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Foreign Corrupt Practices Act (FCPA)Compliance Guide

1 | Baker Hughes

Foreign Corrupt Practices Act (FCPA) Compliance Guide

IntegrityWe believe integrity is the foundation of our individual and corporate actions that drives an organization of which we are proud.

BAKER HUGHES CORE VALUES

TeamworkWe believe teamwork leverages our individual strengths.

LearningWe believe a learning environment is the way to achieve the full potential of each individual and the company.

PerformanceWe believe performance excellence will drive the results that differentiate us from our competitors.

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To all Baker Hughes Employees, Agents, Representatives, Consultants, Distributors, and Joint Venture Partners

Baker Hughes Incorporated is committed to maintaining the highest ethical and legal standards. We strive to comply with both the letter and spirit of applicable laws and regulations in each country in which we do business. Integrity, our first Core Value, provides the foundation for all Company policies, procedures, and actions. We conduct our day-to-day business with our shareholders, employees, customers, representatives, suppliers, competitors, governments and the public in an honest and ethical manner.

The Foreign Corrupt Practices Act of 1977 ( “FCPA”) makes it a crime to give, or to offer to give, anything of value to non-U.S. government officials (including employees of state-owned companies, such as national oil and transportation companies) to improperly influence the performance of the officials’ duties. The FCPA also includes requirements that public companies, like Baker Hughes, have strong internal controls and accurate books and records.

In addition to the FCPA, an emerging consensus against corruption has been bolstered over the past decade by a host of multilateral institutions and international treaties. These multilateral institutions include, among others, the OECD and the United Nations. Some of the key conventions include the OECD Anti-Bribery Convention, Inter-American Convention Against Corruption, Council of Europe Criminal Law Convention on Corruption, and the UN Convention Against Transnational Organized Crime. More than one hundred countries have also adopted their own domestic anti-bribery laws.

Baker Hughes operates a Best-in-Class global ethics and compliance program which is designed to detect and prevent violations of all applicable anti-bribery laws throughout its operations. Failure to comply with the FCPA is not tolerated. Any employee who engages in conduct that results in a violation of the FCPA is subject to discipline, which can include his or her employment termination. Penalties for violating the FCPA and other anti-bribery laws can be severe for both Baker Hughes and individual(s) involved. These penalties may involve large fines and even imprisonment.

Interpreting the FCPA is sometimes challenging because many situations potentially covered by the FCPA fall into unclear or “gray” areas. This Guide provides many illustrative examples to facilitate the reader’s understanding and compliance with the FCPA. These examples were carefully chosen to illustrate some of the most common and significant risk areas of the FCPA - issues that Baker Hughes must successfully address every day. All Baker Hughes employees acting on behalf of Baker Hughes (referenced in this Guide as “Employees”), agents, consultants, certain distributors, and representatives (collectively referenced in this Guide as “Representatives”) and joint venture partners must fully comply with the provisions of the FCPA. For Employees, compliance with the FCPA, other applicable laws, Baker Hughes’ Core Values (Integrity, Teamwork, Performance and Learning), and the Baker Hughes Business Code of Conduct is a condition of continued employment.

Employees are expected to 1) read and apply this Guide in their day-to-day jobs, 2) successfully complete the Company’s required FCPA training, 3) recognize concerns regarding FCPA compliance, 4) ask questions and promptly report any suspected FCPA violation (see page 3 of this Guide), 5) read and understand our Core Values and the Baker Hughes Business Code of Conduct, and 6) abide by all other requirements of Baker Hughes’s compliance program.

Thank you for joining us in our commitment to maintain ethical conduct and in continuing to strengthen Baker Hughes’s reputation for excellence in compliance with laws.

Chad Deaton Chairman, President and Chief Executive Officer Baker Hughes Incorporated

Important information

Reporting FCPA violations or asking questions about the FCPAIf you become aware of any potential or actual violations of the FCPA, or if you have any other questions or concerns, please contact one or more of the following:

• Your supervisor

• Your Baker Hughes Legal Counsel (such as your Region Counsel, Region Compliance Counsel or

Products and Technology Counsel)

• Any member of the Ethics and Compliance team of the Legal Department

• Internal Audit

• Enterprise Security

• The Vice President and Chief Compliance Officer (referenced as the “CCO” in this Guide) by

phone on (+1) 713-439-8439 or by email at CCO@bakerhughes.com • If you wish to remain anonymous or report to a third party, Baker Hughes offers a

24 hour, 7 days a week, multi-lingual, global Business Ethics Help Line operated by

a third party, independent company. • Call toll free within the U.S.: 1-800-288-8475• Call from outside the U.S.:

• “Collect” / reverse charges (where available): (+1) 713-626-0521• Using the free direct dial codes and telephone numbers listed on the Business Ethics Help

Line link on the BHI Interchange home page that allow you to dial directly from various international locations without incurring telephone charges. (see page 5 of this Guide)

• Report online using the confidential links to the Business Ethics Help Line Online version found on the BHI Interchange home page and elsewhere.

• The Senior Vice President and General Counsel’s Office.• Toll free within the U.S.: (+1) 866-303-8676• Outside the U.S.: (+1) 713-439-8676

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Available guidelines, policies and training resources

FCPA guidelines and policies For Employees, Baker Hughes has a number of important FCPA polices and guidelines located on the Ethics and Compliance section of the Baker Hughes intranet. (see page 31 of this Guide for a summary) These policies and guidelines include:

• Baker Hughes’ Facilitating Payments Policy; • Baker Hughes’ Non-U.S. Government Official Travel & Entertainment, Gift Giving and Charitable Donations

Guidelines; • Baker Hughes’ Guidelines and Procedures Relating to FCPA Due Diligence and Third Party Due Diligence

Requirements;• Baker Hughes’ Offshore Payments Policy to Non-U.S. Commercial Sales Representatives; • Baker Hughes’ Non-U.S. Commercial Sales Representatives Commission Payment Approval and Expense

Reimbursement Policy and Guidelines;• Baker Hughes’ Petty Cash Funds Policy;• Baker Hughes’ Non-U.S. Community Contributions;• Baker Hughes’ Real Estate Transactions in Selected Countries Policy; • Baker Hughes’ Use of Non-U.S. Police or Military for Security Purposes Policy; and• Baker Hughes’ Summary of Anti-Bribery Policies, Selected Procedures and Guidelines

An electronic copy of this Guide and the related policies, procedures and guidelines can be downloaded from the Ethics and Compliance section of the Baker Hughes intranet, Interchange.

FCPA electronic training modulesAs a requirement of employment, all Employees must periodically complete one or more FCPA electronic anti-bribery training modules. These modules are available on-line and can be found in LearnLink by searching the catalog under “Anti-bribery.” These modules, which are periodically updated, are also available for locations without sufficient internet access as a .pdf and on CD/DVD. The on-line module, .pdf formatted module and the CD/DVD module are available in twelve different languages - Arabic, Dutch, English, French, German, Indonesian, Italian, Mandarin, Norwegian, Portuguese, Russian, and Spanish.

Interactive live FCPA trainingIn addition to the electronic training module, Employees must participate in interactive, real-time, “live” (classroom or webinar) anti-bribery training if requested to do so by their managers or required to do so by Company guidelines. The live training is offered on a periodic basis around the world and is mandatory for certain groups of Employees who by the nature or location of their job functions are more at risk for FCPA violations. The live training has a General Anti-Bribery Compliance seminar offering, as well as, function specific Anti-Bribery Compliance seminars. Current function specific Anti-Bribery Compliance seminars include offerings related to Financial Approvals, Sponsors of Commercial Sales Representatives, Sales and Marketing to National Oil Companies, as well as a seminar on Customs Compliance.

To obtain more information regarding any of Baker Hughes’ FCPA compliance training courses, please contact any Compliance Contact referenced above.

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BHI Help Line

Direct dialing instructions for select international countriesMake sure you have an outside line (if you are using a public phone, make sure it can be used to make international calls).

STEP ONE: Enter the AT&T Access Code for the Country where the call is originating.

STEP TWO: When you hear a prompt or series of tone prompts after dialing the Access Code, please enter the toll-free number listed below which corresponds with the Country where the call originates.

Note: DO NOT press “1” or “0” before dialing the toll free number!

The call will be connected to the Business Ethics Help Line, which will play the following message in your native language: “Thank you for calling the Business Ethics Help Line. An English speaking interviewer will answer the call shortly and assist in connecting you with a translator. Please confirm the language you speak with the interviewer so that the appropriate translator can be connected. If you would prefer to give your report in English, Press 1.”

Country STEP 1: (AT&T Access Code)

STEP 2: (Toll-Free Number)

Angola 808.000.011 877.349.7488

Argentina 0.800.555.4288 or 0.800.222.1288 877.349.7488

Brazil 0800.890.0288 or 0800.888.8288 877.349.7488

China – Northern China (Beijing Region) 108.888 877.349.7488

China – Southern and Central China (Shanghai and Guangzhou Region)

108.11 877.349.7488

Colombia 01.800.911.0010 or 01.800.911.0011 877.349.7488

Ecuador 1.999.119 877.349.7488

France 0.800.99.0011 or 0.805.701.288 877.349.7488

Indonesia 001.801.10 877.349.7488

Kazakhstan (^ Indicates second dial tone) 8^800.121.4321 877.349.7488

Malaysia 1.800.80.0011 877.349.7488

Norway 800.190.11 877.349.7488

Peru 0.800.50.288 or 0.800.70.088 877.349.7488

Portugal 800.800.128 877.349.7488

Russia – From within Moscow 363.2400 877.349.7488

Russia – From areas outside Moscow 8^495.363.2400 877.349.7488

Russia – From within St. Petersburg 363.2400 877.349.7488

Russia – From areas outside of St. Petersburg 8^812.363.2400 877.349.7488

Russia – From Ekaterinburg, Irkutsk, Novosibirsk, Omsk, Rostov-on-Don, Samara, Vladivostok and other cities (^ Indicates second dial tone)

8^10.800.110.1011 877.349.7488

Spain 900.99.0011 877.349.7488

Sweden 020.799.111 877.349.7488

Trinidad / Tobago 1.800.872.2881 877.349.7488

5 | Baker Hughes

SECTION 1 - Introduction.......................................................................................................................................7The purpose of this Guide ..............................................................................................................................................................7Why FCPA compliance is important ................................................................................................................................................7

