CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP
Tax Department — Transfer Pricing Practice
FUNCTIONAL ANALYSIS INTERVIEW PROTOCOL
Halcyon Semiconductor AG / Halcyon Semiconductor Inc. Intercompany Transactions
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
Purpose: This document constitutes an internal questionnaire template for conducting functional analysis interviews of Halcyon Semiconductor AG ("HSAG") and Halcyon Semiconductor Inc. ("HSI") personnel in connection with the bilateral Advance Pricing Agreement application and contemporaneous transfer pricing documentation for the US-Germany intercompany supply chain. This protocol is prepared for the sole use of Calderwood & Harkness LLP attorneys and is protected by the attorney-client privilege and the attorney work product doctrine. It is not to be shared with client personnel without prior authorization from the supervising partner.
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I. INTRODUCTION AND INSTRUCTIONS FOR INTERVIEWERS
A. Purpose of the Functional Analysis
This interview protocol is designed to support the preparation of a comprehensive functional analysis as the foundational component of the transfer pricing documentation and bilateral Advance Pricing Agreement ("APA") application for the intercompany transactions between Halcyon Semiconductor AG and Halcyon Semiconductor Inc. The functional analysis is the cornerstone of any transfer pricing study and serves to identify, for each controlled transaction, the economically significant functions performed, assets employed, and risks assumed by each party.
The functional analysis prepared on the basis of these interviews will directly support the following regulatory and compliance deliverables:
1.  United States transfer pricing documentation prepared to satisfy the contemporaneous documentation requirements under Internal Revenue Code ("IRC") § 482, Treasury Regulations §§ 1.482-1 through 1.482-9 (governing the determination of arm's length prices for controlled transactions), and Treasury Regulation § 1.6662-6 (governing the documentation requirements necessary to avoid transfer pricing penalties under IRC § 6662(e) and (h));
2.  German transfer pricing documentation prepared to satisfy the documentation requirements under § 1 of the Außensteuergesetz ("AStG," German Foreign Tax Act), §§ 90(3) and 162(3)–(4) of the Abgabenordnung ("AO," German Fiscal Code), and the Gewinnabgrenzungsaufzeichnungsverordnung ("GAufzV," German Transfer Pricing Documentation Regulation);
3.  United States APA application to be filed with the IRS Advance Pricing and Mutual Agreement Program ("APMA") on IRS Form 14661 pursuant to Revenue Procedure 2015-41, as modified by subsequent guidance, seeking a prospective bilateral APA with the competent authority of the Federal Republic of Germany covering the APA term of fiscal years 2025 through 2029; and
4.  German APA application to be filed in parallel with the Bundeszentralamt für Steuern ("BZSt," German Federal Central Tax Office) under the applicable German procedures for advance pricing agreements, coordinated with the mutual agreement procedure under Article 25 of the US-Germany Income Tax Treaty.
The functional analysis conforms to the framework set forth in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022 edition), and in particular Chapter I thereof, which establishes the foundational analytical framework for delineating controlled transactions through the identification of the economically significant functions performed, assets employed (both tangible and intangible), and risks assumed by each party to the controlled transaction. The OECD Guidelines emphasize that the accurate delineation of the actual transaction between associated enterprises requires a thorough understanding of the commercial and financial relations between the parties, and the functional analysis is the primary vehicle through which this understanding is developed.
The intercompany transactions covered by this functional analysis, and which are within the scope of the contemplated bilateral APA application, encompass the following three categories of controlled transactions:
(1) Tangible Goods — Wafer/Die Sales (HSAG → HSI). HSAG manufactures advanced-node semiconductor wafers and singulated die at its fabrication facilities in Germany and sells them to HSI under the Master Intercompany Supply Agreement. HSI resells these products to unrelated third-party customers in the United States and North America.
(2) Royalties — Intellectual Property License (HSI → HSAG). HSI pays royalties to HSAG under the IP License Agreement for the right to use HSAG's proprietary semiconductor process technology, design libraries, and related intangible property in connection with HSI's distribution, marketing, and design-support activities in North America.
(3) Cost-Sharing Contributions — R&D Cost Sharing Arrangement (HSI → HSAG). HSI makes annual cost-sharing contributions to HSAG under the Cost Sharing Arrangement for the joint development of next-generation 2nm and sub-2nm process technologies, pursuant to which HSI acquires the right to exploit resulting intangibles in North America.
B. Covered Entities and Intercompany Transactions Overview
The two principal entities that are the subject of this functional analysis and the contemplated bilateral APA are as follows:
Halcyon Semiconductor AG ("HSAG") is an Aktiengesellschaft organized and existing under the laws of the Federal Republic of Germany, with its registered office at Halcyon-Allee 12, 01099 Dresden, Saxony, Germany. HSAG is publicly listed on the Frankfurt Stock Exchange (XETRA) under ISIN DE000HSA0017. HSAG operates semiconductor fabrication campuses at two locations in Germany: the Dresden campus, which houses Fab 1 and Fab 2 in the Industriepark Klotzsche, and the Chemnitz campus, which houses Fab 3 in the Technologiepark Chemnitz. HSAG is the ultimate parent entity of the Halcyon group and the legal and beneficial owner of the group's core intellectual property portfolio, including proprietary semiconductor process technology, design libraries, patents, trade secrets, and manufacturing know-how.
Halcyon Semiconductor Inc. ("HSI") is a C-corporation organized and existing under the laws of the State of Delaware (File Number 7341825), Employer Identification Number 84-2917630, and is a wholly owned subsidiary of HSAG. HSI maintains its principal office at 8700 Parmer Lane, Building 4, Austin, Texas 78729. HSI also operates a design center at 2455 Augustine Drive, Suite 300, Santa Clara, California 95054, and maintains regional sales offices in Southfield, Michigan and Beaverton, Oregon. HSI serves as the exclusive United States distributor, marketing entity, and design-support entity for Halcyon semiconductor products in the North American market.
In addition to HSAG and HSI, the Halcyon group includes other affiliated entities that are not within the scope of the contemplated bilateral APA but may be referenced contextually during the interview process due to their interactions with HSAG or HSI:
•  Halcyon Semiconductor Japan K.K. ("HSJ") — a kabushiki kaisha organized under the laws of Japan, with its principal office in Tokyo, serving as the distribution and marketing entity for the Japanese and broader Asia-Pacific market (excluding China).
