1032-00006 · Halcyon Semiconductor Inc · Engagement & Administration

engagement-letter-hsag-hsi.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, New York 10022

Telephone: (212) 558-4000 Facsimile: (212) 558-3588

March 10, 2025

C&H Matter Number: 1032-00006 Billing Code: HSAG-TP-2025

Dr. Erwin Fassbinder Senior Vice President, Group Tax Halcyon Semiconductor AG Halcyon-Allee 12 01099 Dresden, Saxony Germany

Priya Raghavan Vice President, Tax Halcyon Semiconductor Inc. 8700 Parmer Lane, Building 4 Austin, TX 78729

Dear Dr. Fassbinder and Ms. Raghavan:

We are pleased to set forth the terms upon which Calderwood & Harkness LLP ("C&H" or the "Firm") has been engaged by Halcyon Semiconductor AG ("HSAG") and Halcyon Semiconductor Inc. ("HSI," and together with HSAG, the "Client") to provide the legal services described herein. This engagement was opened on February 3, 2025, following our initial discussions regarding the Client's transfer pricing posture and the desirability of securing advance certainty through the advance pricing agreement process.

As discussed in our meetings of January 14 and January 28, 2025, C&H has been retained to advise and represent HSAG and HSI in connection with securing a bilateral Advance Pricing Agreement ("APA") between the United States Internal Revenue Service ("IRS") and the German Bundeszentralamt für Steuern ("BZSt"), and to prepare comprehensive contemporaneous transfer pricing documentation for the covered tax years, as more fully described below. This letter, upon execution by authorized representatives of HSAG and HSI, will constitute the binding agreement between C&H and the Client regarding the scope, terms, and conditions of the engagement. The terms and conditions set forth in this letter are supplemented by C&H's Standard Terms and Conditions of Engagement attached hereto as Attachment A, which are incorporated herein by reference. To the extent of any conflict between the terms of this letter and Attachment A, the terms of this letter shall control.

1. Scope of Engagement

1.1 Overview of Matter

C&H is engaged to provide United States federal tax counsel services in connection with the pursuit of a bilateral APA under Article 25 of the Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed June 29, 2006 (the "Treaty"), and in accordance with Rev. Proc. 2015-41, 2015-35 I.R.B. 263, as may be updated or superseded during the term of this engagement. The engagement encompasses transfer pricing advisory services, coordination of economic analysis, preparation and filing of the APA application with the IRS, negotiation support through the competent authority process, preparation of contemporaneous transfer pricing documentation for covered tax years, and the review and drafting of related intercompany agreements to ensure consistency with the Client's transfer pricing positions.

The bilateral APA process is intended to provide the Client with prospective certainty regarding the arm's length pricing of intercompany transactions between HSAG and HSI, eliminate the risk of double taxation that might arise from unilateral adjustments by either the IRS or the BZSt, and mitigate the exposure to transfer pricing penalties under IRC § 6662(e) and the corresponding German provisions. The engagement is structured in two principal phases, as described in Sections 1.4 and 1.5 below.

1.2 Covered Transactions

The intercompany transactions within the scope of this engagement involve the US-Germany supply chain between HSAG and HSI, comprising the following three principal categories of controlled transactions:

Tangible Goods (Wafer/Die Sales). Sales of semiconductor wafers and singulated die from HSAG's fabrication facilities located in Dresden and Chemnitz, Germany, to HSI under the Master Intercompany Supply Agreement dated and effective January 1, 2019, as amended by the First Amendment thereto dated July 1, 2022 (the "Supply Agreement"). In fiscal year 2024, the aggregate intercompany goods transferred under the Supply Agreement were approximately €987.6 million. These transfers constitute the largest category of intercompany transactions between HSAG and HSI by value, reflecting the integrated semiconductor design-and-manufacture model under which HSAG operates as the principal manufacturing entity and HSI serves as the primary distribution and marketing entity for the North American market.

Royalties (IP License). Royalty payments from HSI to HSAG for licensed semiconductor process technology, design libraries, electronic design automation tools, mask works, and related intangible property under the intellectual Property License Agreement dated and effective January 1, 2019 (the "IP License Agreement"). In fiscal year 2024, aggregate royalty payments made by HSI to HSAG under the IP License Agreement were approximately €68.4 million. The royalty is computed as a percentage of HSI's net revenue from products manufactured using HSAG-licensed technology, as defined in the IP License Agreement.

Cost-Sharing Contributions (R&D CSA). HSI's contributions under the Qualified Cost Sharing Arrangement dated and effective July 15, 2018 (the "CSA") for the joint development of next-generation semiconductor process technology, including advanced node research and development activities. In fiscal year 2024, HSI's cost-sharing contributions under the CSA were approximately €224.6 million. The CSA is structured to comply with the requirements of Treasury Regulations § 1.482-7 and allocates costs based on the anticipated benefit shares of HSAG and HSI as the controlled participants in the arrangement.

The aggregate annual intercompany flows across these three transaction categories are approximately €1.28 billion, based on fiscal year 2024 data. This figure may fluctuate in future years as a result of changes in production volumes, new product introductions, changes in the functional profile of the parties, or adjustments to the CSA cost pool.

1.3 APA Scope and Coverage Period

The APA that is the subject of this engagement will have the following characteristics:

• APA Type: Bilateral (United States–Germany)

• Proposed Prospective APA Term: Five (5) tax years, commencing January 1, 2025, and ending December 31, 2029

• Rollback Request: Three (3) prior tax years, commencing January 1, 2022, and ending December 31, 2024, pursuant to Section 8.05 of Rev. Proc. 2015-41

• Total Covered Period (if rollback granted): Eight (8) tax years (January 1, 2022, through December 31, 2029)

The rollback request for the three prior tax years 2022 through 2024 is predicated on the expectation that the transfer pricing methods applied and tested during the APA process will be demonstrably appropriate for such years and that neither the IRS nor the BZSt will have initiated a transfer pricing adjustment for those years prior to the conclusion of APA negotiations. In the event that the rollback request is not accepted by one or both competent authorities, the prospective APA term of five years (2025–2029) will constitute the minimum coverage period sought.

1.4 Phase 1 — APA Application and Contemporaneous Documentation

Phase 1 of the engagement encompasses the preparation, filing, and initial processing of the bilateral APA application and the preparation of contemporaneous transfer pricing documentation for the covered prior years. Specifically, Phase 1 includes the following tasks:

1. Pre-Filing Memorandum. Preparation and submission of a pre-filing memorandum to the IRS Advance Pricing and Mutual Agreement Program ("APMA"), summarizing the controlled transactions, proposed transfer pricing methods, the basis for the bilateral request, and the rollback proposal. The pre-filing memorandum will be prepared in accordance with Section 4 of Rev. Proc. 2015-41 and will request anonymity for the Client to the extent permitted thereunder.

2. Pre-Filing Conference. Attendance at and support for the pre-filing conference with IRS APMA personnel, anticipated to take place at the IRS offices in Washington, D.C. C&H will prepare conference materials, including a summary presentation, discussion outline, and preliminary economic overview, and will attend the conference with at least one partner and one associate.

3. Functional Analyses and Economic Benchmarking Studies. Coordination of detailed functional analyses of HSAG and HSI, characterization of the controlled transactions, and economic benchmarking studies. Meridian Economics GmbH ("Meridian Economics"), as the subcontracted economist (see Section 2.4 below), will prepare the benchmarking studies, including Comparable Profits Method ("CPM") / Transactional Net Margin Method ("TNMM") analyses for the tangible goods transactions, Comparable Uncontrolled Transaction ("CUT") analyses for the royalty transactions, and anticipated benefit share analyses for the CSA contributions. C&H will direct and supervise the economic work and ensure that all analyses are consistent with the legal framework and the APA positions adopted by the Client.

4. Formal APA Application. Preparation and filing of the formal APA application with IRS APMA, including IRS Form 14661 (Application for Advance Pricing Agreement) and the following supporting materials:

(a) Narrative statement of the proposed covered transactions, functional analyses, and comparability analyses;

(b) Economic analysis appendix, incorporating the benchmarking studies prepared by Meridian Economics;

(c) Legal analysis memorandum, addressing the applicable provisions of the Internal Revenue Code, Treasury Regulations, the Treaty, and the OECD Transfer Pricing Guidelines;

(d) Financial data appendix, including historical financial statements, segmented data, and pro forma projections for the prospective APA term; and

(e) User fee submission of $113,500 (the large case rate applicable as of calendar year 2025, as set forth in Rev. Proc. 2015-41, as adjusted).

5. Contemporaneous Transfer Pricing Documentation. Preparation of contemporaneous transfer pricing documentation for HSI, consisting of:

(a) A Master File prepared in accordance with OECD BEPS Action 13 guidelines;

(b) US Local Files for each of fiscal year 2022, fiscal year 2023, and fiscal year 2024, prepared in accordance with the requirements of IRC § 6662(e) and Treasury Regulations § 1.6662-6; and

(c) A CSA documentation addendum for each of the above fiscal years, prepared in accordance with Treasury Regulations § 1.482-7(k) (documentation requirements for qualified cost sharing arrangements).