SECTION 2 - Key provisions of the FCPA ................................................................................................................9Anti-bribery prohibitions ................................................................................................................................................................9Expenditures that may be permissible under the FCPA .................................................................................................................10Accounting, record-keeping and internal controls ........................................................................................................................12FCPA compliance is not a choice - It’s a requirement! ..................................................................................................................15Penalties ......................................................................................................................................................................................16

SECTION 3 - Compliance with local and international laws ................................................................................17Compliance with local laws outside of the U.S..............................................................................................................................17International anti-corruption conventions ....................................................................................................................................17

SECTION 4 - FCPA risks with representatives and joint ventures........................................................................18Liability for the acts of another ....................................................................................................................................................18Warning signs ..............................................................................................................................................................................21Additional issues with joint ventures ............................................................................................................................................22

SECTION 5 - Gifts, meals, travel and entertainment and the FCPA .....................................................................23Gifts .............................................................................................................................................................................................23Meals, travel and entertainment and the FCPA .............................................................................................................................23

SECTION 6 - Charitable donations and community contributions ......................................................................24Charitable donations ....................................................................................................................................................................24Community contributions .............................................................................................................................................................24

SECTION 7 - Contributions to political parties or political candidates ...............................................................25

SECTION 8 – Security and real estate transactions .............................................................................................25Real estate transactions in selected countries ..............................................................................................................................25Use of non-U.S. police or military organizations for security purposes ..........................................................................................26

SECTION 9 - Dealing with potential issues ..........................................................................................................27FCPA issues must be addressed ....................................................................................................................................................27Avoiding trouble: Responding to and reporting potential issues ...................................................................................................28

SECTION 10 - Frequently Asked Questions regarding the FCPA ..........................................................................29

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Introduction

The purpose of this FCPA Compliance Guide (“Guide”)The purpose of this Guide is to educate readers on Baker Hughes’ Core Values, Code of Conduct and FCPA related guidelines, policies, procedures, processes and expectations, which are not always easy to interpret and apply in the context of fast moving actual real life situations. The Guide provides many examples of actual cases and hypothetical questions to facilitate one’s understanding and compliance with the FCPA. This Guide is intended to be used by Employees, Representatives and joint venture partners.

This Guide is an integral part of Baker Hughes’ global Compliance Program. It serves as a preventive tool to assist Employees and Representatives in recognizing, detecting and avoiding potential violations of the FCPA.

Employees and Representatives have an affirmative obligation to become familiar with, and to strictly abide by, the terms and requirements of this Guide. Any Employee who fails to comply with the standards contained in this Guide will be disciplined, which can include possible termination. A Representative’s failure to comply with all of the terms and requirements of this Guide shall be grounds for termination. In addition to strict compliance with the FCPA, Employees and Representatives should always avoid any appearance of impropriety in their business transactions.

Why FCPA compliance is important Integrity is one of the Baker Hughes’ four Core Values. It is, in fact, described as the Baker Hughes’ “first Core Value.” Compliance with all laws, regulations and related policies and guidelines is an essential part of Integrity. Baker Hughes’ Core Values and Code of Conduct are described as the “twin pillars” of the Company’s compliance efforts. All of our actions should be consistent with our Core Values. The Code of Conduct codifies Baker Hughes’ expectations in a wide range of compliance areas. These include, among other things, the FCPA, international transactions, financial integrity, employment practices, conflict of interest, and health, safety and the environment.

Baker Hughes can prevent improper payments under the FCPA, protect itself from liability and preserve its ethical principles and reputation if its Employees and Representatives always strictly adhere to the requirements of this Guide.

Why must we abide by the requirements of the FCPA even if others are not?Question: We have heard rumors that other companies may be paying for lavish trips and entertainment for non-U.S. officials of national oil companies. If Baker Hughes doesn’t do the same, some of our competitors may have an unfair advantage. Why do we have to abide by the FCPA while others do not?

Answer: Regardless of their compliance or non-compliance, most of our competitors are subject to the FCPA because they are U.S. companies or register their shares or bonds to trade on a U.S. securities exchange. In addition, more than 100 countries have adopted laws similar to the FCPA. Moreover, Baker Hughes’ actions will never be dictated by what our competitors do. The Company wants to be a leader and not a follower. In the long term, we can best achieve outstanding financial results for our shareholders by requiring all our Employees and Representatives to strictly adhere to our Core Values, our Code of Conduct, all applicable Baker Hughes policies and all applicable laws, including the FCPA. Violations of the law, of our Code of Conduct and our policies and procedures will not be tolerated under any circumstances. Our Employees, Representatives and customers want to do business with Baker Hughes because it has the best products, services, technology and execution. We also believe they respect and admire our high ethics. Doing the right thing is always good for business and preserving shareholder value.

Recognize, detect and avoid potential violations of the FCPA.

Approximately 93% of all FCPA violations involve books and records violations.

Can I violate the FCPA if I’m not a U.S. citizen?Question: I am a citizen of a country other than the U.S. and have never been to the U.S. I have been recording small “gifts” (as we call them) to non-U.S. government officials on my expense reports as taxi fares. I haven’t told my manager, but these payments allow the import/export side of the business in my country to operate smoothly. Since my manager doesn’t know the details of my gift giving, and I am not a U.S. citizen, am I violating the FCPA?

Answer: Yes, you are. Although you are not a citizen of the U.S., Baker Hughes is a U.S. company and as an employee of a U.S. company, you must abide by the FCPA. Keeping your manager in the dark does not necessarily absolve him or the Company from responsibility under the FCPA for your actions. The payments you made violated Baker Hughes’ No Facilitation Payments Policy, the FCPA and possibly local law. These payments create serious potential liability for you, your manager and Baker Hughes.

In addition, Baker Hughes’ books and records must always be maintained in an accurate fashion for the parent company, all subsidiaries and all joint ventures in which the Company owns a controlling interest. Expenses related to import or export duties should never be mischaracterized or falsified. The requirement under the FCPA to properly record all transactions fairly and accurately extends to all original documents, including invoices, receipts and expense reports – and not just general ledgers. Almost all FCPA violations involve books and records violations.

May I pay a small bribe if it will benefit the company and I do not personally benefit?Question: If I pay a bribe to a non-U.S. government official, I will be able to meet my project deadlines and save Baker Hughes thousands of dollars of damages related to delays not authorized by the project contracts. Can I pay a bribe to protect the Company from having to pay damages under the contract if I do not personally benefit?

Answer: No. Your payment of a bribe to a non-U.S. government official will violate the FCPA, and in all likelihood, local law. It will also violate Baker Hughes’ Core Values and Code of Conduct. Such a payment could cost the Company millions of dollars in fines, penalties, disgorgement of profits and legal fees. If you are caught making the bribe, which is very likely, you may lose your job. You could also be personally subject to stiff civil and criminal penalties (including imprisonment) imposed by the U.S. Department of Justice (“DOJ”), U.S. Securities and Exchange Commission (“SEC”), and local authorities.

For example, in one recent FCPA enforcement action, the gross gain from an illegal transaction that involved violations of the FCPA would have been $12 million; however, the fine assessed by the SEC and DOJ for the FCPA violations was $24 million. In addition to the fine, the company incurred legal fees that cost the Company millions of U.S. dollars. FCPA violations damage Baker Hughes’ valuable relationship with its customers and may provide the basis for a claim of breach of contract.

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Improper gifts to non-U.S. government officialsThe facts A large company provides products and services in the U.S. and 18 countries. The company operates several European subsidiaries (collectively referred to as the “Group”). The Group focuses on the sale and export of products and equipment to hospitals and doctors. The hospitals are both government owned and private facilities. The Group made several payments to doctors employed by the non-U.S. hospitals for the purpose of retaining business. The payments, which totaled more than U.S. $45,000.00, took a variety of forms, including computers, digital cameras, wines, watches and travel.

The result The SEC found that the gifts given to the doctors were made in violation of the FCPA, which prohibits a U.S. company (even if made through its non-U.S. subsidiaries), from making illicit payments to non-U.S. government officials for the purpose of obtaining or retaining business or gaining any improper advantage.

In this case, the doctors were considered non-U.S. government officials (they were employees of the government), and the hospitals were found to be instrumentalities of non-U.S. governments.

Key provisions of the FCPA

Anti-bribery prohibitions The FCPA prohibits Baker Hughes, its Employees and Representatives from knowingly making payments to non-U.S. government officials in order to obtain or retain business or secure an improper advantage. The FCPA specifically prohibits the following conduct:

• knowingly offering, promising, or authorizing to pay money or “anything of value” (e.g., reimbursement of expenses, promise of employment or personal favors)

• directly or indirectly (e.g., through a Representative), to any non-U.S. government official, political party or official of a political party, or candidate for political office

• with the intention of corruptly influencing such official to obtain or retain business or to otherwise secure any improper business advantage.

The FCPA defines a “non-U.S. government official” as:

• Representatives of a government agency at any level, including customs, immigration and transportation workers

• Employees of state-owned enterprises, including national oil and transportation companies

• Representatives of political parties• Candidates for political office • Representatives of public international organizations (e.g., the U.N.,

World Bank, IMF)• Any third party knowing that some or all of the payment will be paid to a

non-U.S. government official• Uncompensated honorary officials whose duties are merely ceremonial if

such officials can influence the award of business• Members of royal families who may lack “official” authority but who

maintain ownership or managerial interest in government enterprises• A non-U.S government official under the FCPA also includes any person

acting in an official capacity for or on behalf of a government agency, department, instrumentality, or public organization. This includes an entity hired to review and accept bids for a government agency.

In addition, payments made to non-U.S. government officials as a means of illegally or improperly reducing customs duties, income taxes, sales taxes, or to collect an outstanding debt, are prohibited by the FCPA.

The FCPA prohibits Baker Hughes, its employees and its representatives from knowingly making payments

to non-U.S. government officials.