•  Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSC") — a limited liability company organized under the laws of the People's Republic of China, with its principal office in Shanghai, serving as the distribution and marketing entity for the Greater China market.
The aggregate annual intercompany flows between HSAG and HSI for fiscal year 2024 are approximately €1.28 billion (or approximately $1.40 billion at the average 2024 EUR/USD exchange rate of 1.0896), composed of the following components:
These figures are subject to confirmation during the interview process and will be reconciled against the audited financial statements of both entities.
C. Interview Logistics and Protocol
All interviews under this protocol are to be conducted by Robert Jansen, Associate, Tax, Calderwood & Harkness LLP, and/or Leila Nazari, Senior Associate, Tax, Calderwood & Harkness LLP. Interview scheduling and logistical coordination will be handled through the designated day-to-day client leads: Priya Raghavan, Vice President, Tax, Halcyon Semiconductor Inc., for HSI-based interviewees, and Dr. Erwin Fassbinder, Senior Vice President, Group Tax, Halcyon Semiconductor AG, for HSAG-based interviewees.
The following logistical parameters apply to all interviews conducted under this protocol:
•  Format: Interviews are to be conducted in person at the interviewee's principal office location whenever practicable. Where in-person interviews are not feasible due to scheduling or geographic constraints, interviews may be conducted via the firm's secure video conferencing platform (Calderwood & Harkness Secure Connect). Under no circumstances should interviews be conducted over unencrypted communication channels or personal video conferencing accounts.
•  Duration: Each interview session is estimated to last approximately 90 to 120 minutes. For interviewees whose roles span multiple transaction categories (e.g., Priya Raghavan, Dr. Erwin Fassbinder), it may be necessary to schedule two sessions to cover all applicable sections without undue time pressure.
•  Note-Taking: Detailed contemporaneous notes are to be taken during each interview session by the interviewer(s). Notes should capture the substance of each response, including specific factual details, figures, and references to supporting documents. Following each interview, notes are to be compiled into a written summary and circulated to the interviewee for review and accuracy confirmation within five business days of the interview date.
•  Adaptation: Interviewers should use professional judgment to adapt the questions in this protocol as appropriate based on the interviewee's specific role, area of responsibility, and level of knowledge. Not all sections of this protocol will be relevant to every interviewee. The Interview Scheduling Matrix in Section I.D below identifies the primary interview sections applicable to each scheduled interviewee.
•  Privilege: All interview notes, summaries, and related communications are attorney work product prepared in anticipation of the APA proceeding and potential transfer pricing controversy. All such materials are subject to the attorney-client privilege and the work product protection under Federal Rule of Civil Procedure 26(b)(3) and applicable state law. Interviewees should be reminded at the commencement of each interview that the discussion is privileged and confidential, and that the interview is being conducted at the direction of outside counsel for the purpose of rendering legal advice regarding transfer pricing compliance and the APA application.
D. Scheduled Interview Subjects
The following individuals have been identified as the initial interview subjects for the functional analysis. Additional interviews may be scheduled as warranted based on the information and leads developed during the initial interview sessions.
Note: The interviewer team reserves the right to schedule additional interviews with other HSAG or HSI personnel as needed based on initial interview responses and the evolving needs of the functional analysis. Potential additional interviewees may include, without limitation, HSAG manufacturing operations personnel, HSI finance and accounting staff, HSI sales and marketing leaders, and personnel at the Santa Clara design center.
E. Document Requests Accompanying Interviews
Interviewers should request from each interviewee any organizational charts, process flow diagrams, written policies, standard operating procedures, internal reports, presentations, memoranda, or other materials that support, illustrate, or corroborate the interviewee's responses to the questions set forth in this protocol. Document requests should be made during the interview wherever possible, and documented in the interview notes and the Document Request Checklist (Appendix B).
The following is a specific list of key documents to be collected in connection with the functional analysis interviews, to the extent such documents have not already been obtained by Calderwood & Harkness LLP from the client:
1.  HSAG corporate organizational chart (current as of March 2025), including all direct and indirect subsidiaries and the ownership chain from HSAG through HSI, HSJ, and HSC;
2.  HSI corporate organizational chart (current as of March 2025), showing all functional departments, reporting lines, and headcount by department and location;
3.  Master Intercompany Supply Agreement between HSAG and HSI, effective January 1, 2019, as amended on July 1, 2022, including all schedules, exhibits, and side letters;
4.  IP License Agreement between HSAG and HSI, effective January 1, 2019, including all amendments, schedules, and exhibits;
5.  Cost Sharing Arrangement between HSAG and HSI, effective July 15, 2018, including all amendments, schedules, exhibits, and ancillary agreements;
6.  Platform Contribution Transaction ("PCT") valuation report prepared by Stonebridge Valuation Partners LLC (Marcus Reinhardt, Managing Director), dated on or about July 15, 2018;
7.  HSI supply chain process flow diagrams, including diagrams illustrating the flow of product from HSAG fabrication through HSI warehousing, order fulfillment, and delivery to third-party customers;
8.  HSAG fabrication process descriptions for each process technology node currently in production (7nm, 5nm, and 3nm), including summaries of manufacturing steps, yields, and quality specifications;
9.  R&D project summaries and budgets for the 2nm and sub-2nm program (CSA scope), including project milestone timelines, expenditure reports, and headcount allocations;
10.  HSAG and HSI headcount reports by function (manufacturing, R&D, sales and marketing, general and administrative, supply chain, finance and tax) and by location, for FY 2020 through FY 2024;
11.  HSAG and HSI audited financial statements for FY 2020 through FY 2024 (audited by Gresham Whitfield LLP);
12.  Intercompany transaction schedules for FY 2020 through FY 2024, showing transaction volumes, amounts, and pricing details for each category of controlled transaction; and
13.  Any prior transfer pricing studies, benchmark analyses, or economic reports prepared for HSAG or HSI.
II. CORPORATE STRUCTURE AND ORGANIZATIONAL OVERVIEW
A. Group Structure
Interviewer Instruction: Ask the interviewee to describe, in their own words, the overall Halcyon group corporate structure, including the ownership chain, entity relationships, and reporting relationships between the various Halcyon entities. Use the following questions to guide the discussion and confirm key structural facts.
1.  Please describe the overall corporate structure of the Halcyon Semiconductor group of companies. How many entities comprise the group, and in which jurisdictions are they organized?
