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CODE
OF BUSINESS CONDUCT AND ETHICS
I. Offering
Business Courtesies
Commercial
Frequency's policy is to treat its customers, vendors
and other business contacts with good faith and fairness,
in accordance with applicable laws and regulations,
without bias or favoritism. The Company subscribes to
the principle that business should be won based on the
excellent value of FEI's products and services, and
the record of its performance. While the providing of
modest entertainment and business courtesies is at times
appropriate, the entertainment or courtesy must not
violate any law, regulation, or policy of the recipient's
employer. Business courtesies are never to be offered
for or because of a return business favor from the recipient.
Business courtesies always should be modest in value,
and should never be extended under circumstances that
could create even the appearance of impropriety or cause
embarrassment to the Company.
Government
FEI employees who deal with our government customers
are responsible for knowing and adhering to the particular
laws, regulations and policy of the recipient regarding
business courtesies. This is particularly important
when dealing with employees of the United States Government.
As a rule, government employees are forbidden by law
from accepting anything of value from a contractor who
does business with the government. This includes even
the most modest of meals, transportation, or promotional
items. While there are some government exceptions to
the general rule, FEI has adopted a policy forbidding
its employees and consultants from giving anything of
value to any government employee. There are no exceptions
even where the government's own rule would permit receipt
of the gift or courtesy. Any question regarding the
propriety of providing or accepting meals, refreshments,
entertainment, transportation or anything of value should
be referred to the FEI Ethics Officer. (See also Section
VII, the Company's Government Compliance Program.)
II. Accepting Business
Courtesies
Commercial
It is FEI's policy to avoid granting unfair consideration
to any supplier, vendor, or other business associate.
Company personnel who deal with FEI's vendors, suppliers
and outside consultants must be alert to situations
where the acceptance of business courtesies such as
meals, gifts, and tickets to sporting events might cause
or create the appearance of favoritism in the allocation
of Company business. FEI employees are discouraged from
accepting business courtesies even of modest value (under
$25), even if such acceptance is infrequent. FEI employees
may not accept business courtesies where there is an
expectation of favorable reciprocal treatment, spoken
or unspoken. FEI personnel who deal with vendors, suppliers
and consultants are responsible for exercising good
judgment and common sense in accepting business courtesies.
Employees who have no responsibilities under government
prime contracts or subcontracts may accept only those
customary business courtesies that are reasonable in
frequency and value, and then only when such acceptance
would be consistent with the reputation of the company
for honest and fair dealing. Should you have a question
as to the propriety of accepting a gift, please feel
free to seek the guidance of the Ethics Officer in handling
the situation. In no event shall any employee accept
anything -- even an item of nominal value -- if the
item is offered with the expectation of favorable treatment
or reward.
Government
Many situations easily can be identified as illegal
or unethical. Accepting a bribe or kickback or furnishing
a false statement, for examples, are clearly prohibited
by law as well as by Company policy. There are other
more subtle situations, however, that likewise could
give rise to a violation of company policy. This is
especially true in contracting with the United States
Government, where a number of special rules exist that
have no counterpart in the commercial marketplace. Violation
of these rules could lead to the loss of a new business
opportunity, termination of an existing contract, or
even disciplinary action against the involved company
employee.
The rule on acceptance of anything of value is much
more restrictive when dealing with suppliers and subcontractors
under government prime or subcontracts. Under the Anti-Kickback
Act, kickbacks are defined as:
any money, fee, commission, credit, gift, gratuity,
thing of value, or compensation of any kind which
is provided, directly or indirectly, to any prime
or subcontractor, prime or subcontractor employee,
for the purpose of improperly obtaining or rewarding
favorable treatment in connection with a prime or
subcontract.
Where FEI is the prime contractor or subcontractor
under a United States Government contract, company personnel
who have responsibility for dealing with suppliers and
subcontractors shall not accept anything of value
from a supplier or subcontractor.
Violation of the Anti-Kickback statute carries severe
penalties for the company and its employees. FEI is
committed to prevent and detect kickbacks in its own
operations. Furthermore, the company must report
all instances where there is a reasonable suspicion
that violation of the Anti-Kickback Act has occurred.
It thus is the responsibility of each FEI employee to
ensure that the rules are followed. If any employee
suspects that a kickback has been offered to or received
by a company employee, it is their duty to report it
promptly. Reports may be made to the Ethics Officer.
Just as acceptance of a kickback can lead to disciplinary
action, so too can failure to report the possible violation
of this policy.
III. Proper Marketing
Practices
FEI's success over the years derives from developing
and delivering high quality technology products and
services on time. Competitively priced superior products
and services, therefore, is our primary marketing tool.
