GARDNER DENVER s.r.l.

Transcription

1 GARDNER DENVER s.r.l. pursuant to section 6, paragraph 3, of Legislative Decree 231 dated 8 June 2001 Regulations for the administrative liability of legal entities, companies and associations even without legal status, pursuant to section 11 of Law 300 dated 29 September 2000 Model approved with resolution of the Board of Directors dated 23 October 2013

2 CONTENTS A Introduction The activity of GARDNER DENVER s.r.l The Legislative Decree The law governing the administrative liability of Entities The adoption of an Organization, Management and Control Model The adoption of the Model The areas in which the company operates Brief analysis of Corporate Governance at GARDNER DENVER Aims pursued by the Model Relations between the Model, Code of Ethics and Group Policy To whom does the Model apply? Areas of risk Crimes of 2nd degree homicide and serious injury through negligence as a result of violating accident prevention regulations and regulations safeguarding hygiene and health in the workplace Crimes against the Public Administration Crimes against the environment Company crimes Other types of crime Integrating risk areas Procedures and control principles Protocols Crimes of 2nd degree homicide and serious injury through negligence as a result of violating accident prevention regulations and regulations safeguarding hygiene and health in the workplace Protocols Crimes against the Public Administration Protocols Crimes against the Environment Protocols Company crimes 56 2

3 5. Supervisory Body (Supervisory Body) Identifying and appointing the Supervisory Body Functions and powers of the Supervisory Body Information flows Reporting of the Supervisory Body to the governing bodies of GARDNER DENVER Reporting to the Supervisory Body by Directors, employees, colleagues and third parties Collecting and keeping information on file Information and training Communication Personnel training Information to External Colleagues and Partners The disciplinary system General principles Violations of the Model Measures against Employees Measures against Directors Measures against Executives Measures against Colleagues, Consultants and third parties 76 ANNEX 1: Code of Ethics 77 ANNEX 2: Organizational Charter/2b/2c 77 3

4 A Introduction The activity of GARDNER DENVER s.r.l. GARDNER DENVER s.r.l. with Sole Proprietor (hereafter GARDNER DENVER and/or the Company ) has the following business object: the design, production, acquisition, sale, import, export, warehousing, assembly, maintenance and repair, technical consultancy for the installation and related start up and management, and, in general, the trade, on its own behalf and for third parties, including as representative, agent, distributor or commissioner for other companies or enterprises, including foreign ones, of compressors, pumps for any application, machines for compressed air, machinery and equipment for industry in general, as well as their accessories functioning with compressed air, equipment and spare parts. Specifically, the Company operates actively through three divisions called respectively GD LONATE/CORMANO, ROBUSCHI, GIEFFE. The GD LONATE/CORMANO Division The division handles engineering, production, procurement and sales, import, export, distribution, marketing, warehousing and in general the trading and maintenance of any type of pneumatic equipment, and particularly vacuum pumps and pumps to create vacuums, suction equipment and industrial vacuum systems, compressors and fans. The activity is carried out in the facilities in Cormano (MI) and Lonate Pozzolo (VA), which employ about 110 people. The division has indirect and occasional relations with the Public Administration. The turnover is about 33,100,000. The ROBUSCHI Division The division is active in the sector for the production of blowers, vacuum pumps, centrifugal pumps and couplings. The activity is carried out in the facility in Parma, which employs about 240 people. This division has indirect and occasional relations with the Public Administration. The turnover is around 55,000,000. 4

5 The GIEFFE Division The division is active in the sector for the construction of vacuum machinery and plant on a project basis, as well as the engineering of vacuum pumps for the medical, chemical and food industries, among others. The activity is carried out in the facility in Noceto (PR), which employs about 10 people. This division has indirect and occasional relations with the Public Administration. The turnover is around 4,000,000. 5

6 1. The Legislative Decree 1.1. The law governing the administrative liability of Entities Legislative Decree 231 dated 8 June 2001 enshrining Regulations for the administrative liability of legal entities, companies and associations even without legal status, pursuant to section 11 of Law 300 dated 29 September 2000 (hereafter the Decree ), taking effect on the subsequent 4 July, introduced into law the criminal liability of Entities (legal entities, companies and associations even without legal status), as well as the individuals who represent them and who carried out a crime. According to this legislation, Entities can be considered liable and hence punished for some crimes committed or attempted in the interest and to the advantage of the Entity itself, by its Directors and employees Basic principles of the Decree and the relevant regulations The Decree updates internal regulations in relation to the liability of legal entities to enshrine the international conventions Italy signed some time ago, including: the Brussels Convention of the European Community dated 26 July 1995 on safeguarding financial interests; the Convention of 26 May 1997, also signed in Brussels, on the fight against corruption involving officers of the European Community or Member States; and the OECD Convention dated 17 December 1997 on the fight against corruption involving foreign public officials in economic and international transactions. The Decree introduced into Italian law a system of administrative liability (essentially a criminal liability) for legal entities (i.e. companies, associations, consortia, etc., hereafter Entities ) for some crimes committed in the interest or for the advantage of the entities themselves, by: individuals who represent, administer or manage the Entities or a local organizational unit with financial and functional autonomy; individuals who de facto exercise management and control over the Entities; individuals subject to the management and supervision of one of the above. This liability is in addition to the (criminal) liability of the individuals who actually committed the crime. 6

7 1.1.2 Penalties The penalties for the 1 Entities, for committing or attempting to commit a crime, as specified above, are: - fines (up to 1.5 million euro); - penalties involving exclusion from carrying out a certain activity, the suspension or revoking of licenses and concessions, prohibition against having dealings with the Public Administration, exclusion from or the revoking of loans and grants, the prohibition to advertise products and services; - confiscation (preventive seizure at the preliminary stage of a trial) of the profit of the Entities from the crime, or equivalent value 2 ; - publicating of the sentence (where the penalty involves an exclusion or prohibition 3 ) The crime itself The Decree and its subsequent additions specifies certain crimes, which can be summarized as belonging to the following categories: - crimes against the Public Administration 4 ; - company crimes 5 ; - abuse of the market 6 ; - 2nd degree homicide and serious personal injury through negligence, committed by violation of accident prevention regulations and regulations safeguarding hygiene and health in the workplace 7 ; - receiving stolen money, money laundering and the use of ill gotten gains 8 ; - crimes against public trust 9 in relation to forging money, forging documents relating to public credit and revenue stamps; - crimes of a terrorist nature or to subvert the democratic order, including financing these activities 10 ; 1 Section 9 and subs., Paragraph I, Subsection II General Penalties of the Decree. 2 Section 6, paragraph 5. 3 Section 18, Subsection II mentioned above. 4 Sections 24 and 25, Paragraph I, Subsection II Administrative liability for crimes under the Criminal Code of the Decree. 5 Section 25 ter, Subsection III mentioned above. 6 Section 25 sexies. 7 Section 25 septies. 8 Section 25 opties. 9 Section 25 bis, Subsection III mentioned above. 10 Section 25 quater, Subsection III mentioned above. 7

8 - crimes against the person, such as the exploitation of child prostitution, paedopornography including via Internet, reducing and keeping people in a state of slavery 11 and female genital mutilation 12 ; - transnational crimes; - IT crimes and illegally processing data; - organized criminal activities; - crimes against industry and trade; - crimes violating copyright; - crimes involving failure to make declarations or making false declarations to the judicial authorities; - crimes against the environment; - crimes of employing third parties whose presence in Italy is illegal, where such presence is a crime Public Administration, public official and person appointed to carry out a public service Public Administration For the purposes of the Decree, a Public Administration is any entity, whether subject to the laws of a private or public enterprise, that carries out a public function or public service. Public function and public service What is meant by public function is any activity subject to the laws governing a public enterprise that relates to the following functions: - legislative (State, Regional Authority, Provincial Authority with special autonomous status, etc.); - administrative (members of state or territorial administrations, Law Enforcement, members of supranational administrations for example the EU members of Authorities, of Antitrust watchdogs, of the Chambers of Commerce, members of Building Committees, organizations responsible for the final approval of public works, experts for the Italian Register of Shipping, etc.); and - judicial (Judges, Court Officers, auxiliary bodies relating to the Administration of Justice, such as Court appointed receivers or liquidators in the case of bankruptcy, etc.). A public official carries out his/her functions via powers to authorize or powers of certification. Remember that: 11 Section 25 quinquies, Subsection III mentioned above. 12 Section 25 quarter. 8

9 - the power to authorize is the power that enables the Public Administration to pursue its aims through a command set up, to which private individuals are subject. This is the activity in which so called public powers are exercised, which include the powers of coercion (arrest, search, etc.) and the ability to establish violations of the law (traffic tickets, etc.), as well as the hierarchical powers within public offices; - the power to certify is the power of the certification agency to establish a fact, and serves as proof, unless legal action is brought to overthrow the judgement. Section 357 of the Criminal Code defines a public official as a person who exercises a legislative, judicial or administrative function. Public service and a person appointed to carry it out What is meant by public service is: - the activity of producing goods and services of general interest and subject to the supervision of the Public Authority; and - activities aimed at guaranteeing the rights of people to life, health, freedom, a retirement pension and social security, education, freedom of expression, etc. and carried out under concession and/or through agreements (e.g. Hospitals, Health Authorities, Social Security or State Accident Insurance Institutions I.N.P.S., I.N.A.I.L. members of City Authority Councils, Banks, Post Offices, Customs Offices, the Railway and Motorway Authorities, Municipal Utilities, Airlines etc.). A public service is an activity governed by the same legislation as public functions, but characterized by a lack of the powers normally associated with the latter (the powers to authorize and certify) and excluding simple duties and providing a merely material service. Section 358 of the Criminal Code defines a person appointed to carry out a public service as any person who carries out a public service Crimes against the Public Administration The Decree peremptorily lists crimes against the Public Administration where the Entity is liable. They include: embezzlement of the State s funds, or the funds of another public or Community entity 13 : failure to allocate funding, grants and so on to the purposes for which they were intended; - misappropriation of funding, grants and other payments by the State, another public or Community entity 14 via the use of falsified documents or the issue of declarations bearing witness to states of affairs that are untrue, or by omitting to provide information required; - aggravated fraud in order to obtain public finances 15 : the misappropriation of funding, financial resources or other payments by the State or other public or Community entity via 13 Section 316 bis of the Criminal Code. 14 Section 316 ter of the Criminal Code. 15 Section 640 bis of the Criminal Code. 9

10 cunning or through swindling other than by providing false documents or declarations or omitting to provide information required; - aggravated fraud against the State or other public entity 16 : the use of cunning and swindling to obtain an unlawful profit from the State or another public entity; IT fraud against the State or another public entity 17 : altering the functioning of an IT or electronic system, or the unauthorized use of data, information or programs in an IT system, to obtain an unlawful profit from the State or other public entity; extortion 18, i.e. where a public official or person appointed to carry out a public service abuses his office to force a private individual or company to hand over or promise money or favours; corruption for an official deed/action/certificate 19, i.e. where a public official or person appointed to carry out a public service or is employed by a public entity, refuses to carry out an action or provide a deed or certificate unless he/she or someone else in the department is paid or provided with favours; corruption for a deed/action/certificate contrary to the duties of the office 20, i.e. where a public official or person appointed to carry out a public service and is employed by a public entity, delays a deed/action or certificate or carries out an action contrary to his/her duties for the payment or promise of payment or provision of favours to him/herself or someone else in the department; - corruption in judicial proceedings 21 : in both cases outlined above, in which money or favors are accepted for oneself or someone else in the department in order to give someone an unfair advantage or disadvantage in a civil or administrative suit or criminal prosecution; - undue persuasion to give or promise money or other benefits 22 : i.e. when a public official or the person appointed to carry out a public service, abuses his/her office and powers and induces someone to give or promise money or favors to him/herself or someone else in the department; criminal liability extends to the person making or promising the payment or favors; - inducement to corruption 23 : in both cases of corruption outlined above, in the event of the public official refusing the money or favors or the private individual or company refusing to pay or provide favors; - embezzlement, extortion, undue persuasion to give or promise money or favors, corruption and inducement to corruption of members of the International Criminal Court or entities of the European Community or officials of the European Community or other States 24 : in such cases law makers these offences are dealt with as crimes against foreign public officials. 16 Section 640, paragraph 2, subsection 1 of the Criminal Code. 17 Section 640 ter of the Criminal Code. 18 Section 317 of the Criminal Code. 19 Section 318 of the Criminal Code. 20 Section 319 of the Criminal Code. 21 Section 319 ter of the Criminal Code. 22 Section 319 quater of the Criminal Code 23 Section 322 of the Criminal Code. 24 Section 322 bis of the Criminal Code 10

