14, 2026; public filing of the Registration Statement on approximately June 8, 2026; declaration of effectiveness of the Registration Statement on approximately June 22, 2026; pricing of the Offering on July 1, 2026; and closing and settlement of the Offering on July 6, 2026. All dates are subject to adjustment based on SEC review timing, market conditions, and completion of the necessary German corporate actions described herein.
II. Background on Halcyon's Corporate Structure
A. Entity Overview
Halcyon Semiconductor Aktiengesellschaft is a German public stock corporation (Aktiengesellschaft) organized and existing under the laws of the Federal Republic of Germany. The Company's registered seat (Sitz) is Munich, Bavaria, and it is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Munich under registration number HRB 217458. The Company's headquarters and principal executive offices are located at Maximilianstraße 72, 80539 Munich, Germany.
The Company's ordinary shares are currently listed and traded on the Frankfurt Stock Exchange under the ticker symbol FRA: HCY in the Prime Standard segment, which is the highest transparency standard of the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and imposes enhanced ongoing reporting and disclosure requirements. The Company's Legal Entity Identifier (LEI) is 5299007KBTVZ3XQHGL48.
Halcyon was founded in 1997 and has grown to become a leading European developer and manufacturer of advanced power semiconductor devices. The Company employs approximately 8,400 individuals worldwide across its operations in Germany, the United States, Singapore, the People's Republic of China, and the Czech Republic. The Company's core business focuses on the design, manufacture, and sale of silicon carbide (SiC) and gallium nitride (GaN) power semiconductor chips and modules for use in automotive, industrial, and renewable energy applications. Halcyon's products are used in electric vehicle powertrains, industrial motor drives, solar inverters, and energy storage systems, among other applications.
B. Current Share Capital
As of the date of this memorandum, the Company's issued and outstanding share capital consists of 215,000,000 ordinary shares (Stammaktien), each without par value (Stückaktien). All outstanding shares are of a single class, and each share carries one vote at the general meeting (Hauptversammlung). The Company does not have any preferred shares (Vorzugsaktien) outstanding, nor does it have any outstanding convertible bonds, warrant bonds, or other instruments convertible into or exchangeable for ordinary shares, other than employee stock options issued under the Company's long-term incentive program administered through the Halcyon Employee Stock Ownership Trust (the "ESOT").
Based on the closing price of the Company's ordinary shares on the Frankfurt Stock Exchange as of January 10, 2026, the Company's market capitalization was approximately €8.6 billion.
C. Major Shareholders (Pre-IPO)
The Company's major shareholders, as of the most recent notification records and shareholder register, are set forth below:
Rheintal Industrieholding GmbH is a family holding company of the Wendt family, domiciled in Düsseldorf, Germany. Its Managing Director (Geschäftsführerin) is Margarethe Wendt, who is the sister of Dr. Friedrich Wendt, the Company's Chief Executive Officer (Vorstandsvorsitzender). Rheintal has been a shareholder of the Company since its founding in 1997 and is the largest single shareholder. As discussed in Section XIII below, Rheintal will sell approximately 8,500,000 existing ordinary shares in the Offering.
Kestrel Capital Partners AG is a European technology-focused investment fund domiciled in Glenrock Assurance, Switzerland. Its Managing Partner is Henrik Sørensen. Kestrel acquired its stake through a series of open-market purchases and a private placement in 2019. As discussed in Section XIII below, Kestrel will sell approximately 4,300,000 existing ordinary shares in the Offering.
The Halcyon Employee Stock Ownership Trust (ESOT) holds shares on behalf of current and former employees of the Company and its subsidiaries under the Company's long-term incentive program. The ESOT is not expected to sell any shares in the Offering.
The remaining approximately 64.9% of the Company's outstanding shares constitutes the free float and is held by a mix of institutional investors, retail shareholders, and other holders who trade on the Frankfurt Stock Exchange.
D. Governance Structure
The Company is governed by a two-tier board system (duales Führungssystem) as required under the AktG for German stock corporations. The two governing bodies are as follows:
Vorstand (Management Board). The Vorstand is responsible for the day-to-day management and strategic direction of the Company. The current members of the Vorstand are:
• Dr. Friedrich Wendt — Chief Executive Officer (Vorstandsvorsitzender)
• Katarina Dalmqvist — Chief Financial Officer (Finanzvorstand)
• Dr. Marcus Helder — Chief Technology Officer
• Ingrid Baumann — Chief Operating Officer
• Wilhelm Ostermann — General Counsel (Chefjustitiar)
Aufsichtsrat (Supervisory Board). The Aufsichtsrat appoints and supervises the members of the Vorstand and is responsible for overseeing the management of the Company. The Aufsichtsrat is chaired by Prof. Dr. Anneliese Voss, who has served as an independent director since 2018 and is a former dean of engineering at the Universität Stuttgart. The composition and independence of the Aufsichtsrat are relevant both for German corporate governance purposes and for the Nasdaq listing requirements that will apply following the US IPO.
The Company's articles of association (Satzung) govern the authorized capital provisions, corporate purpose, governance procedures, and other fundamental aspects of the Company's corporate organization. The Satzung was most recently amended at the annual Hauptversammlung held in June 2025, at which time the shareholders approved the Genehmigtes Kapital 2025 authorization discussed in detail in Section IV below.