Bribery takes many forms Keep in mind that a bribe may be more than money; it may be something of value such as:

• Gifts• Entertainment• Payment or reimbursement of travel expenses• Charitable donation or social contribution • Discounts on products and services not readily

available to the public • Offer of employment for a non-U.S. government

official or a relative of the non-U.S. government official

• Promise or assumption to pay or forgiveness of debt • Personal favors• Scholarship to a relative of non-U.S. government

official• Loans at favorable interest rates

Definition of a non-U.S. government officialUnder the FCPA, a non-U.S. government official includes:

• Officials of a government-owned bank in Argentina• The director of a regional health fund in Poland• Physicians and laboratory employees at government-

owned hospitals in China, Taiwan, Mexico, Luxembourg and France

• The President, the Prime Minister and the Oil Minister of Kazakhstan

• Officials of the National Petroleum Investment Management Service of Nigeria

• U.S. citizen engineers employed by the state oil company in Angola• A captain in the Nigerian Air Force• Customs officials in Haiti and Colombia• Officials of the State Oil Company of Azerbaijan• An Indonesian tax official• Airport officials in China, the Philippines and Thailand• A member of the Nicaraguan legislature• A senior official of the Indonesian Ministry of Environment

Expenditures that may be permissible under the FCPA The anti-bribery provisions of the FCPA include some narrow exceptions and defenses under which payments may be permissible. Determining what activity is permissible under the FCPA’s anti-bribery provisions is, however, not easy. This section includes a few general guidelines and illustrative examples.

Bona fide, reasonable expenses directly related to the promotion of products or execution of a contractFCPA issues can arise from certain site visits, offsite meetings, and other business related transactions that may involve the payment or reimbursement by Baker Hughes of travel and travel-related expenses of non-U.S. government officials. However, bona fide expenses for the travel, meals and lodging of a non-U.S. government official related to the legitimate promotion of Baker Hughes’ products or the execution of a contract are permissible under the FCPA. However, the expenses must be reasonable and directly related to the promotion of products or execution of a contract.

Baker Hughes has detailed Guidelines and approval processes for travel, entertainment and gift giving relating to non-U.S. government officials which must be followed in all cases. Section 5 of this Guide contains further information on these important mandatory guidelines and processes.

A bribe may involve “anything of value” – not just money.

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Facilitating or expediting payments Under the FCPA, the payment of small sums to expedite or secure the performance of certain routine, non-discretionary government functions is sometimes allowed so long as they are properly recorded in appropriate books and records. These payments are known as facilitating, expediting or “grease” payments (“Facilitating Payments”).

Facilitating Payments are typically small sums paid to lower level government officials to:

• Expedite the movement of equipment or goods;• Obtain permits, licenses, and work visas; or• Obtain needed governmental services, such as the processing of

government papers.

However, in many countries it is illegal under local law to make Facilitation Payments. Moreover, some anti-corruption multinational conventions do not permit these kinds of payments.

In addition, regardless of what may be allowed in limited circumstances under the FCPA, under Baker Hughes’ Facilitation Payments Policy, Baker Hughes does NOT allow facilitating payments to be made, except in circumstances that involve an imminent threat to the health, safety or welfare of an employee, family member or co-worker.

In such case, the payment must be properly and timely recorded in the Company’s books and records and a Compliance Contact referenced on page 3 of this Guide should be immediately contacted.

To access a copy of the Baker Hughes’ Facilitation Payments Policy, see page 4 of this Guide.

The anti-bribery provisions of the FCPA include some narrow exceptions under which legitimate business

costs may be permissible.

Reimbursing non-U.S. government official: Travel as part of contract negotiations?Question: I am negotiating a substantial contract. To assist in the decision-making process, I want a non-U.S. government official to visit our U.S. facilities. Since the contract is large, I want Baker Hughes to provide first class tickets for the non-U.S. government official and his wife, a generous per diem amount, hotel and meal costs. Would my proposed actions violate the FCPA?

Answer: Yes, your proposed actions would likely violate the FCPA. Baker Hughes cannot pay for first class airplane tickets for a non-U.S. government official unless approved in advance by the CCO. Further, Baker Hughes cannot pay any travel or entertainment visits associated with a non-U.S. government official’s spouse or family member absent very unusual circumstances and advance approval by the CCO. Moreover, Baker Hughes can never pay a per diem and also reimburse actual travel costs. This would represent the transfer of improper value to the non-U.S. government official. In fact, per diem payments to non-U.S. government officials should be avoided wherever possible.

Follow-up question: I understand. The non-U.S. official will not fly first class or bring his wife, and there will not be any per diem. But he would like to spend a day in New York City on the way back from the Company’s facilities in Houston to his home country. Can the Company pay for his stay in New York?

Answer: Probably not. The side trip to New York does not appear to be related to a legitimate business purpose. Baker Hughes’ guidelines governing the reimbursement of travel for non-U.S. government officials would require that you contact the CCO and obtain all necessary approvals before the official undertakes any travel that is to be reimbursed by the Company.

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Accounting, record-keeping and internal controlsIn addition to prohibiting bribery, the FCPA requires proper accounting, record-keeping and the establishment and maintenance of appropriate internal controls.

The FCPA specifically requires that every publicly traded company in the U.S. (including Baker Hughes):

• Make and keep books, records and accounts that accurately and fairly reflect the transactions and dispositions of the assets of

the company in reasonable detail. Documentation must not only record financial facts related to any transaction, but they must include any other information alerting the reviewer to illegality.

• Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that, among other things, transactions have been executed in accordance with management’s specific authorization and recorded in accordance with generally accepted accounting principles (“GAAP”).

Baker Hughes does not allow Facilitating Payments to be made except in circumstances that involve an imminent threat to an employee, family member or co-worker.

I am concerned for my safety while traveling. What should I do?Question: What if I arrived at an unfamiliar airport in a non-U.S. jurisdiction late at night? It is well known that the security of the road between the airport and the central city is questionable, and I am very concerned for my safety and security in getting into the city. May I request assistance from the local police to get me from the airport to the hotel and pay a “fee” for this service?

Answer: Yes, provided you are genuinely concerned for your personal safety and security and provided that such an established security service exists. The provision of the security service must be legal under local law. If possible, you should try to pay any fee that is paid for the service by check

or credit card directly to an entity involved. If such a course of action is not possible, then at a minimum, a receipt should be obtained evidencing that the service was provided at an appropriate price. The payment must be reasonable for the service provided. Baker Hughes’ Facilitation Payment Policy allows for small payments to non-U.S. government officials where an employee’s safety is in jeopardy.

However, any such payment will also have to be properly and timely recorded in the books and records of the Company, and you must notify a Compliance Contact referenced on page 3 of this Guide. Also, you should call your Baker Hughes contact person in the location, the CCO, your assigned attorney or a Baker Hughes security person to request assistance before proceeding.

Payments to immigration officials?Question: Are payments to immigration officials permissible under Baker Hughes’ Facilitation Payments Policy?

Answer: It depends on the facts. For example, suppose an Employee is traveling to a non-U.S. country. All of the Employee’s paperwork, including passport and visa, are in order. When the Employee arrives in the country, the Immigration officials refuse to stamp the Employee’s passport and threaten to take him to jail unless he pays $50. If the Employee believes his physical safety is at risk, this type of payment would be permitted under Baker Hughes’ Facilitation Payment Policy. If it is determined that the payment was a facilitating payment (remember in this situation, a Compliance Contact referenced on page 3 of this

Guide must be immediately contacted), it is critical that such payment be accurately and timely reflected in the books and records of the Company.

However, if the immigration official indicates that he can file the “additional” paperwork at a later date provided the Employee pays him $100 now, then paying the $100 would not be permissible under Baker Hughes’ Facilitation Payment Policy. A threat to delay, or even a refusal to process, paperwork is not the same as a threat to personal safety. There is no indication of physical risk to the employee. While many of us work in difficult environments from the standpoint of corruption on a routine basis, we must adapt and find appropriate ways to operate within Baker Hughes’ standards and procedures.

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What is “reasonable detail?” This requirement is defined as a degree of detail that “would satisfy prudent businessmen in the conduct of their own affairs.” The record-keeping provision does not require any showing of materiality; regardless of the amount involved in any transaction, it must be recorded. While inadvertent record-keeping errors involving nominal sums may not be pursued under the FCPA, a systemic failure to observe the internal controls requirement could provide the U.S. government the grounds to assert a FCPA violation.

Baker Hughes is fully responsible for ensuring that its wholly owned subsidiaries comply with these requirements. In instances where Baker Hughes holds 50% or less of the voting power of an affiliate, Baker Hughes must attempt in good faith to use its influence to cause the affiliate’s compliance with these record-keeping and internal control provisions of the FCPA.

Internal controls Under the FCPA, Baker Hughes is required to maintain a system of internal accounting controls to detect and prevent violations. Baker Hughes must:

• Perform periodic comparisons of recorded assets against existing assets so that disparities may be identified and addressed; and

• Ensure that transactions conform to GAAP and management expectations.

Where do I record a payment to a non-U.S. government official that I had to make?Question: I work in a country in Europe. From time to time I travel to a country in Africa to provide support services. While in the African country I was physically threatened by an immigration official and paid a facilitating payment to the immigration official to facilitate my release from custody. Should the facilitating payment be recorded in the books of the Baker Hughes entity that employs me or my home country in Europe or in the Baker Hughes entity in the country in Africa where I made the payment?

Answer: If you normally file your expense report in your home country, you would record the payment in books of the Baker Hughes entity in your home country. However, if you would normally file your expense report in the country in Africa, then the recording of your facilitating payment should be made in the books of the Baker Hughes entity in Africa where the payment was made. You should, however, recognize that absent the imminent threat to your health, safety or welfare or that of any employee or member of your family, facilitating payments are prohibited under Baker Hughes’ Facilitation Payment Policy.

Baker Hughes is committed to the highest standards of accuracy and

completeness in the documentation and reporting of all financial information.

Not properly recording paymentsThe facts A U.S. company sold pesticides in India through a subsidiary. The subsidiary entered into agreements with contractors to “expedite the registration” of pesticides. The contractor over the years also added “fictitious charges” on bills paid by the subsidiary. Additionally, payments were made to government officials to distribute and sell products, to government sales and excise tax officials and to government customs officers. Also, there were gifts, travel and entertainment and other items provided to government officials. None of these payments were accurately recorded in the books and records of the U.S. company or its subsidiary.