6. Penalty Protection Statements. Preparation of IRC § 6662(e) penalty protection statements for each of the fiscal years covered by the contemporaneous documentation (FY 2022, FY 2023, and FY 2024), to establish a reasonable cause defense against potential transfer pricing penalties.

7. Coordination with German Counsel. Coordination with Kettner Pflüger Rechtsanwälte (Dr. Tobias Kettner, lead partner), the Firm's German legal counterpart in this engagement, regarding the parallel German APA application to the BZSt and German transfer pricing documentation obligations under § 1 Außensteuergesetz ("AStG"), §§ 90(3) and 162(3)–(4) Abgabenordnung ("AO"), and the Gewinnabgrenzungsaufzeichnungsverordnung ("GAufzV"). Coordination will include alignment of transfer pricing methods, consistency of functional analyses, and harmonization of the legal positions taken in the US and German applications.

8. Intercompany Agreement Review and Drafting. Review and, as necessary, drafting of amended intercompany agreements — specifically, the Master Intercompany Supply Agreement and the IP License Agreement — to ensure consistency with the APA positions adopted and to reflect the arm's length character of the controlled transactions during the proposed APA term. Any amendments to these agreements will be coordinated with the Client's in-house legal team and with Kettner Pflüger.

9. Power of Attorney. Preparation of IRS Form 2848 (Power of Attorney and Declaration of Representative) for HSI, authorizing C&H attorneys to represent HSI before the IRS in connection with the APA application and related matters.

1.5 Phase 2 — APA Negotiation Support

Phase 2 of the engagement encompasses the negotiation and finalization of the bilateral APA, commencing after the filing of the formal APA application and continuing through execution of the APA agreement (or, if negotiations are unsuccessful, through termination of negotiations). Specifically, Phase 2 includes the following tasks:

1. Representation in APA Negotiations. Representation of HSI and HSAG in all stages of APA negotiations with IRS APMA and, through the competent authority process under Article 25 of the Treaty, with the BZSt. C&H will serve as lead counsel for the Client in all communications and meetings with IRS APMA and will coordinate with Kettner Pflüger regarding the parallel negotiation track with the BZSt.

2. Information Document Requests. Response to IRS Information Document Requests ("IDRs") issued during the APA examination process, including the compilation of responsive documents, preparation of written responses, and coordination of interviews with Client personnel.

3. Supplemental Economic Analyses. Preparation of supplemental economic analyses, sensitivity testing, and updated benchmarking studies as may be requested by IRS APMA or the BZSt during the course of negotiations, or as may be advisable in light of developments in the negotiation process. Such analyses will be coordinated with Meridian Economics and, to the extent applicable, may give rise to additional fees under the Meridian Economics subcontractor engagement, which will be billed separately.

4. Proposed APA Agreement Terms. Drafting of proposed APA agreement terms, including the critical assumptions, transfer pricing methodology provisions, annual compliance report specifications, and rollback provisions, for submission to IRS APMA and the BZSt through the competent authority process.

5. Annual Compliance Report Templates. Preparation of annual compliance report templates for use by the Client during each year of the prospective APA term, consistent with the requirements of Section 7 of Rev. Proc. 2015-41.

6. Estimated Phase 2 Period. Based on current IRS APMA processing times and typical bilateral APA timelines, the estimated duration of Phase 2 is approximately two to three years, with an anticipated completion window of 2025 through 2027. However, the actual timeline is subject to the pace of negotiations and is not within C&H's control.

1.6 Exclusions from Scope

The following matters are expressly excluded from the scope of this engagement:

• German Tax Advice. C&H is not engaged to provide German tax advice of any kind. All German tax matters, including the preparation and filing of the German APA application with the BZSt, German transfer pricing documentation under § 1 AStG, §§ 90(3) and 162(3)–(4) AO, and the GAufzV, and any German tax controversy matters, are handled by Kettner Pflüger Rechtsanwälte, which has been separately and directly engaged by HSAG. The estimated fees for Kettner Pflüger's services in connection with the German APA application and related documentation are approximately €320,000, as communicated by HSAG to C&H; such fees are the sole responsibility of HSAG and are not included in the fee arrangements set forth in this engagement letter.

• Other Jurisdictions. C&H is not engaged to provide advice regarding transfer pricing matters involving Halcyon Semiconductor Japan K.K. ("HSJ") or Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSC"), or any other Halcyon group entity outside the United States and Germany. The intercompany transactions between HSI and HSJ, between HSAG and HSC, and among other Halcyon group entities are outside the scope of this bilateral APA and this engagement.

• Audit and Accounting Services. C&H is not engaged to perform audit, review, compilation, or other accounting services of any kind. Gresham Whitfield LLP serves as the independent auditor of the HSAG group and is responsible for all audit and accounting matters. C&H may request financial data and audited financial statements from Gresham Whitfield, through the Client, for purposes of the APA application and transfer pricing documentation.

• State and Local Tax Matters. State and local tax matters, including state transfer pricing issues, state income and franchise tax, and state unclaimed property matters, are excluded from the scope of this engagement unless separately agreed in writing between C&H and the Client.

2. Staffing

2.1 Responsible Partner

Leonard Cross, Partner, Tax, will serve as the Responsible Partner for this engagement. Mr. Cross will have overall responsibility for legal strategy, supervision of the APA application and negotiation process, and the client relationship. Mr. Cross has extensive experience in bilateral APA matters, having led the preparation and negotiation of more than twenty bilateral APAs involving the IRS and European competent authorities, including several involving the semiconductor and technology sectors.

2.2 Billing Partner

Sylvia Hartwell, Partner, Tax, will serve as the Billing Partner for this engagement. Ms. Hartwell will be responsible for the oversight of billing, fee estimates, and engagement economics, including monitoring of fee cap utilization and preparation of periodic budget reports. Ms. Hartwell will coordinate with Ms. Raghavan and Dr. Fassbinder regarding any billing inquiries.

2.3 Engagement Team

• Leila Nazari, Senior Associate, Tax, will serve as the lead associate responsible for day-to-day management of the engagement. Ms. Nazari will be the primary point of contact for routine matters and will be responsible for the drafting of APA application materials, contemporaneous transfer pricing documentation, intercompany agreement reviews, and coordination with German counsel and the subcontracted economists.

• Robert Jansen, Associate, Tax, will serve as the working associate supporting the engagement. Mr. Jansen's responsibilities will include the preparation of functional analyses, review of benchmarking studies and economic data, drafting of documentation, and preparation of IDR responses during Phase 2.

C&H may, from time to time, assign additional attorneys or paraprofessionals to the engagement as workload requires. The Client will be notified in advance of any material changes to the engagement team, and the hourly rates of any additional personnel will be commensurate with their level of experience and consistent with C&H's standard rate schedule. Time billed by additional personnel will be subject to the applicable fee caps set forth in Section 3.2 below.

2.4 Subcontracted Economist

Meridian Economics GmbH (Dr. Annika Breitner, Managing Director; Maximilian Voss, Senior Analyst), with offices at Leopoldstraße 145, 80804 Munich, Germany, has been retained through C&H to perform the economic analyses supporting the APA application and transfer pricing documentation. Meridian Economics will prepare the following deliverables:

(a) CPM/TNMM benchmarking analyses for the tangible goods (wafer/die sales) transactions;

(b) CUT analyses for the royalty (IP license) transactions;

(d) Supporting statistical analyses, sensitivity testing, and economic narrative sections for inclusion in the APA application; and

(e) Such supplemental analyses as may be requested during Phase 2 negotiations (subject to additional fees).

Meridian Economics' services for Phase 1 will be provided at a fixed fee of €485,000, as set forth in a separate subcontractor engagement letter between C&H and Meridian Economics dated February 10, 2025. The Meridian Economics fee will be billed through C&H as a disbursement and is not included in the C&H fee caps described in Section 3.2 below. Any supplemental economic analyses requested during Phase 2 that exceed the scope of the Meridian Economics fixed-fee engagement will be billed on a time-and-materials basis at Meridian Economics' standard rates, with prior Client approval.

3. Fee Arrangements

3.1 Hourly Rates

C&H will bill for attorney time at the following blended hourly rates for the engagement team:

The foregoing hourly rates are effective as of the date of this engagement letter and are subject to annual adjustment in accordance with C&H's standard rate adjustment policies. Notwithstanding the foregoing, any adjusted rates applicable to time billed during Phase 1 and Phase 2 of this engagement shall not exceed one hundred and five percent (105%) of the rates stated above without the prior written approval of the Client. In the event that C&H proposes a rate adjustment in excess of the 105% threshold, C&H will provide the Client with at least sixty (60) days' advance written notice and an opportunity to discuss the proposed adjustment before any such increase takes effect.