E. Material Subsidiaries
The Company conducts its global operations through the following principal subsidiaries, each of which is directly or indirectly wholly owned by Halcyon Semiconductor Aktiengesellschaft:
Halcyon Semiconductor USA Inc. A corporation organized under the laws of the State of Delaware. Registered address: 1209 Orange Street, Wilmington, DE 19801. Principal office: 2500 Augustine Drive, Suite 100, Santa Clara, CA 95054. Employer Identification Number (EIN): 84-3927561. This entity serves as the Company's US sales, application engineering, and customer support hub and will play a central role in the Company's US operations following the US IPO.
Halcyon Power Solutions GmbH. A limited liability company (Gesellschaft mit beschränkter Haftung) organized under the laws of Germany, domiciled in Dresden, Germany, and wholly owned by the Company. This entity operates the Company's silicon carbide fabrication facilities, including the existing Fab 2 and the Fab 3 currently under construction. The expansion of Fab 3 is one of the primary intended uses of proceeds from the Offering.
Halcyon Asia Pacific Pte. Ltd. A private limited company organized under the laws of Singapore and wholly owned by the Company. This entity serves as the Company's Asia-Pacific sales hub and regional distribution center.
Halcyon Shanghai Semiconductor Co., Ltd. A wholly foreign-owned enterprise (WFOE) organized under the laws of the People's Republic of China and wholly owned by the Company. This entity operates the Company's China-based sales and engineering center.
Halcyon Automotive Components s.r.o. A limited liability company (společnost s ručením omezeným) organized under the laws of the Czech Republic, domiciled in Brno, and wholly owned by the Company. This entity performs module assembly and testing operations.
III. Proposed Share Issuance — Parameters
A. New Shares to Be Issued
The Company proposes to issue 30,000,000 new ordinary shares (Stückaktien) without par value as the primary component of the Offering. These 30,000,000 new ordinary shares will correspond to 15,000,000 ADSs at the established ratio of one (1) ADS to two (2) ordinary shares. Upon issuance, the new shares will be deposited with the German custodian bank designated under the Deposit Agreement to be entered into among the Company, Meridian Trust Company, N.A. (the "Depositary"), and holders of ADSs from time to time. The Depositary will issue ADSs against the deposited shares, and the ADSs will be offered and sold in the United States pursuant to a Registration Statement on Form F-1 filed with the SEC and, outside the United States, in reliance on Regulation S under the Securities Act of 1933, as amended (the "Securities Act").
The proposed ADS price range for the Offering is $39.00 to $45.00 per ADS, resulting in an implied midpoint ADS price of approximately $42.06. Based on the midpoint price, the primary gross proceeds to the Company from the issuance of 15,000,000 ADSs would be approximately $630,900,000 (before deduction of underwriting discounts, commissions, and estimated offering expenses). Including the secondary component sold by existing shareholders, the aggregate gross proceeds of the Offering are targeted at approximately $900,000,000.
The issuance of 30,000,000 new ordinary shares would result in dilution to existing shareholders of approximately 12.2%, calculated as 30,000,000 new shares divided by 245,000,000 total post-offering shares.
B. Post-IPO Share Capital
The following table summarizes the Company's share capital before and after the Offering (excluding the greenshoe):
*Reflects both dilution from the primary issuance and the sale of secondary shares by Rheintal (8,500,000 shares) and Kestrel (4,300,000 shares) in the Offering. See Section XIII for a detailed discussion of the selling shareholder component.
As indicated in the table above, the ESOT's holding will remain unchanged at 6,665,000 shares but will be diluted from approximately 3.1% to approximately 2.7% of the post-offering share capital solely as a result of the issuance of new shares. The free float is expected to increase substantially as a consequence of both the US listing and the additional shares entering the market through the primary issuance and the secondary sales.
C. Overallotment (Greenshoe) Consideration
The underwriters led by Westbridge Securities LLC will be granted an overallotment option (the "Greenshoe Option") to purchase up to 3,210,000 additional ADSs, representing fifteen percent (15%) of the 21,400,000 base deal ADSs (comprising 15,000,000 primary ADSs and 6,400,000 secondary ADSs). The 3,210,000 additional ADSs would represent up to 6,420,000 additional ordinary shares.
The source of the Greenshoe Shares has not yet been finally determined and remains under discussion with Westbridge Securities. The Greenshoe Shares may be sourced from one of the following alternatives, or a combination thereof:
(i) the issuance of additional new ordinary shares under the Company's authorized capital, which would require that the authorized capital be sized to accommodate a maximum issuance of 36,420,000 shares (30,000,000 base deal shares plus 6,420,000 greenshoe shares);
(ii) the lending of existing ordinary shares by one or more of the selling shareholders (Rheintal and/or Kestrel), with the Greenshoe Option serving as a mechanism for the underwriters to acquire shares to return to the lending shareholders if the option is exercised, or the stabilization agent purchasing shares in the open market to return borrowed shares if the option is not exercised; or
(iii) a combination of new share issuance and existing share lending.
If the Greenshoe Option is exercised in full at the midpoint ADS price of approximately $42.06, the additional gross proceeds would be approximately $134,812,600. For purposes of this memorandum, we assume that the authorized capital must be sufficient to accommodate the maximum scenario in which all Greenshoe Shares are sourced from new issuances, resulting in a total new share issuance of up to 36,420,000 ordinary shares.