The result The U.S. SEC initiated an expensive and time consuming investigation that took several years to complete. Although this was the first FCPA related violation for the U.S. company and the company had taken significant steps to improve its FCPA compliance program, the company settled with the SEC. Under a “cease-and-desist order,” the company had to pay a several hundred thousand dollar fine.

13 | Baker Hughes

When a bribe is made and is accounted for improperly or not recorded, this would result in the violation of both the anti-bribery and record-keeping provisions of the FCPA. Interestingly, bribes must be recorded as bribes just as facilitating payments must be recorded as facilitating payments.

Baker Hughes’ financial integrity requirementsBaker Hughes is committed to the highest standards of accuracy and completeness in the documentation and reporting of all financial information. Accordingly, all financial information must reflect actual transactions and conform to U.S. or local GAAP, as applicable. No false or misleading entries may be made in the books and records of Baker Hughes. Employees are prohib-ited from engaging in any arrangement that would result in such entries. No undisclosed or unrecorded funds or accounts may be established. Employees are directed to maintain and support a system of internal controls that will provide reasonable assurances that all transactions are executed in accordance with man-agement’s authorization, properly accounted for and accurately recorded.

Sarbanes-Oxley Act of 2002The Sarbanes-Oxley Act (“SOX”) of 2002 provides for fines and up to 20 years in prison for certain acts related to record-keeping failures. SOX prohibits criminally altering, destroying, or concealing any record with the intent to obstruct or influence the investigation or administration of any matter within the jurisdiction of the U.S. government. SOX also covers the same actions when they are taken in relation to, or in contemplation of, a future investigation by the government. Some of the relevant provisions of SOX include:

Paying a commission to an agent under highly suspicious circumstances and failing to properly record commission paymentsThe facts A company made a direct sale to a government-owned airport in a non-U.S. country. The company does have an agent in that country that typically makes sales to the airport on the company’s behalf. Soon after the sale, the agent requested a commission for the company’s direct sale to the airport. The agent said that he was negotiating additional sales and could use the commission in connection with those negotiations to give cash or buy gifts for airport officials. The company paid the requested commission to the agent and recorded it as a “sales commission” in its books and records. The agent did not generate any further sales on the company’s behalf.

The result The U.S. SEC found that, under these circumstances, the company violated both the books and records and internal controls provisions of the FCPA. The SEC concluded that the company was aware with a high probability that the agent intended to use part of the supposed commission to provide something of value to non-U.S. government officials and improperly recorded the payment as a sales commission. Moreover, the agent performed no services for which he deserved a commission and only requested the commission after the direct sales transaction was already completed. Finally, it was determined that the company had knowledge that the agent intended to give cash and gifts to some airport officials.

The Sarbanes-Oxley Act provides for fines and up to 20 years in prison for certain acts related to recordkeeping failures.

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• Section 404 requires companies to include in their annual reports an independent auditor’s attestation of management’s report as to the accuracy of the company’s internal controls and procedures.

• Section 302 requires a company’s CEO and CFO to sign off on the accuracy of their company’s financial statements, with severe civil and criminal penalties for false certification.

• Section 301 and Exchange Act Rule 10A-3 require companies to have established procedures for receipt, retention and treatment of complaints regarding accounting and internal controls.

• Section 806 and Section 1107 require companies to protect employees who report matters from discrimination or retaliation.

FCPA compliance is not a choice – It’s a requirement!Baker Hughes’ obligations to the U.S. governmentLike many other companies, Baker Hughes has been subject to enforcement actions under the FCPA. Compliance with all official agreements, settlements, or orders that the Company has entered that resulted from any FCPA violations and related enforcement actions is required.

On September 12, 2001, the SEC issued a Cease and Desist Order (the “Order”) against Baker Hughes in connection with Baker Hughes’ 1999-2001 internal FCPA investigation of the Company’s operations in Indonesia, Brazil and India. The most important feature of this Order was that it prohibited Baker Hughes and all of its subsidiaries, affiliates, and Employees from committing any further violations of the FCPA.

On April 26, 2007, Baker Hughes announced a settlement with the DOJ and SEC relating to those agencies’ FCPA investigations into Baker Hughes’ operations in Angola, Kazakhstan and Nigeria (the “Settlement”). The Settlement required Baker Hughes to enter into both a Deferred Prosecution Agreement with the DOJ and a Final Judgment with the SEC. The Settlement includes the following obligations on Baker Hughes:

• The duty to permanently refrain from directly or indirectly violating the anti-bribery, accounting, books and records and internal control sections of the FCPA;

• The duty to hire and work with an independent compliance monitor for three years;

• The duty to establish and maintain a robust comprehensive global FCPA compliance program;

• The duty to cooperate with the SEC and DOJ in all future FCPA investigations;

• The duty to ensure that all Baker Hughes transactions are accurately and fairly recorded in the Company’s books, records and accounts; and

• The duty to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: • Transactions are executed in accordance with

management’s general and specific authorization;• Transactions are recorded as necessary to permit

preparation of financial statements in conformity with GAAP and to maintain accountability for assets;

• Access to assets is permitted only in accordance with management’s general and specific authorization; and

Will Baker Hughes pay my legal fees if I violate the FCPA?Question: As an employee, will the company pay my fine or legal fees if I violate the FCPA?

Answer: No, the Company cannot and will not pay an Employee’s fine or associated legal fees relating to an actual FCPA violation. An Employee who violates the FCPA is subject to employment termination and may have both civil and criminal fines imposed upon him by the SEC/DOJ.

Baker Hughes must abide by the

local laws of the countries where

Baker Hughes operates.

15 | Baker Hughes

• The recorded assets are compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

PenaltiesThe FCPA is a criminal statute. The penalties are severe. A single violation of the anti-bribery section of the FCPA may cost a company up to U.S. $2 million in fines. Individuals may be sent to prison for up to five years and are subject to civil fines up to U.S. $100,000 per violation. Baker Hughes cannot pay criminal fines imposed on individuals. The violation of the anti-bribery provisions also carries the potential for civil penalties by the SEC.

The penalties for violations of the record-keeping and accounting sections are the normal SEC penalties that apply to most other violations of the securities laws. The penalties for willful violations of the record-keeping provisions of the FCPA provide for up to 20 years in prison and U.S. $5 million in fines for individuals and fines of up to U.S. $25 million for companies. In recent years, enforcement actions have resulted in increasingly severe penalties for both companies and individuals.

Violations of the FCPA may also affect a company’s eligibility for export licenses and governmental contracts. Adverse publicity that accompanies a criminal investigation, even one that does not result in penalties, can be extremely damaging for both the individuals involved and a company.

International law enforcement cooperation and the ability of U.S. prosecutors to obtain documents, bank records, and testimony from companies and individuals outside the U.S. have increased dramatically in recent years. This makes it easier for the U.S. government to successfully bring and prosecute cases for violations of the FCPA.

Countries around the world are becoming more committed

to stop all forms of bribery.

FCPA violations result in stiff fines and possible imprisonment of individualsThe facts A company’s non-U.S. subsidiary paid over $2 million to support the presidential re-election campaign in a non-U.S. country through a third party, who was also a business advisor to the President of that country. In return, the company received a higher management fee for a contract that it had with a government-owned company. A senior U.S. officer of the company involved “authorized” making the payments and agreed that the payments could be made directly to the President’s business advisor. The payments were recorded as “social payments” in the company’s books and records.

The result The company pled guilty to violating the anti-bribery provisions of the FCPA, falsifying its books and records, and aiding or assisting the filing of a false tax return. The fines assessed against the company were approximately $28 million, including $13 million in criminal penalties and $15 million in disgorged profits. The company also agreed to retain an independent compliance monitor for a period of three years. The company’s regional manager who authorized the payment pled guilty to falsifying the company’s books and records.

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Compliance with local and international laws

Compliance with local laws outside of the U.S. In addition to complying with the FCPA, Baker Hughes must abide by local laws of the countries where Baker Hughes operates. Almost all countries, including the U.S., have some form of domestic anti-bribery law. The laws in most countries strictly prohibit payments to government officials, irrespective of the amount. Additionally, local law may affect the types of business relationships Baker Hughes is permitted to have with government-controlled entities and government officials. It is important that all Employees comply with applicable laws in the countries where Baker Hughes operates, including domestic anti-bribery laws.

International anti-corruption conventionsThere are several International Conventions that deal with improper payments to government officials that Employees should be aware of, such as:

• Inter-American Convention Against Corruption (1996)• European Union (EU) Convention on Corruption (1997) • The 1998 Organization for Economic Cooperation and Development Convention

on Combating Bribery of Officials in International Business Transactions (the “OECD Convention”)

• Council of Europe Criminal Law Convention on Corruption (2002)• UN Convention Against Corruption (2005)• The 2005 United Nations Convention on Bribery.

The Conventions are similar to the FCPA in that they denounce bribery and encourage the passage and/or strict enforcement of local anti-bribery laws and regulations.

The number of Conventions and the countries who are part of these Conventions continues to increase every year. There is no doubt that countries around the world are becoming more and more committed to stop all forms of bribery. This means there is a significant likelihood of greater international cooperation on anti-corruption enforcement.

Commercial bribery lawsThe bribery of persons who are not government officials in order to obtain or retain business is often known as “commercial bribery.” Most countries in which Baker Hughes operates have a variety of laws that prohibit commercial bribery.

The Baker Hughes Business Code of Conduct requires that all employees comply with all applicable laws, including local laws prohibiting commercial bribery. Therefore, to the extent that these laws apply, it is the policy of Baker Hughes to prohibit the bribery of anyone – regardless of whether the bribery involves government officials or private parties.

All Baker Hughes employees must be vigilant to ensure compliance

with all applicable laws and the contractual safeguards

established for any joint venture.

FCPA risks with representatives and joint venturesLiability under the FCPA for the acts of anotherEmployees and Baker Hughes may be liable for payments made to a non-U.S. government official by a Representative or joint venture where the Employee or Baker Hughes knew or should reasonably have known of their unlawful actions. Common areas of liability include sales, marketing, customs, and immigration.

As discussed below, Baker Hughes may be deemed to have knowledge of those transactions if there is ignorance of, or a conscious disregard of, suspicious actions or circumstances. The Employee and Baker Hughes may be liable regardless of whether the Representative or joint venture is directly subject to the FCPA.