Because our reputation is built upon excellence, there
is no need for misrepresentations, false claims, or
shades of truth. Likewise, we must never try to secure
an unauthorized competitive advantage through the unlawful
or unethical acquisition of a competitor's information.
IV. Financial Integrity
All Frequency Electronics directors, officers, and
employees have a direct role in helping to maintain
the company’s financial integrity by keeping company
records accurate. We have a fundamental obligation to
make sound business decisions on behalf of the company
that are undistorted by our individual family, financial
or other interests.
All directors, officers, managers, and employees must
have an unyielding commitment to maximize the value
we create for share holders: We do this through (1)compliance
with applicable laws, regulations and company policies,
(2) rigorous business processes to ensure that management
decisions are based on sound economic analysis (including
a prudent consideration of risks), and that FEI’s
physical, financial and intellectual property assets
are safeguarded and optimally employed; and (3) integrity
in communications to ensure timely and accurate reporting
of actual and projected financial information. Through
the unwavering commitment of all employees to this process,
we create an environment in which we can all take pride.
FEI is committed to the highest standards of compliance
with all applicable security laws and regulations, accounting
standards, accounting controls, and audit practices.
All financial reporting will fairly and accurately reflect
the highest standards of compliance.
All employees and their supervisors have a responsibility
and are encouraged to report any suspected violations
of the company’s financial reporting standards.
Basic Requirements
• Follow FEI's general accounting procedures,
as well as all generally accepted accounting principles,
standards, laws and regulations for accounting and
financial reporting of transactions, estimates and
forecasts.
• Maintain complete, accurate and timely records
and accounts to reflect all business transactions.
• Properly safeguard all physical, financial,
intellectual, and other company assets.
• Use economic, risk-based criteria to make business
decisions.
• Provide timely, candid forecasts and assessments
to management.
• Maintain sound processes and controls.
What FEI Employees Are Urged
to Watch For
• Financial results that seem inconsistent with
underlying performance.
• Inaccurate financial records, such as erroneous
time sheets or invoices, or overstated expense reports.
• Transactions that are inconsistent with good
business economics.
• Confidential information released to unauthorized
third parties.
• Absence of controls to protect assets from
risk of loss.
• Physical assets or other resources that could
be more fully utilized, reallocated or disposed of.
• Circumventing review and approval procedures.
• Adequacy of routines and controls at newly
acquired businesses and at remote, thinly staffed
sites.
Special Procedures under Section
310 of the Sarbanes-Oxley Act of 2002
FEI's Audit Committee has established a system to facilitate
the receipt, retention, and treatment of complaints
from employees or external third parties regarding any
questionable accounting, internal accounting controls,
or auditing matters. The sytem provides two special
reporting channels for this purpose:
• A third party, toll-free hotline in the U.S.,
1-877-778-5463. Callers will be assisted by professional
staff in the caller's language, available 24 hours
a day, 7 days a week. Other locations:
Belgium 0-800-100-0-877-778-5463
France 0-800-99-00-11-877-778-5463
China 108-11-0-800-100-10-877-778-5463
• An internet on-line hotline: http://reportit.net
All reports received through these channels will be
directed to corporate counsel. Reports relating to accounting
or auditing matters will be reviewed under Audit Committee
direction. Confidentiality will be maintained, to the
fullest extent possible, consistent with the need to
conduct an adequate review. Corrective action will be
taken as warranted, including a reply to the person(s)
submitting the report, if identified. A record of all
reports and the disposition thereof will be maintained
by the Ethics Officer.
Reports may be submitted anonymously. Individuals who
choose to report a suspected violation will be protected
from retaliatory action of any kind in accordance with
applicable laws and regulations. This includes actions
taken by the individual to provide information, assist
in investigations, or testify in a proceeding related
to the suspected violation.
The Chief Executive Officer and the Chief Financial
Officer will each sign a yearly certification regarding
the Company’s Code of Business Conduct and Ethics,
which includes standards for financial integrity and
special procedures for the Audit Committee under this
section of the Code.
V. Additional Considerations
Concerning Doing Business with the United States Government
A. General Policy
FEI's general policy in doing business with the government
is (i) to protect the public interest so that government
decision makers act on the merits of the particular
contract action and not because of undue influence,
(ii) to promote the government's goal of full and open
competition by avoiding collusive practices that could
be deemed to be inimical to competition, and (iii) to
provide only factually correct information to the government
by ensuring accuracy, currency and completeness of all
information provided.