2.  Please confirm that Halcyon Semiconductor AG is the ultimate parent entity of the group and is publicly listed on the Frankfurt Stock Exchange (XETRA) under ISIN DE000HSA0017. Is HSAG directly owned by dispersed public shareholders, or are there any significant block holders or controlling shareholders?
3.  Please confirm that Halcyon Semiconductor Inc. is a wholly owned subsidiary of HSAG, incorporated in the State of Delaware under File Number 7341825, with Employer Identification Number 84-2917630. Is HSI directly owned by HSAG, or are there any intermediate holding entities in the ownership chain between HSAG and HSI? If intermediate entities exist, please describe each entity, its jurisdiction of organization, and its role in the group structure.
4.  Please confirm the existence and roles of the following affiliated entities that are outside the scope of the contemplated bilateral APA:
(a) Halcyon Semiconductor Japan K.K. ("HSJ"), organized in Japan with its principal office in Tokyo — please describe HSJ's role in the group, its ownership structure, and any intercompany transactions it has with HSAG or HSI.
(b) Halcyon Semiconductor (Shanghai) Co., Ltd. ("HSC"), organized in the People's Republic of China with its principal office in Shanghai — please describe HSC's role in the group, its ownership structure, and any intercompany transactions it has with HSAG or HSI.
5.  Are there any other affiliated entities, branch offices, permanent establishments, or joint ventures within the Halcyon group that have not been mentioned? If so, please describe each.
6.  Please confirm the following headcount figures for the Halcyon group:
(a) HSAG global headcount: approximately 22,400 employees, of whom approximately 14,600 are based in Germany.
(b) HSI headcount: approximately 2,850 employees.
7.  How are the HSI employees distributed among HSI's four office locations (Austin, TX; Santa Clara, CA; Southfield, MI; Beaverton, OR)? What functions are performed at each location?
B. Management and Decision-Making
8.  Please describe the governance and management structure of Halcyon Semiconductor AG. Please confirm the following key management positions and identify any additional members of the HSAG Vorstand (Management Board) or other senior executives relevant to intercompany transactions:
(a) Chief Executive Officer: Dr. Klaus-Dieter Wehrheim
(b) Chief Financial Officer: Margarethe Stein
(c) Chief Technology Officer: Dr. Hendrik Möller
(d) Senior Vice President, Group Tax: Dr. Erwin Fassbinder
9.  Does HSAG have an Aufsichtsrat (Supervisory Board)? If so, what role, if any, does the Aufsichtsrat play in overseeing intercompany pricing policies or the APA process?
10.  Please describe the governance and management structure of Halcyon Semiconductor Inc. Please confirm the following key management positions and identify any additional HSI officers or senior executives relevant to intercompany transactions:
(a) President and General Manager: Victor Almeida
(b) Vice President, Tax: Priya Raghavan
(c) Vice President, Supply Chain Operations: Thomas Kuroda
11.  Does HSI have a board of directors? If so, who are the directors, and how frequently does the board meet? Are any HSAG executives or directors members of the HSI board?
12.  How are strategic business decisions made at the group level as compared to the entity level? For example, who has decision-making authority with respect to:
(a) Capital expenditure decisions (e.g., new fabrication capacity, facility expansions)?
(b) New product development and technology roadmap decisions?
(c) Entry into new geographic markets or customer segments?
(d) Pricing strategies for third-party sales?
(e) Intercompany pricing policies and transfer pricing methodologies?
13.  What level of autonomy does HSI management have with respect to pricing decisions for sales to third-party US customers, the management of customer relationships, the hiring and management of HSI personnel, and day-to-day operational decisions?
14.  How do HSAG and HSI management interact on matters relating to intercompany pricing and transfer pricing policy? Is there a transfer pricing committee, steering group, or other formal mechanism for coordination between the two entities on these matters? If so, who participates, and how frequently does the group meet?
15.  Are there any management service agreements or shared services arrangements between HSAG and HSI? If so, please describe the services covered, the fee structure, and the contractual terms.
C. Business Overview
Interviewer Instruction: Ask the interviewee to describe the core business activities of the Halcyon group in their own words, allowing the interviewee to provide a natural narrative description of the business before proceeding to more targeted questions. This section is designed to establish the factual foundation for the business description that will appear in the transfer pricing documentation and APA application.
16.  In your own words, please describe the core business activities of the Halcyon Semiconductor group. What does the company do, and what products does it manufacture and sell?
17.  Please confirm that HSAG designs and manufactures advanced-node semiconductor wafers at its fabrication facilities in Germany, utilizing process technologies at the 7nm (nanometer), 5nm, and 3nm nodes. What are the primary end-use applications for Halcyon's semiconductor products?
18.  Please confirm that HSI serves as the exclusive distribution, marketing, and design-support entity for Halcyon semiconductor products in the North American market. Does HSI's territorial scope include Canada and Mexico, or is it limited to the United States?
19.  Please describe the typical end-customer profile for Halcyon's semiconductor products. Who are the principal categories of customers? Do they include:
(a) Original equipment manufacturers ("OEMs") in the automotive, industrial, or data-center sectors?
(b) Authorized third-party distributors or resellers?
(c) Hyperscale data-center operators?
(d) Other categories of customers?
20.  What is the geographic scope of each Halcyon entity's market coverage? Specifically, which geographic markets are served by HSAG (directly or through its subsidiaries), HSI, HSJ, and HSC, respectively?
21.  How does Halcyon's business model compare to those of other participants in the advanced-node semiconductor industry? Is Halcyon an integrated device manufacturer ("IDM"), a pure-play foundry, or a fabless design company?
22.  What is the approximate revenue breakdown by end-market segment (e.g., automotive, industrial IoT, data-center) for the Halcyon group as a whole and for HSI specifically?
III. TANGIBLE GOODS TRANSACTIONS — FUNCTIONS PERFORMED
A. HSAG Manufacturing Functions
Interviewer Instruction: This subsection is primarily directed to Dr. Hendrik Möller (CTO, HSAG) and Dr. Erwin Fassbinder (SVP, Group Tax, HSAG). Questions should be adapted to the technical depth appropriate for each interviewee. Dr. Möller is expected to provide detailed technical descriptions of the manufacturing process, while Dr. Fassbinder is expected to provide a more high-level overview from a transfer pricing perspective.
23.  Please describe HSAG's fabrication operations, including the location, scale, and capabilities of each fabrication facility:
(a) Dresden Fab 1 & Fab 2 — located at Industriepark Klotzsche, Zur Wetterwarte 50, 01109 Dresden, Saxony, Germany. What process technology nodes are manufactured at Fab 1? At Fab 2? What is the wafer-start capacity per month at each facility? When was each facility brought into production?