3.2 Fee Caps

The following fee caps apply to C&H attorney time and internal costs (exclusive of disbursements, filing fees, subcontractor fees, travel expenses, and out-of-pocket costs):

Phase 1 Fee Cap (APA Application and Contemporaneous Documentation): One Million Eight Hundred Fifty Thousand Dollars ($1,850,000). This cap covers all Phase 1 work as described in Section 1.4 of this letter, including all C&H attorney time, internal costs, and overhead associated therewith. The Meridian Economics fixed fee of €485,000 is billed directly through C&H as a disbursement and is excluded from the Phase 1 fee cap.

Phase 2 Fee Cap (APA Negotiation Support): Nine Hundred Seventy-Five Thousand Dollars ($975,000). This cap covers all Phase 2 work as described in Section 1.5 of this letter, including all C&H attorney time, internal costs, and overhead associated therewith.

Total Engagement Fee Cap: The total combined fee cap for the engagement is Two Million Eight Hundred Twenty-Five Thousand Dollars ($2,825,000) (i.e., $1,850,000 + $975,000).

The fee caps represent maximum fees for C&H attorney time and internal costs and do not include disbursements, filing fees (including the IRS APA user fee of $113,500), subcontractor fees (including the Meridian Economics fee and any supplemental economic analysis fees), travel expenses, or other out-of-pocket costs, all of which will be billed separately at cost as described in Section 3.4 below. In the event that C&H anticipates that actual fees for either Phase may approach or exceed the applicable fee cap, C&H will promptly notify the Client and discuss options, which may include a scope reduction, a revised fee cap (subject to mutual written agreement), or other appropriate measures.

3.3 Billing and Payment

C&H will render monthly invoices to the Client reflecting time charges (at the hourly rates set forth in Section 3.1), disbursements, and expenses incurred during the preceding calendar month. Each invoice will include a summary of hours billed by attorney, a description of the work performed, and an itemization of disbursements and expenses.

All invoices are payable within thirty (30) days of receipt by the Client. Payment may be made by wire transfer to the account designated on the invoice or by check payable to Calderwood & Harkness LLP. In the event that any invoice remains unpaid for more than sixty (60) days after the date of the invoice, C&H reserves the right to charge interest on the unpaid balance at the rate of one percent (1%) per month, compounded monthly, from the due date until payment is received.

All invoices will reference the billing code HSAG-TP-2025 and C&H Matter Number 1032-00006. The Client agrees to direct all billing inquiries to Sylvia Hartwell, Billing Partner, at shartwell@calderwoodharkness.com or (212) 558-4127.

3.4 Disbursements and Expenses

Reasonable out-of-pocket expenses incurred by C&H in connection with the engagement will be billed at cost, without markup. Such expenses include, but are not limited to:

(a) Travel expenses (domestic and international), including airfare (coach or business class for international flights exceeding six hours), ground transportation, hotel accommodations, and meals, incurred in connection with meetings at IRS APMA offices in Washington, D.C., client sites in Dresden, Germany, and Austin, Texas, and other locations as may be necessary;

(b) Document reproduction, printing, and binding costs;

(d) Database access fees, including fees for Cascade Software, Bureau van Dijk (Orbis/Dunmore Solutions), Westmark Services Inc., and other economic databases used in connection with benchmarking studies and financial analysis;

(e) Filing fees and government charges; and

(f) Long-distance telecommunications charges.

Travel expenses for meetings at IRS APMA offices in Washington, D.C., and client sites in Dresden and Austin are expected to be a significant component of disbursements and will be billed as incurred in accordance with C&H's standard travel expense policy. C&H will exercise reasonable judgment in incurring travel expenses and will seek to minimize costs where practicable, including through the use of videoconferencing where appropriate.

The IRS APA user fee of One Hundred Thirteen Thousand Five Hundred Dollars ($113,500), representing the large case rate applicable as of calendar year 2025 as set forth in Rev. Proc. 2015-41 (as adjusted), will be billed as a disbursement upon submission of the formal APA application. The Client acknowledges that the IRS user fee is non-refundable and is payable regardless of the outcome of the APA application.

4. Client Contacts and Communication

4.1 Day-to-Day Contacts

The following individuals are designated as the primary day-to-day contacts for the engagement:

United States: Priya Raghavan, Vice President, Tax, Halcyon Semiconductor Inc., 8700 Parmer Lane, Building 4, Austin, TX 78729. Ms. Raghavan may be reached at praghavan@halcyonsemi.com or (512) 831-4400 ext. 2215.

Germany: Dr. Erwin Fassbinder, Senior Vice President, Group Tax, Halcyon Semiconductor AG, Halcyon-Allee 12, 01099 Dresden, Saxony, Germany. Dr. Fassbinder may be reached at e.fassbinder@halcyonsemi.de or +49 351 4488-7100.

C&H will provide quarterly status update letters to both Ms. Raghavan and Dr. Fassbinder regarding engagement progress, upcoming milestones, budget utilization (including a comparison of fees incurred to date against the applicable fee caps), and any material developments in the APA process. In addition to quarterly status updates, C&H will promptly notify the day-to-day contacts of any material developments that arise between quarterly updates, including IRS APMA communications, IDRs, scheduling of meetings, and any issues that may affect the scope, timeline, or cost of the engagement.

4.2 Ultimate Client Contacts

The following individuals are the ultimate client contacts and will be kept informed of significant developments in the engagement as appropriate:

• Dr. Klaus-Dieter Wehrheim, Chief Executive Officer, Halcyon Semiconductor AG

• Margarethe Stein, Chief Financial Officer, Halcyon Semiconductor AG

• Victor Almeida, President and General Manager, Halcyon Semiconductor Inc.

Communications to the ultimate client contacts will be made through the day-to-day contacts unless otherwise directed by the Client.

4.3 Functional Contacts (for Interviews and Information Gathering)

The following individuals have been identified as the principal functional contacts from whom C&H and Meridian Economics will seek information, interviews, and supporting data in connection with the functional analyses, economic studies, and documentation:

• Thomas Kuroda, Vice President, Supply Chain Operations, Halcyon Semiconductor Inc.

• Dr. Hendrik Möller, Chief Technology Officer, Halcyon Semiconductor AG

The Client will make these individuals (and other personnel as may be reasonably required) available for interviews, site visits, and information requests on a timely basis. The Client acknowledges that the quality and timeliness of information provided by functional contacts are critical to the success of the APA application and the preparation of transfer pricing documentation.

5. Key Milestones and Deliverable Timeline

The following milestones and target dates have been established for the engagement. These dates are estimates based on currently available information and are subject to adjustment as circumstances require, including in response to IRS scheduling and processing timelines. C&H will promptly notify the Client of any material changes to the timeline.

The Client understands that the timeline for Phase 2 is inherently uncertain and depends upon the pace of negotiations between the IRS APMA and the BZSt, the volume and complexity of IDRs, the availability of competent authority personnel, and other factors outside C&H's control. C&H will use reasonable efforts to advance the APA negotiations expeditiously and will keep the Client apprised of developments through the quarterly status updates and ad hoc communications described in Section 4.1 above.

6. Confidentiality

All information provided by the Client to C&H in connection with this engagement, including but not limited to financial data, business plans, trade secrets, proprietary technology information, intercompany agreements, internal memoranda, and communications, is confidential and will be treated as protected by the attorney-client privilege and/or the work product doctrine to the fullest extent permitted by applicable law. C&H will maintain all such information in confidence and will limit access to such information to attorneys and staff within C&H who have a need to know in connection with the performance of the engagement.

C&H will not disclose confidential information to any third party without the Client's prior written consent, except as follows:

(a) As required by applicable law, regulation, or court order;

(b) As necessary to perform the engagement, including disclosures to Meridian Economics GmbH in connection with the preparation of economic analyses and benchmarking studies, provided that Meridian Economics is subject to a separate confidentiality agreement executed in connection with its subcontractor engagement; and

(c) As necessary in connection with the APA process, including disclosures to the IRS and the BZSt in the APA application, IDR responses, and negotiation communications, which disclosures are authorized by the Client as an inherent component of the APA process.

The Client hereby authorizes C&H to share information with Kettner Pflüger Rechtsanwälte as necessary for the coordination of the bilateral APA application and German transfer pricing documentation, recognizing that the effective pursuit of a bilateral APA requires close collaboration between US and German counsel and consistent information sharing. C&H will exercise reasonable care to ensure that information shared with Kettner Pflüger is limited to that which is necessary for the coordinated representation.

The obligations set forth in this Section 6 shall survive the termination or expiration of this engagement.

7. Conflicts of Interest

C&H has conducted a comprehensive conflicts check in accordance with the Firm's internal conflict clearance procedures and confirms that, as of the date of this letter, no conflict of interest exists with respect to the representation of HSAG and HSI in this matter. The internal conflict check memorandum, dated February 3, 2025, is on file at the Firm and documents the results of the conflicts search.