B. Preparing and Submitting Claims
and Proposals
There are special requirements that apply when the
company submits a contract claim in connection with
a government contract. All contract claims will be coordinated
in advance with the Company legal counsel. A claim in
excess of $50,000 must be submitted with a certification
that the company believes the claim is made in good
faith, that the supporting data are accurate and complete
to the best of the company's knowledge and belief, and
that the amount requested accurately reflects the contract
adjustment for which the company believes the government
is liable. Employees must exercise due care in preparing
such claims for legal review.
Similarly, the company's proposals for contracts and
contract change modifications in excess of $500,000
often require the submission and certification of cost
and pricing data. This imposes significantly different
disclosure obligations than those the company faces
in the private sector. Where the law requires disclosure,
all employees who are involved in the preparation of
a proposal to the government must ensure that all cost
and pricing data are current, accurate, and complete
as of the date of agreement on contract price.
C. Representations and Certifications
All of the proposals that FEI furnishes to the government
and its prime contractors contain important certifications
and representations. For example, the company may be
required to certify that it has complied with or intends
to comply with federal socioeconomic laws and regulations.
It is the responsibility of each employee who prepares,
signs, or in any way supports the company's certifications
and representations to assure that these important documents
are prepared carefully and accurately. A false certificate
can lead to civil and criminal sanctions against the
company as well as the involved employees.
D. Employing Government Personnel
There are strict laws and regulations that govern the
recruiting and hiring of current and former government
personnel, including both military and U.S. civil service
employees. Violations could result not only in sanctions
against the government employee, but could include civil
and criminal liability for the company.
The rules in this area are many and complex. For instance,
some former government personnel are prohibited from
being employed at all by certain contractors. Others
have one or two year restrictions on being able to contract
with their former agencies on behalf of their new employers.
All former government employees, of whatever rank or
grade, have a life long restriction related to all particular
matters for which they had personal and substantial
responsibility as federal employees. In all cases, it
is necessary to conduct a thorough review of the candidate's
prior government service before employment discussions
are held with the individual.
Many employment discussions begin between technical
personnel. Accordingly, prior to the holding of any
employment discussions -- including discussion between
technical personnel -- with a current or former government
employee, the matter shall first be reviewed and approved
by the FEI Human Resources Office.
E. Quality Assurance
FEI customers are entitled to and will expect strict
compliance with the work described in the contract.
Quantity, quality, material, testing, specifications
and inspection requirements in contracts and subcontracts
must be observed. FEI's policy is to insist on integrity
in the services we provide and integrity of the records
and reports related to that work. Therefore, substitution
of materials or contractually required skill levels
or procedures will only be made with the prior written
approval of the customer. We will always conduct the
appropriate tests and inspections to assure all standards
and specification are met. Vendors and suppliers must
likewise be required to meet all quantity, quality,
material, testing, and inspection requirements in FEI
purchase orders and subcontracts.
F. Labor and Material Charging
Making the best use of time on the job is essential
to meeting our obligation to customers, shareholders
and others. We are personally accountable for the proper
use of our time and are expected to be on the job when
scheduled and conform to rules governing performance
on that job. Given the nature of some of our contracts,
accurate accounting of our time as well as our material
costs is an essential part of the trust our customers
place in us. Frequency employees and consultants shall
complete time entries on a daily basis, even in circumstances
where the particular contract permits lesser frequency.
Time entries, time sheets and all other business records
must be complete and accurate. Falsification of time
entries, time sheets or other records is strictly prohibited.
Correction of time sheets or other records can only
be accomplished in accordance with established FEI procedures
and must be supported by appropriate documentation and
approvals.
G. Consultants, Agents, and Representatives
FEI shall use the services of outside consultants only
when it is more cost effective than using employees
of the company to perform the required services or where
the nature of the services requires a person not otherwise
available within the company. Consultants, agents, or
other representatives under contract with FEI shall
be required to comply with this Code in the same manner
and to the same standards as FEI employees. Consultants
will receive an orientation and a copy of our code at
the start of their assignment. FEI's exposure if a consultant
were to act inappropriately or to violate the law in
the course of providing services to the company can
be the same as if the consultant were a full-time employee.
It is important, therefore, that consultants engaged
by the company be selected with great care. Engagement
of consultants shall be coordinated in advance with
the Human Resources Office. Consideration should be
given to the knowledge and experience of the consultant,
as well as to the reputation of the consultant for integrity.
Failure of a consultant to comply with statutes, regulations
and contractual requirements shall be grounds for immediate
termination of the agreement with the consultant.
VI. Responsibilities
A. Conflicts of Interest
Each FEI employee is expected to devote his/her entire
time and effort to the business of the Company. No employee
will engage in any other business that may be similar
to or in competition with that of FEI. At any time that
there is a question as to a competing business, guidance
will be provided by the Human Resources Office.