11 nd degree homicide and serious injury through negligence as a result of violating accident prevention regulations and regulations safeguarding hygiene and health in the workplace Law 123 of 3 August 2007 published in the Official Gazette on 10 August 2007, issue no. 185, and entering into force on 25 August 2007, introduces section 25 septies of Legislative Decree 231/01, subsequently amended by the Unified Safety Law: the Entity is liable in cases of: - 2nd degree homicide (section 589 of the Criminal Code) and - serious injury due to criminal negligence (section 590 of the Criminal Code), where the crime of 2nd degree homicide is committed violating section 55, paragraph 2 of the Unified Safety Law, or the crimes in question were committed violating accident prevention regulations and regulations governing hygiene and health in the workplace. The reference regulations are enshrined in the Unified Safety Law. However, it is necessary to specify that every violation of the obligation on the employer to guarantee safety in the workplace (section 2087 of the Civil Code) leading to a serious injury gives rise to criminal proceedings against the company. The law, in fact, states that any violation of safety regulations for the workplace are an aggravating circumstance in the crime of 2nd degree homicide and serious injury and therefore section 25 septies of Legislative Decree 231/2001 is applicable. Serious injury means (section 583 of the Criminal Code) an injury which leads to: a life threatening illness, or illness or inability to attend to routine matters for a period of over forty days; permanent impairment of a sense or organ; an illness that certainly or probably cannot be cured; loss of one of the senses; loss of a limb, or mutilation making the limb useless, or loss of an organ or the ability to procreate, or permanent or serious speech impairment; deformation or permanent scarring of the face. In these cases the crime is punished through guilt alone: without the need to demonstrate mens rea, unlike for other crimes. Therefore it is necessary to adopt an Organizational Model that extends the analysis of risk to situations covered by the regulations governing health and safety in the workplace Receiving stolen money, money laundering and the use of ill gotten gains. Legislative Decree dated 16 November 2007, implementing Directive 2005/60/EC dated 26 October 2005 and Directive 2006/70/EC dated 1 August 2006 introduces into the framework for application of Legislative Decree 231/01 the cases set out in sections 648 (receipt of stolen goods), 648 bis (money laundering) and ter (the use of money, goods or profits derived from criminal activities). 11

12 It should be noted that, if sections 648 bis and ter were already deemed crimes for which the entity was liable for prosecution within the framework of international crimes (Law 146/2006), the crime of receiving stolen money (section 648 of the Criminal Code), has been included for the first time. These are crimes with a common matrix and some components of difference. Lawmakers have aimed to prevent others (ʺnot directly involvedʺ), after a crime (or alleged crime) has been committed from benefiting from the crime. The nucleus of the three types of offense therefore can be found in activities subsequent to the committing of a crime, activities that involve attacking assets (so that the offender or other party cannot materially benefit from handling stolen money or ill gotten gains) and supporting judicial proceedings (because illicit or ill gotten gains tend to be hidden or laundered making it difficult to prosecute offenders and to combat crime). The differences between sections 648, 648 bis and 648 ter of the Criminal Code, on the other hand, essentially are related to conduct (a material component) and not a subjective component (generic or specific malicious fraud) 25. In relation to the material component material: Receiving: punishable are acts to acquire, receive, hide or interfere in order to acquire, receive or hide money and things derived from a crime. Money laundering: punishable are acts to replace, transfer, or carry out transactions to prevent the identification and origin of crime money, goods or other forms of benefiting from a crime. The use of ill gotten gains: punishable is the use of the above in economic or financial activities. With regard to the subjective component: Receiving: punishable is any conduct designed to procure profit for oneself or others (specific fraud). Money laundering: the crime is of the type included as a generic fraud. The use of ill gotten gains: the crime is of the type included as a generic fraud. 25 The crime of money laundering cannot be distinguished from receiving stolen money as specified in section 648 of the Criminal Code on the basis of the above, but the difference consists in the structural components of the crime, such as the subjective component, which is the case in the event of specific fraud for the purpose of making ill gotten monetary gains for receiving money and generic fraud in the case of money laundering, and the material component, in particular the use of means aimed at preventing the identification and concealing the origin of an asset, which is a characteristic component in conduct as set out in section 648 bis of the Criminal Code (Criminal Court of Cassation, 12 April 2005, De Luca Appeal). 12

13 Of these three cases of criminal activity, within the framework of criminal company law, money laundering is certainly the most relevant and hence represents the highest risk: in Italy the regulations governing money laundering were introduced by Legal Decree 59 dated 21 March 1978, converted into Law 191 dated 18 May 1978, which introduced section 648 bis of the Criminal Code, then called replacing stolen money or valuables or ill gotten gains from kidnapping for the purposes of extortion. Hence this was a specific form of receiving ill gotten gains defined through the criminal origin of the money. The reform of 1990, (section 23, Law 55 dated 19 March 1990), suppressed the profit aim (a subjective component) and conduct was based on the attempt to prevent the identification of the criminal origin of the ill gotten gains, as dealt with exhaustively in current regulations. Section 648 ter of the Criminal Code was also added, punishing subsequent conduct irrespective of money laundering, i.e. the use of ill gotten gains in economic or financial activities. This hypothesis, therefore, referred and refers to activities after the committing of a crime aimed at laundering the ill gotten gains. The subsequent reform, by Law 328/1993 ratifying the Convention of Strasbourg dated 8 November 1990, maintained the overall structure of 1990 but removed the obligatory listing of criminal activities replacing it with the generic definition of ill gotten goods, i.e. money, assets or goods obtained from criminal activities. This regulation, which is evolving constantly, sets out restrictions on the use and transfer of cash, the obligation to identify clients, the obligation on financial brokers to be registered and the obligation to report suspect transactions, as well operational regulations for the prevention of criminal activities (know your customer rule and the quantitative analysis of transactions) with an impact on the contents of compliance models Company crimes Within the framework of the reform of company law, Legislative Decree 61 dated 11 April , applicable since 16 April 2002, introduced a new section, 25 ter, extending the administrative liability of entities to so called ʺcompany crimesʺ. Company crimes are crimes which can be carried out directly: - by the Board of Directors, - by Directors, - by Directors General, - by Statutory Auditors, - by Liquidators, as well as with the complicity of the organization set up for administrative and accounting purposes, for financial management or to implement the IT accounting system. 26 Article 3. 13

14 Examples of company crimes include: false reporting (section 2621 of the Civil Code): including in the company reports required by law material facts that are untrue or omitting statutory information regarding the economic, equity or financial position of the company or Group; false reporting to the detriment of shareholders or creditors (section 2622, paragraphs 1 and 2 of the Civil Code): including in statutory reports material facts that are untrue or omitting statutory information on the economic, equity or financial situation of the company or Group, to the detriment of the shareholders or creditors; improper return of conferred assets (section 2626 of the Civil Code): returning conferred assets to shareholders or releasing them from the obligation of making conferrals; illegal distribution of profits and allocations to reserve funds (section 2627 of the Civil Code): distributing profits or allocations to reserve funds where this is against the law; illegal transactions regarding shares or shareholdings or in the parent company (section 2628 of the Civil Code): purchasing or underwriting shares in companies or in the parent company, eroding the company s share capital; transactions against the interests of creditors (section 2629 of the Civil Code): reducing share capital, merging or hiving off part of the company with a detrimental effect on creditors; failure to notify a conflict of interests (section 2629 bis of the Civil Code): violation of the obligations to notify a situation of conflict of interests to the detriment of the company or third parties; fictitious constitution of share capital (section 2632 of the Civil Code): a fictitious increase in share capital, by mutual underwriting of shares and by exaggerating the value of conferrals or equity in the event of transforming the company; improper distribution of company assets by liquidators (section 2633 of the Civil Code): distributing company assets before the payment of creditors or before making the necessary allocations to satisfy creditors; prevention of control (section 2625, paragraph 2 of the Civil Code): hiding documents so to prevent shareholders or company bodies from carrying out control activities; corruption of private individuals (section 2635, paragraph 3 of the Civil Code): giving or promising to give money or other benefits (as the agent of corruption) to Directors, Directors General or the executives who draw up the Financial Statements of the company, Statutory Auditors or liquidators, who as a consequence of the gift or promise of money or other benefits, for themselves or others, carry out acts or omissions in violation of the obligations upon them to draw up accurate and truthful Statements, to the detriment of the company (as the parties corrupted); liability pursuant to Legislative Decree 231/2001, regarding the agent of corruption; improper influence on the Shareholders Meeting (section 2636 of the Civil Code): carrying out simulated or fraudulent actions aimed at creating unlawful majorities at Shareholders Meetings; - market rigging (section 2637 of the Civil Code): spreading false information or carrying out simulated transactions in order to cause an alteration in the price of non listed financial instruments; 14

15 - preventing the watchdog from carrying out its supervisory function (section 2638, paragraphs 1 and 2 of the Civil Code): in order to prevent watchdogs from carrying out their supervisory activities, reporting untrue material facts, although subject to evaluation, in relation to the economic, equity or financial situation of the companies under the supervision of watchdogs or, for the same purposes, hiding by other fraudulent means facts that should be reported Market abuse By extension, company crimes include market abuse, governed by Law 62 dated 18 April 2005, i.e.: - abuse of privileged information (section 184 Legislative Decree 58/1998), a crime committed by someone who, due to his/her ʺprivilegedʺ position (for example as a member of the Board or executive Director or part of the Control Entity supervising the issuer, or someone with a shareholding in the issuer) uses this information to trade on financial markets; - market manipulation (section 185 of Legislative Decree 58/1998), a crime committed by those who spread untrue information or connive to alter the price of financial instruments forging moneys, bills of public credit and revenue stamps Law 409 dated 23 November 2001, enshrines Urgent dispositions in light of the introduction of the Euro, and includes as part of the Decree section 25 bis, which aims to punish the crime of forging moneys, bills of public credit and revenue stamps, further examples of company crimes: - forging moneys and conspiracy to spend or circulate forged moneys within the State (section 453 of the Criminal Code); - alteration of moneys (section 454 of the Criminal Code); - forging of watermarked paper used for bills of public credit or revenue stamps (section 460 of the Criminal Code); - manufacturing or possession of watermarks or instruments used for the forging of moneys, revenue stamps or watermarked bills (section 461 of the Criminal Code); - introduction into the State or spending, without conspiracy, of forged moneys (section 455 of the Criminal Code); - spending forged moneys received in good faith (section 457 of the Criminal Code); - use of forged or altered revenue stamps received in good faith (section 464, paragraph 2 of the Criminal Code); - forging revenue stamps, introduction into the State, procurement, possession or circulation of forged revenue stamps (section 459 of the Criminal Code); - use of forged or altered revenue stamps (section 464, paragraph 1 of the Criminal Code). 15

16 Acts of terrorism or subverting the democratic order Law 7 dated 14 January 2003, ratified the international Convention on the fight against the financing of terrorism, signed in New York on 9 December Unlike for other cases of criminal liability for companies, this Law does not list the potential crimes: each crime committed for the purposes of terrorism or the subversion of the democratic order involves company liability to prosecution Crimes against individuals and against the person There are numerous relevant areas: - reducing and keeping someone in a state of slavery (section 600 of the Criminal Code): reducing and keeping someone in a state of continuous subjection, so as to exploit the person by profiting from his/her work; - the slave trade (section 601 of the Criminal Code): trading in slaves and people in conditions similar to slavery; - procurement and sale of slaves (section 602 of the Criminal Code): any act that involves transferring slaves or people in conditions similar to slavery; - prostitution of minors (section 600 bis, paragraphs 1 and 2 of the Criminal Code): inducing, fostering or exploiting the prostitution of minors, or carrying out sexual acts with minors in exchange for money or other economic benefits; - pornography using minors (section 600 ter paragraphs 1, 2, 3 and 4 of the Criminal Code): exploiting minors for pornographic exhibitions of the production of pornographic material; trading in pornographic material produced through exploitation; distribution, dissemination or publishing of pornographic material produced by the exploitation of minors, or news or information aimed at the inducement or exploitation of minors; - tourist initiatives aimed at exploiting the prostitution of minors (section 600 quinquies of the Criminal Code): organizing or marketing trips for the exploitation of child prostitutes; - possession of paedopornographic material (section 600 quater Criminal Code): obtaining or merely possessing pornographic material produced using minors; - virtual pornography (section 600 quater paragraph 1 of the Criminal Code): where in the case of paedopornography and the possession of paedopornographic material, the pornographic material comprises virtual images; - crime of mutilating female genital organs (section 583 bis of the Criminal Code) with no therapeutic purpose Transnational crimes Transnational crimes, introduced by Law 146 dated 16 March 2006, ratifying implementation of the Convention and Protocols of the United Nations against organized crime, are those committed by criminal associations operating in more than one State, and carrying out the following crimes: 16

