It is important each year to review the basic compliance responsibilities of the Companyand its employees. This memo will refresh your knowledge about compliance obligations in three very important areas: (1) the U.S. Foreign Corrupt Practices Act; (2) Export Control Regulations; and (3) U.S. Antiboycott Regulations.

Foreign Corrupt Practices Act (“FCPA”)

The increasing globalization of competition and the opening of new markets offers the Companysubstantial business opportunities. These opportunities are not without risk. One of the most significant risks that the Company must be careful to avoid is violating the anti-bribery provisions of the FCPA. While all companies continue to feel the pressure of meeting financial goals, it is important that the pressure of meeting these goals does not override our good judgment.

The FCPA makes it unlawful for the Company or anyone acting on behalf of the Company, to “corruptly” pay, promise to pay or authorize the payment of money or anything of value to a foreign official, foreign political party or candidate for political office or any intermediary that the Company knows will use all or a part of the money to make a payment to a foreign official or political party to obtain or retain business or direct business to any person or business.

Penalties for violation of the FCPA can be substantial. Corporations can be fined up to $2 million, and officers, directors and employees convicted of violating the FCPA can be imprisoned for up to five years. In addition, an indictment under the FCPA can result in the immediate suspension of export licensing privileges and the suspension from the award of government procurement contracts. The U.S. Justice Department continues to be very active in pursuing violations of the FCPA. Refer to Corporate Policy of the Company.

Export Control Regulations

Millions of dollars of the Company’s revenue is derived from exports, and the Company’s exports continue to grow with the increasing globalization of our business. All exports are subject to either U.S. export control regulations and/or the regulations of the country from which the export takes place. It is the Company’s policy to comply with all applicable export control regulations.

Exports are controlled on the basis of three factors: (1) type of product or technology being exported; (2) country of ultimate destination; and (3) the final customer and the intended end use of the product or technology. Each export, from a simple thermostat to the export of an inertial navigation system requires an export license from the U.S. Government. In many cases, however, items can be exported by using a general license which is a blanket authorization to export with out specific approval from the U.S. Government. If a general license cannot be used, then an individual validated export license must be obtained from the appropriate government agency.

In recent years, the focus of export controls has shifted to efforts to limit the proliferation of weapons of mass destruction. Because many of the Company’s control system products may have potential for use in the production of chemical, biological and nuclear weapons and missiles, we must continue to be disciplined to ensure that we know where and how products will be used. Special care must be taken to prevent transactions involving the proliferation of weapons of mass destruction. We must also ensure that no exports or transfers of technology are made to any person or company listed on any export control denial list. Further, the U.S. Government continues to embargo certain countries from receiving any U.S. origin products or technology: Cuba, North Korea, Libya, Iraq, Iran, Serbia, and Montenegro. Certain other country restrictions may apply to specific products.

Penalties for violating export control regulations can be severe and can include loss of export privileges, loss of government contracting rights, and significant fines. To help ensure that remains in compliance with export control regulations, every exporting location around the world should have an Export Control Officer identified and an Export Management System in place to guard against illegal exports of products, technology, and software. For specific export control questions, please contact your local export control officer, or the Office of General Counsel.

U.S. Antiboycott Regulations

As many of you have undoubtedly heard, the Mid-East peace talks have mentioned the disbanding of the Arab Boycott of Israel. Many Middle East countries have already begun the process. Slowly, we are beginning to see fewer and fewer boycott-related clauses and language in contracts and letters of credit. However, until the united States Government considers the Arab Boycott of Israel to be officially terminated, we must still concern ourselves with compliance with U.S. Antiboycott Regulations.

Boycotting nations not only refuse to do business with Israel directly, but they also foster secondary and tertiary boycotts by pressuring companies not to do business with Israel and not deal with other companies who do business with Israel. Consequently, companies with contracts in boycotting countries sometimes pass along boycott requests to their suppliers and subcontractors. We must always be alert to requests for any such information as they are commonplace in such documents as letters of credit and shipping documentation. Not only is

furnishing the information illegal, but U.S. law also requires us to report the mere request for such information. Every boycott-related request must be reported to the Trade Administration office who has the responsibility for submitting timely reports to the U.S. Commerce Department.

The Office of Antiboycott Compliance continues to actively enforce these regulations, and significant fines and penalties continue to be imposed against individuals and companies who are found to be in violation of regulations. The penalties for failing to report a boycott request are as severe as those for complying with the request. The highest fines levied against companies have been for late reporting and have resulted in fines in excess of $1 million. For additional information, please refer to Corporate Policy, Compliance with U.S. Antiboycott Regulations, and Corporate Instruction Guidelines for Compliance with U.S. Antiboycott Regulations.

Summary

Company’s Code of Ethics and Business Conduct policies state that we are committed to the highest level of ethical conduct in our dealings with people, organizations, and governments wherever we operate in the world. Success in maintaining our leadership in world markets depends on compliance with all applicable laws so that we can maintain our valuable reputation as a corporation of the highest integrity.

Please pass this memo on to any other employees in your organization as appropriate. If you have any specific questions regarding any of the laws outlined in this memo, please contact the Office of General Counsel or the Trade Administration Department.

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