C&H represents both HSAG and HSI jointly in this matter. The Client acknowledges that, while the interests of HSAG and HSI are currently aligned with respect to the bilateral APA, there exists the theoretical possibility that the interests of the two entities could diverge during the course of the engagement, including with respect to the allocation of income or the determination of arm's length pricing that favors one entity over the other. In the event of any actual or reasonably foreseeable conflict between the interests of HSAG and HSI, C&H will promptly notify both entities and discuss the conflict with the day-to-day contacts and, if appropriate, the ultimate client contacts. Depending on the nature and severity of the conflict, C&H may be required to withdraw from representation of one or both entities, in which case C&H will cooperate in the orderly transition of the matter to successor counsel and will refund any prepaid but unearned fees.

Each of HSAG and HSI, by executing this engagement letter, consents to the joint representation and acknowledges the potential for conflicts as described above.

8. Applicable Law and Regulatory Framework

The engagement will be governed by and conducted with reference to the following principal legal and regulatory authorities, among others:

(a) Internal Revenue Code ("IRC") § 482 (allocation of income and deductions among controlled taxpayers);

(b) IRC § 6662(e) (substantial valuation misstatement penalty for transfer pricing) and IRC § 6662(h) (gross valuation misstatement penalty);

(c) Treasury Regulations §§ 1.482-1 through 1.482-9 (transfer pricing methods and standards for controlled transactions involving tangible property, intangible property, services, and cost sharing arrangements);

(d) Treasury Regulations § 1.6662-6 (transfer pricing penalty provisions and reasonable cause defense);

(e) Rev. Proc. 2015-41, 2015-35 I.R.B. 263 (advance pricing agreement procedures);

(f) The Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed June 29, 2006 (the "Treaty"), in particular Article 9 (Associated Enterprises) and Article 25 (Mutual Agreement Procedure);

(g) The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022 edition), including the guidance on transfer pricing documentation and country-by-country reporting in Chapter V (BEPS Action 13); and

(h) German transfer pricing statutes and regulations, including § 1 Außensteuergesetz ("AStG"), §§ 90(3) and 162(3)–(4) Abgabenordnung ("AO"), and the Gewinnabgrenzungsaufzeichnungsverordnung ("GAufzV"), for purposes of coordination with Kettner Pflüger Rechtsanwälte. For the avoidance of doubt, C&H will not provide legal advice on the interpretation or application of German law; such advice is the exclusive responsibility of Kettner Pflüger.

The foregoing list is illustrative and not exhaustive. Additional legal authorities, including administrative guidance, case law, and technical advice memoranda, may be relevant to specific aspects of the engagement and will be identified and analyzed as the work progresses.

9. Limitation of Liability

C&H will perform the services described in this engagement letter with reasonable care and in accordance with the professional standards applicable to attorneys practicing in the area of international transfer pricing and advance pricing agreements. However, C&H makes no guarantee or assurance regarding the outcome of the APA application, the acceptance of any transfer pricing method or position by the IRS or the BZSt, the granting of the rollback request, or the outcome of any transfer pricing matter. The APA process involves negotiations between two sovereign taxing authorities, and the ultimate outcome is inherently uncertain and beyond C&H's control.

To the fullest extent permitted by applicable law, C&H's aggregate liability to the Client arising out of or in connection with this engagement, whether based in contract, tort (including negligence), breach of fiduciary duty, or otherwise, shall not exceed the total amount of fees actually paid by the Client to C&H under this engagement letter. This limitation of liability shall not apply to the extent that liability arises from C&H's willful misconduct, gross negligence, or fraud.

The Client acknowledges that it has been advised of this limitation of liability and has had the opportunity to seek independent advice regarding the same. By executing this engagement letter, the Client agrees to be bound by this limitation.

10. Termination

Either party may terminate this engagement upon thirty (30) days' prior written notice delivered to the other party at the addresses set forth in this letter (or such other addresses as may be designated in writing). Notice of termination shall be effective upon receipt by the non-terminating party.

Upon termination of the engagement, the Client shall be responsible for payment of all fees and expenses incurred by C&H through the effective date of termination, subject to the applicable fee cap for the Phase in which the termination occurs. In no event shall the Client be required to pay fees in excess of the applicable fee cap as a result of termination.

Upon termination, C&H will promptly deliver to the Client all documents, work product, and files in C&H's possession that belong to the Client, subject to C&H's right to retain copies for its own records in accordance with applicable ethical rules and the Firm's document retention policies. C&H will cooperate in the orderly transition of the matter to successor counsel designated by the Client, including by providing reasonable assistance in transferring files, introducing successor counsel to relevant IRS APMA contacts (to the extent permitted), and briefing successor counsel on the status of the engagement.

C&H reserves the right to withdraw from the engagement if the Client fails to pay invoices in a timely manner, fails to cooperate in providing information necessary for the engagement, or if circumstances arise that create an irreconcilable conflict of interest, in each case subject to any applicable ethical obligations regarding withdrawal from representation.

11. Governing Law and Dispute Resolution

This engagement letter and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law.

Any dispute, controversy, or claim arising out of or relating to this engagement letter or the services provided hereunder, including any dispute regarding the interpretation, breach, or termination of this letter, shall be resolved by binding arbitration administered by the American Arbitration Association ("AAA") in accordance with its Commercial Arbitration Rules then in effect. The arbitration shall be conducted in New York, New York, before a single arbitrator selected in accordance with the AAA's procedures. The arbitrator shall have the authority to award any remedy available at law or in equity, subject to the limitation of liability set forth in Section 9 above. The decision of the arbitrator shall be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with the arbitration, unless the arbitrator determines otherwise.

12. Acceptance and Execution

We ask that authorized representatives of both HSAG and HSI review the terms set forth in this engagement letter carefully and, if acceptable, sign and return one fully executed original of this letter to confirm acceptance of the terms of the engagement. A scanned copy transmitted by email to Leonard Cross at lcross@calderwoodharkness.com shall constitute effective delivery, provided that the original executed letter is sent by international courier within ten (10) business days thereafter.

If you have any questions regarding this letter or the terms of the engagement, please do not hesitate to contact Leonard Cross at (212) 558-4215 or lcross@calderwoodharkness.com, or Sylvia Hartwell at (212) 558-4127 or shartwell@calderwoodharkness.com.

We look forward to working with HSAG and HSI on this important matter and to achieving a successful outcome in the bilateral APA process.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Leonard Cross Partner, Tax Responsible Partner

Date: March 10, 2025

By: ________

Sylvia Hartwell Partner, Tax Billing Partner

Date: March 10, 2025

ACCEPTED AND AGREED

The undersigned hereby accept and agree to the terms and conditions set forth in this Engagement Letter dated March 10, 2025, and in the Standard Terms and Conditions of Engagement attached hereto as Attachment A.

HALCYON SEMICONDUCTOR AG

On behalf of Halcyon Semiconductor AG, Halcyon-Allee 12, 01099 Dresden, Saxony, Germany Steuernummer: 203/118/04527 VAT ID: DE 814 723 956

By: ________

Name: Dr. Erwin Fassbinder

Title: Senior Vice President, Group Tax

Date: ________

HALCYON SEMICONDUCTOR INC.

On behalf of Halcyon Semiconductor Inc., 8700 Parmer Lane, Building 4, Austin, TX 78729 EIN: 84-2917630 Delaware File Number: 7341825

By: ________

Name: Priya Raghavan

Title: Vice President, Tax

Date: ________

ENCLOSURES

The following documents are enclosed with or attached to this Engagement Letter:

• Attachment A: Calderwood & Harkness LLP Standard Terms and Conditions of Engagement

• Attachment B: IRS Form 2848 (Power of Attorney and Declaration of Representative) — for execution by Halcyon Semiconductor Inc. (to be prepared separately and provided under cover of supplemental correspondence)

Attorney	Title	Hourly Rate
Leonard Cross	Partner, Tax	$1,250 per hour
Sylvia Hartwell	Partner, Tax	$1,175 per hour
Leila Nazari	Senior Associate, Tax	$825 per hour
Robert Jansen	Associate, Tax	$650 per hour
Milestone / Deliverable	Date / Target
Engagement opened	February 3, 2025
Engagement letter execution	March 10, 2025
Pre-filing memorandum submission to IRS APMA	April 14, 2025
Pre-filing conference with IRS APMA	May 19, 2025 (scheduled)
Formal APA application filing (Form 14661 and supporting documentation)	Target: July 7, 2025
German APA application submission to BZSt (coordinated with Kettner Pflüger)	Target: August 15, 2025
FY 2024 contemporaneous transfer pricing documentation (Master File and US Local File)	Deadline: September 30, 2025
FY 2022 and FY 2023 contemporaneous transfer pricing documentation (US Local Files)	Target: concurrent with APA application filing
Prospective APA Year 1 ends	December 31, 2025
Phase 2 negotiation support (estimated period)	2025–2027
End of proposed prospective APA term	December 31, 2029