17 - criminal association: an association of at least three people aimed at committing an unspecified number of crimes; - criminal association of the mob kind: a criminal association which intimidates its members and benefits from the subjection of members and the silence imposed on them; - criminal association for the smuggling of foreign tobacco products: a criminal association aimed at illegally importing, selling, transporting, procuring or possessing foreign tobacco products in the territory of the State; - criminal association with the aim of drug trafficking: a criminal association that distributes illegal drugs; - trafficking in migrants and dispositions relating to clandestine immigration: fostering illegal immigration and the stay of clandestine immigrants in the country; - money laundering: replacing or transferring ill gotten gains, and obstructing attempts to identify the origin of the money, goods or assets; - the use of ill gotten gains; - inducement not to make a declaration: inducement by threats, violence or the offer of money to a person to make a false declaration to the judicial authorities; - aiding and abetting: the offer to aid and abet someone accused of criminal activities for the purpose of obstructing the investigation Crimes committed abroad The criminal liability established by this Decree also applies to crimes committed abroad pursuant to sections 7, 8, 9 and 10 of the Criminal Code provided the State where the crime was committed does not prosecute the offenders IT crimes and the unlawful processing of data Legislative Decree 48 dated 4 April 2008 ratifying the implementation of the Convention of Budapest of the European Council relating to IT crime, includes for the application of Legislative Decree 231/01 the following crimes: - false IT documents (section 491 bis of the Criminal Code); - unlawful access to an IT or electronic data system (section 615 ter of the Criminal Code); - unlawful possession and dissemination of access codes to IT or electronic data systems (section 615 quater of the Criminal Code); - dissemination of equipment, devices or IT programs for the purposes of damaging or crashing an IT or electronic data system(section 615 quinquies of the Criminal Code); - unlawfully intercepting, preventing or interrupting the communication of IT or electronic data (section 617 quater Criminal Code); - installing equipment for the purposes of intercepting, preventing or interrupting the communications of IT or electronic data systems (section 617 quinquies of the Criminal Code); - damaging information, data and IT programs (section 635 bis of the Criminal Code); 17

18 - damaging information, data and IT programs used by the State or another public entity or of public utility (section 635 ter of the Criminal Code); - damaging information or electronic data systems (section 635 quater of the Criminal Code); - damaging of IT or electronic data systems of public utility (section 635 quinquies of the Criminal Code); - IT fraud by the subject providing an electronic signature certification service (640 quinquies of the Criminal Code) Other crimes Criminal organizations Law 94 dated 15 July 2009 enshrining Dispositions relating to public safety, which came into force on 8 August 2009, introduces into Legislative Decree 231/2001 section 24 ter Criminal Organizations, extending the criminal liability of Entities in the following cases: - criminal association (section 416 of the Criminal Code); - criminal association of the mob kind (section 416 bis of the Criminal Code); - electoral exchange engineered by the mafia (section 416 ter of the Criminal Code); - kidnap for the purposes of robbery or extortion (section 630 of the Criminal Code); - crimes committed making use of the conditions set out in section 416 bis i.e. furthering the activities of criminal associations; - a criminal association for the purpose of trafficking in illegal or psychotropic drugs (section 74 of the Unified Text as per Presidential Decree 309 dated 9 October 1990); - crimes of illegally manufacturing, importing into the State, selling, handing over or possessing and transporting to a public place firearms and weapons of war or parts thereof, explosives, clandestine weapons and ordinary firearms excluding those specified in section 2, paragraph three, of Law 110 dated 18 April Crimes against industry and trade; Crimes violating copyright Law 99 dated 23 July 2009 enshrining Dispositions for the development and internationalization of companies, and with reference to energy, which came into force on 15 August 2009, includes in Legislative Decree 231/01 the following crimes: Crimes against industry and trade; Crimes violating copyright: - interfering with the freedom of industry and trade (section 513 of the Criminal Code); - unfair competition with threats or violence (section 513 bis of the Criminal Code); - fraud against national industries (section 514 of the Criminal Code); - fraud against the exercise of trade (section 515 of the Criminal Code); - selling foodstuffs that are not genuine as though they were (section 516 of the Criminal Code); 18

19 - the sale of industrial products with false markings (section 517 of the Criminal Code); - the manufacture and sale of goods produced by infringing industrial property rights (section 517 ter Criminal Code); - forging the specification of a geographical origin for food produce and beverages (section 517 quater of the Criminal Code); - crimes of infringement of copyright (sections 171, first paragraph, subsection a bis, and third paragraph, 171 bis, 171 ter, 171 septies and 171 octies of Law 633 dated 22 April 1941). Crime of inducing someone to make a false declaration or not to make any declaration to the judicial authorities Law 116 dated 3 August 2009 Ratification and implementation of the Convention of the United Nations Organization against corruption, adopted by the UN General Assembly on 31 October 2003 with resolution 58/4, signed by the Italian State on 9 December 2003, and the measures updating internal regulations and amending the Criminal Code and Criminal Code of Procedure, adds to crimes previously specified in Legislative Decree 231/01 the crime of inducing someone to make a false declaration or not to make a declaration to the judicial authorities (section 377 bis of the Criminal Code). Crimes against the Environment Legislative Decree 121 dated 7 July 2011, as follows: Implementation of Directive 2008/99/EC for protecting the environment against crime, and Directive 2009/123/EC amending Directive 2005/35/EC relating to the pollution caused by shipping and the introduction of penalties for these violations, and adds to the previously specified crimes in Legislative Decree 231/01 Crimes against the Environment, which include: - killing, destroying, capturing, taking possession of and holding protected wild animals or vegetable species (section 727 bis of the Criminal Code); - destroying or negatively impacting on the habitat within a protected site (section 733 bis of the Criminal Code); - trading in species specified in Enclosure A, Annex I and Annex C, part 1 of Regulation (CE) 338/97 (section 1 of Law 150 dated 7 February 1992); - trading in species specified in Enclosure A, Annex I and III, and Annex C, part 2 of Regulation (CE) 338/97 (section 2 of Law 150 dated 7 February 1992); - prohibition of the possession of species that are a danger to the health and safety of the general public (section 6 of Law 150 dated 7 February 1992); - the discharge of effluent (section 137, paragraph 2, 3, 5, 11, 13 of Legislative Decree 152 dated 3 April 2006); - discharge into the soil (section 103 of Legislative Decree 152 dated 3 April 2006); - discharge underground and into underground waters (section 104 of Legislative Decree 152 dated 3 April 2006); 19

20 - discharge into the sewer system (section 107 of Legislative Decree 152 dated 3 April 2006); - discharge of dangerous substances (section 108 of Legislative Decree 152 dated 3 April 2006); - unauthorized processing of waste (section 256 paragraph 1, 3, 5, 6, and sections 208, 209, 210, 211,212, 214, 215, 216 of Legislative Decree 152 dated 3 April 2006); - prohibition to abandon waste (section 192 of Legislative Decree 152 dated 3 April 2006); - prohibition to mix dangerous substances (section 187 of Legislative Decree 152 dated 3 April 2006); - electrical and electronic waste, sanitary waste, scrap vehicles and asbestos containing products (section 227 of Legislative Decree 152 dated 3 April 2006); - the reclamation of sites (section 257 paragraphs 1 and 2 of Legislative Decree 152 dated 3 April 2006); - violation of the statutory reporting obligations, keeping registers, ledgers and forms (section 258, paragraph 4, sentence II of Legislative Decree 152 dated 3 April 2006); - false declarations by a private individual in a public deed (section 483 of the Criminal Code); - illegal trafficking in waste (section 259 paragraph 1 of Legislative Decree 152 dated 3 April 2006); - organized activities for illegally trafficking in waste (section 260, paragraphs 1 and 2 of Legislative Decree 152 dated 3 April 2006); - IT system to trace waste (section 260 bis of Legislative Decree 152 dated 3 April 2006); - violation of restrictions on issue values (section 279, paragraph 5 of Legislative Decree 152/06); - material falsehood committed by a public official in certificates or administrative authorizations (section 477 of the Criminal Code); - material falsehood committed by a private individual (section 482 of the Criminal Code); - ceasing to use or reducing the use of ozone depleting substances (section 3 of Law 549 dated 28 December 1993); - intentional pollution from shipping (section 8 of Legislative Decree 202 dated 6 November 2007); - accidental pollution from shipping (section 9 of Legislative Decree 202 dated 6 November 2007). Employment of citizens from other countries without valid resident permits in Italy Legislative Decree 109/2012, as follows: Implementation of Directive 2009/52/EC introducing minimum regulations and penalties for employers who employ citizens of other countries who do not possess a valid residence permit with reference to section 25 duodecies of Legislative Decree 231/01 and the crime specified in section 22 paragraph 12 bis of Legislative Decree 286/1998 (employment of citizens from other countries without a valid residence permit in Italy). 20

21 1.2. The adoption of an Organization, Management and Control Model The Decree 27 introduces a special form of non criminal liability if Entities can demonstrate: a) that, before a crime was committed, they had adopted and effectively implemented organizational and management models able to prevent such crimes from being committed; b) that they have entrusted to an internal organism, with independent proactive and control powers, the task of supervising over the functioning and compliance with these models, as well as updating them; c) that the people who committed the crime acted in defiance of these organizational and management models; d) that the body appointed pursuant to subsection b) above did not fail to carry out its duties or carry them out insufficiently Model providing exemption in the event of a crime The Decree also stipulates that, in relation to the extension of delegated powers and the risk of committing a crime, the organizational, management and control models should have the following features 28 : 1. identify the areas of risk for the committing of the crimes specified in the Decree; 2. establish specific protocols for training programs and the implementation of the decisions taken by the entity in relation to the crimes to be prevented; 3. includes ways of identifying and managing financial resources able to prevent these crimes from being committed; 4. set out obligations to inform the watchdog supervising the functioning and compliance of the Model; 5. include an internal system for disciplinary action and penalties in the event of failing to comply with the measures enshrined in the Model. The Decree establishes that the organizational, management and control models must be adopted, guaranteeing the above features, on the basis of codes of behaviour (e.g. Guidelines) drawn up by associations representing the industry and notified to the Ministry of Justice which, together with other relevant Ministries, shall come to an opinion (within 30 days) about whether the models are suitable for the prevention of the crimes in question 29. In entities of small size supervisory and control functions may be carried out by the executive body itself Section 6, paragraph Section 6, paragraph Section 6, paragraph Section 6, paragraph 4. 21

22 1.2.2 GARDNER DENVER and the adoption of the Model: introduction For the purposes of ensuring ever greater efficiency and transparency in carrying out its business activities, GARDNER DENVER decided to adopt an organizational, management and control model in line with the regulation enshrined in the Decree (hereafter Model ), as illustrated in more detail in section 2 below. GARDNER DENVER believes that, over and beyond the regulations enshrined in law, adopting this Model, and at the same time a Code of Ethics and Business Conduct (the Code of Ethics ) 31 (Annex 1), comprises a further valid instrument in drawing the attention of all employees and people who work with the company, to their responsibilities, ensuring in their activities proper and transparent behaviour in line with the ethical and social values of GARDNER DENVER in the pursuit of its business aims, and will prevent the crimes specified in the Decree from being committed within the company. For the purposes of drawing up the Model, GARDNER DENVER analysed the risk areas in the company in light of the regulations set out in the Decree, the rulings of Courts and the guidelines of the Italian Confederation of Industry (Confindustria). Implementing the provisions of the Decree, the Chairman of the Board of Directors of GARDNER DENVER appointed the company Professional Governance Overview s.r.l. in the persons of Carlo Ravasi and Elisabetta Billo to act as the Internal Supervisory and Control Body (hereafter Supervisory Body ), with the task of supervising the functioning, effectiveness and compliance of the Model and to update the Model as required. 31 The Code of Ethics and Business Conduct is an organic system of regulations, procedures and ethical principles that govern the way the company and other companies in the Gardner Denver Group conduct business. The Code of Ethics and Business Conduct is the code of Ethics for the Group and hence also for the company. 22

23 2. The adoption of the Model 2.1. The areas in which the company operates GARDNER DENVER is part of the GARDNER DENVER Group (hereafter GD Group ), which operates nationally and internationally The GD Group The GD Group is one of the leading suppliers of high quality industrial equipment as well as technology and services. For decades, the GD Group has produced high range equipment such as pumps for compressors and fans, to name but a few. The technical experience of the Group, combined with its production capacity and service capability, guarantee reliable and efficient products in terms of energy consumption in the sector, with the lowest costing full life cycle of all. The GD Group designs, produces and sells blade and rotative compressors or alternative types of highly sophisticated compressors, fans and liquid ring pumps for various industrial and transport applications. In addition, the GD Group supplies pumps used in the oil and other industries, as well as equipment for the transfer of fluids in the chemicals, oil and food processing industries. The products and solutions of the GD Group are sold worldwide through a multi channel distribution network and are used in almost all market sectors. The Group has 36 manufacturing facilities in America, Europe and Asia, and offices in 33 countries. Consolidated turnover in 2012 was $2.4 bn The Company in Italy Organizational structure GARDNER DENVER is a limited liability company characterized by a functional organizational structure divided into three divisions, each of which is shown in the attached Organizational Chart (Annexes 2/a, 2/b, 2/c). The leading sensitive processes identified by GARDNER DENVER within the structure refer principally to the operating functions by which the Company carries out its activities. The Organizational Charts show the functions/operating processes where crimes could be committed. Identifying these functions/processes involved using the same nomenclature as used by GARDNER DENVER as shown in the Organizational Chart of the Company Brief analysis of Corporate Governance at GARDNER DENVER GARDNER DENVER has the following executive bodies: The Shareholders Meeting; The Board of Directors; The Board of Statutory Auditors. 23