(b) Chemnitz Fab 3 — located at Technologiepark Chemnitz, Annaberger Straße 240, 09125 Chemnitz, Saxony, Germany. What process technology nodes are manufactured at Fab 3? What is the wafer-start capacity per month? When was Fab 3 brought into production?
24.  What is the capital investment in each fabrication facility? Please provide, to the extent available, the approximate original cost, accumulated depreciation, and net book value of the tangible assets at each facility, as well as an estimate of the replacement cost of the fabrication equipment.
25.  How is production capacity allocated among product lines, customer orders, and entities (e.g., HSAG internal use, HSI, HSJ, HSC, and any direct third-party sales by HSAG)? Is there a formal capacity allocation process? Who has decision-making authority over capacity allocation?
26.  Please describe the semiconductor manufacturing process from start to finish, beginning with the receipt of raw silicon wafers through the completion of singulated die ready for shipment. Please address the following stages of the manufacturing process, to the extent applicable:
(a) Wafer preparation and incoming inspection;
(b) Front-end-of-line ("FEOL") processing, including lithography, deposition, etching, and ion implantation;
(c) Back-end-of-line ("BEOL") processing, including metallization and interconnect formation;
(d) Wafer-level testing and electrical characterization;
(e) Wafer dicing / singulation into individual die;
(f) Die sorting, binning, and quality classification;
(g) Final inspection, packaging (if performed by HSAG), and preparation for shipment.
27.  Please describe the quality control and testing procedures performed by HSAG prior to shipment of wafers/die to HSI. What quality standards are applied (e.g., ISO 9001, IATF 16949 for automotive-grade products, other customer-specific quality requirements)? What is the typical manufacturing yield at each process node?
28.  What is HSAG's role in demand planning and production scheduling in response to purchase forecasts and orders received from HSI? Does HSAG produce to HSI's specific orders (make-to-order), or does HSAG maintain finished goods inventory for sale to HSI (make-to-stock)? How far in advance does HSI provide demand forecasts, and how binding are those forecasts?
29.  What manufacturing personnel and expertise are required to operate HSAG's fabrication facilities? How many employees are engaged in manufacturing operations at each facility? What specialized qualifications, training, or expertise are required for fabrication engineers and technicians?
30.  Does HSAG perform any research and development activities at its fabrication facilities that are distinct from the next-generation 2nm/sub-2nm R&D covered by the Cost Sharing Arrangement? For example, does HSAG engage in process improvement, yield optimization, or sustaining engineering activities for the 7nm, 5nm, and 3nm nodes? If so, how are such activities funded, and who bears the associated costs?
B. HSI Distribution and Sales Functions
Interviewer Instruction: This subsection is primarily directed to Victor Almeida (President & GM, HSI), Thomas Kuroda (VP, Supply Chain Operations, HSI), and Priya Raghavan (VP, Tax, HSI). Questions should focus on developing a detailed understanding of HSI's role in the distribution chain and the value it adds in the supply chain.
31.  Please describe HSI's role in the distribution chain for Halcyon semiconductor products sold to US and North American customers. How does HSI receive semiconductor products from HSAG, and what happens to those products from the point of receipt through delivery to the end customer?
32.  Does HSI perform any additional packaging, testing, assembly, kitting, or other value-added processing of wafers or die received from HSAG? Or does HSI distribute the products in the same form in which they are received?
33.  Please describe the order fulfillment process in detail, from the initial receipt of a customer purchase order through final delivery and invoicing. Specifically:
(a) How does HSI receive and process customer purchase orders?
(b) How does HSI manage inventory — what inventory management systems are used, and what are HSI's inventory policies (e.g., target days of supply, safety stock levels)?
(c) What warehousing and logistics operations does HSI maintain? Where are HSI's warehouse facilities located? Does HSI own or lease its warehouse space? Does HSI use third-party logistics providers ("3PLs")? If so, please identify the providers and describe the services they perform.
(d) How are products shipped from HSI's warehouse(s) to third-party customers? What shipping methods and carriers are used?
(e) How does HSI invoice customers, and what are the standard payment terms for third-party sales?
34.  What is HSI's role in demand forecasting and the generation of purchase orders to HSAG? How far in advance does HSI prepare demand forecasts? How are those forecasts communicated to HSAG? What is the process for converting forecasts into firm purchase orders?
35.  Please describe HSI's customer relationship management activities, including:
(a) Account management: How are key customer accounts managed? Are account managers assigned to specific customers or customer segments? What is the scope of the account manager's role?
(b) Technical support: Does HSI provide pre-sale or post-sale technical support to customers? If so, what types of technical support are provided (e.g., design-in support, application engineering, integration support)? What personnel are involved in providing technical support?
(c) Post-sale service: Does HSI provide warranty service, returns handling, or other post-sale support to US customers? What are the terms and conditions applicable to product returns and warranty claims?
36.  Please describe the marketing activities performed by HSI in the North American market, including:
(a) Participation in industry trade shows and conferences (please identify specific events);
(b) Advertising and promotional activities (print, digital, trade media);
(c) Customer development and business development activities;
(d) Market intelligence gathering and competitive analysis;
(e) Product launch support and demand generation activities.
37.  How many sales and marketing personnel does HSI employ? Please provide a breakdown of sales and marketing headcount by location:
(a) Austin, TX (principal office);
(b) Santa Clara, CA (design center);
(c) Southfield, MI (regional sales office);
(d) Beaverton, OR (regional sales office).
38.  What is the role of the Santa Clara design center in HSI's sales and marketing function? Does the design center provide design-in support, application engineering, or other customer-facing technical services?
C. Pricing and Contract Terms
39.  How are intercompany transfer prices for wafers and die determined under the Master Intercompany Supply Agreement? Please describe the pricing mechanism in detail:
(a) Is the pricing mechanism cost-plus, resale-minus, negotiated, formula-based, or some other approach?
(b) What is the pricing formula or methodology, including the cost base (if cost-plus) or the markup/markdown percentage?
(c) How is the cost base or reference price calculated? What cost components are included?
(d) Is the pricing methodology consistent across all product types and process nodes (7nm, 5nm, 3nm), or do different pricing formulas apply to different product categories?