PRIVILEGED AND CONFIDENTIAL
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, New York 10022
Telephone: (212) 558-4000 Facsimile: (212) 558-3588
March 10, 2025
C&H Matter Number: 1032-00006 Billing Code: HSAG-TP-2025
Dr. Erwin Fassbinder Senior Vice President, Group Tax Halcyon Semiconductor AG Halcyon-Allee 12 01099 Dresden, Saxony Germany
Priya Raghavan Vice President, Tax Halcyon Semiconductor Inc. 8700 Parmer Lane, Building 4 Austin, TX 78729
Dear Dr. Fassbinder and Ms. Raghavan:
We are pleased to set forth the terms upon which Calderwood & Harkness LLP ("C&H" or the "Firm") has been engaged by Halcyon Semiconductor AG ("HSAG") and Halcyon Semiconductor Inc. ("HSI," and together with HSAG, the "Client") to provide the legal services described herein. This engagement was opened on February 3, 2025, following our initial discussions regarding the Client's transfer pricing posture and the desirability of securing advance certainty through the advance pricing agreement process.
As discussed in our meetings of January 14 and January 28, 2025, C&H has been retained to advise and represent HSAG and HSI in connection with securing a bilateral Advance Pricing Agreement ("APA") between the United States Internal Revenue Service ("IRS") and the German Bundeszentralamt für Steuern ("BZSt"), and to prepare comprehensive contemporaneous transfer pricing documentation for the covered tax years, as more fully described below. This letter, upon execution by authorized representatives of HSAG and HSI, will constitute the binding agreement between C&H and the Client regarding the scope, terms, and conditions of the engagement. The terms and conditions set forth in this letter are supplemented by C&H's Standard Terms and Conditions of Engagement attached hereto as Attachment A, which are incorporated herein by reference. To the extent of any conflict between the terms of this letter and Attachment A, the terms of this letter shall control.
1. Scope of Engagement
1.1 Overview of Matter
C&H is engaged to provide United States federal tax counsel services in connection with the pursuit of a bilateral APA under Article 25 of the Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed June 29, 2006 (the "Treaty"), and in accordance with Rev. Proc. 2015-41, 2015-35 I.R.B. 263, as may be updated or superseded during the term of this engagement. The engagement encompasses transfer pricing advisory services, coordination of economic analysis, preparation and filing of the APA application with the IRS, negotiation support through the competent authority process, preparation of contemporaneous transfer pricing documentation for covered tax years, and the review and drafting of related intercompany agreements to ensure consistency with the Client's transfer pricing positions.
The bilateral APA process is intended to provide the Client with prospective certainty regarding the arm's length pricing of intercompany transactions between HSAG and HSI, eliminate the risk of double taxation that might arise from unilateral adjustments by either the IRS or the BZSt, and mitigate the exposure to transfer pricing penalties under IRC § 6662(e) and the corresponding German provisions. The engagement is structured in two principal phases, as described in Sections 1.4 and 1.5 below.
1.2 Covered Transactions
The intercompany transactions within the scope of this engagement involve the US-Germany supply chain between HSAG and HSI, comprising the following three principal categories of controlled transactions:
Tangible Goods (Wafer/Die Sales). Sales of semiconductor wafers and singulated die from HSAG's fabrication facilities located in Dresden and Chemnitz, Germany, to HSI under the Master Intercompany Supply Agreement dated and effective January 1, 2019, as amended by the First Amendment thereto dated July 1, 2022 (the "Supply Agreement"). In fiscal year 2024, the aggregate intercompany goods transferred under the Supply Agreement were approximately €987.6 million. These transfers constitute the largest category of intercompany transactions between HSAG and HSI by value, reflecting the integrated semiconductor design-and-manufacture model under which HSAG operates as the principal manufacturing entity and HSI serves as the primary distribution and marketing entity for the North American market.
Royalties (IP License). Royalty payments from HSI to HSAG for licensed semiconductor process technology, design libraries, electronic design automation tools, mask works, and related intangible property under the intellectual Property License Agreement dated and effective January 1, 2019 (the "IP License Agreement"). In fiscal year 2024, aggregate royalty payments made by HSI to HSAG under the IP License Agreement were approximately €68.4 million. The royalty is computed as a percentage of HSI's net revenue from products manufactured using HSAG-licensed technology, as defined in the IP License Agreement.
Cost-Sharing Contributions (R&D CSA). HSI's contributions under the Qualified Cost Sharing Arrangement dated and effective July 15, 2018 (the "CSA") for the joint development of next-generation semiconductor process technology, including advanced node research and development activities. In fiscal year 2024, HSI's cost-sharing contributions under the CSA were approximately €224.6 million. The CSA is structured to comply with the requirements of Treasury Regulations § 1.482-7 and allocates costs based on the anticipated benefit shares of HSAG and HSI as the controlled participants in the arrangement.
The aggregate annual intercompany flows across these three transaction categories are approximately €1.28 billion, based on fiscal year 2024 data. This figure may fluctuate in future years as a result of changes in production volumes, new product introductions, changes in the functional profile of the parties, or adjustments to the CSA cost pool.
1.3 APA Scope and Coverage Period
The APA that is the subject of this engagement will have the following characteristics:
•  APA Type: Bilateral (United States–Germany)
•  Proposed Prospective APA Term: Five (5) tax years, commencing January 1, 2025, and ending December 31, 2029
•  Rollback Request: Three (3) prior tax years, commencing January 1, 2022, and ending December 31, 2024, pursuant to Section 8.05 of Rev. Proc. 2015-41
•  Total Covered Period (if rollback granted): Eight (8) tax years (January 1, 2022, through December 31, 2029)
The rollback request for the three prior tax years 2022 through 2024 is predicated on the expectation that the transfer pricing methods applied and tested during the APA process will be demonstrably appropriate for such years and that neither the IRS nor the BZSt will have initiated a transfer pricing adjustment for those years prior to the conclusion of APA negotiations. In the event that the rollback request is not accepted by one or both competent authorities, the prospective APA term of five years (2025–2029) will constitute the minimum coverage period sought.
1.4 Phase 1 — APA Application and Contemporaneous Documentation
Phase 1 of the engagement encompasses the preparation, filing, and initial processing of the bilateral APA application and the preparation of contemporaneous transfer pricing documentation for the covered prior years. Specifically, Phase 1 includes the following tasks:
1.  Pre-Filing Memorandum. Preparation and submission of a pre-filing memorandum to the IRS Advance Pricing and Mutual Agreement Program ("APMA"), summarizing the controlled transactions, proposed transfer pricing methods, the basis for the bilateral request, and the rollback proposal. The pre-filing memorandum will be prepared in accordance with Section 4 of Rev. Proc. 2015-41 and will request anonymity for the Client to the extent permitted thereunder.
2.  Pre-Filing Conference. Attendance at and support for the pre-filing conference with IRS APMA personnel, anticipated to take place at the IRS offices in Washington, D.C. C&H will prepare conference materials, including a summary presentation, discussion outline, and preliminary economic overview, and will attend the conference with at least one partner and one associate.
3.  Functional Analyses and Economic Benchmarking Studies. Coordination of detailed functional analyses of HSAG and HSI, characterization of the controlled transactions, and economic benchmarking studies. Meridian Economics GmbH ("Meridian Economics"), as the subcontracted economist (see Section 2.4 below), will prepare the benchmarking studies, including Comparable Profits Method ("CPM") / Transactional Net Margin Method ("TNMM") analyses for the tangible goods transactions, Comparable Uncontrolled Transaction ("CUT") analyses for the royalty transactions, and anticipated benefit share analyses for the CSA contributions. C&H will direct and supervise the economic work and ensure that all analyses are consistent with the legal framework and the APA positions adopted by the Client.
4.  Formal APA Application. Preparation and filing of the formal APA application with IRS APMA, including IRS Form 14661 (Application for Advance Pricing Agreement) and the following supporting materials:
(a) Narrative statement of the proposed covered transactions, functional analyses, and comparability analyses;
(b) Economic analysis appendix, incorporating the benchmarking studies prepared by Meridian Economics;
(c) Legal analysis memorandum, addressing the applicable provisions of the Internal Revenue Code, Treasury Regulations, the Treaty, and the OECD Transfer Pricing Guidelines;
(d) Financial data appendix, including historical financial statements, segmented data, and pro forma projections for the prospective APA term; and
(e) User fee submission of $113,500 (the large case rate applicable as of calendar year 2025, as set forth in Rev. Proc. 2015-41, as adjusted).
5.  Contemporaneous Transfer Pricing Documentation. Preparation of contemporaneous transfer pricing documentation for HSI, consisting of:
(a) A Master File prepared in accordance with OECD BEPS Action 13 guidelines;
(b) US Local Files for each of fiscal year 2022, fiscal year 2023, and fiscal year 2024, prepared in accordance with the requirements of IRC § 6662(e) and Treasury Regulations § 1.6662-6; and
(c) A CSA documentation addendum for each of the above fiscal years, prepared in accordance with Treasury Regulations § 1.482-7(k) (documentation requirements for qualified cost sharing arrangements).