24 2.2.1 Board of Directors 1. Powers of the Board of Directors The Board of Directors has the power and duty to run the company, seeking to achieve its primary aim of creating value for shareholders; for this purpose, it takes all the decisions required or deemed useful to achieve the company purpose. In compliance with the Articles of Association, the Board of Directors exercises all the powers for the ordinary and extraordinary administration of the company and the general power of setting policy and controlling the activities of the Company and its enterprises; specifically: a) it examines and approves the strategic, industrial and financial plans of the Company; b) evaluates and approves the annual budget of the Company; c) examines and approves operations including investments and disinvestments which by their nature and through their strategic role, size and the commitment of resources involved, have a significant bearing on the activities of the Company; d) ensures that the organizational and general administrative set up of the company is fit for purpose; e) draws up and adopts the rules of corporate governance ; f) provides and revokes directors with power of attorney, defining the limits of their powers and the way these powers are to be exercised and how often, normally no longer than every six months, that they must report to the Board on the activities they have carried out; j) after consultation with the Board of Statutory Auditors, it establishes Managing Directors fees and the fees of special appointees as well as those of individual Directors, unless the Shareholders Meeting has not already done so; k) it supervises the overall running of the company with special attention to situations of conflicting interests, in light specifically of the information received from the Managing Directors, and comparing the results obtained with expected results; l) it exercises the other powers conferred upon it by the law and the Articles of Association. 2. Directors Duties Directors bring to the Companies their own specific professional skills; they are thoroughly familiar with the duties and responsibilities of the position; they dedicate sufficient time to the job; they are informed in their decision making and in passing resolutions; they treat the information that comes into their possession through their positions as confidential. the Chairman of the Board of Directors and Managing Directors notify the Board of the leading regulatory and legislative changes impacting on the Company and its executive bodies. 24

25 3. Composition of the Board of Directors The Board of Directors comprises executive Directors (i.e. Managing Directors including the Chairman where he has specific powers of attorney, and Directors with executive functions in the Company) and non executive Directors with consulting roles. Specifically, for each Division there is a Managing Director. Board members are people with specific skills able to contribute to decision making after assessing all aspects of a question, guaranteeing fully and properly motivated resolutions. In the event of the appointment of Directors General and appointees with special powers ofattorney, their powers must not overlap according to the principle of the separation of powers. 4. Board of Directors Meetings The Board of Directors meets regularly, at least once every six months, and every time it is convened by the Chairman in the interests of the Company; it also meets when requested to by the Board of Statutory Auditors, pursuant to the law and the Articles of Association. Board meetings are chaired by the Chairman of the Board, assisted by the Secretary, who need not necessarily be a member of the Board of Directors. Every Director may put forward items to be included on the Agenda for the meeting; The Board decides if the topic should be included on the Agenda and when. 5. Chairman of the Board of Directors Without prejudice to the other powers under the Articles of Association, the Chairman of the Board of Directors: a) convenes meetings of the Board of Directors, establishes the Agenda and, preparatory to the meeting, transmits to the Directors amply in advance given the circumstances of the case, the documentation required for an informed discussion of the matter; b) chairs the meeting and counts the votes; c) informs the Board of all relevant matters at least once every six months and of the general progress of the Company. 6. Powers of attorney The Board of Directors grants members one or more powers of attorney, establishing the purpose and limits or power and can revoke powers of attorney at any time. The Board of Directors can make special appointments, establishing the purpose, powers and duration of the appointment. Each Division has a Managing Director. The Board may make appointments for specific deeds or categories of deeds and may appoint Directors General. 25

26 7. Shareholders Meetings The Company encourages and facilitates the participation of shareholders at Shareholders Meetings, providing all the information and documentation required for a knowledgeable discussion of the matters on the Agenda. 2.3 Aims pursued by the Model In line with the need to disseminate and consolidate a culture of transparency and integrity, and aware of the importance of ensuring with ever greater efficiency the ideal conditions for the proper conduct of business and its activities, in order to safeguard its position and image, GARDNER DENVER adopts an organizational, management and control Model in line with the provisions of the Decree, establishing its inspiring principles Aims of the Model and main points The adoption of the Model, although not made compulsory by the Decree, 32 aims to make everyone who works for, in the name and on behalf of the Company, aware of the need in carrying out their activities for proper behaviour in compliance with the provisions of the Decree, to prevent the crimes covered by the Decree from being committed and to eliminate the risk of these crimes. The Model has the main aim of creating a formal and organic system of protocols and control activities to prevent, as far as possible, the crimes specified in the Decree from being committed. By identifying the risks of a crime associated with each activity ( sensitive activities ) and by establishing a procedure for these activities, the aim is to: - on the one hand, promote full awareness among all those who work for and in the name of GARDNER DENVER unlawful activities are not tolerated and that penalties may be applied for failures to comply with the procedures; - on the other, through the constant monitoring of activities, to enable action to be taken promptly to prevent crimes from being committed or put a stop to non compliant activities. In addition to the above, the main points of the Model are: the mapping of risk activities, i.e. those activities where the crimes specified in the Decree may be committed, aka sensitive activities ; the creation of a Supervisory Body with the specific task of monitoring the effective and proper functioning of the Model; verifying and documenting all relevant operations; the application of, and compliance with, the principle of the separation of functions so nobody independently manages an entire process; granting powers according to organizational responsibilities; 32 The Model is voluntary not obligatory. 26

27 verifying ex post company behaviour and the functioning of the Model, regularly updating it as required; - the dissemination and involvement at all levels of the Company of regulations, procedures and company policies Approval of the Model The current Model was approved by the Board of Directors of GARDNER DENVER in its first version, by resolution dated 23 October Amending and updating the Model As established by the Decree, the Model is enacted by the Executive Body 33. Consequently, subsequent amendments and substantial additions are the responsibility of the Board of Directors of GARDNER DENVER. However, it is recognized that in general terms, the Managing Director of each Division after informing the Supervisory Body may make formal amendments or additions to the text, such as altering the Organizational Chart or modifying Section 1 in the event of legislative changes that may add to the list of the crimes covered by the Decree without, however, impacting on the Sensitive Activities of GARDNER DENVER and on the implementation of new protocols. In any case, the alterations and additions must be ratified by resolution of the Board of Directors at its next meeting. 2.4 Relations between the Model, Code of Ethics and Group Policy The Model responds to the need of preventing the crimes specified in the Decree from being committed, via regulations specifically governing behaviour and conduct. These regulations, taken together, are completed by the Code of Ethics for the GD Group and by Group Policy; in particular the Code of Ethics, which enshrines the ʺcompany ethics of business conduct, and the Group Policy with internal regulations for the purpose of promoting a culture of ethical integrity and transparency, means that the Company by virtue of being a member of the GD Group, already has an adequate organizational structure. In particular, each company function is subject to a series of procedures, rules of behaviour, standards and control criteria which limit, within reasonably discretionary frameworks, the modus operandi of company bodies and with them, the related top level functions and underlying subjects. Overall, the procedures, regulations for conduct and standards of proper professional behaviour (the last of these being issued centrally), are notified officially to all employees (electronically and by hard copies fixed to company noticeboards) and are also notified to International Watchdogs (Internal Auditing) which carries out routine controls including compliance controls in each Division. 33 Section 6, paragraph 1, subsection a) of the Decree. 27

28 Therefore, for the purposes of general considerations on the overall organizational system of the Company and its ability to mitigate operational risks in the broadest sense, the regulations in place and current organizational set up play a vital role along with the current guidelines of the Group and applicable to all members and subsidiaries, which are believed to be reasonably able to reduce risks to an acceptable level, i.e. the risks of crimes being committed which may benefit the Companies themselves. Specifically, the following Group Policies are in place: - Accounting & Control Policies; - Corporate Policies; - Human Resources; - Information Technology; - Treasury; - Guarantee of Confidentiality & Information on proprietors; - Safe Harbor Privacy; - Internet & Electronic mail (e mail) usage; - Asbestos outlawed; - Anti corruption regulations; - Compliance in trading; - Waste management; - Safety management of tenders awarded and works to be carried out. 2.5 To whom does the Model apply? The rules set out in the Model apply to all those who have a management, administrative, executive or control function in GARDNER DENVER, to employees and to anyone who, although not a GARDNER DENVER employee, work with a mandate from GARDNER DENVER or with the Company as a consultant or in any other continuous way. GARDNER DENVER communicates this Model by suitable means guaranteed to ensure that all the relevant people are fully aware of its contents. Subjects to whom the Model applies are expected to comply with it and all its dispositions, including in carrying out duties of trust and loyalty, lawfulness and diligence as arising from legal relations with GARDNER DENVER. GARDNER DENVER condemns all behaviour that, for any reason, fails to comply with the law, the provisions of the Model and the Code of Ethics. 28

29 3. Areas of risk This Section refers to the behaviour of Directors, executives and employees of GARDNER DENVER when carrying out risk activities, as well as external consultants and partners (hereafter Addressees ). The aim of this Section is that all Addressees as specified above adopt rules of conduct compliant with these specifications, in order to prevent the crimes specified in the Decree. For every area of risk mapped out, and for each Division, subjects/company functions (see the attached Organizational Chart Annex 2a/2b/2c), who may potentially commit a crime. 3.1 Crimes of 2nd degree homicide and serious injury through negligence as a result of violating accident prevention regulations and regulations safeguarding hygiene and health in the workplace The Company carries out production and marketing processes that involve the risks mapped out in the Risk Assessment Documents drawn up by each Division. In particular, on the basis of the interviews carried out in order to draw up this Model and analyse the respective Risk Assessment Documents, the main risks are as follows: The GD LONATE/CORMANO Division - Electrocution; - Warehouse; - Unloading/loading goods. The ROBUSCHI Division - Risks from moving parts; - Electrical risks; - Noise; - Chemical risk; - Manual handling of overhead loads; - Repetitive handling operations; - Electromagnetic risks; - Radiation from artificial sources; - Biological risks. The GIEFFE Division - Risks from moving parts; - Electrical risks; - Noise; - Chemical risk; - Manual handling of overhead loads; - Repetitive handling operations; - Electromagnetic risks; - Radiation from artificial sources; - Biological risks. 29

30 Below are set out the main sensitive operations deemed common to all divisions: Sensitive activities Area Crime The Management of risks relating to health and safety in the workplace with particular reference to the following activities: updating of the Risk Assessment Document by (internal and external) managers in order to comply with Legislative Decree 81/2008 training and information obligations pursuant to sections 36 and 37 of Legislative Decree 81/08 the management of accidents and injuries the presence of contractors and technicians on the premises and hence the application and updating of the DUVRI the process of maintenance and management of Individual Protective Devices The GD LONATE/CORMANO Division Leading positions Managing Director Operations Manager RSPP Human Resources Manager The ROBUSCHI Division Leading positions Managing Director Plant Manager RSPP HR Manager The GIEFFE Division Leading positions Managing Director Production RSPP 2nd degree homicide (section 589 of the Criminal Code) Injury caused by negligence (section 590 of the Criminal Code) 3.2 Crimes against the Public Administration The crimes considered here are based on relations between the Company and the Public Administration. These relations may be direct, indirect or occasional. Direct relations means carrying out activities in which GARDNER DENVER has direct dealings with a public function or public service. Indirect relations means supplementary and/or support activities in relation to those who have direct dealings with a public Administration: if a company or other entity stipulates a contract with a Public Administration or takes part in a tender from the European Union and, in order to implement the contract, the company makes use of the services of GARDNER DENVER, this is an indirect relationship with a public administration. 30

31 Occasional relations means control and ascertaining activities carried out by P.A. in the areas of safety, work, social security, taxation etc.) and which it may carry out in relation to any company in the country. On the basis of the documentation gathered and the interviews carried out GARDNER DENVER has relations with the Public Administration only of the indirect and occasional kinds. Below are set out the main sensitive processes that GARDNER DENVER has identified within the company, in order of decreasing remaining risk and divided as specified above into those that are common to all three divisions; consequently, no differentiation is necessary. INDIRECT RELATIONS Sensitive activities Area Crime Assigning/managing appointments and external consultants Selection and management of employees and colleagues Management of liquidity and accounting Management of free gifts and donations Management of relations with the financial administration The GD LONATE/CORMANO Division Leading positions Managing Director Operations Manager Human Resources Manager Procurement Specialist Sales & Marketing Manager Finance Manager Director of the Supply Chain The ROBUSCHI Division Leading positions Managing Director Plant Manager HR Manager Procurement Manager Sales & Marketing Director Finance Director The GIEFFE Division Leading positions Managing Director Sales Marketing Warehouse and Procurement Department Misappropriation to the detriment of the State, another public or Community entity (section 316 bis of the Criminal Code): Unlawful receipt of grants, funding or other payments by the State, or other public or Community entity (art 316 ter of the Criminal Code) Aggravated fraud for the purpose of obtaining public funds (section 640 bis of the Criminal Code) Aggravated fraud to the detriment of the State or other public entity (section 640, paragraph 2, subsection 1 of the Criminal Code) IT fraud to the detriment of the State or other public entity (section 640 ter of the Criminal Code) Corruption relating to official deeds (section 318 of the Criminal Code) Corruption for actions contrary to one s official duties (section 319 of the Criminal Code) Inducement to corruption (section 322 of the Criminal Code) Corruption in relation to judicial procedures (section 319 ter of the Criminal Code) Undue inducements to give or promise money or other benefits (section 319 quater of the Criminal Code) 31