IV. Authorized Capital (*Genehmigtes Kapital*) Under the *Aktiengesetz*
A. Legal Framework — AktG §§ 202–206
The German Stock Corporation Act provides a mechanism through which a stock corporation may authorize its Management Board (Vorstand) to issue new shares without the need for a separate shareholder vote at the time of issuance. This mechanism, known as genehmigtes Kapital (authorized capital), is governed by Sections 202 through 206 of the AktG. It is the standard instrument used by German stock corporations to retain the flexibility to access capital markets on an expedited basis and is the corporate vehicle upon which the proposed US IPO issuance is predicated.
The key provisions of the authorized capital framework are as follows:
Section 202(1) AktG — Authorization. The Satzung (articles of association) may authorize the Vorstand, with the consent (Zustimmung) of the Aufsichtsrat, to issue new shares up to a specified nominal amount (or, in the case of no-par-value shares, a specified number of shares) for a period not exceeding five years from the date of registration of the authorization. This authorization constitutes the genehmigtes Kapital.
Section 202(2) AktG — Shareholder Approval. The authorization must be granted by the general meeting (Hauptversammlung) by a resolution passed with a majority of at least three-quarters (75%) of the share capital represented at the meeting at which the resolution is adopted. This supermajority requirement reflects the significance of the authorization, as it effectively delegates to the Vorstand the power to increase the Company's share capital — a power that ordinarily resides with the shareholders.
Section 202(3) AktG — Maximum Limit. The authorized capital may not exceed fifty percent (50%) of the existing share capital at the time the authorization is registered in the commercial register. In the case of Halcyon, fifty percent of the 215,000,000 currently outstanding ordinary shares equals a maximum authorized capital of 107,500,000 shares. The proposed issuance of 30,000,000 new shares (or up to 36,420,000 shares including the full greenshoe exercise) is well within this statutory maximum, representing approximately 14.0% (or 16.9% including the greenshoe) of the existing share capital.
Section 203 AktG — Utilization and Pre-Emptive Rights. When the Vorstand utilizes the authorized capital, the statutory provisions governing capital increases (including the pre-emptive rights provisions of Section 186 AktG) apply by analogy, unless the Satzung authorization expressly provides otherwise. This provision is of central importance for the proposed Offering because the new shares will be issued without pre-emptive rights, as discussed in Section VII below.
Sections 204–206 AktG — Implementation. These sections govern the specific implementation of the capital increase, including the Vorstand resolution, the registration requirements, and the effectiveness of the capital increase upon entry in the commercial register.
B. Review of Halcyon's Existing Authorized Capital
Based upon Bähr Stein's preliminary review of Halcyon's current Satzung (as most recently amended at the annual Hauptversammlung held in June 2025), the Satzung contains an authorized capital provision designated as "Genehmigtes Kapital 2025" (GK 2025). This authorization was adopted by the shareholders at the June 2025 annual Hauptversammlung with the requisite supermajority approval.
The Genehmigtes Kapital 2025 authorization permits the Vorstand, with the consent of the Aufsichtsrat, to issue up to a specified number of new Stückaktien on one or more occasions through June 2030. The specific number of authorized shares is expected to be at least 43,000,000, representing approximately twenty percent (20%) of the Company's existing share capital. Bähr Stein is in the process of confirming the precise terms and remaining available balance of this authorization, which is a critical-path item for the Offering.
For the proposed US IPO, the existing authorized capital must be sufficient to cover both:
(a) the base issuance of 30,000,000 new ordinary shares; and
(b) if the Greenshoe Shares are to be sourced from new share issuances, up to 6,420,000 additional ordinary shares,
for a total maximum utilization of up to 36,420,000 new ordinary shares.
If the existing authorized capital is insufficient to accommodate the total proposed issuance — whether because the original authorization amount is lower than required or because prior utilizations have reduced the available balance below 36,420,000 shares — an extraordinary general meeting (außerordentliche Hauptversammlung) would need to be convened to approve a new or supplemental authorized capital authorization. As discussed in Section VIII.B below, such an extraordinary general meeting would add approximately six to eight weeks to the offering timeline due to the mandatory convocation period and associated preparation requirements, which would significantly disrupt the current target schedule.
Based on Bähr Stein's preliminary analysis, the existing Genehmigtes Kapital 2025 authorization is expected to be sufficient to support the proposed issuance without the need for further shareholder approval. This expectation must be formally confirmed by Bähr Stein in writing.
Recommendation: Bähr Stein should provide a formal written confirmation of the precise terms, scope, and remaining availability of the Genehmigtes Kapital 2025 at the earliest practicable date, for incorporation into the due diligence record and the disclosure in the Registration Statement on Form F-1. This confirmation should address the total authorization amount, the date of registration, the expiration date, the scope of the pre-emptive rights exclusion authorization, and any prior utilizations of the authorized capital.
C. Partial Utilization and Remaining Balance
It is essential to verify whether any portion of the Genehmigtes Kapital 2025 has been previously utilized since its adoption. Prior utilizations — for example, for employee equity issuances under the Company's long-term incentive program, contributions to the ESOT, acquisition-related share issuances, or other purposes — must be deducted from the total authorization to determine the remaining available balance.
Bähr Stein has been asked to confirm the amount of authorized capital previously utilized under the Genehmigtes Kapital 2025 and the resulting remaining balance available for the proposed US IPO issuance.
After utilization for the US IPO (assuming a maximum issuance of 36,420,000 new shares, including full greenshoe exercise), the remaining balance of authorized capital will need to be considered in the context of any future capital needs of the Company. If the remaining balance following the Offering is minimal, the Company may wish to consider proposing a new authorized capital resolution at the next annual Hauptversammlung (expected in June 2027) to replenish its authorized capital and maintain future financing flexibility.