6.  Penalty Protection Statements. Preparation of IRC § 6662(e) penalty protection statements for each of the fiscal years covered by the contemporaneous documentation (FY 2022, FY 2023, and FY 2024), to establish a reasonable cause defense against potential transfer pricing penalties.
7.  Coordination with German Counsel. Coordination with Kettner Pflüger Rechtsanwälte (Dr. Tobias Kettner, lead partner), the Firm's German legal counterpart in this engagement, regarding the parallel German APA application to the BZSt and German transfer pricing documentation obligations under § 1 Außensteuergesetz ("AStG"), §§ 90(3) and 162(3)–(4) Abgabenordnung ("AO"), and the Gewinnabgrenzungsaufzeichnungsverordnung ("GAufzV"). Coordination will include alignment of transfer pricing methods, consistency of functional analyses, and harmonization of the legal positions taken in the US and German applications.
8.  Intercompany Agreement Review and Drafting. Review and, as necessary, drafting of amended intercompany agreements — specifically, the Master Intercompany Supply Agreement and the IP License Agreement — to ensure consistency with the APA positions adopted and to reflect the arm's length character of the controlled transactions during the proposed APA term. Any amendments to these agreements will be coordinated with the Client's in-house legal team and with Kettner Pflüger.
9.  Power of Attorney. Preparation of IRS Form 2848 (Power of Attorney and Declaration of Representative) for HSI, authorizing C&H attorneys to represent HSI before the IRS in connection with the APA application and related matters.
1.5 Phase 2 — APA Negotiation Support
Phase 2 of the engagement encompasses the negotiation and finalization of the bilateral APA, commencing after the filing of the formal APA application and continuing through execution of the APA agreement (or, if negotiations are unsuccessful, through termination of negotiations). Specifically, Phase 2 includes the following tasks:
1.  Representation in APA Negotiations. Representation of HSI and HSAG in all stages of APA negotiations with IRS APMA and, through the competent authority process under Article 25 of the Treaty, with the BZSt. C&H will serve as lead counsel for the Client in all communications and meetings with IRS APMA and will coordinate with Kettner Pflüger regarding the parallel negotiation track with the BZSt.
2.  Information Document Requests. Response to IRS Information Document Requests ("IDRs") issued during the APA examination process, including the compilation of responsive documents, preparation of written responses, and coordination of interviews with Client personnel.
3.  Supplemental Economic Analyses. Preparation of supplemental economic analyses, sensitivity testing, and updated benchmarking studies as may be requested by IRS APMA or the BZSt during the course of negotiations, or as may be advisable in light of developments in the negotiation process. Such analyses will be coordinated with Meridian Economics and, to the extent applicable, may give rise to additional fees under the Meridian Economics subcontractor engagement, which will be billed separately.
4.  Proposed APA Agreement Terms. Drafting of proposed APA agreement terms, including the critical assumptions, transfer pricing methodology provisions, annual compliance report specifications, and rollback provisions, for submission to IRS APMA and the BZSt through the competent authority process.
5.  Annual Compliance Report Templates. Preparation of annual compliance report templates for use by the Client during each year of the prospective APA term, consistent with the requirements of Section 7 of Rev. Proc. 2015-41.
6.  Estimated Phase 2 Period. Based on current IRS APMA processing times and typical bilateral APA timelines, the estimated duration of Phase 2 is approximately two to three years, with an anticipated completion window of 2025 through 2027. However, the actual timeline is subject to the pace of negotiations and is not within C&H's control.
1.6 Exclusions from Scope
The following matters are expressly excluded from the scope of this engagement:
•  German Tax Advice. C&H is not engaged to provide German tax advice of any kind. All German tax matters, including the preparation and filing of the German APA application with the BZSt, German transfer pricing documentation under § 1 AStG, §§ 90(3) and 162(3)–(4) AO, and the GAufzV, and any German tax controversy matters, are handled by Kettner Pflüger Rechtsanwälte, which has been separately and directly engaged by HSAG. The estimated fees for Kettner Pflüger's services in connection with the German APA application and related documentation are approximately €320,000, as communicated by HSAG to C&H; such fees are the sole responsibility of HSAG and are not included in the fee arrangements set forth in this engagement letter.
•  Other Jurisdictions. C&H is not engaged to provide advice regarding transfer pricing matters involving Halcyon Semiconductor Japan K.K. ("HSJ") or Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSC"), or any other Halcyon group entity outside the United States and Germany. The intercompany transactions between HSI and HSJ, between HSAG and HSC, and among other Halcyon group entities are outside the scope of this bilateral APA and this engagement.
•  Audit and Accounting Services. C&H is not engaged to perform audit, review, compilation, or other accounting services of any kind. Gresham Whitfield LLP serves as the independent auditor of the HSAG group and is responsible for all audit and accounting matters. C&H may request financial data and audited financial statements from Gresham Whitfield, through the Client, for purposes of the APA application and transfer pricing documentation.
•  State and Local Tax Matters. State and local tax matters, including state transfer pricing issues, state income and franchise tax, and state unclaimed property matters, are excluded from the scope of this engagement unless separately agreed in writing between C&H and the Client.
2. Staffing
2.1 Responsible Partner
Leonard Cross, Partner, Tax, will serve as the Responsible Partner for this engagement. Mr. Cross will have overall responsibility for legal strategy, supervision of the APA application and negotiation process, and the client relationship. Mr. Cross has extensive experience in bilateral APA matters, having led the preparation and negotiation of more than twenty bilateral APAs involving the IRS and European competent authorities, including several involving the semiconductor and technology sectors.
2.2 Billing Partner
Sylvia Hartwell, Partner, Tax, will serve as the Billing Partner for this engagement. Ms. Hartwell will be responsible for the oversight of billing, fee estimates, and engagement economics, including monitoring of fee cap utilization and preparation of periodic budget reports. Ms. Hartwell will coordinate with Ms. Raghavan and Dr. Fassbinder regarding any billing inquiries.
2.3 Engagement Team
•  Leila Nazari, Senior Associate, Tax, will serve as the lead associate responsible for day-to-day management of the engagement. Ms. Nazari will be the primary point of contact for routine matters and will be responsible for the drafting of APA application materials, contemporaneous transfer pricing documentation, intercompany agreement reviews, and coordination with German counsel and the subcontracted economists.
•  Robert Jansen, Associate, Tax, will serve as the working associate supporting the engagement. Mr. Jansen's responsibilities will include the preparation of functional analyses, review of benchmarking studies and economic data, drafting of documentation, and preparation of IDR responses during Phase 2.
C&H may, from time to time, assign additional attorneys or paraprofessionals to the engagement as workload requires. The Client will be notified in advance of any material changes to the engagement team, and the hourly rates of any additional personnel will be commensurate with their level of experience and consistent with C&H's standard rate schedule. Time billed by additional personnel will be subject to the applicable fee caps set forth in Section 3.2 below.
2.4 Subcontracted Economist
Meridian Economics GmbH (Dr. Annika Breitner, Managing Director; Maximilian Voss, Senior Analyst), with offices at Leopoldstraße 145, 80804 Munich, Germany, has been retained through C&H to perform the economic analyses supporting the APA application and transfer pricing documentation. Meridian Economics will prepare the following deliverables:
(a) CPM/TNMM benchmarking analyses for the tangible goods (wafer/die sales) transactions;
(b) CUT analyses for the royalty (IP license) transactions;
(c) Anticipated benefit share analysis for the CSA contributions under Treasury Regulations § 1.482-7;
(d) Supporting statistical analyses, sensitivity testing, and economic narrative sections for inclusion in the APA application; and
(e) Such supplemental analyses as may be requested during Phase 2 negotiations (subject to additional fees).
Meridian Economics' services for Phase 1 will be provided at a fixed fee of €485,000, as set forth in a separate subcontractor engagement letter between C&H and Meridian Economics dated February 10, 2025. The Meridian Economics fee will be billed through C&H as a disbursement and is not included in the C&H fee caps described in Section 3.2 below. Any supplemental economic analyses requested during Phase 2 that exceed the scope of the Meridian Economics fixed-fee engagement will be billed on a time-and-materials basis at Meridian Economics' standard rates, with prior Client approval.
3. Fee Arrangements
3.1 Hourly Rates
C&H will bill for attorney time at the following blended hourly rates for the engagement team:
The foregoing hourly rates are effective as of the date of this engagement letter and are subject to annual adjustment in accordance with C&H's standard rate adjustment policies. Notwithstanding the foregoing, any adjusted rates applicable to time billed during Phase 1 and Phase 2 of this engagement shall not exceed one hundred and five percent (105%) of the rates stated above without the prior written approval of the Client. In the event that C&H proposes a rate adjustment in excess of the 105% threshold, C&H will provide the Client with at least sixty (60) days' advance written notice and an opportunity to discuss the proposed adjustment before any such increase takes effect.
3.2 Fee Caps
The following fee caps apply to C&H attorney time and internal costs (exclusive of disbursements, filing fees, subcontractor fees, travel expenses, and out-of-pocket costs):