32 OCCASIONAL RELATIONS Sensitive activities Area Crime Management of administrative, tax or social security inspections in relation to safety in the workplace Obtaining permits, licenses and authorizations The GD LONATE/CORMANO Division Leading positions Managing Director RSPP Finance Manager The ROBUSCHI Division Leading positions Managing Director Plant Manger RSPP Finance Director The GIEFFE Division Leading positions Managing Director RSPP Corruption relating to official deeds (section 318 of the Criminal Code) Corruption for actions contrary to one s official duties (section 319 of the Criminal Code) Inducement to corruption (section 322 of the Criminal Code) Corruption in relation to judicial procedures (section 319 ter of the Criminal Code) Aggravated fraud to the detriment of the State or other public entity (section 640, paragraph 2, subsection 1 of the Criminal Code) IT fraud to the detriment of the State or other public entity (section 640 ter of the Criminal Code) Undue inducements to give or promise money or other benefits (section 319 quater of the Criminal Code) 3.3 Crimes against the environment Legislative Decree 121/2011 introduced the administrative liability of entities in the case of the committing of so called crimes against the environment, without prejudice to criminal prosecution of the material offenders. However, this regulation relates only partially to the complex legislation governing crimes against the environment as specified in the opening Section. Company plant in each of the three divisions has common features, allowing for a common analysis of the environmental risks related to the plant. The only exception are the factories in Parma and Noceto, which include among the risks the need for more attentive management of atmospheric emissions. Below are set out the most significant environmental risks for each division: 32

33 The GD LONATE/CORMANO Division Waste Sensitive activities Area Crime Process of waste management and related statutory obligations Selection and process of managing relations with waste disposal companies Process of obtaining waste analysis certificates Leading positions Managing Director Operations Manager Engineering Manager Activities involving collecting, transporting, recovering and disposing of waste, as well as the sale or brokerage of waste without authorization /registration/notification (section 256, paragraph 1, subsections a) and b) of Legislative Decree 152/06) Prohibition to mix waste (section 256 paragraph 5 of Legislative Decree 152/06) False information on waste analysis certificates (section 258, paragraph 4 and section 260 bis, paragraph 6 of Legislative Decree 152/06) Contamination of the soil and making good any environmental damage Process of waste management Pollution of the soil, beneath the soil and surface or underground waters without reclamation (section 257, paragraphs 1 and 2 of Legislative Decree 152/06) Meeting statutory obligations in relation to making good polluted sites The ROBUSCHI and GIEFFE Divisions Waste Sensitive activities Area Crime Process of waste management and related statutory obligations Selection and process of managing relations with waste disposal companies Process of obtaining waste analysis certificates The ROBUSCHI Division Leading positions Managing Director Plant Manager Engineering Director The GIEFFE Division Leading positions Managing Director Production Technical Department Activities involving collecting, transporting, recovering and disposing of waste, as well as the sale or brokerage of waste without authorization /registration/notification (section 256, paragraph 1, subsections a) and b) of Legislative Decree 152/06) Prohibition to mix waste (section 256 paragraph 5 of Legislative Decree 152/06) 33

34 Contamination of the soil and making good any environmental damage Process of waste management Meeting statutory obligations in relation to making good polluted sites Emissions Meeting statutory requirements in relation to the management of atmospheric emissions False information on waste analysis certificates (section 258, paragraph 4 and section 260 bis, paragraph 6 of Legislative Decree 152/06) Pollution of the soil, beneath the soil and surface or underground waters without reclamation (section 257, paragraphs 1 and 2 of Legislative Decree 152/06) Violation of limits to emissions and the quality of the air (section 279, paragraph 5 of Legislative Decree 152/06) 3.4 Company crimes The areas where activities are deemed to involve particular risk in relation to company crimes are the following: Sensitive activities Area Crime Drawing up Financial Statements and other company reports required by law (presentation of data, processing and approval) Management of company transactions Management of relations with the external auditor and Board of Statutory Auditors Leading positions The Board of Directors; The GD LONATE/CORMANO Division Managing Director Finance Manager The ROBUSCHI Division Managing Director Finance Director The GIEFFE Division Managing Director False reporting (section 2621 of the Civil Code): False reporting to the detriment of shareholders or creditors (section 2622, paragraphs 1 and 2 of the Civil Code): Improper return of conferrals (section 2626 of the Civil Code) illegal distribution of profits and allocations to reserve funds (section 2627 of the Civil Code): Illegal transactions involving shares or shareholdings or shares in the parent company (section 2628 of the Civil Code) Fictitious creation of share capital (section 2632 of the Civil Code) transactions against the interests of creditors (section 2629 of the Civil Code): 34

35 failure to notify a conflict of interests (section 2629 bis of the Civil Code): improper distribution of company assets by liquidators (section 2633 of the Civil Code): prevention of control (section 2625, paragraph 2 of the Civil Code): preventing the watchdog from carrying out its supervisory function (section 2638, paragraphs and of the Civil Code): Sensitive activities Area Crime Management of the process of acquiring new clients Management of existing clients Taking part in private tenders Assigning/managing appointments and external consultants (procurement cycle) Selection and management of employees and colleagues Management of liquidity and accounting Management of free gifts and donations The GD LONATE/CORMANO Division Leading positions Managing Director Operations Manager Human Resources Manager Procurement Specialist Sales & Marketing Manager Finance Manager The ROBUSCHI Division Leading positions Managing Director Plant Manager HR Manager Procurement Manager Sales & Marketing Director Finance Director The GIEFFE Division Leading positions Managing Director Sales Marketing Warehouse and Procurement Department Corruption among private parties (section 2635 Civil Code) 35

36 3.5 Other types of crime With regard to other potential crimes specified in the Decree, i.e. crimes involving the receipt of illegal money, receiving stolen money, money laundering and the use of ill gotten gains, the crime of illegally using privileged information and abuse of the market 34, forging money, crimes against individuals (slavery and paedopornography), IT crimes 35, crimes of association, working with organized criminal organizations, crimes against industry and trade 36, crimes relating to the infringement of copyright, the crime of inducing someone to make a false declaration to judicial authorities, the crime of employing citizens of third countries without valid residence permits, the risks of these crimes are considered negligible and hence no specific measures and/or procedures have been adopted, the existing regulations governing behaviour and business conduct as enshrined in the Model and in company policies remaining in place. 3.6 Integrating risk areas Additions to the above areas of risk or sensitive activities may be made by the Board of Directors of GARDNER DENVER, after consultation with the Supervisory Body, which is mandated to define the suitable operational measures. 34 In this regard, the Company has put in place a dedicated policy called Guarantee of confidentiality & Information about proprietors. 35 The Company has also implemented a policy called Internet and Electronic Mail (e mail) Usage. 36 The Company has implemented a policy called compliance with trading. 36

37 4. Procedures and control principles This Section has the aim of identifying for each class of crime relevant for GARDNER DENVER, the general and specific protocols, which Directors, executives and employees ( Exponents of GARDNER DENVER) must comply with, along with Colleagues, Consultants and Partners. The processes of GARDNER DENVER and their related activities, currently considered to be sensitive with reference to existing types of crime leading to a strengthening of the internal control system, are summarized and listed in the table above, in Section 3. Receivers Addressees of this Section are: Exponents of GARDNER DENVER, Colleagues, Consultants and Partners. All Addressees, insofar as they involved in activities considered sensitive and in light of the various positions and obligations to GARDNER DENVER, must comply with established rules of conduct, in order to prevent the crimes specified in the Decree from being committed. In particular, this Section has the function of: a) providing a list of general principles and specific procedural principles binding on Addressees, in relation to the type of relationship they have with GARDNER DENVER, and are expected to comply with, and properly implement, the Model; b) providing the Supervisory Body and managers of various functions expected to cooperate with it, with the operational instruments required in order to carry out its control, monitoring and verification activities. In carrying out their respective activities/functions, in addition to the regulations in the Model, Exponents are expected to comply with the regulations and principles of the following documents: the Code of Ethics; any other documentation relating to procedures applicable at the Company. Colleagues, Consultants and Partners must be notified of the adoption of the Model and Code of Ethics by GARDNER DENVER. 4.1 Protocols Crimes of 2nd degree homicide and serious injury through negligence as a result of violating accident prevention regulations and regulations safeguarding hygiene and health in the workplace The principles and general and specific protocols apply to all GARDNER DENVER Divisions. 37

38 4.1.1 General protocols: general principles of behaviour and their implementation Not allowed This Section specifies what is ʹexpressly forbiddenʹ in the behaviour of Exponents of GARDNER DENVER, i.e.: any behaviour that could expose GARDNER DENVER to criminal prosecution pursuant to section 25 septies of Legislative Decree 231/2001; any behaviour that might facilitate crime as specified in section 25 septies of Legislative Decree 231/2001; failure to update prevention measures, in relation to the organizational and production changes impacting on health and safety in the workplace or developments in technology, prevention and protection; failure to adopt appropriate measures ensuring that only workers who have been given proper training can gain access to areas that expose them to a serious and specific risk; the issuing of orders to resume work despite a continuing situation of serious and immediate danger; failure to adopt suitable measures to prevent technical measures from causing risks to health among the general population and to detriment of the external environment; failure to adopt fire prevention and fire fighting measures and to promptly evacuate the premises in the event of a situation of serious and immediate danger. Obligations This Section specifies the ʹexpress obligationsʹ on the personnel specified above, i.e. the obligation to: comply with the dispositions and instructions imparted by GARDNER DENVER, for collective and individual protection; properly use devices, means of transport and other work equipment as well as safety devices; suitably use the protective devices placed at their disposal; immediately report to the RSPP (Prevention and Protection Service Manager) any failures or lack of the above devices, and any situations of danger that come to their attention, taking direct action in the event of present danger; do not to remove or modify without authorization or compromise safety devices, signs and controls; do not carry out operations or activities on their own initiative, which are not in their remit and which may compromise their own or othersʹ protection or safety; to comply with the measures set out in the Emergency and Evacuation Plan. In general all Addressees of the Model must comply with the dispositions of GARDNER DENVER in order to maintain safe and healthy working conditions and promptly notify to the relevant functions any situations of risk/danger, accidents (irrespective of how serious) and violations of the rules of behaviour and procedures of GARDNER DENVER. 38

39 4.1.2 Specific protocols: generally applicable procedural principles At each of its plants, GARDNER DENVER has implemented a regimen for the measures of accident prevention and controls set out in the law and enshrined in Legislative Decree 81/08, as well as the special regulations applicable such as the appointment of a Prevention and Protection Service Manager (RSPP), a workers safety representative, the appointment of a plant doctor and the adoption of the Risk Assessment Document (pursuant to section 4 of the Decree). Management of the health and safety measures in the workplace and of the obligations on the Addressees involves everyone, each within the sphere of his/her own work practices and functions. The procedures in place at each Division must also be implemented and are referenced here in their entirety. Protocol 1 Management of risks regarding health and safety at work Specific protocols Delegating functions For the proper management of risks in the workplace, the following protocols apply: compliance with statutory technical/structural standards relating to equipment, plant, the workplace, chemical, physical and biological agents; carrying out activities to assess risks and setting up preventive and protective measures as a consequence of the risk assessment; carrying out activities of an organizational nature, such as emergencies, First Aid, the management of tenders, routine safety meetings and consultations with workers safety representatives; carrying out healthcare surveillance activities; carrying out employee training and information activities; carrying out supervisory activities to ensure compliance with procedures and working instructions designed for safety; the acquisition of statutory documents and certificates; carrying out routine checks to ensure that the procedures are being implemented effectively. The system for delegating health and safety functions should comply with the following requirements: (a) effectiveness the appointee must be free to take decisions and implement spending independently; (b) the appointee must have suitable technical and professional skills; 39