40.  Are transfer prices set at the beginning of the fiscal year, or are they adjusted periodically throughout the year? If adjusted periodically, what is the frequency and mechanism for adjustment? What triggers a price adjustment?
41.  Are there year-end true-up or compensating adjustment mechanisms in the Master Intercompany Supply Agreement? If so, please describe the mechanics of the true-up process, including the target range or margin that triggers an adjustment, the calculation methodology, and the timing of the true-up payment.
42.  What are the standard intercompany payment terms under the Master Intercompany Supply Agreement? Specifically:
(a) In what currency are intercompany invoices denominated? Please confirm that intercompany transactions are denominated in EUR.
(b) What are the payment terms (e.g., net 30, net 60, net 90)?
(c) Are credit terms extended by HSAG to HSI? If so, is interest charged on overdue balances?
(d) Please confirm the average 2024 EUR/USD exchange rate used for financial reporting purposes: 1.0896.
43.  How are third-party sales prices to US customers determined? Does HSI have independent pricing authority over third-party sales, or does HSAG play a role in setting or approving third-party prices?
44.  What role, if any, does HSAG play in setting, approving, or influencing the prices at which HSI sells products to unrelated third-party customers? Are there global pricing guidelines, price lists, or minimum pricing thresholds established by HSAG?
D. Terms of Sale and Incoterms
45.  Under what Incoterms (International Commercial Terms, ICC 2020) or other delivery terms are wafers and die shipped from HSAG to HSI? Please identify the specific Incoterm applicable to intercompany shipments (e.g., EXW, FCA, CIF, DDP) and the named place of delivery.
46.  At what point in the shipment process does title to the goods pass from HSAG to HSI? At what point does risk of loss transfer from HSAG to HSI? Is the transfer of title simultaneous with the transfer of risk, or are they different?
47.  Who arranges and pays for international freight, customs brokerage, import duties, and cargo insurance for shipments from HSAG's fabrication facilities in Germany to HSI's receiving location(s) in the United States? Are freight, customs, and insurance costs included in the intercompany transfer price, or are they invoiced separately?
48.  Are there any transshipment or consolidation points between HSAG's fabrication facilities and HSI's warehouse? If so, please describe.
IV. TANGIBLE GOODS TRANSACTIONS — ASSETS EMPLOYED
A. HSAG Assets
49.  Please describe the tangible assets employed by HSAG in connection with its semiconductor manufacturing operations and the intercompany supply of wafers/die to HSI. This should include, without limitation:
(a) Fabrication equipment (lithography tools, deposition equipment, etching equipment, ion implanters, metrology equipment, clean room systems);
(b) Testing and quality control equipment;
(c) Clean room facilities and associated building systems;
(d) Real property (owned or leased land and buildings at the Dresden and Chemnitz campuses);
(e) Information technology systems and manufacturing execution systems;
(f) Warehousing and logistics assets.
50.  Please describe the intangible assets employed by HSAG in its manufacturing operations, including:
(a) Proprietary semiconductor process technology (7nm, 5nm, 3nm nodes);
(b) Manufacturing know-how, trade secrets, and proprietary processes;
(c) Patented inventions (please provide an estimate of the number of active patents and patent applications relevant to manufacturing);
(d) Software and design tools developed or licensed by HSAG for manufacturing purposes;
(e) Any other intangible assets material to the manufacturing function.
51.  What is the estimated book value and replacement cost of HSAG's fabrication assets? Please provide, to the extent available:
(a) Net book value of property, plant, and equipment at each fabrication campus (Dresden and Chemnitz) as of December 31, 2024;
(b) An estimate of the replacement cost of the core fabrication equipment;
(c) Annual capital expenditures for the fabrication operations for FY 2020 through FY 2024.
52.  Please describe HSAG's working capital employed in the intercompany supply chain, including:
(a) Raw materials inventory (silicon wafers, chemicals, gases, photomasks);
(b) Work-in-process inventory;
(c) Finished goods inventory awaiting shipment to HSI or other customers;
(d) Accounts receivable from HSI (intercompany) and from any third-party customers (if applicable);
(e) Trade accounts payable to suppliers.
B. HSI Assets
53.  Please describe the tangible assets employed by HSI in its distribution, marketing, and design-support operations, including:
(a) Office space (owned or leased) at each HSI location (Austin, Santa Clara, Southfield, Beaverton);
(b) Warehouse facilities (owned or leased);
(c) Information technology systems (ERP, CRM, supply chain management systems);
(d) Demonstration equipment, test equipment, or laboratory facilities used in customer engagement or design-support activities;
(e) Vehicles, furniture, fixtures, and other tangible personal property.
54.  Please confirm that HSI holds limited or no manufacturing-related intangible property (i.e., HSI does not own semiconductor process technology, manufacturing know-how, or manufacturing-related patents in its own right, other than through the exploitation rights acquired under the CSA for future 2nm/sub-2nm technology).
55.  Please describe HSI's working capital employed in its operations, including:
(a) Accounts receivable from third-party customers — what is the typical days sales outstanding ("DSO")? What is the aggregate accounts receivable balance as of December 31, 2024?
(b) Finished goods inventory — what is the typical inventory level held by HSI (measured in days of supply or dollar value)? What is the aggregate inventory balance as of December 31, 2024?
(c) Accounts payable, including intercompany payables to HSAG — what is the typical days payable outstanding ("DPO")? What is the aggregate accounts payable balance as of December 31, 2024?
56.  Does HSI own any marketing intangibles, customer relationships, or other intangible property in its own right? Specifically:
(a) Does HSI own any trademarks, trade names, or service marks registered in the United States or elsewhere?
(b) Has HSI developed customer lists, customer databases, or customer relationships that constitute intangible property independent of HSAG?
(c) Has HSI developed any marketing intangibles through its advertising, promotional, or customer development activities?
(d) Does HSI own or license any software, databases, or other intangible property used in its distribution or marketing activities?
57.  Please describe the Santa Clara design center in greater detail. Specifically:
(a) What physical assets are located at the design center (office space, laboratory equipment, workstations, servers)?
(b) How many personnel are based at the design center, and what are their functions and qualifications?
(c) What is the primary purpose of the design center — does it primarily serve a customer-facing design-in support function, or does it also perform internal R&D or product development activities?
(d) Are any of the design center's activities performed under the Cost Sharing Arrangement? If so, how are those activities tracked and allocated between CSA and non-CSA functions?