Phase 1 Fee Cap (APA Application and Contemporaneous Documentation): One Million Eight Hundred Fifty Thousand Dollars ($1,850,000). This cap covers all Phase 1 work as described in Section 1.4 of this letter, including all C&H attorney time, internal costs, and overhead associated therewith. The Meridian Economics fixed fee of €485,000 is billed directly through C&H as a disbursement and is excluded from the Phase 1 fee cap.
Phase 2 Fee Cap (APA Negotiation Support): Nine Hundred Seventy-Five Thousand Dollars ($975,000). This cap covers all Phase 2 work as described in Section 1.5 of this letter, including all C&H attorney time, internal costs, and overhead associated therewith.
Total Engagement Fee Cap: The total combined fee cap for the engagement is Two Million Eight Hundred Twenty-Five Thousand Dollars ($2,825,000) (i.e., $1,850,000 + $975,000).
The fee caps represent maximum fees for C&H attorney time and internal costs and do not include disbursements, filing fees (including the IRS APA user fee of $113,500), subcontractor fees (including the Meridian Economics fee and any supplemental economic analysis fees), travel expenses, or other out-of-pocket costs, all of which will be billed separately at cost as described in Section 3.4 below. In the event that C&H anticipates that actual fees for either Phase may approach or exceed the applicable fee cap, C&H will promptly notify the Client and discuss options, which may include a scope reduction, a revised fee cap (subject to mutual written agreement), or other appropriate measures.
3.3 Billing and Payment
C&H will render monthly invoices to the Client reflecting time charges (at the hourly rates set forth in Section 3.1), disbursements, and expenses incurred during the preceding calendar month. Each invoice will include a summary of hours billed by attorney, a description of the work performed, and an itemization of disbursements and expenses.
All invoices are payable within thirty (30) days of receipt by the Client. Payment may be made by wire transfer to the account designated on the invoice or by check payable to Calderwood & Harkness LLP. In the event that any invoice remains unpaid for more than sixty (60) days after the date of the invoice, C&H reserves the right to charge interest on the unpaid balance at the rate of one percent (1%) per month, compounded monthly, from the due date until payment is received.
All invoices will reference the billing code HSAG-TP-2025 and C&H Matter Number 1032-00006. The Client agrees to direct all billing inquiries to Sylvia Hartwell, Billing Partner, at shartwell@calderwoodharkness.com or (212) 558-4127.
3.4 Disbursements and Expenses
Reasonable out-of-pocket expenses incurred by C&H in connection with the engagement will be billed at cost, without markup. Such expenses include, but are not limited to:
(a) Travel expenses (domestic and international), including airfare (coach or business class for international flights exceeding six hours), ground transportation, hotel accommodations, and meals, incurred in connection with meetings at IRS APMA offices in Washington, D.C., client sites in Dresden, Germany, and Austin, Texas, and other locations as may be necessary;
(b) Document reproduction, printing, and binding costs;
(c) Courier, overnight delivery, and postage charges;
(d) Database access fees, including fees for Cascade Software, Bureau van Dijk (Orbis/Dunmore Solutions), Westmark Services Inc., and other economic databases used in connection with benchmarking studies and financial analysis;
(e) Filing fees and government charges; and
(f) Long-distance telecommunications charges.
Travel expenses for meetings at IRS APMA offices in Washington, D.C., and client sites in Dresden and Austin are expected to be a significant component of disbursements and will be billed as incurred in accordance with C&H's standard travel expense policy. C&H will exercise reasonable judgment in incurring travel expenses and will seek to minimize costs where practicable, including through the use of videoconferencing where appropriate.
The IRS APA user fee of One Hundred Thirteen Thousand Five Hundred Dollars ($113,500), representing the large case rate applicable as of calendar year 2025 as set forth in Rev. Proc. 2015-41 (as adjusted), will be billed as a disbursement upon submission of the formal APA application. The Client acknowledges that the IRS user fee is non-refundable and is payable regardless of the outcome of the APA application.
4. Client Contacts and Communication
4.1 Day-to-Day Contacts
The following individuals are designated as the primary day-to-day contacts for the engagement:
United States: Priya Raghavan, Vice President, Tax, Halcyon Semiconductor Inc., 8700 Parmer Lane, Building 4, Austin, TX 78729. Ms. Raghavan may be reached at praghavan@halcyonsemi.com or (512) 831-4400 ext. 2215.
Germany: Dr. Erwin Fassbinder, Senior Vice President, Group Tax, Halcyon Semiconductor AG, Halcyon-Allee 12, 01099 Dresden, Saxony, Germany. Dr. Fassbinder may be reached at e.fassbinder@halcyonsemi.de or +49 351 4488-7100.
C&H will provide quarterly status update letters to both Ms. Raghavan and Dr. Fassbinder regarding engagement progress, upcoming milestones, budget utilization (including a comparison of fees incurred to date against the applicable fee caps), and any material developments in the APA process. In addition to quarterly status updates, C&H will promptly notify the day-to-day contacts of any material developments that arise between quarterly updates, including IRS APMA communications, IDRs, scheduling of meetings, and any issues that may affect the scope, timeline, or cost of the engagement.
4.2 Ultimate Client Contacts
The following individuals are the ultimate client contacts and will be kept informed of significant developments in the engagement as appropriate:
•  Dr. Klaus-Dieter Wehrheim, Chief Executive Officer, Halcyon Semiconductor AG
•  Margarethe Stein, Chief Financial Officer, Halcyon Semiconductor AG
•  Victor Almeida, President and General Manager, Halcyon Semiconductor Inc.
Communications to the ultimate client contacts will be made through the day-to-day contacts unless otherwise directed by the Client.
4.3 Functional Contacts (for Interviews and Information Gathering)
The following individuals have been identified as the principal functional contacts from whom C&H and Meridian Economics will seek information, interviews, and supporting data in connection with the functional analyses, economic studies, and documentation:
•  Thomas Kuroda, Vice President, Supply Chain Operations, Halcyon Semiconductor Inc.
•  Dr. Hendrik Möller, Chief Technology Officer, Halcyon Semiconductor AG
The Client will make these individuals (and other personnel as may be reasonably required) available for interviews, site visits, and information requests on a timely basis. The Client acknowledges that the quality and timeliness of information provided by functional contacts are critical to the success of the APA application and the preparation of transfer pricing documentation.
5. Key Milestones and Deliverable Timeline
The following milestones and target dates have been established for the engagement. These dates are estimates based on currently available information and are subject to adjustment as circumstances require, including in response to IRS scheduling and processing timelines. C&H will promptly notify the Client of any material changes to the timeline.
The Client understands that the timeline for Phase 2 is inherently uncertain and depends upon the pace of negotiations between the IRS APMA and the BZSt, the volume and complexity of IDRs, the availability of competent authority personnel, and other factors outside C&H's control. C&H will use reasonable efforts to advance the APA negotiations expeditiously and will keep the Client apprised of developments through the quarterly status updates and ad hoc communications described in Section 4.1 above.
6. Confidentiality
All information provided by the Client to C&H in connection with this engagement, including but not limited to financial data, business plans, trade secrets, proprietary technology information, intercompany agreements, internal memoranda, and communications, is confidential and will be treated as protected by the attorney-client privilege and/or the work product doctrine to the fullest extent permitted by applicable law. C&H will maintain all such information in confidence and will limit access to such information to attorneys and staff within C&H who have a need to know in connection with the performance of the engagement.
C&H will not disclose confidential information to any third party without the Client's prior written consent, except as follows:
(a) As required by applicable law, regulation, or court order;
(b) As necessary to perform the engagement, including disclosures to Meridian Economics GmbH in connection with the preparation of economic analyses and benchmarking studies, provided that Meridian Economics is subject to a separate confidentiality agreement executed in connection with its subcontractor engagement; and
(c) As necessary in connection with the APA process, including disclosures to the IRS and the BZSt in the APA application, IDR responses, and negotiation communications, which disclosures are authorized by the Client as an inherent component of the APA process.
The Client hereby authorizes C&H to share information with Kettner Pflüger Rechtsanwälte as necessary for the coordination of the bilateral APA application and German transfer pricing documentation, recognizing that the effective pursuit of a bilateral APA requires close collaboration between US and German counsel and consistent information sharing. C&H will exercise reasonable care to ensure that information shared with Kettner Pflüger is limited to that which is necessary for the coordinated representation.
The obligations set forth in this Section 6 shall survive the termination or expiration of this engagement.
7. Conflicts of Interest
C&H has conducted a comprehensive conflicts check in accordance with the Firm's internal conflict clearance procedures and confirms that, as of the date of this letter, no conflict of interest exists with respect to the representation of HSAG and HSI in this matter. The internal conflict check memorandum, dated February 3, 2025, is on file at the Firm and documents the results of the conflicts search.