40 (c) the activities of the appointee must be supervised, without undue deference but also without undue interference; (d) certainty, specificity and awareness. The appointment by the employer must: - by made through an official and unambiguously dated deed; - refer to someone with all the professional requirements and experience required by the specific nature of the functions being delegated; - grant the appointee sufficient independence to properly carry out the appointment; - be accepted in writing by the appointee. The appointee must be fully aware of the functions for which he/she has been appointed. Duties and responsibilities of appointees Organization of the Prevention and Protection Service Risk Assessment Document Organizational dispositions must be issued and approved by the relevant company bodies to define the function roles, skills and responsibilities of appointees in line with statutory requirements. These dispositions must: - be recorded by an official deed with an unambiguous date; - be accepted in writing by the appointee. The appointee must be informed of the responsibilities being attributed to him/her and properly trained so that he/she meets the requirements of professionalism, knowledge and experience for that particular function. Organizational dispositions must be issued and approved by the relevant company bodies to govern the roles, responsibilities and method of managing the prevention and protection service within the organization, in line with statutory requirements. In particular, compliance with the following is required: - the personnel responsible for prevention and protection service must have the proper skills and experience; - workers appointed to carry out emergency measures, to prevent fires and provide First Aid, must have at least the minimum skills, be in the number and have the duties and responsibilities required for these functions; - the appointment and acceptance process must be signed by the plant doctor. The Risk Assessment Document (hereafter DVR) must be drawn up in compliance with the regulations for the sector. In particular the DVR must contain all the useful information describing the organization and activities of GARDNER DENVER, in addition to identifying and classifying precisely the 40

41 risks to the health and safety of employees and users, the measures for prevention and protection adopted and to be adopted in the future. The DVR must be drawn up and updated under the responsibility of the Employer, in collaboration with the Prevention and Protection Service Manager and relevant Doctor, after consultation with the Workers Safety Representatives and appointees to the Prevention and Protection Service. The formal moment for updating and reviewing the DVR is the routine meeting pursuant to section 35 of Legislative Decree 81/08 which takes place at least once a year. Activities relating to safety management must be allocated with a specific annual budget of expenditure in line with the program of ongoing activities and the improvement plan agreed at the meeting specified in section 35. Any additions to the budget of expenditure that may become necessary for work not previously scheduled may be decided within the framework of the independent spending decided by the Employer and/or the Managing Director, based on the general regulations for expenditure. DVR management GARDNER DENVER appoints a Health and Safety Manager for the workplace, who must ensure that: the prevention and protection measures set out in the Risk Assessment Document are adopted; employees are used in compliance with current regulations (working hours, breaks, overtime, etc.); all employees comply with regulations and dispositions governing health and hygiene in the workplace, in relation to their specific activities. Management of maintenance activities and upgrading plant Training GARDNER DENVER must: schedule maintenance and cleaning work in line with the maintenance schedule; carry out all scheduled actions and certificate the fact; upgrade plant according to legislative changes; ensure the regular maintenance of safety devices. Training must also be scheduled with the involvement of Exponents and Colleagues of GARDNER DENVER, in relation to the meanings of safety signs and to safety procedures. Training on existing risks in the plant must include subcontractors on site. 41

42 Management of accidents Management of Individual Protective Devices Management of the presence of subcontractors and technicians on the premises and hence the provisions and updating of the DUVRI (Unified Document for the Assessment of Risk from Interference) Information to the Supervisory Body It is necessary to establish a procedure for the collection and analysis of data relating to accidents inside the plant in order to guarantee traceability and keep a record of potentially dangerous situations, of the accidents and the progress and results of investigations. Therefore responsibilities need to be allocated in the following areas: - recording accidents; - analysing events; - establishing any corrective action to be taken. It is necessary to define responsibilities and operational procedures for: - the choice of Individual Protective Devices ( DPI ); - the distribution and maintenance of DPIs; - information about their use; - supervision of their use by workers. The risks that exist in each plant must be made known to subcontractors and technicians working on the premises. Subcontractors and technicians must be chosen partly on the basis of the budget they allocate to compliance with regulations and safety measures. It is necessary to disseminate and comply with the procedure called safety management for tenders and work contracts. The DUVRI must be drawn up in compliance with the regulations in the sector updated in the event of changes to the risk system; the DUVRI must be notified to all those involved. The RSPP must send the Supervisory Body a report every six months, including at least the following: - a description of accidents/injuries over the period; - the results of the monitoring and verification activities carried out; - the progress of the improvement program; - any reports of risk or danger received; - the results of any checks by regulators, colleagues/consultants, and the Group Audit. In the event of accidents that caused (or could have caused) serious injury, the RSPP promptly notifies the Supervisory Body. 42

43 4.2 Protocols Crimes against the Public Administration The principles and general and specific protocols apply to all Divisions of GARDNER DENVER General protocols: general principles of behaviour and their implementation Not allowed The Section includes what is expressly forbidden of Exponents directly and of Colleagues, Consultants and Partners, by means of specific contractual clauses: behaviour that facilities the committing of the specified crimes; behaviour which, although not itself criminal, has the potential to lead to crime; any situation of conflict of interests with the P.A. in relation to the crimes specified. Within this framework of conduct, it is forbidden, in particular, to: carry out work for Consultants and Partners in general that is not justified by the contractual relations existing with them or in relation to the type of appointment they have and to local custom; make payments of money or grant benefits of another nature (for example promise to hire someone) to Italian or foreign officials of the public administration (or their family members); distribute gifts over and above the token gifts acceptable in the practice of GARDNER DENVER, i.e. any form of gift beyond normal practice for courtesies of the kind or with more than a mere token value (the value should be within the bounds of accepted practice), or aimed at acquiring favourable or preferential treatment in relation to business activities. In particular, it is not allowed to give anything to an Italian or foreign official of the public administration or their family members that might influence the discretionality or independence of their judgement or induce them into providing any kind of favour or advantage to GARDNER DENVER. Gifts are allowed if they are of token value only and serve merely to promote the brand image of GARDNER DENVER. Courtesy expenses for a birthday or anniversary or within the sphere of image or communications, including sponsorship, are always authorized by the Managing Director, provided they meet the requirements set out above. In all cases, gifts or courtesy expenses must be suitably documented to enable the Supervisory Body to verify compliance; carry out work or sign off fees to Consultants and Partners that are not justified by the contractual relationship with them; make false declarations to national, Community or international public bodies, in order to obtain grants or funding or finance at advantageous conditions; use sums received from national or Community public bodies in the form of grants or funding for other purposes than those for which the grant or funding was made. 43

44 Duties In order to prevent the above conduct: relations with a P.A. in Risk Areas must be managed on a case by case basis, appointing an Internal Manager for each operation or series of operations (where they are essentially repetitive); appointments of Consultants and Partners, for whatever reason they are made, must be in writing, specifying the fee agreed for the service and must be proposed or negotiated or verified or approved by at least two authorized employees of GARDNER DENVER; no payment can be made in cash or in kind beyond the use of petty cash; those who have a control or supervisory function in relation to the compliance of the above activities (payment of invoices, how funding from the State or Community bodies is used) must pay special care to how these actions are carried out and notify the Supervisory Body promptly of any irregularities; for each individual sensitive activity it is advisable to carry out regular monitoring activities of the procedures in order to obtain an immediate update in light of regulatory changes Specific protocols: generally applicable procedural principles For the purposes of carrying out the duties and complying with the prohibitions set out above in subparagraph 4.2.1, the following protocols apply to all the activities of GARDNER DENVER: Protocol 1 Assigning/managing appointments and external consultants Delegating, Powers ofattorney and powers assigned Operational management Employees, colleagues, company bodies, consultants and partners that have material relations with a P.A. on behalf of GARDNER DENVER must receive a formal appointment to do so (with appointment of employees or ad hoc provisions for the other subjects specified). Where necessary, a specific written power ofattorney is provided in compliance with all the requirements set out. With reference to this sensitive area, the following protocols apply: make a complete separation of tasks between the various functions within the framework of the procurement organization, in particular between the function of identifying and selecting suppliers, consultants or service providers and the function that approves procurement orders, the function that authorizes payments and the function that controls management and the traceability of operations; identify general and transparent criteria for determining a maximum purchase price for a given product or service by the acquisition of a number of quotations (at least three); determine general rules above all in relation to payments terms and conditions; 44

45 plan benchmarking activities (comparison with market values). Contracts Contracts between GARDNER DENVER and colleagues, consultants and partners must be in writing and specify the totality of the conditions and terms; they must contain standard clauses, defined in conjunction with the Supervisory Body in order to comply with the provisions of Legislative Decree 231/2001. Colleagues, consultants and partners must be chosen with transparent means according to a specific procedure that includes a preliminary assessment and final approval by the Managing Director. The Supervisory Body verifies compliance by all the company bodies involved in the process, of the selection and assessment procedure leading to the appointment, receipt and assessment of quotations, approval, invoicing and accounting. Consulting work carried out on the basis of an appointment must be absolutely truthful. In contracts with colleagues, consultants and partners, a clause must be included that specifies the consequences of violation and the committing of the crimes specified in Legislative Decree. 231/2001(e.g. express termination clauses and penalties). Conflicts of interest The Supervisory Body must be informed in writing of any critical aspect or conflict of interest that may arise with a P.A. Informing Supervisory Body the The Supervisory Body must be given the following information: procurement operations carried out at non market values, which do not reflect the standards adopted by the company; all collection operations above or below the ordinary terms of payment (for example invoices paid at sight). 45

46 Protocol 2 Selection and management of employees and colleagues Selection Hiring, management, training and incentives for employees and colleagues The Supervisory Body, in conjunction with the Managing Director and the various functions of GARDNER DENVER involved in risk areas, assesses the opportunity to set up a specific system to assess employees and colleagues in the selection stage, which reflects the need of GARDNER DENVER in relation to the application of Legislative Decree 231/2001. The regulations governing these activities must include: a clear definition of the roles and duties of subjects responsible for the selection and management of employees and colleagues; a formal system for assessing candidates in order to guarantee the traceability of the motives leading to the selection or exclusion of a candidate; identifying the subject responsible for the management of relevant activities and allocation of related responsibilities; management of incentive schemes for employees and colleagues; the definition of methods for filing the documentation relating to the relevant activities, in order to guarantee the prompt availability of documents when requested and the traceability of the process. This Model should be made known to all personnel, not only executives, and suitable communication mechanisms (for example posters in common rooms and publication in company organs) must be set up to notify the personnel of any changes and/or updates to the Model. Protocol 3 Management of liquidity and accounting Financial transactions No payment can be made in cash. The transactions carried out with the P.A. must be traceable and verifiable afterwards via proper documentary and IT supports, with particular reference to payments by credit card. The subject who has relations or negotiates with the P.A. cannot on his/her own freely access financial resources and authorize payments. There must a formal authorization to make the payment. It is necessary to verify the accuracy of the agreements, procurement orders, invoices and payments to be made to the tax authorities and social security institutions with the greatest attention to the initials 46

47 authorizing the operations. It is necessary to check the accuracy of the payments made to colleagues and members of company bodies, and the activity carried out which must be proven by suitable documents and authorizations. Irregularities anomalies and It is advisable to carry out controls on management reports, financial flows and bank reconciliation. Those who have a control or supervisory function in relation to the compliance of the above activities: payment of invoices; payments relating to sums to be paid to the tax authority and social security institutions; accuracy of agreements, purchase orders and invoices; the use of funding obtained from Community, national or regional entities, etc. must pay special attention to these transactions and immediately notify the Supervisory Body of any irregularities or anomalies. Protocol 4 Management of gifts/donations Gifts/Donations With reference to this sensitive area it is necessary to: make sure people are familiar with the Model and training/information programs on the dispositions of the Decree in relation to all those working with or for the Company; check compliance with the principles and procedures put in place by the Group. In addition, the following is forbidden: making cash donations or giving benefits or advantages of another nature (for example the promise to hire someone) to public officials appointed to carry out controls including the control of accident prevention measures and the safeguarding of hygiene and health in the workplace; distribute gifts over and above the token gifts acceptable in the practice of the company, i.e. any form of gift beyond normal practice for courtesies of the kind or with more than a mere token value (the value should be within the bounds of accepted practice), or aimed at acquiring favourable or preferential treatment in relation to business activities. In particular, it is not allowed to give anything to an Italian or foreign official of the 47

48 public administration or their family members that might influence the discretionality or independence of their judgement or induce them into providing any kind of favour or advantage to the company. Protocol 5 Management of relations with the Financial Administration and of administrative, tax and social security inspections relating to safety in the workplace Inspections During any judicial, tax or administrative inspections or inspections carried out by Watchdogs in the sector, including the authorities responsible for verifying compliance with Legislative Decree 81/2008, tax inspections and checks carried out by INPS (the State Social Security Institution) should be carried out in the presence of subjects expressly appointed for the purpose of being present during such inspections (at least 2). Internal records of all such inspections shall be drawn up and kept on file. If the final report shows critical areas, the Supervisory Body must be notified in writing by the manager of the function involved. Specific procedures must be complied with governing the way appointees of GARDNER DENVER and third parties take part in judicial, tax, administrative and/or Watchdog inspections and the way relations with public entities are managed, where these entities deal with safety in the workplace, the safeguarding of the environment, accident prevention regulations and the safeguarding of health and hygiene in the workplace. Protocol 6 Management of relations with public entities in order to obtain authorizations and licenses to carry out GARDNER DENVER activities Authorizations Licenses and These activities must include: the segregation of functions responsible for the activity of contacting the public entity in order to request information, to submit an application and for the management of licenses and/or authorizations, including specific control systems (for example filling in training forms by external consultants, convening meetings, recording important rulings) in order to guarantee compliance with the principles of integrity, transparency and the properness of the process; specific control and verification protocols for the truthfulness and accuracy of the documents required in order to obtain licenses and/or authorizations. 48

