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Caltta Technologies Co., Ltd.
Caltta Technologies Co., Ltd.
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Notice of Monitors Appointment


Documents for Internal Publication re: Monitor Appointment (pursuant to October 3, 2018 Order Modifying Conditions of Probation)


Announcement Regarding the Monitor’s Extended Appointment


Message Regarding Cooperation with the Monitor


Our Company is continuing in a monitorship period, which began on July 20, 2017, during which the independent corporate monitor, James M. Stanton, (the “Monitor”) will continue to perform his responsibilities as set forth in the 2017 Plea Agreement, Attachment A (Modified) to the Plea Agreement, and the U.S. Court’s Agreed Order Appointing Corporate Monitor.  In accordance with the U.S. Court’s Order Modifying Conditions of Probation issued on October 3, 2018, the Company will retain the Monitor through March 22, 2022 (the “probationary period”).  During this probationary period, the Monitor will be continually monitoring and assessing ZTE’s compliance with U.S. export control laws, including compliance by the Company’s subsidiaries, affiliates, and other entities worldwide over which the Company has ownership or control (collectively, “Subsidiaries and Affiliates”).  As ZTE’s President announced to all employees on July 2, 2017, our Company is fully committed to export compliance and we are dedicated to being cooperative, transparent, and supportive of the Monitor’s work.  Since the monitorship period began, we have welcomed, and will continue to welcome, the Monitor’s oversight in making our Company stronger and more compliant.  In accordance with the U.S. Court’s Order Modifying Conditions of Probation, I am directing all directors, officers, and employees of ZTE and its Subsidiaries and Affiliates to continue making the Monitor’s engagement during ZTE’s probationary period smooth and successful by fully cooperating promptly, truthfully, and completely with any request made in accordance with the Monitor’s duties.  This direction is consistent with, and incorporates by reference, the instruction ZTE’s President gave to all employees on July 2, 2017.


As part of our Company’s March 2017 Plea Agreement, Attachment A (Modified) to the Plea Agreement, and accompanying Agreed Order Appointing Corporate Monitor (“March 2017 Settlement Documents”), the Company agreed that James M. Stanton, a Partner with the law firm of Stanton LLP, would serve as the court-appointed Monitor.  Since March 2017, Mr. Stanton has had, and will continue to have during the remainder of the probationary period, a team supporting him in the continued performance of his responsibilities.  As set forth in both the March 2017 Settlement Documents and the U.S. Court’s October 3, 2018 Order Modifying Conditions of Probation, Mr. Stanton’s primary responsibility is to assess, monitor, and report on our Company’s compliance with the terms of the March 2017 Settlement Documents, the October 3, 2018 Order Modifying Conditions of Probation, and U.S. export control laws and regulations, and to make recommendations for improvement – including but not limited to our Company’s compliance program and all related policies, practices, procedures, and systems regarding all exports, reexports, or transfers (in-country) subject to those laws and regulations, and the prevention, detection, and reporting of violations of U.S. export controls.  Mr. Stanton’s duties extend to ZTE worldwide, including our Subsidiaries and Affiliates.


During Mr. Stanton’s term as Monitor, as has been the case since beginning his term on July 20, 2017, Mr. Stanton will report to the U.S. Court, setting forth his assessment and, if appropriate and necessary, making recommendations reasonably designed to improve our Company’s compliance program and all related export control policies and procedures.  Mr. Stanton will continue to submit his report to the U.S. Court on an annual basis.  In his discretion, the Monitor may provide the U.S. Court with interim reports regarding our Company’s compliance with U.S. export control law, the March 2017 Settlement Documents, and the U.S. Court’s Order Modifying Conditions of Probation.  Additionally, Mr. Stanton and his team will conduct two annual audits before July 2020 of our Company’s compliance with our June 2018 Settlement Documents and with U.S. export control laws with respect to all exports, reexports, or transfers (in country) that are subject to those laws.  Mr. Stanton will submit those audit reports to BIS and our Company’s Board of Directors. To be clear, the external Special Compliance Coordinator (“SCC”) separately selected by the U.S. Government, will continue to perform his responsibilities as set forth in the June 8, 2018 Superseding Settlement Agreement between ZTE and the U.S. Government.  Accordingly, the Company must cooperate fully with both the SCC and the Monitor simultaneously.


As with the Company’s Special Compliance Coordinator, your cooperation with the Monitor and his team is critical throughout the probationary period.  As has been the case since the monitorship began on July 20, 2017, some employees will receive requests from the Monitor for documents, data, or other information.  The Monitor also will request to interview certain employees.  I want to emphasize that it is of utmost importance that you continue to take such requests very seriously, and respond to them in a truthful, timely, and complete manner and in no way interfere with or impede his ability to monitor our Company’s compliance.  Continuing to fulfill the Monitor’s requests quickly, efficiently, and accurately is critical to the ongoing health and success of ZTE’s business.


Should you have any questions, please direct them to Lawrence Koh (10229121), Chief Export Compliance Officer, or to Shen Nan, Senior Vice President for Legal and Compliance.  Please do not hesitate to ask questions in order to ensure your compliance with the above directions.


