Contract analysis

I. Executive Summary This memorandum analyzes whether the seventeen shipments of HCA-9100 series analog-to-digital converter ("ADC") chipsets (classified under Export Control Classification Number ("ECCN") 3A001) that are the subject of the ongoing inquiry by the U.S. Department of Justice, National Security Division, Counterintelligence and Export Control Section ("DOJ NSD/CES") (Reference No. NSD-CES-2025-04871) im

II. Factual Background For purposes of this OFAC analysis, we set forth the following summary of the relevant facts. A more detailed recitation of the underlying facts appears in the separate Calderwood & Harkness memorandum regarding EAR exposure dated November 8, 2025 and in the VSD filed with BIS/OEE. The factual summary below is limited to those facts bearing on the OFAC analysis. Products at Issue. The products

III. Analytical Framework — Distinction Between BIS/EAR and OFAC Regimes A proper understanding of the Company's regulatory exposure requires a clear appreciation of the distinction between the two principal U.S. regulatory frameworks governing international trade in controlled goods: the Export Administration Regulations administered by BIS, on the one hand, and the economic sanctions programs administered by OFAC,

IV. OFAC-Administered Programs Relevant to PRC Transactions This section identifies and analyzes each OFAC-administered sanctions program that could potentially bear on transactions involving PRC-based counterparties and evaluates whether any such program is implicated by the seventeen shipments at issue. We have reviewed all current OFAC-administered programs and identified the following as potentially relevant (or,

V. Screening Results A. Methodology Screening of all relevant entities and individuals was performed using two independent sources to ensure reliability and comprehensiveness:

1. Sentinel Compliance Data Services Ltd. (Edinburgh, UK). Sentinel is HSAG's and Archipelago's commercial restricted-party screening platform, used for transactional screening in the ordinary course of business. Sentinel's database encompasses all OFAC-maintained lists, including the SDN List, the SSI List, the NS-CMIC List, the Foreign Sanctions Evaders List, the Capta List (formerly the List of Foreign Financial I

2. OFAC's Own Online SDN Search Tool (sanctionssearch.ofac.treas.gov). This is the publicly available, government-maintained search tool provided by OFAC. It permits searching the consolidated sanctions list, including all SDN entries, and allows for name-based and ID-based searching. We used this tool as a direct government-source verification check against the Sentinel results. Both romanized (English) and Chinese-

VI. NS-CMIC 50 Percent Rule Analysis Under OFAC's published guidance, the prohibitions applicable to NS-CMIC-listed entities extend to entities that are 50% or more owned, individually or in the aggregate, by one or more NS-CMIC-listed persons. This principle — commonly referred to as the "50 Percent Rule" — is consistent with OFAC's general ownership guidance set forth at 31 C.F.R. § 501.807 and in OFAC's Revised Gu

VII. DOJ Position on OFAC During the course of the Company's engagement with DOJ NSD/CES, we have specifically addressed the question of OFAC involvement with the responsible prosecutors. Their position has been consistent and clear: October 14, 2025 Initial Conference Call. During the initial conference call with AUSA Adrienne Kolb and Trial Attorney Jonathan Weir of DOJ NSD/CES, Kolb confirmed that the DOJ inquiry

VIII. Residual Risk Assessment While our analysis concludes that no OFAC violation has occurred and that current OFAC exposure is negligible, we address below certain residual risks that the Company should be aware of, along with our assessment of the likelihood and significance of each. A. Future OFAC Designation of End Users Risk Level: Low. It is possible that Zhonghe, Lansheng, or their principals could be design

IX. Recommendation: No OFAC Voluntary Self-Disclosure Based on the analysis set forth in this memorandum, we do not recommend filing a voluntary self-disclosure with OFAC. An OFAC voluntary self-disclosure is appropriate only where there is a reasonable basis to believe that an apparent violation of OFAC-administered sanctions has occurred. OFAC's VSD process, described in 31 C.F.R. § 501.604 and the OFAC Economic Sa

X. Recommendations Based on the analysis set forth in this memorandum, we recommend the following measures to memorialize the OFAC analysis, mitigate residual risk, and strengthen the Company's sanctions compliance posture going forward:

1. Include OFAC Analysis in DOJ Communications. We recommend referencing the thoroughness of the Company's OFAC self-assessment in communications with DOJ NSD/CES to demonstrate the breadth and diligence of the Company's overall compliance review. Specifically, in the Company's next substantive submission to AUSA Kolb and Trial Attorney Weir — which is currently being prepared in connection with the cooperation frame

2. Implement Ongoing OFAC Screening. As part of the enhanced compliance program being designed by Ashford Pennington LLC under the direction of Dr. Miriam Hecht, the Company should implement ongoing, automated OFAC screening for all customers, distributors, and counterparties — in addition to the BIS Entity List and other restricted-party list screening already being implemented. OFAC screening should be fully integr

3. Monitor OFAC Designation Actions. The Company should subscribe to OFAC's automated email notification system for list updates, which provides same-day notification of all changes to OFAC-maintained lists. In addition, OFAC list changes should be integrated into the Sentinel platform (or any successor restricted-party screening vendor's database) with a maximum update lag of two (2) business days from the date of O

4. Memorialize in Settlement Agreement. If and when a resolution is reached with DOJ in connection with the NSD-CES-2025-04871 inquiry, we recommend including a recital in the settlement agreement (whether in the form of a deferred prosecution agreement, non-prosecution agreement, or administrative settlement) confirming that the matter does not involve OFAC-administered sanctions and that no referral to OFAC has bee

5. Coordinate with Braxton Merritt and Kessler Pratt & Whitfield. The conclusion of this memorandum — that OFAC exposure is negligible — should be shared, on a privilege-protected basis, with the Company's other outside counsel teams working on related matters: (a) Braxton Merritt LLP (Elena Voss). Ms. Voss's team is conducting the securities disclosure analysis to determine whether and how the DOJ inquiry must be di

XI. Conclusion Based on our comprehensive analysis — encompassing the screening of all relevant entities and individuals against all current OFAC-maintained restricted-party lists (SDN List, SSI List, NS-CMIC List, Foreign Sanctions Evaders List, Capta List, and Non-SDN Menu-Based Sanctions List); the analysis of all potentially applicable OFAC-administered sanctions authorities, including Executive Orders 13959/1403