49 4.3 Protocols Crimes against the Environment General Protocols: general principles of behaviour and their implementation Not allowed This Section specifies what Addressees are not allowed to do, as follows: carry out, cooperate in or encourage criminal behaviour as specified in the Decree (section 25 undecies); carry out, cooperate in or encourage behaviour which, although not itself criminal, has the potential to lead to crimes as specified in the Decree. Within the framework of conduct, it is forbidden to: carry out work for outsourcers, consultants, partners and colleagues in general that is not justified by the contractual relations existing with them or in relation to the type of appointment they have and to local custom; make cash donations or grant other benefits or advantages of any kind (for example promise to hire someone) to a public official responsible for environmental controls; distribute gifts over and above the token gifts acceptable in the practice of the company, i.e. any form of gift beyond normal practice for courtesies of the kind or with more than a mere token value (the value should be within the bounds of accepted practice), or aimed at acquiring favourable or preferential treatment in relation to business activities. In particular, it is not allowed to give anything to an Italian or foreign official of the public administration or their family members that might influence the discretionality or independence of their judgement or induce them into providing any kind of favour or advantage to the company. behave in any way that could obstruct an official in his/her supervisory functions or in carrying out an inspection on behalf of a Public Authority (Tax Police, Employment Inspectors, the Regional Agency for Environmental Prevention and Protection, the Fire Service, etc.) including: blatant opposition, excuses not to cooperate, obstructive behaviour or failure to cooperate through delaying tactics or failure to provide the documents required, postponing meetings scheduled some time ago. Obligations This Section specifies the ʹexpress obligationsʹ on the above subjects in relation to: managing relations with the P.A. on a case by case basis and with reference to the regulatory authorities in environmental matters for the activities in areas of risk, identifying the manager for each operation or series of operations (where they are essentially repetitive) carried out in risk areas; including activities to inform all workers; including activities for informing and training workers within the framework of the company organization with reference to the activities in areas of crime risk; including activities to inform the workers of external companies that work on GARDNER DENVER premises; 49

50 including a proper supervisory system in compliance with procedures and environmental protection measures by workers, identifying people for the purpose within each plant; setting up internal regulations for environmental protection based on the risks; acquiring and keeping on file the documentation regarding compliance with the law, with regulations and with norms safeguarding the environment; keeping on file the documentation relating to applications for authorizations, the permits themselves, certificates and all other documents involved, as well as any deeds adding to or modifying these authorizations; keeping on file the documentation relating to internal company regulations; constantly monitoring company procedures, ensuring a thorough and prompt review, especially where risks become more serious or there is an emergency; including regular environments audits; monitoring environmental regulations and compliance; regularly verifying compliance with administrative requirements under the relevant environmental legislation. All of the above, without prejudice to additional environmental safeguards introduced by GARDNER DENVER in relation to activities in areas of risk Specific protocols: generally applicable procedural principles In order to implement the prohibitions and obligations listed above in subparagraph 4.3.1, the following specific protocols apply: The GD LONATE/CORMANO Division The ROBUSCHI Division The GIEFFE Division 50

51 Protocol 1 Process of managing waste and related statutory requirement/selection of the process for managing relations with companies appointed to dispose of waste/process for obtaining waste analysis certificates Definition of roles and responsibilities Operational management Specific procedures apply for: the clear definition of the roles and duties of units responsible for environmental matters, with particular reference to waste management and preparatory as well as subsequent activities; identifying the function and subject appointed to manage on behalf of GARDNER DENVER the process of implementation and verification of compliance with statutory requirements in relation to waste management. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. In operational terms, the following protocols apply: identification of the producer for legal purposes of each item of waste, on the basis of the initial analysis of the waste production process with the assessment of the type of waste produced and of how and when it is disposed of, with any radiometric tests required; identification of the nature of waste via allocation of a EWC (European Waste Catalogue) code, for the purposes of proper waste management on and off site and the determination of whether the waste is compatible with the type of dump site. Where there are doubts about which EWC code to use, particularly in relation to the characterization of the waste as dangerous, carry out chemical analysis to identify the waste c/o qualified and accredited laboratories; the waste analysis certificate must give only truthful and accurate information based on the analysis; update loading and unloading registers for production and waste handling; manage temporary dump sites in compliance with statutory requirements; manage the preliminary and final storage of waste in compliance with the permits obtained; fill in and issue waste identification forms for transportation off site; apply for the required permits for all subjects involved in the various phases of waste management (collection, transportation, recovery, disposal); starting with the System of waste traceability (SISTRI), carry out the following: fill in the Sistri schedule Area for registration by 51

52 time, fill in the Sistri schedule Area for waste handling, verify acceptance at the destination by e mail receipt from Sistri; routinely verify the proper implementation of the above; outsourcers, consultants, partners and colleagues in general, dedicated to meeting statutory requirements in relation to waste management, including the haulier, the company appointed to dispose of the waste, should be chosen with a transparent method according to a specific company procedure ending in the final approval of the Managing Director; appointments of external colleagues (for example technicians for the preparation of the technical documentation needed to meet statutory requirements regarding the environment), as well as the company responsible for waste disposal, should be in writing and specify the fees payable, proposed or verified or approved by at least two employees of GARDNER DENVER; in contracts with outsourcers, consultants, partners and colleagues in general, these must declare that they are familiar with the regulations of Legislative Decree 231/2001 and their implications for the Company, that they have never been involved in judicial procedures for the crimes specified in the legislation (or if they have, they must state the fact so the Company can dedicate more attention to the work of the consultant or to the workings of the partnership), and their commitment to compliance with Legislative Decree. 231/2001; in contracts with outsourcers, consultants, partners and colleagues, a clause must be included that specifies the consequences of violating regulations specified in Legislative Decree. 231/2001(e.g. express termination clauses and penalties); no payment may be made in cash or kind. 52

53 Protocol 2 Process of managing waste and implementation of statutory obligations to restore a polluted site Definition of roles and responsibilities Operational management Specific procedures apply for: the clear definition of the roles and duties of units responsible for environmental matters, with particular reference to waste management and preparatory as well as subsequent activities; identifying the function and subject appointed to manage on behalf of GARDNER DENVER the process of implementation and verification of compliance with statutory requirements in relation to waste management. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. With reference to this sensitive area, the following protocols apply: if an event occurs which may cause contamination of the site, within 24 hours, the necessary measures must be adopted to prevent the spread of the contamination, and all relevant authorities must be promptly notified; carry out a preliminary investigation and for the purpose identify the concentrations for the leading parameters of potential pollution. In the event of ascertaining the presence of contamination, immediately notify the relevant authorities and describe to them the preventive measures taken to make the site safe and handle the emergency; within the time specified by current legislation, submit to the authorities an action plan for the polluted site in order to obtain their authorization; after approval of the action plan, again by the time specified in current legislation, submit to the Regional Authority the results of the risk analysis for the specific site, based on the action plan. In this case, the following procedure applies: o following the assessment and validation of this analysis the site is declared polluted or unpolluted. In the latter event, the relevant authorities declare the procedure over and establish what type of monitoring of the site is required, and the plan is submitted by the pollution manager; if the site is declared polluted, within six months of the approval of the risk analysis document, a project must be submitted to make good the site or render it safe operationally or permanently (and, where required, further action must be taken to restore the site environmentally); o the relevant authorities approve the project with or without additional instructions (completion may be postponed only once to request additional instructions or 53

54 further information restarting the clock from the submission of the new project); o the relevant authorities ascertain and certify completion of the restoration work and the permanent and operational safety of the site, as well as compliance with the specifications of the project. outsourcers, consultants, partners and colleagues in general, dedicated to meeting statutory requirements in relation to waste management, including the haulier, the company appointed to dispose of the waste, should be chosen with a transparent method according to a specific company procedure ending in the final approval of the Managing Director; appointments of external colleagues (for example technicians for the preparation of the technical documentation needed to meet statutory requirements regarding the environment), as well as the company responsible for waste disposal, should be in writing and specify the fees payable, proposed or verified or approved by at least two employees of GARDNER DENVER; the above contracts must contain standard clauses with their unconditional acceptance of the Model pursuant to Legislative Decree 231/2001, adopted by GARDNER DENVER; in contracts with outsourcers, consultants, partners and colleagues in general, these must declare that they are familiar with the regulations of Legislative Decree 231/2001 and their implications for the Company, that they have never been involved in judicial procedures for the crimes specified in the legislation (or if they have, they must state the fact so the Company can dedicate more attention to the work of the consultant or to the workings of the partnership), and their commitment to compliance with Legislative Decree. 231/2001; in contracts with outsourcers, consultants, partners and colleagues, a clause must be included that specifies the consequences of violating regulations specified in Legislative Decree. 231/2001(e.g. express termination clauses and penalties); no payment may be made in cash or kind. 54

55 The ROBUSCHI Division The GIEFFE Division Protocol 3 Meeting statutory requirements in relation to the management of atmospheric emissions Definition of roles and responsibilities Operational management Specific procedures apply for: the clear definition of the roles and duties of units responsible for environmental matters, with particular reference to waste management and preparatory as well as subsequent activities; identifying the function and subject appointed to manage on behalf of GARDNER DENVER the process of implementation and verification of compliance with statutory requirements in relation to atmospheric emissions. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. In operational terms, the following protocols apply: verification in relation to the dispositions of the law of the need to obtain authorization for atmospheric emissions, issued for the entire plant; see that the authorization is obtained in the time specified by the law and carry out statutory controls for as yet unauthorized plant; carry out the dispositions set out in the authorization in relation to: method of capture and conveyance (for emissions technically capable of being conveyed), compliance with limit emission values and regulations, sampling and analysis method, frequency of controls; maintain and update the emission authorizations required by law; make a new application for authorization in the event of a substantial change in plant; routinely verify the proper implementation of the above regulations; outsourcers, consultants, partners and colleagues in general, dedicated to meeting statutory requirements in relation to waste management, including the haulier, the company appointed to dispose of the waste, should be chosen with a transparent method according to a specific company procedure ending in the final approval of the Managing Director; appointments of external colleagues (for example technicians for the preparation of the technical documentation needed to meet statutory requirements regarding the environment), as well as the 55

56 company responsible for waste disposal, should be in writing and specify the fees payable, proposed or verified or approved by at least two employees of GARDNER DENVER; the above contracts must contain standard clauses with their unconditional acceptance of the Model pursuant to Legislative Decree 231/2001, adopted by GARDNER DENVER; in contracts with outsourcers, consultants, partners and colleagues in general, these must declare that they are familiar with the regulations of Legislative Decree 231/2001 and their implications for the Company, that they have never been involved in judicial procedures for the crimes specified in the legislation (or if they have, they must state the fact so the Company can dedicate more attention to the work of the consultant or to the workings of the partnership), and their commitment to compliance with Legislative Decree. 231/2001; in contracts with outsourcers, consultants, partners and colleagues, a clause must be included that specifies the consequences of violating regulations specified in Legislative Decree. 231/2001(e.g. express termination clauses and penalties); no payment may be made in cash or kind Protocols Company crimes General Protocols: general principles of behaviour and their implementation Not allowed This Section specifies what Addressees are not allowed to do, as follows: carry out, cooperate in or encourage criminal behaviour as specified in the Decree (section 25 ter); carry out, cooperate in or encourage behaviour which, although not itself criminal, has the potential to lead to crimes as specified in the Decree. Within the framework of conduct, it is forbidden to: represent or transmit for processing and the presentation of the balance sheet for the period and the reporting package, reports or prospectuses or other company documents which include false data, lack data or in any other way fail to accurately describe the economic, equity and financial situation of the Company; omit data and information required by law in relation to the economic, equity and financial situation of the Company; return conferrals to shareholders or release them from the obligation to make conferrals, with the exception of the legitimate case of reducing share capital; 56