V. TANGIBLE GOODS TRANSACTIONS — RISKS ASSUMED
A. HSAG Risks
58.  Please describe the risks assumed by HSAG in connection with its manufacturing operations and the intercompany sale of wafers and die to HSI. For each risk category identified below, please describe the nature and magnitude of the risk, HSAG's ability to control the risk, and any risk mitigation strategies employed:
(a) Manufacturing / production risk: What is the risk of yield loss, equipment failure, fab downtime, or production delays? How does HSAG manage these risks? What is the financial impact of a major fabrication tool failure or yield excursion?
(b) Technology obsolescence risk: What is the risk that HSAG's current process technologies (7nm, 5nm, 3nm) will become obsolete as the industry advances to smaller nodes? What is the typical technology lifecycle for each node?
(c) Capacity utilization risk: What is the risk that HSAG's fabrication capacity will be underutilized due to demand fluctuations? What is the current capacity utilization rate at each fabrication facility? What is the financial impact of unused capacity?
(d) Raw material and supply chain risk: What is the risk of disruption in the supply of critical raw materials (e.g., silicon wafers, specialty chemicals, rare gases, photomasks)? Does HSAG have sole-source or limited-source suppliers for any critical inputs?
(e) Product liability risk: What is the risk that defective wafers or die manufactured by HSAG will cause harm to end-use products or create product liability exposure? Does HSAG carry product liability insurance?
(f) Foreign exchange risk: What is the risk arising from the denomination of intercompany transactions in EUR while HSI's third-party revenues are denominated in USD? Does HSAG hedge EUR/USD currency exposure?
(g) Inventory risk: What is the risk that HSAG will hold work-in-process or finished wafer/die inventory that becomes obsolete, unsaleable, or subject to write-down prior to shipment to HSI?
B. HSI Risks
59.  Please describe the risks assumed by HSI in connection with its distribution, marketing, and design-support activities and the resale of Halcyon products to third-party US customers. For each risk category identified below, please describe the nature and magnitude of the risk, HSI's ability to control the risk, and any risk mitigation strategies employed:
(a) Inventory risk (finished goods): How much finished goods inventory does HSI hold at any given time (measured in days of supply and dollar value)? What is the risk of inventory obsolescence or write-down? Has HSI experienced significant inventory write-downs in the past? What inventory management practices does HSI employ to mitigate this risk?
(b) Credit and collection risk: What is the risk that HSI will be unable to collect receivables from third-party US customers? What is HSI's bad debt experience? Does HSI perform credit evaluations of customers? Does HSI carry trade credit insurance?
(c) Market risk: What is the risk arising from fluctuations in demand for Halcyon semiconductor products in the North American market, including customer concentration risk, competitive pricing pressure, and end-market cyclicality? How concentrated is HSI's customer base — what percentage of revenue is attributable to HSI's top five and top ten customers?
(d) Foreign exchange risk: What is the risk arising from the fact that HSI purchases products from HSAG in EUR-denominated transactions while selling to third-party customers in USD? Does HSI hedge its EUR/USD exposure? If so, what hedging instruments and strategies are employed?
(e) Warranty / product return risk: Does HSI bear warranty obligations to third-party US customers? What are the terms and conditions of HSI's product warranty? What is HSI's warranty claim and product return experience?
(f) General business / operational risk: What other operational risks does HSI face, including risks related to regulatory compliance, litigation, environmental matters, or other contingencies?
60.  Who bears the risk of semiconductor market cyclicality — HSAG, HSI, or is this risk shared between the two entities? Please describe how the economics of market downturns and upturns are allocated between HSAG and HSI under the intercompany pricing arrangement. Specifically, in a period of declining demand or falling prices, does HSI's margin compress, or does HSAG's margin compress, or do both margins adjust?
61.  How are the risks identified above contractually allocated between HSAG and HSI under the Master Intercompany Supply Agreement? Please identify any specific contractual provisions that allocate risk between the parties (e.g., indemnification clauses, warranty limitations, force majeure provisions, minimum purchase commitments).
C. Risk Allocation and Control
62.  For each material risk identified above, which entity has the financial capacity to bear the risk? Please describe the relevant financial resources of each entity (e.g., total assets, net worth, available liquidity, credit facilities) that demonstrate its capacity to absorb potential losses associated with the identified risks.
63.  For each material risk identified above, which entity exercises control over the risk, within the meaning of the OECD Transfer Pricing Guidelines? Specifically, which entity has the decision-making authority to take on, lay off, or mitigate the risk, and which entity actually performs the risk mitigation functions? Please distinguish between the capability to control a risk and the actual performance of risk control functions.
64.  Are there any risk mitigation strategies employed by HSAG or HSI, including:
(a) Foreign exchange hedging (forward contracts, options, natural hedging);
(b) Insurance coverage (product liability, cargo, business interruption, trade credit);
(c) Contractual protections (indemnification, limitation of liability, force majeure);
(d) Diversification strategies (customer diversification, supplier diversification, geographic diversification);
(e) Inventory management practices (just-in-time procurement, consignment inventory, vendor-managed inventory)?
VI. ROYALTY / IP LICENSE TRANSACTIONS
A. Licensed Intangibles — Description
Interviewer Instruction: This section is primarily directed to Dr. Hendrik Möller (CTO, HSAG), Dr. Erwin Fassbinder (SVP, Group Tax, HSAG), and Priya Raghavan (VP, Tax, HSI). For Dr. Möller, focus on the technical description of the intangible property and its development. For Dr. Fassbinder and Ms. Raghavan, focus on the legal and contractual framework for the IP license and the financial terms.
65.  Please describe the intangible property licensed by HSAG to HSI under the IP License Agreement, effective January 1, 2019. Specifically, what categories of intangible property are within the scope of the license?
(a) Proprietary semiconductor process technology — please describe the specific process technologies covered (7nm, 5nm, 3nm, or all current and future nodes?);
(b) Design libraries — please describe the nature and scope of the design libraries licensed;
(c) Related intangibles, including patents, trade secrets, know-how, and any other intellectual property rights included in the license.
66.  How were these intangible assets developed? Please describe:
(a) The R&D activities that led to the development of each category of licensed intangible property;
(b) The entity or entities that performed the development activities (confirm that HSAG was the primary developer);
(c) The time period over which the intangibles were developed;
(d) The approximate cumulative R&D investment attributable to the development of the licensed intangibles.