C&H represents both HSAG and HSI jointly in this matter. The Client acknowledges that, while the interests of HSAG and HSI are currently aligned with respect to the bilateral APA, there exists the theoretical possibility that the interests of the two entities could diverge during the course of the engagement, including with respect to the allocation of income or the determination of arm's length pricing that favors one entity over the other. In the event of any actual or reasonably foreseeable conflict between the interests of HSAG and HSI, C&H will promptly notify both entities and discuss the conflict with the day-to-day contacts and, if appropriate, the ultimate client contacts. Depending on the nature and severity of the conflict, C&H may be required to withdraw from representation of one or both entities, in which case C&H will cooperate in the orderly transition of the matter to successor counsel and will refund any prepaid but unearned fees.
Each of HSAG and HSI, by executing this engagement letter, consents to the joint representation and acknowledges the potential for conflicts as described above.
8. Applicable Law and Regulatory Framework
The engagement will be governed by and conducted with reference to the following principal legal and regulatory authorities, among others:
(a) Internal Revenue Code ("IRC") § 482 (allocation of income and deductions among controlled taxpayers);
(b) IRC § 6662(e) (substantial valuation misstatement penalty for transfer pricing) and IRC § 6662(h) (gross valuation misstatement penalty);
(c) Treasury Regulations §§ 1.482-1 through 1.482-9 (transfer pricing methods and standards for controlled transactions involving tangible property, intangible property, services, and cost sharing arrangements);
(d) Treasury Regulations § 1.6662-6 (transfer pricing penalty provisions and reasonable cause defense);
(e) Rev. Proc. 2015-41, 2015-35 I.R.B. 263 (advance pricing agreement procedures);
(f) The Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed June 29, 2006 (the "Treaty"), in particular Article 9 (Associated Enterprises) and Article 25 (Mutual Agreement Procedure);
(g) The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022 edition), including the guidance on transfer pricing documentation and country-by-country reporting in Chapter V (BEPS Action 13); and
(h) German transfer pricing statutes and regulations, including § 1 Außensteuergesetz ("AStG"), §§ 90(3) and 162(3)–(4) Abgabenordnung ("AO"), and the Gewinnabgrenzungsaufzeichnungsverordnung ("GAufzV"), for purposes of coordination with Kettner Pflüger Rechtsanwälte. For the avoidance of doubt, C&H will not provide legal advice on the interpretation or application of German law; such advice is the exclusive responsibility of Kettner Pflüger.
The foregoing list is illustrative and not exhaustive. Additional legal authorities, including administrative guidance, case law, and technical advice memoranda, may be relevant to specific aspects of the engagement and will be identified and analyzed as the work progresses.
9. Limitation of Liability
C&H will perform the services described in this engagement letter with reasonable care and in accordance with the professional standards applicable to attorneys practicing in the area of international transfer pricing and advance pricing agreements. However, C&H makes no guarantee or assurance regarding the outcome of the APA application, the acceptance of any transfer pricing method or position by the IRS or the BZSt, the granting of the rollback request, or the outcome of any transfer pricing matter. The APA process involves negotiations between two sovereign taxing authorities, and the ultimate outcome is inherently uncertain and beyond C&H's control.
To the fullest extent permitted by applicable law, C&H's aggregate liability to the Client arising out of or in connection with this engagement, whether based in contract, tort (including negligence), breach of fiduciary duty, or otherwise, shall not exceed the total amount of fees actually paid by the Client to C&H under this engagement letter. This limitation of liability shall not apply to the extent that liability arises from C&H's willful misconduct, gross negligence, or fraud.
The Client acknowledges that it has been advised of this limitation of liability and has had the opportunity to seek independent advice regarding the same. By executing this engagement letter, the Client agrees to be bound by this limitation.
10. Termination
Either party may terminate this engagement upon thirty (30) days' prior written notice delivered to the other party at the addresses set forth in this letter (or such other addresses as may be designated in writing). Notice of termination shall be effective upon receipt by the non-terminating party.
Upon termination of the engagement, the Client shall be responsible for payment of all fees and expenses incurred by C&H through the effective date of termination, subject to the applicable fee cap for the Phase in which the termination occurs. In no event shall the Client be required to pay fees in excess of the applicable fee cap as a result of termination.
Upon termination, C&H will promptly deliver to the Client all documents, work product, and files in C&H's possession that belong to the Client, subject to C&H's right to retain copies for its own records in accordance with applicable ethical rules and the Firm's document retention policies. C&H will cooperate in the orderly transition of the matter to successor counsel designated by the Client, including by providing reasonable assistance in transferring files, introducing successor counsel to relevant IRS APMA contacts (to the extent permitted), and briefing successor counsel on the status of the engagement.
C&H reserves the right to withdraw from the engagement if the Client fails to pay invoices in a timely manner, fails to cooperate in providing information necessary for the engagement, or if circumstances arise that create an irreconcilable conflict of interest, in each case subject to any applicable ethical obligations regarding withdrawal from representation.
11. Governing Law and Dispute Resolution
This engagement letter and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law.
Any dispute, controversy, or claim arising out of or relating to this engagement letter or the services provided hereunder, including any dispute regarding the interpretation, breach, or termination of this letter, shall be resolved by binding arbitration administered by the American Arbitration Association ("AAA") in accordance with its Commercial Arbitration Rules then in effect. The arbitration shall be conducted in New York, New York, before a single arbitrator selected in accordance with the AAA's procedures. The arbitrator shall have the authority to award any remedy available at law or in equity, subject to the limitation of liability set forth in Section 9 above. The decision of the arbitrator shall be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with the arbitration, unless the arbitrator determines otherwise.
12. Acceptance and Execution
We ask that authorized representatives of both HSAG and HSI review the terms set forth in this engagement letter carefully and, if acceptable, sign and return one fully executed original of this letter to confirm acceptance of the terms of the engagement. A scanned copy transmitted by email to Leonard Cross at lcross@calderwoodharkness.com shall constitute effective delivery, provided that the original executed letter is sent by international courier within ten (10) business days thereafter.
If you have any questions regarding this letter or the terms of the engagement, please do not hesitate to contact Leonard Cross at (212) 558-4215 or lcross@calderwoodharkness.com, or Sylvia Hartwell at (212) 558-4127 or shartwell@calderwoodharkness.com.
We look forward to working with HSAG and HSI on this important matter and to achieving a successful outcome in the bilateral APA process.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Cross Partner, Tax Responsible Partner
Date: March 10, 2025
By: ________
Sylvia Hartwell Partner, Tax Billing Partner
Date: March 10, 2025
ACCEPTED AND AGREED
The undersigned hereby accept and agree to the terms and conditions set forth in this Engagement Letter dated March 10, 2025, and in the Standard Terms and Conditions of Engagement attached hereto as Attachment A.
HALCYON SEMICONDUCTOR AG
On behalf of Halcyon Semiconductor AG, Halcyon-Allee 12, 01099 Dresden, Saxony, Germany Steuernummer: 203/118/04527 VAT ID: DE 814 723 956
By: ________
Name: Dr. Erwin Fassbinder
Title: Senior Vice President, Group Tax
Date: ________
HALCYON SEMICONDUCTOR INC.
On behalf of Halcyon Semiconductor Inc., 8700 Parmer Lane, Building 4, Austin, TX 78729 EIN: 84-2917630 Delaware File Number: 7341825
By: ________
Name: Priya Raghavan
Title: Vice President, Tax
Date: ________
ENCLOSURES
The following documents are enclosed with or attached to this Engagement Letter:
•  Attachment A: Calderwood & Harkness LLP Standard Terms and Conditions of Engagement
•  Attachment B: IRS Form 2848 (Power of Attorney and Declaration of Representative) — for execution by Halcyon Semiconductor Inc. (to be prepared separately and provided under cover of supplemental correspondence)
Attorney | Title | Hourly Rate
Leonard Cross | Partner, Tax | $1,250 per hour
Sylvia Hartwell | Partner, Tax | $1,175 per hour
Leila Nazari | Senior Associate, Tax | $825 per hour
Robert Jansen | Associate, Tax | $650 per hour
Milestone / Deliverable | Date / Target
Engagement opened | February 3, 2025
Engagement letter execution | March 10, 2025
Pre-filing memorandum submission to IRS APMA | April 14, 2025
Pre-filing conference with IRS APMA | May 19, 2025 (scheduled)
Formal APA application filing (Form 14661 and supporting documentation) | Target: July 7, 2025
German APA application submission to BZSt (coordinated with Kettner Pflüger) | Target: August 15, 2025
FY 2024 contemporaneous transfer pricing documentation (Master File and US Local File) | Deadline: September 30, 2025
FY 2022 and FY 2023 contemporaneous transfer pricing documentation (US Local Files) | Target: concurrent with APA application filing
Prospective APA Year 1 ends | December 31, 2025
Phase 2 negotiation support (estimated period) | 2025–2027
End of proposed prospective APA term | December 31, 2029

PRIVILEGED AND CONFIDENTIAL

CALDERWOOD & HARKNESS LLP

ACCEPTED AND AGREED

HALCYON SEMICONDUCTOR AG

HALCYON SEMICONDUCTOR INC.

ENCLOSURES

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