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Efforts to Eradicate Human Trafficking and Slavery

On January 1, 2012, the California Transparency in Supply Chains Act ("Act") of 2010 went into effect. The law seeks to address the issues of slavery and human trafficking in supply chains of certain manufacturers and retailers doing business in California, including SGI, by requiring public disclosures of their efforts to eradicate slavery and human trafficking from their direct supply chains of tangible goods.

SGI has established a Code of Business Conduct and Ethics, committing SGI to the highest standards of honesty, integrity and fair dealings. Integrity is one of SGI's core values in its conduct of business which includes treating people fairly. In addition, SGI is committed to compliance with all applicable laws, rules and regulations, including local, state, federal and foreign requirements. SGI further requires its employees to comply with all applicable laws and to abide by SGI contracting policies and guidelines. In its source selection of suppliers, SGI conducts evaluations on the basis of best value to SGI, prohibits the suppliers' use of unfair methods of competition and deceptive practices, and requires suppliers, including consultants and contractors, through terms and conditions to conduct their businesses in a legal and ethical manner and to comply with applicable laws. In certain instances, SGI agreements with third parties may also include requirements for those persons or companies to comply with relevant aspects of SGI's policies.

Evaluation and verification of product supply chains. SGI employs a rigorous set of contractor requirements to ensure that product supply chains comply with applicable laws. In 2016, SGI intends to initiate a verification process with its direct suppliers to evaluate and address the risks of human trafficking and slavery. From that initial process to be conducted by a third party on behalf of SGI, it is intended that SGI will complete the verification in areas left unaddressed as part of SGI's overall review to be performed by SGI employees.

Audits of suppliers. Upon verification of the product supply chain for risks of human trafficking and slavery, SGI intends to conduct audits of direct suppliers to evaluate ongoing supplier compliance and risk reduction of trafficking and slavery in supply chains in accordance with company standards. These audits may or may not be announced and, depending on SGI's assessment of supply chain risk, will be conducted by SGI or by an independent third party on behalf of SGI.

Certification and requirements for direct suppliers. SGI requires that direct suppliers of materials incorporated into SGI's products comply with the laws of the country or countries in which they are doing business and SGI intends to evaluate and address the risks of human trafficking through its verification process. SGI anticipates further strengthening of this requirement by specifically including in its certification process for new direct suppliers added to the supply chain a disclosure requirement about reduction of the risk of slavery and human trafficking.

Internal accountability standards and procedures. SGI has a Code of Business Conduct and Ethics outlining accountability standards that require all employees to comply with applicable laws in the conduct of their employment responsibilities. SGI would not engage contractors if SGI were aware the contractors were not in compliance with applicable laws concerning slavery and human trafficking. SGI is also evaluating the proper procedures to implement, if any, for contractors that fail to meet company standards.

Employee training. SGI provides training, including ethics training, to all employees. SGI believes it has established a culture of responsibility and ethical and moral behavior. Employees at SGI involved in the supply chain of products have a special responsibility to adhere to principles of integrity and fairness and to avoid illegal or unethical business practices within the supply chain of products. Through a third party, SGI intends to provide to SGI employees and management with direct responsibility for supply chain management some additional training on risk mitigation with respect to human trafficking and slavery. [v. 11-05-15]