Contract analysis

I. Executive Summary Calderwood & Harkness LLP ("C&H") has completed its internal investigation into the matters encompassed by the U.S. Department of Justice, National Security Division inquiry designated NSD-CES-2025-04871 (the "Investigation"). This memorandum presents C&H's findings, analysis, and recommendations to the General Counsel of Halcyon Semiconductor AG ("HSAG" or the "Company"), including its wholly ow

1. Three post-Entity-List shipments to Zhonghe constitute apparent violations of the Export Administration Regulations ("EAR"). Three shipments to Zhonghe Microelectronics Co., Ltd. ("Zhonghe"), dated June 27, July 15, and August 3, 2025, were made after Zhonghe's addition to the Bureau of Industry and Security ("BIS") Entity List (Supplement No. 4 to Part 744 of the EAR) on June 14, 2025, without a required BIS lice

2. The violations were not willful. Based on exhaustive review of documentary evidence, electronic communications, and sworn witness interviews, C&H has found no evidence that any employee of HSAG, HSI, or Archipelago knowingly shipped controlled items to an Entity-Listed party. The root causes of the violations were systemic and compounding in nature: (a) a 12-calendar-day (9-business-day) delay by Sentinel Complian

3. Eight pre-Entity-List Zhonghe shipments are not violations. The eight Zhonghe shipments completed between March 12, 2024 and May 22, 2025 occurred before Zhonghe's Entity List designation became effective. At the time of each shipment, no BIS license was required and no EAR violation occurred. These shipments require no further remedial action.

4. Six Lansheng shipments do not constitute demonstrable violations. DOJ's inquiry also encompasses six shipments to Lansheng Harborline Technologies Technologies Ltd. ("Lansheng"), based in Chengdu, PRC, under a military end-use theory pursuant to EAR § 744.21. After thorough investigation, C&H found no evidence that HSAG, HSI, or Archipelago had knowledge — actual or constructive — that Lansheng was procuring items

5. No OFAC violations. As detailed in C&H's November 22, 2025 memorandum to the General Counsel entitled "OFAC and Sanctions Exposure Analysis" (privileged), none of the end users identified in the DOJ inquiry, nor their principals, beneficial owners, or known affiliates, appear on any list administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), including the Specially Designa

6. Compliance program deficiencies require immediate remediation. The Phase I assessment conducted by Ashford Pennington LLC ("Ashford Pennington") and delivered by Dr. Miriam Hecht, Principal Consultant, on February 5, 2026, identified six principal deficiencies in the Company's export compliance program. These deficiencies are consistent with C&H's own findings during the course of this Investigation and are summar

II. Investigation Methodology Duration and Scope The Investigation was conducted over a period of approximately 14 weeks, commencing on October 18, 2025 and concluding on January 24, 2026. The scope of the Investigation encompassed all transactions between the Company (including HSI and Archipelago acting as the Company's authorized distributor) and Zhonghe and Lansheng, respectively, from January 2023 through August

III. Detailed Findings — Three Post-Entity-List Zhonghe Shipments The three shipments discussed in this Section constitute the violations that C&H recommends be included in the Company's resolution with DOJ and BIS. Each shipment involved the same product (HCA-9100-A3 series analog-to-digital converter ("ADC") chipsets, ECCN 3A001), the same origin (HSAG's fabrication facility in Dresden, Germany), the same routing t

IV. Detailed Findings — Pre-Listing Zhonghe Shipments The Investigation reviewed eight shipments to Zhonghe completed prior to Zhonghe's Entity List designation. These shipments were completed between March 12, 2024 and May 22, 2025, representing the first eight of the 11 total Zhonghe shipments in the investigation universe. All eight shipments were lawful at the time of completion. Zhonghe was not on any BIS restri

V. Detailed Findings — Lansheng Shipments A. Overview DOJ's inquiry encompasses six shipments to Lansheng Harborline Technologies Technologies Ltd. ("Lansheng"), a privately held company based in Chengdu, Sichuan Province, PRC. These six shipments were completed between April 8, 2024 and August 19, 2025, with an aggregate commercial invoice value of approximately $2.42 million (average approximately $403,000 per ship

1. Communications review. C&H reviewed all communications between HSI and Archipelago personnel, on the one hand, and Lansheng, on the other, for the period January 2023 through August 2025. This review encompassed email correspondence, purchase order communications, technical support inquiries, and internal discussions among HSI and Archipelago sales and compliance personnel regarding the Lansheng account. None of t

2. End-user certificates. Lansheng provided end-user certificates ("EUCs") for all six shipments. Each EUC states that the products will be used for "civilian telecommunications infrastructure signal processing" and contains standard certifications that the products will not be used for military end uses, will not be diverted to any end user or destination prohibited under applicable export control laws, and will not

3. No employee knowledge. None of the 17 individuals interviewed during the Investigation had any awareness of or reason to know about Lansheng's alleged connections to PRC military or defense entities. No HSAG, HSI, or Archipelago employee reported receiving any information, from any source, suggesting that Lansheng was engaged in military procurement, was affiliated with a PRC defense research institute, or was act