V. *Vorstand* (Management Board) Resolution
A. AktG Requirements
Under Section 204 of the AktG, the utilization of authorized capital to issue new shares requires the adoption of a formal resolution by the Vorstand (Vorstandsbeschluss). The Vorstand resolution must determine the material terms and conditions of the issuance, including the following:
(a) the number of new shares to be issued;
(b) the issue price (Ausgabebetrag) — for Stückaktien, the minimum issue price is the pro rata amount of the share capital attributable to each share, as required by Section 9(1) of the AktG, and the actual issue price may not be set below the stock exchange price (Börsenkurs) of the existing shares at the time of issuance;
(c) the form of contribution — in this case, a cash capital increase (Barkapitalerhöhung);
(d) the exclusion of pre-emptive rights (Bezugsrechtsausschluss), if authorized by the Satzung or approved by the Aufsichtsrat; and
(e) any other terms and conditions of the issuance, including conditions precedent or subsequent to the effectiveness of the resolution.
The Vorstand resolution must be adopted by a majority of the members of the Vorstand in accordance with Halcyon's internal rules of procedure (Geschäftsordnung des Vorstands). Bähr Stein will prepare the draft Vorstand resolution for review by C&H and the Company's management.
B. Timing and Coordination
The Vorstand resolution must be adopted sufficiently in advance of the SEC effectiveness date (target: June 22, 2026) to ensure that the German corporate authorization process does not become a bottleneck in the offering timeline. At the same time, the final issue price cannot be determined until the bookbuilding process is completed and the offering is priced, which is targeted for July 1, 2026.
To address this sequencing issue, it is standard practice in cross-border IPO transactions involving German issuers to adopt the Vorstand resolution in two stages:
Stage 1 — Preliminary Conditional Resolution. A preliminary Vorstand resolution adopted in advance of SEC effectiveness (target: by early June 2026) that authorizes the issuance of up to 36,420,000 new ordinary shares, subject to conditions including: (i) the SEC's declaration of effectiveness of the Registration Statement on Form F-1; (ii) the successful completion of the bookbuilding process and pricing of the Offering; and (iii) the execution of the Underwriting Agreement between the Company and Westbridge Securities LLC, as representative of the several underwriters. This conditional resolution provides the necessary corporate authorization while preserving the Company's ability to decline to proceed if market conditions or other circumstances do not support the Offering.
Stage 2 — Supplemental Resolution (Pricing Resolution). A separate or supplemental Vorstand resolution adopted at the time of pricing (target: July 1, 2026) that sets the final issue price based on the ADS pricing determined through the bookbuilding process. This resolution will specify the exact number of new shares to be issued and the precise per-share issue price, converted from the US dollar ADS price to a euro-denominated per-share issue price at the applicable exchange rate.
For the Greenshoe Shares, the initial Vorstand resolution should include a standing authorization permitting the issuance of up to 6,420,000 additional new shares within the thirty (30) day period following pricing (greenshoe expiration: July 31, 2026) at the same per-share issue price, conditional upon exercise of the overallotment option by the underwriters. If the Greenshoe Option is exercised, a further supplemental resolution or confirmation may be required, together with a separate Commercial Register filing, as discussed in Section X below.
C. *Vorstand* Members to Participate
All five members of the Vorstand are expected to participate in the adoption of the Vorstand resolution:
• Dr. Friedrich Wendt (CEO / Vorstandsvorsitzender)
• Katarina Dalmqvist (CFO / Finanzvorstand)
• Dr. Marcus Helder (CTO)
• Ingrid Baumann (COO)
• Wilhelm Ostermann (General Counsel / Chefjustitiar)
Conflict of Interest Consideration. We note that Dr. Friedrich Wendt is the brother of Margarethe Wendt, the Managing Director (Geschäftsführerin) of Rheintal Industrieholding GmbH, which is both the Company's largest shareholder (holding 22.3% of outstanding shares) and a selling shareholder in the Offering (proposing to sell approximately 8,500,000 existing shares). While the issuance of new shares by the Company is a corporate action that benefits the Company (through the receipt of capital increase proceeds) and is distinct from the secondary sale by Rheintal, the familial relationship between a Vorstand member and a principal of a selling shareholder warrants careful consideration under the duty of care (Sorgfaltspflicht) provisions of Section 93 of the AktG and any applicable internal governance policies of the Company regarding conflicts of interest and recusal.
Bähr Stein should advise on whether any formal recusal of Dr. Wendt from the Vorstand resolution is required or advisable under the AktG or the Company's internal rules of procedure, particularly with respect to any terms of the issuance that may directly affect Rheintal's interests (e.g., the pricing, which determines the dilution impact on Rheintal's remaining holding). As a practical matter, it is desirable to have Dr. Wendt participate in the resolution to the extent permissible, given his role as Vorstandsvorsitzender and his knowledge of the Company's strategic rationale for the Offering.
VI. *Aufsichtsrat* (Supervisory Board) Consent
A. AktG Requirements
Section 204(1) of the AktG requires that the issuance of new shares under authorized capital receive the consent (Zustimmung) of the Aufsichtsrat. This consent is a mandatory prerequisite for the validity of the capital increase and cannot be waived. The Aufsichtsrat consent must also specifically cover the exclusion of pre-emptive rights if the Vorstand resolution provides for such exclusion, as is the case in the proposed Offering.