67.  Please describe HSAG's total R&D expenditure in FY 2024. Please confirm that HSAG's total R&D expenditure in FY 2024 was approximately €1,420,000,000. What is the breakdown of this R&D expenditure between (a) sustaining R&D for current-generation technologies (7nm, 5nm, 3nm), (b) next-generation R&D covered by the CSA (2nm/sub-2nm), and (c) other R&D activities?
68.  Please describe the legal ownership and registration status of HSAG's patents and other registered intellectual property rights:
(a) In which jurisdictions are HSAG's patents registered?
(b) How many active patents and pending patent applications does HSAG hold? What is the approximate breakdown by jurisdiction (Germany, US, Japan, China, other)?
(c) Are any patents or other IP rights registered in the name of HSI or any other subsidiary?
69.  Are any of the licensed intangibles co-owned or jointly developed with HSI or any other entity (other than intangibles developed under the CSA, which will be addressed in Section VII)? If so, please describe the nature of the co-ownership and the legal and contractual framework governing the co-owned intangibles.
B. Functions Related to IP
70.  What functions does HSAG perform in developing, maintaining, protecting, and exploiting the licensed IP? Please address each of the following functional categories:
(a) R&D personnel and capabilities: How many R&D employees does HSAG employ? Where are they located? What are their qualifications and areas of expertise?
(b) Patent prosecution and defense: How does HSAG manage its patent portfolio? Does HSAG use in-house patent counsel, outside patent counsel, or both? How many patent filings does HSAG make per year?
(c) IP strategy and management: How does HSAG make strategic decisions regarding its IP portfolio, including decisions to file, maintain, abandon, license, or enforce patents? Is there an IP steering committee or similar body?
(d) IP enforcement: Has HSAG been involved in any patent infringement litigation, either as plaintiff or defendant? If so, please describe the nature and outcome of such proceedings.
71.  What functions does HSI perform in relation to the licensed IP? Please address each of the following:
(a) Does HSI contribute to the development or enhancement of the licensed intangibles outside of the CSA? If so, please describe the nature and extent of HSI's contributions.
(b) Does HSI develop any unique intangible property of its own as a result of its distribution, marketing, or design-support activities in the North American market? For example:
(i) Marketing intangibles (brand awareness, trade show presence, promotional materials);
(ii) Customer relationships (established relationships with OEMs, hyperscalers, and distributors);
(iii) Localization intangibles (adaptations of Halcyon products or processes for the US market);
(iv) Market data and competitive intelligence.
(c) What design-support activities are performed at the Santa Clara design center? Do these activities involve the creation or enhancement of intangible property? If so, how are the resulting intangibles owned and allocated between HSAG and HSI?
C. Royalty Terms
72.  Please confirm the royalty rate applicable under the IP License Agreement: 6.0% of HSI's net US revenues attributable to the licensed intellectual property.
73.  How is "IP-attributable revenue" defined and calculated under the IP License Agreement? Specifically:
(a) What is the definition of the royalty base (i.e., "net US revenues attributable to licensed IP")?
(b) How does HSI determine which revenues are "attributable to" the licensed IP? Is there a specific methodology, allocation key, or product-level analysis?
(c) Are any revenues excluded from the royalty base (e.g., revenues from products that do not incorporate licensed IP, revenues from services, or revenues from products covered by the CSA)?
74.  Please confirm the royalty computation methodology for FY 2024:
(a) HSI net US revenues: $4,120,000,000;
(b) IP-attributable share of net US revenues: 18.1%;
(c) IP-attributable revenue: $4,120,000,000 × 18.1% = $745,720,000;
(d) Royalty rate: 6.0%;
(e) Royalty amount (USD): $745,720,000 × 6.0% = approximately $44,743,200;
(f) Contractual denomination: EUR;
(g) Royalty amount (EUR): €68,400,000 at weighted average payment rate of 1.0307 EUR/USD.
75.  What is the payment frequency for royalty payments under the IP License Agreement (e.g., quarterly, semi-annually, annually)? In what currency are royalty payments made? What exchange rate is used for conversion? How are royalty payments settled (wire transfer, intercompany netting, or other mechanism)?
76.  Does the royalty rate or royalty base adjust over time under the IP License Agreement? Under what circumstances would an adjustment occur (e.g., expiration of underlying patents, introduction of new process nodes, changes in HSI's product mix)?
77.  What is the term of the IP License Agreement? Does it renew automatically? Under what circumstances can either party terminate the agreement?
D. Assets and Risks — IP License
78.  What assets does HSAG employ in its capacity as the licensor under the IP License Agreement? This should include the IP portfolio itself (patents, trade secrets, design libraries), the R&D infrastructure (facilities, equipment, personnel) that supports the ongoing development and maintenance of the licensed IP, and any other assets relevant to the licensing function.
79.  What risks does HSAG assume as licensor under the IP License Agreement?
(a) IP obsolescence risk: What is the risk that the licensed intangibles will become technologically obsolete or commercially less valuable over time?
(b) Enforcement risk: What is the risk that third parties will infringe HSAG's IP, and what are the costs and uncertainties associated with IP enforcement?
(c) Third-party infringement risk: What is the risk that the licensed intangibles infringe upon the intellectual property rights of third parties, and what are the potential costs and liabilities associated with such infringement?
(d) Development risk: What is the risk that HSAG's ongoing R&D efforts will fail to produce commercially viable improvements to the licensed intangibles?
80.  What risks does HSI assume as licensee under the IP License Agreement?
(a) Market risk: What is the risk that HSI will be unable to generate sufficient revenue from products incorporating the licensed IP to justify the royalty payments?
(b) Technology risk: What is the risk that the licensed IP will become outdated or uncompetitive in the North American market?
(c) Payment risk: What is the risk that HSI will be obligated to make royalty payments regardless of its financial performance or market conditions?
VII. COST SHARING ARRANGEMENT (R&D CSA) TRANSACTIONS
A. CSA Overview
Interviewer Instruction: This section is primarily directed to Dr. Hendrik Möller (CTO, HSAG), Dr. Erwin Fassbinder (SVP, Group Tax, HSAG), and Priya Raghavan (VP, Tax, HSI). For Dr. Möller, focus on the technical scope and objectives of the joint R&D program. For Dr. Fassbinder and Ms. Raghavan, focus on the legal, contractual, and financial aspects of the CSA.
81.  Please describe the Qualified Cost Sharing Arrangement between HSAG and HSI:
(a) Effective date: Please confirm that the CSA became effective on July 15, 2018.