In the event you would like to contact Mr. Stanton directly, his contact info is listed below:


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Thank you for your cooperation and support of ZTE during this important time.  This notice shall remain posted on our Company’s internal website(s) and be included in any Company employee manuals or similar documents during the probationary period.


FAQs Regarding Independent Corporate Monitor Role


What is the Monitor?


Under the March 2017 Plea Agreement, Attachment A (Modified) and accompanying U.S. Court Order (“March 2017 Settlement Documents”) between the U.S. Government and ZTE, and as re-affirmed by the U.S. Court’s recent Order Modifying Conditions of Probation, ZTE agreed to a court-appointed independent corporate monitor to, at the Company’s expense, monitor, assess, and report on compliance by ZTE and its Subsidiaries and Affiliates worldwide with the terms of the March 2017 Settlement Documents and U.S. export control laws and regulations, and to make recommendations for improvement – including but not limited to our Company’s compliance program and all related policies, practices, procedures, and systems regarding all exports, reexports, or transfers (in-country) subject to those laws and regulations, and the prevention, detection, and reporting of violations of U.S. export controls.  With the Company’s agreement, Mr. Stanton was appointed as the Monitor and the monitorship began on July 20, 2017.  The Monitor is a judicial adjunct and is not an employee or agent of ZTE or the U.S. Department of Justice.  The Monitor does not serve as legal counsel to ZTE and no attorney-client relationship has been or will be formed between ZTE and the Monitor.


Who is the Monitor?


James M. Stanton was appointed by the U.S. Court on March 22, 2017 to serve as the Monitor.  The monitorship commenced on July 20, 2017.  Mr. Stanton and his team are based in Dallas, Texas, though he and his team will conduct their work from various locations, including Shenzen, China and other Company locations as he determines are appropriate.


What is the term of the Monitor?


In March 2017, the U.S. Court appointed Mr. Stanton to serve as the Monitor for a three-year period, which began on July 20, 2017, as part of the conditions of the Company’s probation set forth in the March 2017 Settlement Documents.  On October 3, 2018, the U.S. Court modified the conditions of the Company’s probation and extended the term of the Monitor through March 22, 2022.


What is the Monitor’s role and what are his duties?


The responsibility of the Monitor is to continually monitor, review, assess, and report on compliance by the Company and its Subsidiaries and Affiliates worldwide with U.S. export control regulations, the March 2017 Settlement Documents, and the October 3, 2018 U.S. Court Order Modifying Conditions of Probation.  The Monitor is a judicial adjunct and will report to the U.S. Court.  The Monitor has had, and will continue to have, full and complete access to all relevant Company personnel, books, records, systems, documents, audits, reports, facilities and technical information, in accordance with the March 2017 Settlement Documents and the October 3, 2018 U.S. Court Order Modifying Conditions of Probation.


What impact will the Monitor have on the Company and its Subsidiaries and Affiliates?


The Monitor’s scope includes monitoring, assessing, and reporting on the compliance of Company business with export control regulations and sanctions laws, and imposes strict standards for the Company’s compliance obligations.  This includes ZTE Subsidiaries and Affiliates worldwide.  The Monitor’s responsibilities are in addition to the appointment of the Special Compliance Coordinator, Roscoe C. Howard, Jr. by the U.S. Bureau of Industry and Security (“BIS”), pursuant to the Company’s agreements with BIS in June 2018.  Under the March 2017 Settlement Documents and the October 3, 2018 U.S. Court Order Modifying Conditions of Probation, the U.S. Government also requires ZTE’s full cooperation with the Monitor.


Oversight by the Monitor will help significantly improve the Company’s compliance capability in the long-term.  Because the Company is committed to implementing a sound and complete compliance system and compliance culture at ZTE, working efficiently and accurately together with the Monitor will allow the Company to maintain sustainable development, meet its obligations under U.S. export control regulations, the March 2017 Settlement Documents, the October 3, 2018 U.S. Court Order Modifying Conditions of Probation, and to become the benchmark company for such compliance in the long-term.


What level of cooperation with the Monitor is expected by Company employees and employees of the Company’s Subsidiaries and Affiliates worldwide?


Full cooperation with the Monitor and his team is essential to the ongoing success of the Company’s business.  This cooperation is expected throughout the Monitor’s term ending March 22, 2022.  It is of the utmost importance that all requests by the Monitor for books, documents, data, interviews of personnel, records, systems, audits, reports, facilities, technical information, or other information be taken very seriously, and that all responses are made in a truthful, timely, and complete manner.  All employees are prohibited from interfering or impeding the Monitor’s ability to monitor the Company’s compliance with U.S. export control laws, the March 2017 Settlement Documents, the October 3, 2018 U.S. Court Order Modifying Conditions of Probation, or any other discharge of the Monitor’s duties and responsibilities.


To whom should I address further questions about the instructions above, or regarding the Monitor?


Please direct questions to Lawrence Koh (10229121), Chief Export Compliance Officer, or to Shen Nan, Senior Vice President for Legal and Compliance.


You may also contact Mr. Stanton directly, his contact info is listed below:


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