The Aufsichtsrat consent must be adopted in accordance with the procedural requirements set forth in the Satzung and the Aufsichtsrat's internal rules of procedure (Geschäftsordnung des Aufsichtsrats). These procedures typically specify the quorum requirements, voting thresholds, and the permissibility of written resolutions in lieu of meetings.
B. Supervisory Board Chair
The Aufsichtsrat is chaired by Prof. Dr. Anneliese Voss, who has served as an independent director since 2018. Prior to joining the Company's Aufsichtsrat, Prof. Dr. Voss served as dean of engineering at the Universität Stuttgart and has extensive experience in the semiconductor industry through her academic research and advisory roles.
The independence of Prof. Dr. Voss and the other members of the Aufsichtsrat must be confirmed in connection with the Offering for dual purposes: first, to satisfy the requirements of German corporate governance standards (including the German Corporate Governance Code (Deutscher Corporate Governance Kodex)); and second, to comply with the listing requirements of the Nasdaq Global Select Market, which require that a majority of the board of directors (or, for foreign private issuers, the applicable governing body) be composed of independent directors and that the audit committee be composed entirely of independent members.
C. Timing. The Aufsichtsrat consent should be obtained concurrently with or promptly following the adoption of the Vorstand preliminary conditional resolution. Given the target SEC effectiveness date of June 22, 2026, we recommend that the Aufsichtsrat consent be obtained no later than mid-June 2026.
Under the AktG, a written circular resolution (Umlaufbeschluss) of the Aufsichtsrat is permissible if authorized by the Satzung. If the Satzung does not authorize circular resolutions for matters of this nature, a formal meeting (Sitzung) of the Aufsichtsrat must be convened, which may require additional lead time for scheduling and notice purposes. Bähr Stein has been asked to confirm whether Halcyon's Satzung permits circular resolutions of the Aufsichtsrat for capital measures, and if so, whether any specific procedural requirements (such as unanimity or a minimum participation threshold) apply to such circular resolutions.
If a formal Aufsichtsrat meeting is required, we recommend scheduling the meeting for a date no later than mid-June 2026, with the agenda and supporting materials (including the draft Vorstand resolution, the Vorstand report on the exclusion of pre-emptive rights, and background materials on the Offering) to be circulated to the Aufsichtsrat members sufficiently in advance of the meeting to permit thorough review.
VII. Exclusion of Pre-Emptive Rights (*Bezugsrechtsausschluss*)
A. Statutory Pre-Emptive Rights — AktG § 186
Under Section 186(1) of the AktG, existing shareholders of a German stock corporation have a statutory pre-emptive right (Bezugsrecht) to subscribe for new shares in any capital increase in proportion to their existing shareholdings. This right is designed to protect existing shareholders from dilution of their voting power and economic interest and is a fundamental principle of German corporate law. Where pre-emptive rights apply, the company must offer the new shares to existing shareholders on a pro rata basis, and the subscription period must be at least two weeks (Section 186(1) sentence 2 AktG).
For a capital increase carried out under authorized capital pursuant to Section 203 of the AktG, the pre-emptive rights provisions of Section 186 apply by analogy, unless the pre-emptive rights are excluded in accordance with the procedures and requirements described below.
B. Basis for Exclusion
A complete exclusion of pre-emptive rights is necessary for the Offering because the new shares will be offered exclusively in the form of ADSs in the United States (pursuant to a Registration Statement on Form F-1) and, outside the United States, in reliance on Regulation S under the Securities Act, through a coordinated international bookbuilding process. It is not practicable to simultaneously offer subscription rights to all existing shareholders of a German stock corporation in the context of a US registered initial public offering for the following reasons:
(a) The SEC registration process for the Form F-1 and the underwritten bookbuilding mechanics are fundamentally inconsistent with the statutory two-week subscription period and pro rata allocation requirements under Section 186 AktG.
(b) A simultaneous rights offering to German and European shareholders would require the preparation and filing of a separate prospectus under Regulation (EU) 2017/1129 (the Prospectus Regulation) in addition to the US Registration Statement, creating duplicative regulatory requirements and significant additional cost and delay.
(c) The bookbuilding process, which is essential for price discovery and the determination of the optimal ADS price within the filing range, requires discretionary allocation authority by the underwriters, which is inconsistent with the pro rata allocation mandated by the statutory pre-emptive right.
(d) The offering is structured as an ADR-based issuance in which the new shares are deposited with a German custodian and represented by ADSs; offering subscription rights in the form of ordinary shares to existing shareholders while simultaneously conducting a US ADR offering would create complex cross-market settlement issues and potential regulatory conflicts.
The exclusion must be authorized by the Satzung provision granting the authorized capital, in accordance with Section 203(2) in conjunction with Sections 186(3) and 186(4) of the AktG, or by a specific shareholders' resolution.
C. Conditions for Valid Exclusion
1. Authorization in the *Satzung*. As a threshold matter, the Genehmigtes Kapital 2025 authorization in the Satzung must expressly empower the Vorstand, with the consent of the Aufsichtsrat, to exclude pre-emptive rights in connection with the issuance of new shares under the authorized capital. This authorization must be of sufficient scope to cover the proposed issuance of up to 36,420,000 new shares without pre-emptive rights.