Employees have a duty to inquire where circumstances indicate that a Representative or joint venture may have acted or will act unlawfully under the FCPA. Specifically, Employees should be alert to any indicators of illegal transactions or warning signs that may be encountered in transactions involving Representatives or joint ventures.

To help identify FCPA warning signs and reduce the risk of potential liability for the actions of third parties, Baker Hughes has adopted comprehensive FCPA due diligence procedures to screen and monitor Representatives. These policies must be followed when establishing a relationship with commercial/sales agents and other Representatives. Baker Hughes’ FCPA due diligence policies are discussed later in this section and can be accessed as described on page 4 of this Guide.

Employees must never ignore FCPA warning signs when dealing with Representatives acting on behalf of Baker Hughes. The “I don’t want to know” mindset may be the basis for liability for Baker Hughes and for the individual Employee(s) involved. Baker Hughes will impose discipline, which may include termination, on any Employee who ignores FCPA warning signs or knowingly participates in an FCPA violation.

Payment of bribe to reduce tax liability The facts The subsidiary of a U.S. company operating in a non-U.S. jurisdiction believed that it was owed a tax refund in the amount of U.S. $1.8 million. To validate the claim, tax officials performed an audit and, instead of granting the refund, issued an assessment for an additional U.S. $3 million of taxes. The company disputed the assessment. One of the tax officials introduced a proposed “settlement,” which ultimately involved the engagement of a third party accounting firm to represent the company in the negotiations of the settlement. In exchange for a U.S. $75,000.00 cash payment to the non-U.S. government official, the tax assessment imposed on the company was to be reduced to U.S. $270,000. The company made a payment of U.S. $145,000 to the accounting firm as a “success fee,” a portion of which was intended for the non-U.S. government tax official. The payment to the accounting firm was booked by the company as payment for “professional fees/success fee.”

The result Although the payment was made to a third party representative, the SEC found a violation of the books and records provision of the FCPA and issued a cease-and-desist order. The company’s managers and officers should have known that a portion of the payment would be passed to a non-U.S. government official for the purpose of influencing his decision to reduce the tax assessment.

May I ignore illegal actions by my joint venture partner under the FCPA?Question: A Baker Hughes joint venture partner has suggested that he and I split a payment to a non-U.S. government official in connection with a bid that the joint venture has submitted. May I simply ignore the fact that this request has been made?

Answer: Absolutely not. If Baker Hughes deliberately ignores the request of the joint venture partner to engage in illegal activity under the FCPA and fails to investigate a possibility that a bribe has occurred or will occur, Baker Hughes would be imputed with knowledge of any such illegal payment its joint venture partner makes. In such a situation, Baker Hughes would likely be liable under the FCPA.

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Hiring representatives and entering into joint ventures can create the potential for FCPA

liability based on the actions of the individuals and entities involved.

Any FCPA concerns with minority owned joint ventures?Question: If Baker Hughes owns less than 50% of a joint venture and does not have management control, could Baker Hughes ever be liable under the FCPA for the actions of the joint venture?

Answer: Yes, it is possible. If Employees have knowledge of FCPA potential violations and do not report them or ignore warning signs, Baker Hughes could be liable for FCPA violations of the joint venture. Baker Hughes must also make all reasonable efforts to ensure that the joint venture maintains accurate accounts and records consistent with the requirements of the FCPA.

Conducting business with non-U.S. governments The FCPA prohibits corrupt payments to non-U.S. government officials. The FCPA does not prohibit a U.S. company from conducting business with non-U.S. governments, agencies and government-controlled entities or instrumentalities. Baker Hughes’ business activities frequently require direct dealings with non-U.S. government entities and officials acting in their official capacities. This may include the sale of Baker Hughes’ products and services to government-owned companies and joint ventures with government-owned or government-controlled entities. The FCPA requires heightened vigilance in dealing with such entities, so that any warning signs are identified and addressed promptly.

Conducting business with non-U.S. government officials or entities owned or controlled by non-U.S. government officialsConducting business with a non-U.S. government official or private company wholly or partially owned by a non-U.S. government official, or in which a non-U.S. government official holds an economic interest, can raise serious FCPA concerns. Any agreement to enter into any direct or indirect relationship with a non-U.S. government official could potentially constitute a bribe under the FCPA. The following examples illustrate the definition of “conducting or doing business” with a non-U.S. government official:

• Entering into a joint venture with a non-U.S. government official’s company;

• Hiring a non-U.S. government official as a consultant or representative;

• Paying fees for services; • Providing investment opportunities; and• Awarding a contract or subcontract to a non-U.S. government

official’s company.

Employees are strictly prohibited from negotiating with or enter-ing into any business transaction that may involve a non-U.S. government official or a company wholly or partly owned by a non-U.S. government official without prior review by the CCO. There are no exceptions to this rule.

Precautions when establishing a business relationship related to a non-U.S. government official The following are the minimum precautions that must be taken by Employees when contemplating the establishment of a business relationship with an entity that is in any way related to a non-U.S. government official:

• The arrangement should be created only if permissible under local law.

• The host government must be made aware of the relationship.

19 | Baker Hughes

Settlement of customs disputesThe facts In 2003, an oil and gas services company contracted with some local customs brokers in a non-U.S. jurisdiction for the customs brokers to “intervene” and settle all customs disputes with the government customs authorities as they might arise in that country. The company agreed in all cases to pay 50% of any amounts in dispute with the non-U.S. government customs officials to its customs broker in exchange for the broker properly settling all such disputes with appropriate government customs authorities. Over the course of about four years, the company paid its customs brokers a total amount of approximately $2.5 million in fees. The customs brokers did not provide good evidence to the company of how much money was actually paid to the non-U.S. government authorities to settle each of the customs matters.

The result The company investigated all matters handled by these customs brokers and determined that while there was no clear evidence of any bribery on the part of the customs agents under the FCPA, the company’s books and records did not accurately reflect the ultimate disposition of the monies paid to the customs broker as required by the FCPA. As a result, the company admitted to a books and records violation under the FCPA.

• Baker Hughes must have audit rights over the entity that is co-owned by the non-U.S. government official.

• The non-U.S. government official must agree to undertake, as evidenced by a signed certificate, that he/she will not take any action or use any influence to affect the government’s decision concerning any Baker Hughes’ business.

• The non-U.S. government official should not be in a position to exert influence over matters affecting Baker Hughes’ business. If the non-U.S. government official is, or appears to be in the position to exert influence, the official must disassociate himself from the arrangement, or Baker Hughes should terminate the relationship.

• The arrangement must be approved by the CCO.

Requirements for written contracts with all representativesEmployees are prohibited from entering into agreements with Representatives before completing the Baker Hughes’ FCPA Due Diligence Procedures as described below. In addition, Employees must, in all instances before using the Representative, formally define the scope of the third party relationship in a Baker Hughes’ standard form written contract.This contract must be approved by the CCO or any member of the Legal Department.

It is Company policy that all relationships with third parties be clearly reflected in a signed, Baker Hughes standard form written contract before the third party undertakes any work on behalf of Baker Hughes. The Baker Hughes attorney who drafts or reviews the contract has primary responsibility for ensuring that the contract contains all of Baker Hughes’ safeguards against potential violations of U.S. and local law, including the FCPA.

Baker Hughes’ FCPA Due Diligence requirementsAs previously mentioned, Baker Hughes may be liable for the acts of Representatives and joint ventures. Hiring Representatives and entering into joint ventures can create the potential for FCPA liability in non-U.S. jurisdictions based on the actions of the individuals and entities involved. To reduce this risk, Baker Hughes has developed and instituted its comprehensive FCPA Due Diligence Procedures, which are mandatory for the establishment of all relationships with commercial/sales agents and any other type of Representatives operating in a non-U.S. jurisdiction and having any interaction with non-U.S. government officials. The FCPA Due Diligence Procedures are readily available from the Baker Hughes Legal Department and can be directly accessed in accordance with the instructions contained on page 4 of this Guide.

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The following is a summary of the steps that must be followed to comply with the FCPA Due Diligence Procedures:

• The contract with the Representative should include, among other things, the following provisions:• The Representative’s obligation to strictly

comply with the FCPA;• The Representative’s obligation to maintain

separate books and records;• Baker Hughes’ right to audit the

Representative’s books and records, including documents pertaining to the Representative’s interaction with non-U.S. government officials on behalf of Baker Hughes; and

• Baker Hughes’ right to unilaterally terminate the contract in the event of credible evidence of an FCPA violation being discovered.

• All Representatives must be listed in the Legal Due Diligence Database.

• Critical information must be compiled and preserved during the selection process of the Representative. At a minimum, this information should include the:• Experience and skills of the Representative; • Business reputation of the Representative,

especially with other U.S. companies; and • Representative’s and family’s relationship

to any political parties, candidates, non-U.S. government officials or entities.

• You must be assured that any relationship between the Representative or the Representative’s family and a political party or non-U.S. government official is permissible under local law.

• The rationale for the rate of the Representative’s commission, if any, must be documented.

• Include an explanation of the Representative’s capabilities, the services that will be provided and the basis for believing the compensation is reasonable.

• Conduct an in-person interview with the Representative, preferably at the Representative’s place of business, and explain Baker Hughes’ expectations and anti-bribery policies. There

must never be any body language or implicit understandings to suggest anything less than full compliance with anti-bribery policies and laws.

• Verify the information the Representative provides on background questionnaires and other forms submitted to Baker Hughes.

• Require yearly certificates of compliance from the Representative stating an understanding of the applicable anti-bribery laws and compliance with both Baker Hughes’ policies and applicable laws.

• Maintain and update the Representative’s due diligence file with new information gained during any review of the relationship.

• Conduct a recertification process for the Representatives at least every two years.

Warning signsWhen dealing with Representatives and joint venture partners, Employees have a continuing duty to be alert for suspicious circumstances under the FCPA, the so-called warning signs. Several examples of common warning signs are:

• The country where the transaction is taking place has a history of corruption.

• The Representative was specifically recommended by a non-U.S. government official.

• The Representative refuses to agree to abide by the FCPA.

• The Representative provides incomplete or inaccurate information in required disclosures.

• The Representative requires that payment be made to a third party or in some other country than where services are being provided.

• The Representative requests an unusually large commission in relation to the services provided.