(b) Scope: Please confirm that the CSA covers the joint development of next-generation 2nm and sub-2nm semiconductor process technology, and describe the specific R&D activities within the scope of the CSA.
(c) Regulatory framework: Please confirm that the CSA is structured as a "qualified cost sharing arrangement" within the meaning of Treasury Regulation § 1.482-7, and that the CSA is intended to comply with the requirements of that regulation.
82.  What is the objective of the joint R&D program under the CSA? What specific technical milestones, deliverables, or outcomes is the program intended to achieve?
83.  What is the expected timeline for the development and commercialization of 2nm process technology? When is the first 2nm test chip expected? When is volume production expected to begin? What is the expected timeline for sub-2nm technology (e.g., 1.4nm gate-all-around)?
84.  Are there any other participants in the CSA besides HSAG and HSI? For example, do HSJ or HSC participate in the CSA?
B. Participant Roles and Contributions
85.  Please describe HSAG's role as the primary R&D performer under the CSA:
(a) What R&D facilities, personnel, and equipment are dedicated to the 2nm/sub-2nm program?
(b) Where are the R&D activities conducted (Dresden, Chemnitz, or other locations)?
(c) How many HSAG employees are assigned to the 2nm/sub-2nm program, and what are their qualifications?
(d) Please describe the specific R&D activities conducted by HSAG under the CSA, including process development, characterization, device modeling, pilot production, and any other activities within scope.
86.  Please describe HSI's role as a CSA participant:
(a) Does HSI perform any R&D activities under the CSA? If so, describe the nature, scope, and location of such activities (e.g., contributions from the Santa Clara design center).
(b) How many HSI employees, if any, are assigned to CSA-related R&D activities? What are their functions and qualifications?
(c) What is HSI's contribution mechanism under the CSA — does HSI make cash payments to HSAG to fund its share of qualified R&D costs, or does HSI incur and bear R&D costs directly? If HSI incurs costs directly, how are those costs tracked, reported, and credited against HSI's cost-sharing obligation?
C. Cost Sharing Percentages and Anticipated Benefit Shares
87.  Please confirm that HSI's cost-sharing percentage under the CSA is 22.5%, reflecting HSI's anticipated benefit share derived from the exploitation of 2nm/sub-2nm technology in the North American market. Please confirm that HSAG bears the remaining 77.5% of qualified R&D costs.
88.  How was the 22.5% cost-sharing percentage determined? Specifically:
(a) What methodology was used to estimate each participant's reasonably anticipated benefits from exploitation of the intangibles developed under the CSA (e.g., income method, units-based method, or other methodology consistent with Treasury Regulation § 1.482-7(e))?
(b) What assumptions were used in the projections (e.g., projected revenues, profit margins, market share, product lifecycle)?
(c) What discount rate was applied to the projected benefit streams?
(d) Who performed the analysis (internal, external economist, or valuation firm)?
89.  Are the cost-sharing percentages reviewed and adjusted periodically? Please confirm that the CSA provides for a triennial review of cost-sharing percentages. When was the most recent review, and what was the outcome? When is the next review scheduled?
90.  Please confirm the following FY 2024 cost-sharing data:
(a) Total qualified R&D costs incurred under the CSA in FY 2024: €998,200,000;
(b) HSI's share of FY 2024 qualified R&D costs: €998,200,000 × 22.5% = €224,600,000;
(c) HSAG's share of FY 2024 qualified R&D costs: €998,200,000 × 77.5% = €773,600,000.
91.  How are "qualified R&D costs" defined under the CSA? What categories of costs are included (e.g., personnel costs, materials, equipment depreciation, facility costs, overhead allocations)? Are there any categories of costs that are excluded?
D. Platform Contribution Transaction (PCT)
92.  Please describe the Platform Contribution Transaction ("PCT") that was executed in connection with the formation of the CSA on July 15, 2018. Specifically:
(a) PCT amount: Please confirm that HSI made a buy-in payment of $312,500,000 (USD) to HSAG in connection with the PCT.
(b) Pre-existing intangibles: What pre-existing intangible assets did HSAG contribute to the CSA that formed the basis for the PCT valuation? Please describe the nature and scope of the contributed intangibles.
(c) Valuation methodology: Please confirm that the PCT was valued using the income method prescribed by Treasury Regulation § 1.482-7(g)(4).
(d) discount rate: Please confirm that the discount rate used in the PCT valuation was 11.8%. How was this discount rate determined? What were the key inputs (risk-free rate, equity risk premium, company-specific risk adjustment, technology risk adjustment)?
(e) Projection period: Please confirm that the PCT valuation was based on a 15-year projection period. What assumptions were used to project the income streams attributable to the pre-existing intangibles over this period?
(f) Valuation provider: Please confirm that the PCT valuation was performed by Stonebridge Valuation Partners LLC (Marcus Reinhardt, Managing Director), located at 200 Park Avenue, Suite 1510, New York, NY 10166. Was the valuation report reviewed and accepted by both HSAG and HSI management?
93.  How was the discount rate of 11.8% determined? Please describe the methodology and key inputs used to derive the discount rate, including the risk-free rate, equity risk premium, size premium (if any), and technology-specific risk premium. Was a weighted average cost of capital ("WACC") approach used, or was a different approach applied consistent with Treasury Regulation § 1.482-7(g)(4)(vi)?
94.  Have there been any periodic adjustments to the PCT since its initial determination in 2018, as contemplated by Treasury Regulation § 1.482-7(i)(6) (periodic adjustments triggered by actual results that differ materially from projections)? If adjustments have been made, please describe the nature, amount, and basis for each adjustment.
95.  Was the PCT payment made in a single lump sum, or was it structured as installment payments? If installment payments, what were the payment terms and was interest charged on the deferred amounts?
E. Exploitation Rights
96.  What exploitation rights does each CSA participant receive with respect to intangible property developed under the CSA?
(a) HSAG exploitation rights: Please confirm that HSAG receives exploitation rights for all territories worldwide, excluding North America. Are HSAG's exploitation rights exclusive or non-exclusive?
(b) HSI exploitation rights: Please confirm that HSI receives exploitation rights for the North American territory. Are HSI's exploitation rights exclusive or non-exclusive?
97.  How are "North American exploitation rights" defined in the CSA? Does the definition of North America include the United States, Canada, and Mexico? Does it include US territories?
98.  Under the CSA, can either participant sublicense its exploitatio