Bähr Stein has been asked to confirm that the existing authorized capital resolution contains an authorization for pre-emptive rights exclusion that is broad enough to cover the proposed issuance. Specifically, Bähr Stein should confirm whether the authorization permits exclusion of pre-emptive rights (a) for cash capital increases where the issue price is not significantly below the stock exchange price (the "simplified exclusion," discussed in subsection 2 below), (b) under a general authorization subject to the Vorstand's determination that the exclusion serves the interests of the Company, or (c) both. The scope and wording of the authorization in the Satzung will determine the legal basis upon which the pre-emptive rights exclusion can be structured.
2. Simplified Exclusion (*Erleichterter Bezugsrechtsausschluss*) — § 186(3) Sentence 4 AktG. German law provides a streamlined mechanism for the exclusion of pre-emptive rights known as the simplified exclusion (erleichterter Bezugsrechtsausschluss) under Section 186(3) sentence 4 of the AktG. Under this provision, pre-emptive rights may be excluded for a cash capital increase if two conditions are simultaneously met:
(a) the capital increase does not exceed ten percent (10%) of the existing share capital, determined either at the time of the shareholders' resolution authorizing the authorized capital or at the time of the utilization, whichever is lower; and
(b) the issue price of the new shares is not significantly below the stock exchange price (Börsenkurs) of the existing shares at or around the time of the issuance decision.
Applying the ten percent threshold to Halcyon's existing share capital of 215,000,000 shares, the maximum number of shares that may be issued under the simplified exclusion is 21,500,000 shares (10% × 215,000,000). The proposed base issuance of 30,000,000 new shares exceeds this threshold by 8,500,000 shares. Including the greenshoe of up to 6,420,000 additional shares, the total potential issuance of 36,420,000 shares exceeds the threshold by 14,920,000 shares.
Accordingly, the simplified exclusion under Section 186(3) sentence 4 AktG alone cannot serve as the legal basis for the exclusion of pre-emptive rights for the entire issuance. However, a combination approach is available and commonly used in practice: up to 21,500,000 shares may be issued under the simplified exclusion (subject to compliance with the pricing requirement), and the remaining shares (8,500,000 for the base deal, or up to 14,920,000 including the greenshoe) may be issued under a general exclusion authorization in the Satzung, subject to the substantive justification requirements discussed in subsection 3 below.
It should be noted that the ten percent limit under Section 186(3) sentence 4 AktG is subject to reduction if the Company has previously utilized the simplified exclusion for other share issuances, or if it has issued convertible or warrant bonds with pre-emptive rights exclusion based on the same statutory provision, during the period since the adoption of the authorized capital resolution. Bähr Stein should confirm whether any such prior utilizations have occurred.
3. General Exclusion — Substantive Justification (*Sachliche Rechtfertigung*). For the portion of the issuance that cannot be covered by the simplified exclusion (or if the Satzung authorization provides for a general exclusion covering the entire issuance), the exclusion of pre-emptive rights must be objectively justified (sachlich gerechtfertigt) in the interest of the Company. This requirement derives from the constitutional protection of property rights (Eigentumsgarantie) under Article 14 of the German Basic Law (Grundgesetz) and has been extensively developed through the jurisprudence of the German Federal Court of Justice (Bundesgerichtshof, "BGH").
The leading authorities — including the BGH's landmark decisions in Kali+Salz (BGHZ 71, 40) and Harborview Group/Nold (BGHZ 136, 133) — establish that the exclusion of pre-emptive rights must satisfy two cumulative requirements:
(a) Legitimate Corporate Purpose. The exclusion must serve a legitimate corporate purpose (sachlich gerechtfertigt durch ein Gesellschaftsinteresse). The purpose must be in the interest of the company as a whole, rather than in the interest of individual shareholders or the management.
(b) Proportionality. The means chosen — i.e., the exclusion of pre-emptive rights — must be proportionate (verhältnismäßig) to the corporate purpose pursued. This requires that (i) the exclusion is suitable to achieve the stated purpose; (ii) the exclusion is necessary, in the sense that no less restrictive alternative is available; and (iii) the burden on existing shareholders (in terms of voting dilution and economic dilution) is not disproportionate to the benefit to the company.
Applying these principles to the proposed US IPO, the following legitimate corporate purposes support the exclusion of pre-emptive rights for the issuance of new shares:
Access to US Capital Markets and Funding of Strategic Growth Initiatives. The proceeds of the primary offering are intended to be used for: (i) the expansion of the Company's silicon carbide fabrication facility (Fab 3) in Dresden, Germany, at an estimated cost of approximately $280,000,000; (ii) research and development for next-generation gallium nitride (GaN) power semiconductor devices, at an estimated cost of approximately $140,000,000; (iii) repayment of the Company's existing revolving credit facility in an amount of approximately $100,000,000; and (iv) general corporate purposes, including working capital. The US IPO is the most effective means of raising the capital required to fund these strategic initiatives and to position the Company for long-term growth in the rapidly expanding power semiconductor market.
Broadening of the Shareholder Base and Enhancement of International Visibility. The listing of ADSs on the Nasdaq Global Select Market (ticker: HCYN) will complement the Company's existing listing on the Frankfurt Stock Exchange (FRA: HCY) and provide access to a deep pool of US institutional and retail investors. This broadening of the shareholder base is expected to enhance the Company's international profile, improve liquidity, and provide the Company with a US-listed equity currency that can be used for future acquisitions and employee compensation in the United States.