4. No BIS "is informed" notice. BIS did not issue an "is informed" letter, email notification, or any other form of communication to HSAG, HSI, or Archipelago regarding Lansheng prior to any of the six shipments. Under § 744.21(b)(2), the "is informed" mechanism is the regulatory tool by which BIS alerts exporters to military end-use concerns when the exporter may not otherwise have knowledge. The absence of an "is i

5. Screening results. Lansheng passed all restricted-party screenings at the time of each shipment. Both Sentinel's automated screening (through Archipelago's system) and any independent screening performed by HSAG or HSI returned "CLEAR" results. Lansheng has never appeared on any U.S. or multilateral export-control restricted-party list. D. Conclusion on Lansheng Based on the foregoing findings, C&H concludes that

VI. Compliance Program Deficiencies C&H's investigation and Ashford Pennington LLC's Phase I assessment, delivered by Dr. Miriam Hecht on February 5, 2026, identified six principal deficiencies in the Company's export compliance program. These deficiencies are interrelated and collectively created the conditions that allowed the three violative Zhonghe shipments to occur. Remediation of these deficiencies is both ope

1. Over-reliance on third-party distributor screening. HSAG delegated restricted-party screening for its Asia-Pacific distribution channel entirely to Archipelago and, by extension, to Sentinel Compliance Data Services Ltd. as Archipelago's screening database vendor. Neither HSAG nor HSI performed independent, parallel screening of Archipelago's PRC customers against BIS or OFAC restricted-party lists. This created a

2. No re-screening at ship-confirm. Archipelago's order management system was configured to perform restricted-party screening only at the order entry stage. Once an order received a "CLEAR" result and was pre-approved by the compliance officer, the system did not re-screen the order at any subsequent stage, including the ship-confirm stage — the critical control point at which goods are physically released for shipm

3. Inadequate SLA monitoring. HSAG did not audit or monitor Sentinel's compliance with the 5-business-day database update SLA set forth in Section 4.3 of the Archipelago–Sentinel Master Services Agreement dated February 15, 2020. While HSAG was not a direct party to the Archipelago–Sentinel contract, HSAG had constructive oversight obligations as the principal in the distribution arrangement and possessed contractual

4. Character-encoding deficiency. Archipelago's order management system stored PRC customer names in simplified Chinese characters as the primary identifier, reflecting the operational reality of Archipelago's Asia-Pacific customer base. Sentinel's Entity List database updates, however, used romanized (English) names, consistent with the format published in the Federal Register. Sentinel's screening module, as config

5. No real-time Entity List monitoring. Neither HSAG nor HSI maintained a process for real-time monitoring of BIS Entity List additions. The Company's compliance framework relied on periodic (quarterly) retrospective reviews — conducted by Janet Liang at HSI — to identify discrepancies between the Company's customer base and the current Entity List. Between quarterly reviews, the Company's only check against Entity L

6. Insufficient compliance staffing. HSI had only one trade compliance analyst — Janet Liang — responsible for screening oversight for all U.S. and reexport transactions involving HSI's product lines. This single analyst was responsible for monitoring restricted-party list compliance, conducting quarterly reviews, responding to compliance inquiries from sales and distribution personnel, and coordinating with Archipel

VII. Recommendations Based on the findings set forth in this memorandum, C&H makes the following five recommendations:

1. Proceed with resolution discussions on the basis of the three Zhonghe violations. The evidence developed during the Investigation supports a strong mitigation case. The violations were non-willful, were promptly self-disclosed through the BIS voluntary self-disclosure ("VSD") process (VSD filed November 4, 2025, BIS reference OEE-VSD-2025-00319), and the Company has cooperated extensively with DOJ and BIS througho

2. Resist any Lansheng-related violations in the settlement terms. For the reasons set forth in Section V.D above, the evidence does not support a finding that the Company violated EAR § 744.21 with respect to the six Lansheng shipments. Conceding Lansheng violations in the settlement would have three significant adverse consequences: (a) It would increase the civil penalty by an estimated $1.5 million to $2.5 millio

3. Implement Ashford Pennington's recommended remedial measures in advance of settlement. The Company's ability to demonstrate that it has already taken concrete remedial steps — rather than merely promising future improvements — will significantly strengthen its position in the penalty mitigation analysis and in negotiations regarding the scope and duration of any compliance monitor. C&H recommends that the followin

4. Accept a compliance monitor for 18 months as part of the resolution. While the Company would prefer to avoid the imposition of an independent compliance monitor, C&H recognizes that a monitor is a standard element of NSD settlements in export-control cases, particularly where the violations involved shipments to Entity-Listed PRC parties and where the compliance program exhibited multiple systemic deficiencies. Re

5. Coordinate disclosure with external advisors. The settlement of this matter will trigger disclosure obligations under multiple regulatory frameworks and contractual commitments. C&H recommends that the Company coordinate the following disclosures in a timely and consistent manner: • Securities disclosure (U.S.). Braxton Merritt LLP (Elena Voss) should be consulted regarding the Company's obligations under SEC Regu