• The Representative requests reimbursement for poorly documented (or questionable) expenses.

• The Representative makes unusually large or frequent political contributions.

• The Representative has family or business ties to relevant non-U.S. government officials.

• The only primary qualification the Representative has is influence over non-U.S. government officials.

21 | Baker Hughes

Ignoring warning signs: Company executives can be liableThe facts A company disclosed that there was a high probability that certain employees were aware that its distributors in Thailand, China and the Philippines paid or offered to pay bribes in connection with its business. The alleged payments, which were believed to be approximately $100,000, were all made by distributors. The company was specifically faulted by the DOJ for not conducting due diligence on its distributors to determine the existence of warning signs.

The result The company had to pay U.S. $1.3 million in fines and penalties, disgorge $589,000 in profits, and had to institute a best-in-class global compliance program. In addition, a company executive had to pay a $65,000 penalty and agree to a permanent injunction against future violations.

This list is not exhaustive, and Employees must be alert for any circumstances that raise questions concerning payments made to Representatives. Employees should never be afraid to scrutinize, question and stop commission payments about which they have concerns.

Additional issues with joint venturesUnder the FCPA, Baker Hughes has the following obligations with respect to joint ventures:

• If Baker Hughes has a majority interest in the joint venture, Baker Hughes is required by law to require the joint venture to comply with the FCPA’s accounting and record-keeping requirements. In addition, Baker Hughes must have unrestricted access to the accounting records of the joint venture.

• If Baker Hughes has a minority interest in the joint venture, Baker Hughes is required by law to make a good-faith effort to request the joint venture to comply with the FCPA accounting and record-keeping requirements.

All Employees must be vigilant to ensure compliance with all applicable laws and the contractual safeguards established for any joint venture.

When monitoring joint ventures, Employees should be alert to the following:

• Use of Representatives without conducting FCPA due diligence or the absence of written contracts;

• Unusual, incomplete or overly complex arrangements that demonstrate a lack of transparency;

• Unusual or overly generous subcontracts; and• Excessive, false or poorly described payment

requests.

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Excessive travel & entertainment of a non-U.S. government officialThe facts Prior to receiving a contract award in connection with a multi-phase project for the construction of a sewage facility in Egypt, a U.S. engineering firm paid for first class tickets for a non-U.S. government official, his wife and children to travel to the United States on two occasions. The official also received cash advances to cover trip related expenses and per diem payments in advance of the travel. The non-U.S. government official held a position on the committee responsible for the award of the contract and, therefore, had the ability to influence the awarding of the contract.

The result The U.S. DOJ successfully asserted that the U.S. company violated the FCPA because the cash advances, per diem amounts and travel expenses for family members were not bona fide expenses. The non-U.S. government official was in a position to influence the outcome of a contract. In addition to the tickets and reimbursing much of the non-U.S. government official’s actual expenses, the company provided the official with several cash advances prior to the trip.

Gifts, meals, travel and entertainment and the FCPAGiftsThe FCPA permits reasonable and bona fide expenses directly related to the promotion of Baker Hughes’ products or execution of a Baker Hughes’ contract. However, Baker Hughes has developed detailed Guidelines and an approval form for Gifts relating to non-U.S. government officials. All Employees must comply with these Guidelines. To access a copy of Guidelines and approval form, see page 4 of this Guide.

• A gift should comply with any local laws or business policies that apply to the non-U.S. government official.

• A gift of cash is never appropriate.• A gift should not be extravagant or lavish. • Employees should avoid a pattern of providing nominal gifts

to the same person or group, as it may begin to take on the appearance of a bribe.

• The gift should be customary under the circumstances. • The gift should be transparent, and Employees should not

allow anyone to conceal the facts. • The gift should be given in a manner that avoids any

appearance of impropriety.

• The expense of the gift must be fairly and accurately accounted for in Baker Hughes’ books and records.

• The gift should never have a value of more than U.S. $100 without approval from the CCO.

Meals, travel and entertainmentProper business entertainment of non-U.S. government officials is more challenging to discern than gift giving because there is greater room for disagreement over what is considered a reasonable business expenditure under the FCPA. As with gifts, Baker Hughes has developed detailed Guidelines and approval forms for travel and entertainment relating to non-U.S. government officials. All Employees must strictly comply with these Guidelines. To access a copy of these Guidelines and approval form, see page 4 of this Guide.

With regard to business entertainment, Employees should be aware of the following considerations:

• The entertainment expenditure should comply with any local laws or business policies.

• The expense should avoid even the appearance of impropriety. • The entertainment costs should be unmistakably reasonable -

not lavish, extravagant, or too frequent. • The expenditure should be in line with local customs.

23 | Baker Hughes

Making a charitable donation at request of a non-U.S. government official

• The expenditure should be openly incurred; that is, there should be no effort made to conceal the facts by either the donor or the recipient.

• The expenditure should not impose a sense of obligation on the recipient.

• The expense of the entertainment must be fairly, accurately and timely accounted for in Baker Hughes’ books and records.

Charitable donations and community contributionsCharitable donationsDonations, whether cash or in-kind, to charities may be restricted by the FCPA. FCPA risks can arise in connection with charitable contributions in a variety of contexts:

•Where a non-U.S government official or family member of an official is involved in the organization receiving the donation;

• Where the request is to assist a non-U.S. government agency, such as by providing computers, telephones, or office equipment;

• Where the recipient organization lacks financial transparency; or

• Where the facts otherwise create a possibility that the contribution could be diverted to an improper beneficiary or purpose.

As with gifts, travel and entertainment, Baker Hughes has developed detailed Guidelines and an approval form for Charitable Donations relating to non-U.S. government officials. No donation to a charitable organization affiliated with a non-U.S. government official or entity, or suggested/requested by a non-U.S. government official, can be made without the prior approval of the Legal Department. Donations of over $100 (U.S.) must be approved by the CCO. All Employees must strictly comply with these Guidelines, which include additional documentation and approval requirements.

Non-U.S. community contributionsBaker Hughes may periodically make benevolent contributions to certain communities (such as a donation to an unincorporated village or tribal community). While these communities may not have a state-recognized government, certain of these communities may generally follow a principle of collectiveness where control and access to community resources are regulated by community leaders, such as village or tribal elders.

In these cases, Baker Hughes’ Non-U.S. Community Contributions Policy requires that all contributions to these non-U.S. communities first be approved by certain senior managers, which may only approve a contribution if they (1) determine that the contribution does not violate company policy and (2) receive satisfactory legal advice from Baker Hughes legal counsel.

The facts The subsidiary of a U.S. pharmaceutical company operating in a non-U.S. country made donations to an organization dedicated to the renovation and preservation of historical buildings. The founder and director of the organization was also the director of a local government body that allocated health fund resources to hospitals and other entities. The payments were recorded as medical donations in the subsidiary’s books and records. In two years, the donations made to the organization were about 30% of the subsidiary’s budget for social giving and were structured in a way that allowed the subsidiary’s local manager to exceed his authorization limits. The local manager viewed the payments as “dues.”

The result The company settled with the U.S. SEC for violations of the books and records and internal controls provisions of the FCPA. The U.S. SEC found that recording the payments as donations, when they were seen as “dues,” violated the books and records provision. The U.S. SEC also found that the company’s FCPA internal controls policies were inadequate because they did not require any due diligence prior to making promotional or charitable donations. Further, the U.S. SEC found that the company should have been aware that there were FCPA issues because the recipient was not a healthcare related entity; the payments were relatively large; the payments were structured to avoid authorization limits; and the charity’s founder and president was a government official with ability to influence the purchase of the company’s products.

Baker Hughes | 24

Employees are prohibited from making payments, whether in cash or in-kind,

to political parties, party officials or political candidates for the purpose of obtaining, retaining, or directing business

to a specific entity.

Reasonable and ordinary business practices allowed with non-U.S. government officialsThe facts An American company provided samples of packaged beef products to non-U.S. government officials. The packages, valued at U.S. $250 each, were distributed to non-U.S. government officials in their capacities as official representatives for the government.

The result It was determined that the packaged beef was provided to make the non-U.S. government officials aware of the quality of the food product and for testing, sampling and inspection, and thus was a reasonable and bona fide expenditure. As a result, the DOJ declined to take action against the beef packing organization.

Contributions to political parties or political candidatesA candidate for political office, political parties and party officials outside the U.S. are covered by the provisions of the FCPA. Employees are prohibited from making payments, whether in cash or in-kind, to political parties, party officials or political candidates for the purpose of obtaining, retaining, or directing business to a specific entity. In-kind contributions include participation in political campaigns during paid working hours and use of administrative support, company facilities, equipment, and supplies. Be aware that such activities may also be prohibited under local law.

Even when an Employee intends for a payment to be a legitimate lobbying transaction, the appearance of impropriety makes it very difficult to prove the absence of a corrupt intent. As a result, no decision regarding political contributions shall be made without the approval of Baker Hughes Government Relations and the CCO. This approval must be obtained even if there is a written law in the country where the donation is being made that explicitly permits campaign contributions.

Security and Real Estate TransactionsReal Estate Transactions in Selected CountriesPursuant to Baker Hughes’ Real Estate Transactions in Selected Countries Policy, an employee or representative of Baker Hughes may enter into a real estate transaction in the following countries – Angola, Azerbaijan, China, Congo, Equatorial Guinea, Gabon, India, Indonesia, Iraq, Kazakhstan, Mexico, Nigeria, Russia, Saudi Arabia, Turkmenistan and Venezuela – only after he or she:

• has undertaken or overseen reasonable efforts to document the fair market value of the property;

• has undertaken or overseen reasonable efforts to document whether each third party lessor, lessee, seller or purchaser is a government official or is affiliated with any government official; and

• has obtained satisfactory legal advice from Baker Hughes legal counsel pursuant to policy requirements and procedures.

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May we give to charity?Question: May Baker Hughes make a donation to a non-U.S. government entity?

Answer: Employees must seek the advice of the CCO or any member of the Legal Department whenever a donation to a non-U.S. government entity has been requested or proposed. Any donation must be pre-approved by senior management and accurately reflected in the Company’s books and records. A donation should never be given directly or indirectly to an individual government official. In addition, donations should not be given to a charity that is designated by a government official unless that charity is internationally recognized. The Red Cross is an example of an internationally recognized charitable organization.