Impracticability of Pre-Emptive Rights in the Context of a US Registered Offering. As discussed in Section VII.B above, it is not practicable to offer subscription rights to all existing shareholders while simultaneously conducting a US registered offering through a bookbuilding process. The structural and regulatory constraints of the US IPO process make the exclusion of pre-emptive rights a necessary component of the transaction.
With respect to proportionality, the following factors mitigate the burden on existing shareholders:
Issue Price at or Near Market. The issue price of the new shares will be set at or above the prevailing stock exchange price of the Company's shares on the Frankfurt Stock Exchange (appropriately converted at the applicable EUR/USD exchange rate). This ensures that existing shareholders are not subject to material economic dilution, as the value of their existing shares is not diminished by the issuance of new shares at a discount. The current EUR/USD exchange rate of approximately €1.00 = $1.078 (as of January 10, 2026) will be applied in the conversion. As discussed in Section IX below, the pricing mechanics require further coordination with the financial advisors to ensure compliance with the AktG minimum price requirements.
Proportionate Dilution. The voting dilution of approximately 12.2% (or up to approximately 14.5% including the full greenshoe) is moderate and within the range customarily accepted by German courts as proportionate in the context of capital-raising transactions serving significant corporate purposes.
Opportunity to Participate. Existing shareholders who wish to maintain or increase their exposure to the Company may do so by purchasing ADSs in the Offering or ordinary shares on the Frankfurt Stock Exchange before or after the Offering.
4. *Vorstand* Report on Pre-Emptive Rights Exclusion — § 186(4) Sentence 2 AktG. Section 186(4) sentence 2 of the AktG requires the Vorstand to prepare and publish a written report (Bericht) to the Hauptversammlung justifying the reasons for the exclusion of pre-emptive rights. This report is a formal corporate document and must set forth in detail the grounds upon which the exclusion is based and the reasons why the exclusion serves the interests of the Company.
In the case of the proposed Offering, the authorized capital resolution (Genehmigtes Kapital 2025) was approved at the annual Hauptversammlung in June 2025 with the authorization to exclude pre-emptive rights. At that time, the Vorstand delivered a general report to the Hauptversammlung explaining the potential uses of the authorized capital and the circumstances under which pre-emptive rights might be excluded.
For the specific utilization of the authorized capital in connection with the US IPO, the Vorstand must prepare a supplemental report explaining the specific reasons for the exclusion at the time of utilization. This supplemental report must address the particular facts and circumstances of the Offering, including the corporate purposes served, the pricing parameters, and the proportionality analysis described in subsection 3 above.
Bähr Stein has been engaged to prepare the supplemental Vorstand report in coordination with C&H. The supplemental report must be made available to shareholders at the Company's registered office and, if required by the Satzung or applicable law, published in the designated gazette (Bundesanzeiger). The report should be finalized sufficiently in advance of the Vorstand preliminary resolution (target: early June 2026) to allow for review by the Aufsichtsrat and the Company's management.
D. Dilution Impact on Existing Shareholders
The following table summarizes the dilution impact of the proposed issuance on the Company's existing shareholders:
*Reflects both dilution from the primary issuance and the sale of secondary shares by the respective selling shareholder.
As the table illustrates, existing shareholders who do not participate in the Offering will experience voting dilution of approximately 12.2%. However, the economic dilution will be significantly mitigated by the fact that the issue price will be set at or near the prevailing market price, meaning that the per-share value of the Company's equity should be preserved or enhanced (to the extent the proceeds are deployed productively). The increase in the free float from approximately 64.9% to approximately 74.4% will also contribute to improved liquidity and trading depth, which benefits all shareholders.
These factors — pricing at or near market, moderate proportionate dilution, and enhanced liquidity — support the proportionality of the pre-emptive rights exclusion and reduce the risk of a successful shareholder challenge (Anfechtungsklage).
VIII. Shareholder Approval Requirements
A. No Further *Hauptversammlung* Required (If Authorized Capital Sufficient)
If the existing Genehmigtes Kapital 2025 authorization is sufficient in both amount (at least 36,420,000 shares remaining available) and scope (including a pre-emptive rights exclusion authorization covering the proposed issuance), no further shareholder approval by the Hauptversammlung is required for the issuance of the new shares. The Vorstand, with the consent of the Aufsichtsrat, may proceed to issue the new shares under the existing authorization without convening a general meeting.
This is a significant structural advantage of the authorized capital mechanism and a key reason for the structuring choice in the proposed Offering. The ability to proceed without a shareholder vote eliminates schedule risk associated with the convocation and holding of a general meeting, reduces public disclosure requirements, and avoids the uncertainty inherent in obtaining shareholder approval, particularly in a company with a large free float.
B. Contingency: Extraordinary General Meeting (*Außerordentliche Hauptversammlung*)
Notwithstanding the foregoing, if for any reason the existing authorized capital is insufficient — for example, because prior utilizations have reduced the available balance below 36,420,000 shares, or because the pre-emptive rights exclusion authorization in the Satzung is deficient in scope or wording — an extraordinary general meeting (außerordentliche Hauptversammlung, "EGM") would be required to approve a new or supplemental authorized capital authorization.
The following timing and procedural constraints would apply to an EGM:
Convocation Period. German law requires a minimum convocation period of thirty (30) days for a Hauptversammlung (Section 123 AktG). Including the time required for preparation of the convocation notice, agenda, and supporting materials, the total lead time from the decision to convene an EGM to the date of the meeting would be approximately six to eight weeks.