B. Drug Free Workplace
Frequency is committed to maintain a drug free work
place. There are serious personal and business consequences
of being involved in an alcohol or substance abuse accident.
We are committed to having a safe working environment
for the benefit of our employees and customers. The
use or introduction of any illegal substance abuse items
on company premises or at company sponsored functions
is strictly prohibited.
C. Equal Opportunity
The Company affirms its position that all personnel
actions shall be without regard to race, color, religion,
sex, age, national origin, veteran status, or handicap.
The Company further recognizes that its strength derives
from the diverse nature of the employees at its facility.
We will try to be sensitive to the needs, as best we
can, caused by cultural differences and those diversities.
D. Company Information and Intellectual
Property
Because of the nature of FEI's business, we regard
safeguards as a vital concern. Our business is highly
competitive and our continued success depends on the
ability to out-perform our competitors. In the normal
process of business, employees may be exposed to information
about the company that might be detrimental if known
by outside parties. None of this information including
company methods, processes, or research programs should
be discussed with friends or relatives outside of the
Company. It should be discussed only as necessary to
the normal processing of our daily business with those
that have a need to know.
In the government portion of our business, we are a
defense contractor. In this area, our facility is cleared
to the SECRET level under the authority of the Department
of Defense. It is imperative that those cleared employees
do their utmost to safeguard all classified information.
Compromise of classified information will be regarded
as a breach of company policy and may result in disciplinary
action.
E. Computer software
All software packages used at FEI must be purchased
and licensed to FEI and be authorized for use by the
MIS department. Most software packages allow only for
single station use. Programs may not be copied for use
on multiple stations without obtaining pemission and
proper procedures from the Information Systems Office.
F. Health and Safety Issues
It is FEI's policy to establish and manage a safe and
healthy work environment. As such, FEI will comply with
all health and safety laws and regulations, and establish
our own stricter standards where laws are not adequately
protective or do not exist.
G. Environment
FEI recognizes that the resources we use are finite.
In keeping with the growing consciousness of our ecosystem,
FEI will continue to promote energy conservation and
recycling where appropriate.
H. Community Relations
FEI recognizes its responsibility to the communities
in which we live and work. As citizens of the broadly
defined human neighborhood, we must do our fair share
to support good works and charity and bear our fair
share of taxes. We must encourage civic improvements,
as well as better health and education. Indeed, we are
all part of a greater society and individually and collectively
we must play our role in helping our community.
I. Dealing with the Media
In order that the Company may speak with "one voice"
all employees of FEI are to refer any and all inquiries
from the media to the Office of The Chairman of the
Board of Directors.
J. Securities Law
In the course of everyday business operations and employee
may become aware of non-public material information
relating to important business matters. Securities law,
and Company policy, prohibit persons from trading on
the basis of non-public material information.
VII. The Company's
Compliance Program
The cornerstone of ethical business conduct is communication
to Company employees and consultants of what the Company
considers proper business practice. This Code and periodic
business ethics training are intended to ensure that
all FEI employees and consultants know the rules. FEI
also has designated the Director of Human Resources
as the Government Contracts Compliance Officer. The
Director of Human Resources is a resource to all employees
and consultants as to questions on doing business with
the Government.
In this regard, FEI expects the personal commitment
of all employees and consultants to maintain the company's
reputation as an ethical and responsible business organization,
and to report any suspected improprieties in accordance
with established procedures (see below).
How to Handle Ethical Issues
FEI is committed to operating its business in accordance
with the highest levels of integrity and ethical standards.
Should an improper practice or irregularity occur within
the Company, management is committed to making all necessary
corrections, taking remedial actions to prevent reoccurrence,
and making timely and open disclosures of the improper
actions to the appropriate government authorities.
If such irregularities occur, several options are available
for the reporting of violations:
• You may report the matter to your supervisor,
manager, or the Ethics Officer, or to any member of
the Ethics Committee.
• You may call FEI's Helpline 516-227-2521.
• You may write to the FEI Ethics Committee,
c/o Ethics Officer, Frequency Electronics, Inc, Box
241, Uniondale, NY 11553.
• You may send electronic mail to: hotline@freqelec.com
FEI's HELPLINE has been established as a means for
employees to communicate with management. HELPLINE,
as well as any of these options, should also be used
to seek clarification of any issue or dilemma confronting
and employee.
The Ethics Officer is responsible for answering employee
inquiries and for establishing compliance training programs.
Supervisors shall ensure that those employees and consultants
reporting to them are made aware of both the Company's
commitment to proper business practices and each individual's
obligation to comply with the policies.
©2004 Frequency Electronics Inc.
All rights reserved.
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