Giving of lavish gifts and entertainment to non-U.S. government officials

Use of non-U.S. police or military organizations for security purposesIn certain situations, Baker Hughes may have no reasonable option other than engaging a non-U.S. military or police organization to provide security or protection services. Unless otherwise authorized by Baker Hughes Incorporated’s CCO or applicable policy exceptions, Baker Hughes policy prohibits this engagement (or payment for such services) unless:

• certain senior managers receive satisfactory legal advice from Baker Hughes legal counsel;

• either (1) Region Counsel determines that the engagement or payment is required by local law or (2) enterprise security confirms that there is no other alternative for effective security;

• the engagement (or payment) is pursuant to a written agreement; and

• the non-U.S. military or police organization is paid directly (rather than to the account of an individual).

The facts Over the course of five years, a steel company and its subsidiary made about $1.8 million in payments to customer employees to induce them to buy scrap metal. The company gave over $138,000 in gifts and entertainment expenses to non-U.S. government officials to induce such officials to award new business. Gifts included jewelry, gift certificates, perfume, golf, and use of an apartment.

The result The non-U.S. subsidiary pleaded guilty to violations of the FCPA, conspiracy, and wire fraud, and agreed to pay a $7.5 million criminal fine. The parent company settled an SEC action by disgorging approximately U.S. $7.7 million, representing its illicit profits associated with a project obtained plus prejudgment interest, and agreeing to a cease-and-desist order.

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Last minute increase in commissions

Remember that all employees must comply with U.S. and local law.

Dealing with potential issues

FCPA issues must be addressedEmployees may be imputed with sufficient “knowledge” for a violation of the FCPA if they ignore FCPA related issues that come to their attention. Ignorance of, or a conscious disregard of, suspicious actions on the part of Representatives is prohibited. Potential or actual FCPA issues involving Employees or Representatives that are ignored and not addressed may result in Baker Hughes being deemed to have knowledge of the unlawful transactions.

If you see or learn about suspicious actions relating to the FCPA that involve an Employee or a Representative, immediately inform one of the Compliance Contacts listed on page 3 of this Guide. Do not ignore the situation and assume it will go away or someone else will take care of it. Doing so creates risk, and potential liability, for Baker Hughes and for you.

The facts A company submitted a bid for a major engineering project in a non-U.S. country. The company had a good reputation and offered technical advantages and expertise over its competitors. After protracted negotiations, the company was informally notified that it would be awarded the work. However, just prior to the formal award, non-U.S. government officials suggested that the company engage a specific agent to assist in “dealings with” the government entity that was responsible for the management of the project. The company complied and engaged the services of the agent. A commission fee was negotiated with the agent, and the company was awarded the contract.

The result The request to engage a specific agent, especially late in or toward the end of the process, raises serious FCPA issues. Baker Hughes policy requires that a comprehensive FCPA due diligence process must be completed prior to hiring any Representative. These warning signs would always necessitate enhanced scrutiny of the Representative and the transaction. If Baker Hughes fails to conduct FCPA due diligence with respect to each non-U.S. Representative that it hires, then the U.S. government may view the failure as “willful blindness,” and the Company could be exposed to serious potential liability with respect to any Representative that it hires.

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Are political contributions OK?Question: If I make a personal political contribution in a non-U.S. country and the Company subsequently reimburses me for the contribution, who is liable if local law prohibits political contributions?

Answer: The SEC and DOJ are likely to take the position that both the Employee and the Company may be held liable since reimbursement of the payment by the Company implicitly recognizes that the Employee acted on its behalf. You must always consult with and obtain written authorization from your regularly assigned attorney, the CCO and Government Relations before making any political contribution on behalf of the Company.

Avoiding trouble: Responding to and reporting potential issuesResponding to a request for an improper payment under the FCPA To protect Baker Hughes and its Employees, the following rules must be followed without exception when responding to a request for an improper payment under the FCPA:

• Refuse to make the payment and explain that Baker Hughes does not make such payments;

• Make it clear that the refusal is absolute and that there is never any body language or implicit understandings to suggest anything less than full compliance with the Company’s anti-bribery policies and law;

• Immediately report the request to the CCO (or if you cannot immediately contact the CCO, then immediately to a Compliance Contact listed on page 3 of this Guide and then, at your first opportunity, to the CCO);

• If a joint venture partner or a Representative is involved, explain that they are not authorized to make an improper payment under the FCPA on behalf of Baker Hughes; and Baker Hughes will immediately terminate the relationship if an improper payment is made.

Things to rememberEmployees have certain obligations to Baker Hughes, which include the following:

• When you have doubts or concerns, ask questions; • Conduct comprehensive FCPA due diligence on Representatives

or joint venture partners (See page 20 of this Guide); • Be vigilant - monitor third parties closely; • If you hear rumors of improper payments or warning signs (see

page 21 of this Guide) never ignore them - immediately refer them to a Compliance Contact listed on page 3 of this Guide;

• Record and document all payments and any disposition of Company assets; and

• Remember that all Employees must comply with U.S. and local law.

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A rumor regarding your agent

Frequently Asked Questions regarding the FCPAFrequently Asked Questions

What actions are prohibited under the FCPA? (see pages 9 and 10 of this Guide)

Under the FCPA, U.S. companies and their employees are prohibited from bribing non-U.S. government officials. The FCPA also prohibits making or authorizing an offer to pay or a promise to pay a non-U.S. government official to induce that official to exercise his or her discretion in an improper or illegal fashion to award business or to grant an improper advantage to Baker Hughes.

What types of payments are prohibited? (see pages 9 and 10 of this Guide)

Prohibited transactions include payment of anything of value to a non-U.S. government official for a corrupt purpose to unfairly obtain or retain business or gain an improper advantage. Examples are giving gifts, paying expenses, forgiveness of a debt, and personal favors (e.g., the hiring of a relative of the non-U.S. government official.)

Who is a foreign or non-U.S. government official? (see page 10 of this Guide)

The FCPA defines a “non-U.S. Government official” or “foreign official” as any officer, employee or representative of a non-U.S. government or any department, agency, or instrumentality of the government or a public international organization. The FCPA’s definition of an official also includes employees and officers of government-owned or controlled companies or enterprises, such as a state-owned oil or transportation company.

Is Baker Hughes liable for the acts of its agents or third party representatives? (see page 18 of this Guide)

Yes, Baker Hughes may be liable for bribes made by both its U.S. and non-U.S. Representatives, or other parties acting on its behalf if Baker Hughes had prior knowledge of or should reasonably have known about the bribes. If the circumstances indicate that Baker Hughes ignored conduct that violated the anti-bribery provisions of the FCPA, the Company or its Employees may be deemed to have knowledge of the unlawful conduct. All Employees have a duty to inquire when circumstances raise warning signs regarding FCPA compliance.

The facts A company hired an agent, and a competitor of the agent reports to the company that the agent has been bribing a non-U.S. government official. The company decides that the information must be wrong and continues with its relationship with the agent.

The result If credible information suggesting facts of this nature is received, the company must investigate or risk the presumption that the company knew of the unlawful activity. Baker Hughes requires that concerns of this nature must be immediately reported to one of the Compliance Contacts listed on page 3 of this Guide.

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All employees have a duty to inquire when circumstances raise warning signs regarding FCPA compliance.

May Baker Hughes transact business with non-U.S. government entities? (see page 19 of this Guide)

Yes, the FCPA does not prevent Baker Hughes from engaging in legitimate business transactions with non-U.S. government entities, such as contracting for the delivery of various goods and services. The FCPA is focused on corrupt payments to individual non-U.S. government officials that are made in order to unfairly gain business opportunities or improper advantages.

Is it possible to do business with a non-U.S. government official as an individual or entities that are co-owned by a non-U.S. government official? (see page 19 of this Guide)

Yes, but Baker Hughes and Employees must be very vigilant in supervising these relationships and gaining assurances that the non-U.S. government officials will comply with the FCPA. In these situations, the CCO must be contacted prior to the initiation of any transaction and all pertinent FCPA due diligence requirements must be followed. These situations should be avoided if at all possible.

What happens if an employee violates the FCPA? If an FCPA violation occurs, Baker Hughes and the individual(s) involved in the violation may be found liable for substantial monetary penalties. In addition, an individual Employee who is found to have engaged in illegal activity under the FCPA may also be subject to imprisonment. In the event that an Employee is found guilty of a violation of the FCPA, Baker Hughes will not pay (or reimburse) the Employee for the fines or legal fees incurred in defending against the charges. The employee will also be subject to disciplinary action including possible termination.

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Summary of anti-bribery policies and selected procedures and guidelines

The following is a brief summary of select Baker Hughes Anti-bribery policies, procedures and guidelines which are in effect at the time of the publication of this guide. Employees should consult currently posted policies, procedures and guidelines for full details on, and future updates to, these topics as changes are made from time-to-time.

Facilitating paymentsBaker Hughes employees and representatives may not offer, pay, promise or provide gifts or anything of value to a government official in exchange for a business advantage, except in situations presenting an imminent threat to the health, safety or welfare of an employee, a member of his or her family or a co-worker. Specifically, this policy prohibits “facilitation payments,” which are nominal payments made to low level government officials to expedite or perform a routine, non-discretionary governmental action.

Guidelines for travel, entertainment, gifts and charitable donations connected to non-U.S. government officialsThese guidelines require that all expenditures and donations must be:

• reasonable and bona fide (i.e., genuine) expenses related to marketing, contracting or charitable activities,

• permissible under applicable foreign and domestic laws and regulations,

• not provided with a corrupt purpose to obtain or retain business or to gain an improper business advantage,

• made by wire transfer, by company check or by another approved method – but never by cash or a cash equivalent – for all reimbursements to a non-U.S. government entity or payments to a charitable organization recommended by or associated with a non-U.S. government official,

• properly documented (including receipts and written requests, whenever possible) and recorded in Baker Hughes’ books and records, and

• pre-approved, using the appropriate approval form provided in the relevant guidelines, in accordance with the following chart.