Supermajority Requirement. The adoption of a new authorized capital resolution requires the affirmative vote of at least three-quarters (75%) of the share capital represented at the meeting (Section 202(2) AktG).
Feasibility of Approval. Given the shareholder composition (Rheintal 22.3%, Kestrel 9.7%, ESOT 3.1%, free float 64.9%), obtaining the required supermajority is expected to be feasible, particularly with the support of Rheintal and Kestrel, both of which are selling shareholders and thus have a vested interest in the completion of the Offering. However, the need for an EGM would introduce schedule risk, require premature public disclosure of the Offering, and create a period of market uncertainty.
Public Disclosure. The convocation of an EGM and the publication of the agenda (including the proposed authorized capital resolution and the pre-emptive rights exclusion authorization) would constitute a public disclosure that could not be delayed under MAR, as the convocation notice must be published in the Federal Gazette (Bundesanzeiger) and on the Company's website. This premature disclosure could affect the Company's share price and the market dynamics of the Offering.
For these reasons, it is of paramount importance that Bähr Stein confirm, as promptly as practicable, that the existing Genehmigtes Kapital 2025 authorization is sufficient to support the proposed issuance without the need for an EGM.
C. Notification to Existing Shareholders
While no shareholder vote is required (assuming sufficient authorized capital), existing shareholders must be notified of the capital increase through the following channels:
(a) Federal Gazette (*Bundesanzeiger*). The implementation of the capital increase must be disclosed in the Federal Gazette in accordance with applicable AktG requirements.
(b) Investor Relations Channels. The Company's investor relations function should publish information regarding the capital increase on the Company's website and through its regular communications channels.
(c) Ad Hoc Disclosure Under MAR. The Frankfurt Stock Exchange (FRA: HCY, Prime Standard) imposes additional ad hoc disclosure requirements under the Market Abuse Regulation (EU) No 596/2014 ("MAR"). Any inside information (Insiderinformation) regarding the capital increase must be disclosed to the public without undue delay, subject to the delay provisions under Article 17(4) MAR (discussed in Section XII.A below). The timing of the ad hoc announcement must be carefully coordinated with the public filing of the Registration Statement with the SEC and the launch of the bookbuilding process.
IX. Issue Price Considerations
A. Minimum Issue Price — AktG § 9
Section 9(1) of the AktG establishes the minimum issue price for shares of a German stock corporation. For Stückaktien (no-par-value shares), the minimum issue price is the pro rata amount of the share capital (Grundkapital) attributable to each share, calculated by dividing the total registered share capital by the number of outstanding shares. Shares may not be issued below this statutory minimum under any circumstances.
In the case of the proposed Offering, the actual issue price will be significantly above the statutory minimum, as it will be determined by reference to the market value of the Company's shares through the bookbuilding process. The statutory minimum price requirement is therefore not expected to be a binding constraint, but must be confirmed by Bähr Stein based on the current registered share capital figure in the Satzung.
B. Relationship to Stock Exchange Price
Beyond the statutory minimum under Section 9(1), the relationship between the issue price and the stock exchange price of the Company's existing shares is critical for two reasons:
First, to the extent the pre-emptive rights exclusion relies on the simplified exclusion provision of Section 186(3) sentence 4 AktG, the issue price must not be "significantly below" (nicht wesentlich unter) the stock exchange price. German legal commentary and case law generally interpret this requirement as permitting a discount of no more than approximately three to five percent (3–5%) of the volume-weighted average price (VWAP) of the Company's shares on the Frankfurt Stock Exchange at or around the time of the issuance decision.
Second, even if the simplified exclusion is not the sole basis for the pre-emptive rights exclusion, maintaining the issue price at or near market levels is an important factor in the proportionality analysis (Verhältnismäßigkeitsprüfung) for the general exclusion, as it limits the economic dilution suffered by non-participating shareholders. An issue price materially below market would increase the risk of a successful shareholder challenge (Anfechtungsklage) and would weaken the justification for the exclusion.
C. EUR/USD Conversion and Pricing Coordination
The ADS price will be set in US dollars within the proposed range of $39.00 to $45.00 per ADS. Since each ADS represents two (2) ordinary shares, the implied price per ordinary share in US dollars is $19.50 to $22.50 (at the bottom and top of the range, respectively). At the current exchange rate of approximately €1.00 = $1.078 (as of January 10, 2026), the implied price per ordinary share in euros is approximately €18.09 to €20.87.
However, based on the Company's current market capitalization of approximately €8.6 billion divided by 215,000,000 outstanding shares, the current share price on the Frankfurt Stock Exchange is approximately €40.00 per share. The proposed ADS pricing, at the midpoint of the range ($42.06 per ADS, implying $21.03 per ordinary share, or approximately €19.51 per ordinary share at the current exchange rate), implies an ordinary share price that is significantly below the current Frankfurt share price.
This apparent discrepancy requires careful analysis and may arise from one or more of the following factors:
(a) The ADS ratio and pricing may be calibrated to place the ADS price within a range that is attractive and accessible to US retail and institutional investors (typically in the $20–$60 range for technology IPOs on Nasdaq), requiring an ADS-to-share ratio that differs from one-to-one.
(b) The Company's Frankfurt Stock Exchange share price may be expected to adjust downward in connection with the announcement of the Offering to reflect the dilutive impact of the new share issuance and the increase in supply.