Required Approval(s) (All values in U.S. Dollars)

Gifts Local Meals and/or Local Entertainment Travel Charitable Donations1

Less than $1002Greater than

$100 Less than $2504$250 to $4004

Greater than $400 All Less than $100

Greater than $100

Supervisor3 X X X X X X

Geomarket Vice President or Managing Director level X X X

Region/Operations Counsel X X X X X X

Chief Compliance Officer* X X X X

* or designee1. All charitable donations may also be subject to additional corporate,

regional or Geomarket authorization requirements.2. Subject to additional corporate, regional, Geomarket requirement and

local law, no pre-approval is necessary for advertising or promotional items (for example, items bearing a company logo) valued under $100.

3. No form required – use normal reporting and approval procedures for business expenses.

4. For employees at or above the level of Geomarket Vice President or Managing Director, pre-approval of local business meals and/or local entertainment (not involving travel) with a value of less than $400 is not required, and only normal reporting and approval procedures for business expenses are required.

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Due diligence procedures for commercial sales representatives, processing consultants and professional consultantsBaker Hughes maintains three separate due diligence procedures that govern an initial due diligence examination, and a common set of procedures that govern subsequent examinations and re-certifications, for:

• all commercial sales representatives5 who or that represent Baker Hughes’ commercial interests within a non-U.S. jurisdiction,

• all processing consultants6 who or that represent Baker Hughes before any non-U.S. government official, and

• all professional consultants7, subject to certain exemptions, who or that represent Baker Hughes before any non-U.S. government official.

All of these procedures, and their associated checklists, require that these third party individuals and entities:

• execute a suitable written agreement containing certain required anti-bribery provisions including, but not limited to, a Baker Hughes audit right,

• cooperate with, and successfully complete, an initial due diligence examination undertaken by Baker Hughes as well as similar examinations and re-certifications of compliance occurring at two year intervals thereafter, and

• have a BHI employee sponsor who is responsible for overseeing their engagement and continued use.

Among other purposes, the due diligence examinations conducted under these procedures seek to evaluate any ties (either directly or through close relatives or other contacts) between the third party individual or entity and any non-U.S. government official. Non-U.S. government officials can include employees of a government instrumentality (such as a national oil company), public international organization (such as the World Bank), political party or candidates for government office.

Offshore payments to Non-U.S. Commercial Sales RepresentativesAll payments to Non-U.S. Commercial Sales Representatives (“CSRs”) must be made by bank wire transfer to the account of that CSR at a designated financial institution in the country in which that commercial sales representative renders services, subject to the following exceptions:

• Payment may be made in a country where a commercial sales representative maintains its principal place of business upon confirmation by a Baker Hughes attorney that the contract clearly specifies that payment may be made in that country and the law allows.

• Payments may be made by check upon written approval by Region/Operations Counsel, Region Compliance Counsel or any other Baker Hughes attorney designated by the Chief Compliance Officer.

• Payments may be made in a country other than where a commercial sales representative renders services or maintains its principal place of business only upon written approval by the Chief Compliance Officer.

CSR commission payment approval and expense reimbursement review This Policy provides approval requirements for all commission payments to CSRs made by Baker Hughes and establishes review guidelines and a final authorization process for reimbursement of certain types of expenses incurred by CSRs. CSRs covered by this Policy are listed in the Company’s Legal Due Diligence Database as the providers of the following types of services: 1) Sales Representative and 2) Trade Sponsor.

5. Common examples of commercial sales representatives include sales representatives, joint ventures, joint venture partners, plain distributors, trade sponsors, certain contractors and certain subcontractors.

6. Common examples of processing consultants include customs brokers, freight forwarders, couriers and visa processors (with a focus on clearing goods or persons through customs or immigration into the country of destination).

7. Common examples of professional consultants include attorneys, tax advisors and accounting firms.

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Authorized employees of Baker Hughes must approve all payments (including commissions and any reimbursement of expenses) to any CSR in accordance with the Non-U.S. Commercial Sales Representatives Commission Payment Approval and Expense Reimbursement Review Policy. Among other criteria, all approvals must be based upon confirmation that payment will

comply with the payment provisions of all applicable contract(s) and the review of specific documentation, including payment calculations, and must follow a specific approval workflow process and be properly reported through quarterly financial reporting procedures. The approval requirements are listed in the following charts:

Commission Payments

Required Approval(s)8 Increased Risk CSRs9, All Countries

Normal Risk CSRs9 High Risk Countries10

Normal Risk CSRs9, Non-High Risk Countries10

(All values in thousands of U.S. Dollars) <$25 >$25 <$25 >$25 <$25 >$25, <$100 >$100

BHI GeoMarket Controller X X X X X X X

BHI GeoMarket Managing Director X X X X X X X

BHI Region Finance Vice President X X X X X X

BHI Region President X X X

Chief Compliance Officer X X

Expense Reimbursements

Required8 Approval(s)IR CSR9 and FCPA Risk

Category11 for All Countries

IR CSR9 and Non-FCPA Risk Category11 for All Countries

OR NR CSR9 and FCPA Risk

Category11 for High Risk Country10

NR CSR9 and Non-FCPA Risk Category for High Risk Country10,

OR NR CSR9 and FCPA Risk Category11

for Non-High Risk Country10

NR CSR9 and Non-FCPA Risk Category11 for Non-High Risk

Country10

(All values in thousands of U.S. Dollars)

<$25 >$25 <25>$25, <$100

>$100 <$100>$100, <$250

>$250 <250>$250, <$400

>$400

BHI GeoMarket Controller X X X X X X X X X X X

BHI GeoMarket Managing Director X X X X X X X X X X X

BHI Region Finance Vice President X X X X X X X X

BHI Region President X X X X

Chief Compliance Officer X X

8. Approvers listed are for Regions/Geomarkets. For Integrated Operations, Reservoir Technology & Consulting, and Baker Petrolite Downstream approvers, refer to the Non-U.S. Commercial Sales Representatives Com-mission Payment Approval and Expense Reimbursement Review Policy, Exhibit 1 - Management Approvers.

9. CSRs are categorized as either Increased Risk (“IR”) or Normal Risk (“NR”) by the CCO. IR CSRs include CSRs whom the CCO, at his discre-tion, determines to be an IR CSR based on such factors as: (1) the type and scope of the CSR’s activities; (2) the extent of the CSR’s interaction with foreign officials; (3) the amount of money the CSR is being paid; (4) the perceived and actual level of corruption risk in the country in which the CSR is operating; (5) the quality of the CSR’s personnel; (6) the CSR’s length of service to BHI, and (7) any past compliance or FCPA issues involving the CSR. NR CSRs will include all CSRs not categorized by the CCO as IR.

10. High Risk Countries include Angola, Azerbaijan, China, Congo, Egypt, Equa-torial Guinea, India, Indonesia, Iraq, Kazakhstan, Libya, Mexico, Nigeria, Russia, Saudi Arabia, Turkmenistan, Venezuela, Vietnam and Yemen.

11. FCPA risk category expenses include, but are not limited to customs, logis-tics, and duties charges/expenses; facilitating/expediting fees; charitable and community contributions; political donations; travel and entertainment; reimbursements to CSRs for sponsorship fees paid by the CSR on behalf of BHI; professional fees; taxes; security or police payments; gifts; immigration expenses; permits, licenses and other regulatory expenses; social respon-sibility payments; payments to consultants and agents; customer training; and fines and penalties. Consult Region Compliance Counsel to determine whether a particular expense type poses an FCPA risk.

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Petty Cash Funds PolicyExcept for small travel advances, the local petty cash fund should only be used for payment of small incidental operating expenses, generally not to exceed $50 USD per item.

• Examples of petty cash expenses are:• Employee meals when working late (only when company credit cards can not be used)• Company Postage• Delivery Charges • Cleaning Supplies• Certain temporary, small travel advances not to exceed (U.S.) $500 • Other similar items not generally reimbursed through the expense reporting process• Other miscellaneous employee expenses for less than (U.S.) $50 such as; employee taxi, office

supplies, etc.

There are situations when the use of petty cash is not allowed

Petty cash may not be used for:

• Payments to, or on behalf of, a government official • Any gifts, travel, meals, entertainment, charitable donations or other

expense benefitting, or at the request of, a government official• Payment to any commercial agent, possessing consultant, or

professional agent• Charitable or political donations • Payments connected to customs clearance• Other items generally reimbursed through the expense reporting process

Non-U.S. community contributionsNo contribution (such as a donation or a payment) to a non-U.S. community may be made without the prior approval of senior management. Senior management may approve a contribution to a non-U.S. community only if he or she (1) determines that the contribution does not violate company policy and (2) receives satisfactory legal advice from Baker Hughes legal counsel. All contributions to non-U.S. communities must be satisfactorily documented as specified in the associated procedures.

This policy applies to communities that generally follow a principle of collectiveness where control and access to community resources are regulated by community leaders, such as village or tribal elders. However, neither the definition of “community” nor this policy apply to “instruments of the State” (such as an official local government, university or governmental agency) or charitable organizations – although anti-bribery laws and other policies may apply to these contributions.

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Real estate transactions in selected countriesAn employee or representative of Baker Hughes may enter into a real estate transaction connected with BHI in the following countries – Angola, Azerbaijan, China, Congo, Equatorial Guinea, Gabon, India, Indonesia, Iraq, Kazakhstan, Mexico, Nigeria, Russia, Saudi Arabia, Turkmenistan and Venezuela – only after he or she:

• has undertaken or overseen reasonable efforts to document the fair market value of the property,

• has undertaken or overseen reasonable efforts to document whether each third party lessor, lessee, seller or purchaser is a government official or is affiliated with any government official and

• has obtained satisfactory legal advice from Baker Hughes legal counsel.

Use of non-U.S. police or military organizations for security purposesA non-U.S. military or police organization may be engaged to provide, or paid for the provision of, security (including explosives-related activities) or protection services only upon the approval of senior management. No senior manager may approve such engagement or payment unless:

• the senior manager receives satisfactory legal advice from Baker Hughes legal counsel;• either (1) Region/Operations Counsel determines that the engagement or payment is

required by local law or (2) enterprise security confirms that there is no other alternative for effective security;

• the engagement or payment is pursuant to a written agreement; and• the non-U.S. military or police organization is paid directly (rather than to the account of an

individual)12.

12. Unless otherwise authorized by procedures established by the Chief Compliance Officer or approved in writ-ing by the Chief Compliance Officer on a case-by-case basis.Notes

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Notes:

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Notes:

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