57 distribute profits or advances not actually made or which should by law be allocated to a reserve fund; reduce the share capital or carry out a merger or hive off part of the company in violation of the dispositions of law safeguarding creditors and to their detriment; make fictional increases in share capital, attributing shares at below their nominal value for the purposes of the increase in share capital; behave in a way that could obstruct controls or auditing by the internal Auditing function of the Group, by concealing documents or using fraudulent means, or otherwise prevent controls from being carried out by the function or by the appointee for the legal review of the accounts pursuant to section 2409 of the Civil Code; omit to carry out, with the necessary thoroughness, accuracy and promptness, all the routine reporting established by statutory requirements for the Company; set out in the above communications and reports facts that are untrue, or fail to reveal facts relating to the economic, equity and financial conditions of the Company; behave in any way that could obstruct an official in his/her supervisory functions or in carrying out an inspection on behalf of a Public Authority (Tax Police, Employment Inspectors, etc.) including: blatant opposition, excuses not to cooperate, obstructive behaviour or failure to cooperate through delaying tactics or failure to provide the documents required, postponing meetings scheduled some time ago. Obligations This Section specifies the ʹexpress obligationsʹ on the above subjects in relation to: to behave properly, transparently and cooperatively, in compliance with statutory requirements and in all activities designed to process accounts, draw up and present the balance sheet and interim report of GARDNER DENVER and any other documents required by regulations in the sector; strictly comply with all statutory requirements safeguarding the integrity and effectiveness of the share capital of the Company; refrain from carrying out simulated or otherwise fraudulent activities which would considerably distort the economic, equity and financial situation of the Company; be fully familiar and comply with the principles of Corporate Governance approved by the Company Bodies of GARDNER DENVER, the documents setting out information on GARDNER DENVER, and Group Accounting & Control Policies. The following actions are also necessary: implementation of a training program for personnel involved in the rules of Corporate Governance and company crimes; the inclusion of routine meetings of the functions set up to control the Company and the Supervisory Body for the purposes of verifying compliance with the regulations of Corporate Governance (including by means of obtaining specific certification letters); transmission, duly in advance, to the appointed functions responsible for controlling the Company of all the documents relating to items on the Agenda for the meetings of Company Bodies where their opinion is required by law. 57

58 4.4.2 Specific protocols: generally applicable procedural principles Protocol 1 Drawing up Financial Statements and other company reports required by law (presentation of data, processing and approval) Definition of roles and responsibilities Operational management Specific procedures apply for: the clear definition of the roles and duties of those responsible for the management of accounts, drawing up the balance sheet, preparing the interim report and financial statements, and for carrying out controls to ensure that the information in the final documents is complete and truthful; identification of the function and subject appointed to carry out the accounting function for GARDNER DENVER and for drawing up accounting documents, who should have the necessary power of attorney to do carry out these functions. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. The way the accounts are managed and accounting documents are drawn up (balance sheet, interim report, Financial Statements) shall be such as to reflect the accounts truthfully and properly in compliance with the procedures adopted by GARDNER DENVER. There must be a clear separation of roles and responsibilities in the management of the accounts and in drawing up accounting documents. For each document traceability to the relevant sources and information about each component shall be ensured. All the documentation shall be absolutely truthful and in line with the purposes for which it is required. For this purpose all the documentation required to draw up the accounting documents (balance sheet, Financial Statements, interim report) shall be kept on file after being signed off by the function manager. The following also applies: a training and information program for personnel involved in keeping company accounts; the monitoring of the processes for the selection of outsourcers who provide accounting management services and draw up documents on behalf of GARDNER DENVER. The documentation drawn up and in general all information should contain only truthful data. 58

59 Protocol 2 Management of company transactions Definition of roles and responsibilities Operational management Specific procedures apply for: clearly defining the roles and duties of those responsible for the management of company transactions, including controls relating to the thoroughness and truthfulness of the information contained in the documentation required to carry out institutional activities as regulated by GARDNER DENVER; identification of the function and subject appointed to manage on behalf of GARDNER DENVER the above operations, who should have specific power of attorney to carry out those functions. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. Company operations should be managed properly and truthfully in line with the principles of Corporate Governance adopted by the Board of Directors. There must be a clear separation of roles and responsibilities between those who decide an operation needs to be carried, those who carry it out and those who check on it. For each document traceability to the relevant sources and information about each component shall be ensured. All the documentation shall be absolutely truthful and in line with the purposes for which it is required. For this purpose the documentation relating to company operations shall be filed in a dedicated folder signed off by the function manager. The following also applies: a training and information program for personnel involved in drawing up the documentation relating to company operations; the monitoring of the powers and signature on documents relating to company operations. The documentation drawn up and in general all information should contain only truthful data. 59

60 Protocol 3 Management of relations with the external auditor and Board of Statutory Auditors Identification of subjects responsible For the management of relations with the Board of Statutory Auditors and the person appointed to carry out the legal review of the accounts, the following dispositions apply: identification of the personnel at GARDNER DENVER with responsibilities of interacting with the Board of Statutory Auditors and the person appointed for the legal review of the accounts and the transmission of the related documentation; the opportunity should be provided to the Board of Statutory Auditors and the person appointed to legally review the accounts to contact the Supervisory Body in order to jointly verify situations that might be critical in relation to company crimes Specific procedures in sensitive areas corruption among private parties In order to prevent crimes from being committed involving corruption among private parties, pursuant to section 2635 of the Civil Code, where the company might be in the role of the agent of corruption, the following general protocols apply. Addressees are expressly not allowed to: - give or promise money or other benefits or advantages to Directors, Directors General or executives responsible for drawing up the company accounts, statutory auditors or liquidators of client companies or potential clients in the private sector; - behave in a way which may not in itself be a crime pursuant to section 2635 of the Civil Code but could become a crime; - be in or be suspected of a conflict of interests in relation to clients or potential clients in relation to the above crimes. Within the framework of conduct, it is forbidden to: carry out work for outsourcers, consultants, partners and colleagues in general that is not justified by the contractual relations existing with them or in relation to the type of appointment they have and to local custom; make payments of money or provide other benefits or advantages of any kind (for example the promise to hire someone) to subjects specified in section 2635 of the Civil Code; distribute gifts over and above the token gifts acceptable in the practice of the company, i.e. any form of gift beyond normal practice for courtesies of the kind or with more than a mere token value (the value should be within the bounds of accepted practice), or aimed at acquiring favourable or preferential treatment in relation to business activities. In particular, gifts shall not be made to Directors, Directors General or executives 60

61 responsible for drawing up the company account, statutory auditors or liquidators of client companies or potential clients in the private sector, that might influence their discretionality or independence of judgement or induce them to provide any advantage to the company. In addition, the procedure with ʺAnti corruption regulations applies. Protocol 4 Management of the process of acquiring new clients and managing existing clients Definition of roles and responsibilities Operational management The following protocols apply: there must be a clear separation of roles and responsibilities between those who authorize a sales process and those who authorize payment; there must be a clear separation of roles and responsibilities between the various functions in the sales organization, in particular between responsibilities to clients (i.e. account managers), responsibilities in defining prices for quotations and payment conditions/schedules (and related penalties) and responsibilities for settling disputes or terminating agreements; there must be a complete separation of tasks between the various functions within the framework of the procurement organization, in particular between the function of identifying and selecting suppliers, consultants or service providers and the function that approves procurement orders, the function that authorizes payments and the function that controls management and the traceability of operations; identify general and transparent criteria for determining a maximum price for the quotation of a product or service, so that any irregularity can be detected without undue difficulty; determine general rules above all in relation to payments terms and conditions; plan benchmarking activities (comparison with market values). monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. 61

62 Informing Supervisory Body the The Supervisory Body must be given the following information: sales operations above a certain sum which could represent risk; sales operations above the average price of a product by a certain percentage, as resulting from the above general criteria; all collection operations below the ordinary terms of payment (for example invoices paid at sight). Protocol 5 Taking part in private tenders Definition of roles and responsibilities Operational management Specific procedures apply for: clearly defining the roles and duties of those responsible for the process of taking part in the tenders of private companies, including controls in relation to the thoroughness and truthfulness of the information contained in the documentation required to take part in the tender; identification of the function and subject appointed to manage on behalf of GARDNER DENVER the above operations, who should have specific power of attorney to carry out those functions. monitoring compliance with authorizing powers, delegated tasks and powers of attorney by the Supervisory Body via examination of sample documents signed off. The following protocols apply: verification of the proper application of the procedure for taking part in tenders both in relation to receiving information about the nature of the tender (i.e. how the company comes to know about the tender) and in relation to the assessment of the tender itself, its approval and preparing and submitting the bide and accompanying documents to the private company that issued the tender; verify the existence of conflicts of interest with reference to the suitability of taking part in the tender or not taking part; carry out controls on the documentation bearing witness to the conditions sine qua non for taking part in a tender either directly or via an outsourcer, the entities contacted, the checks carried out by the Legal Department, the resolutions passed to authorize participation in the tender, verification that the sealed bid envelope and accompanying documentation is intact; proceed with the traceability and verification afterwards of the transactions carried out with third parties via adequate 62

63 documentary/it supports; verify the mode of authorization and monitoring carried out by leading functions in relation to tenders, obtaining from time to time a list of them and of those currently being prepared, checking all the steps taken; monitoring the signing off powers for tenders awarded to the company and for tenders yet to be awarded. Also applicable are protocols relating to crimes against the Public Administration, where they are the same as the crime of corruption among private parties: Assigning/managing appointments and external consultants; Selection and management of employees and colleagues; Management of liquidity and accounting; Management of gifts. 63

64 5. Supervisory Body (Supervisory Body) For the purposes of the effective and efficient implementation of this Model, it must be entrusted to an Entity Body (with independent powers of initiative and control) with the duty of monitoring its functioning and compliance with the Model, as well as for updating the Model. 5.1 Identifying and appointing the Supervisory Body The Body should meet the following requirements: - honorability; to meet the requirement for honorability, members must not be banned, excluded from office or have been found guilty even where the sentence is open to appeal of any crime leading to exclusion, whether temporary or permanent, from public office or from executive positions, not have been found guilty of any crimes specified by Legislative Decree 231/01, even if still open to appeal; - autonomy and independence, assessed in relation to the entire body not individual members, in terms of: the possession of independent powers of initiative and control; no operational functions at GARDNER DENVER; reporting directly to the Board of Directors; - professionalism meaning: possession of sufficient specialist skills; provision of instruments and specialist techniques to carry out its activities, and the ability to utilize external consultants; - continuity of action meaning: duration of the mandate independent of other company bodies; regular controls. Compliance with the above requirements is verified upon the appointment of the Body by the Board of Directors, which has appointed the following members to the Body: - Professional Governance Overview s.r.l.; - Carlo Ravasi; - Elisabetta Billo. The Chairman of the Supervisory Body is Professional Governance Overview s.r.l. The appointment to the Supervisory Body is for 3 financial periods until approval of the balance sheet for the period ended 31/12/2015 and may be renewed each time. The appointment may be revoked by the Board of Directors in the following cases: 64

65 - in all cases specified by the law where an employer may terminate the employment of an employee 37 ; - for reasons relating to a specific breach of the duties of members, whether intentionally or otherwise (for example by duplicity, negligence, inefficiency, etc.); - where the member is no longer able to carry out his/her duties; - where members no longer meet the requirements set out above; - where a member gives up employment or cooperation with GARDNER DENVER. Where the appointment of a member of the Supervisory Body is revoked, the Board of Directors appoints a new member; The member so appointed remains in office until the end of the mandate for the entire Supervisory Body. 5.2 Functions and powers of the Supervisory Body The Supervisory Body has the duty to supervise: the effectiveness of the Model: i.e. make sure that the behaviour of employees at GARDNER DENVER complies with the Model; the efficiency of the Model: i.e. it makes sure that the Model as established is able to prevent the crimes specified in the Decree and subsequent laws extending its scope; whether or not to update the Model on the basis of changing environmental conditions or to the structure of the Body. Operationally, the Supervisory Body is responsible for: routinely verifying the mapping of crime risk areas ( Areas of Risk and/or sensitive activities ) in order to upgrade it in the basis of changes to activities and/or the structure of GARDNER DENVER. For this purpose, the Supervisory Body must be informed by the Managing Director and managers in operational areas as well as by those responsible for control activities within the framework of individual functions, of any situation that might expose the Entity to the risk of crime. All communications shall be in writing; routinely and, if necessary, with the help of external consultants, verify compliance with the Model, in particular ensuring that the procedures and controls are implemented and documented as required and that the ethical principles enshrined in the Model are used to guide conduct; verify that the Model is able to prevent the crimes specified in the Decree; routinely verify operations or actions carried out, above all in the context of sensitive activities whose results must be summarized in a report to be kept on file by the Supervisory Body, to be presented and illustrated at least once a year to the Board of Directors and Board of Statutory Auditors, or whenever required; 37 this is applicable where the member of the Supervisory Body is also an employee of GARDNER DENVER. 65

66 coordinate with other functions (including via meetings) in order to exchange information and update crime risk areas/sensitive activities and: o continuously monitor their development; o verify the various aspects of implementation of the Model (definition of standard clauses, the training of personnel, changes in regulations and organization, etc.); o guarantee that the corrective actions required to upgrade the Model are sufficient and effective and are carried out promptly; collect, process and store the information received in relation to the Model. For this purpose, the Supervisory Body has free access to all the relevant company documentation and must be continuously informed by the Managing Director and managers in the various operational areas: a) about aspects of the activities of GARDNER DENVER that may expose the Entity to the risk of committing one of the crimes specified in the Decree; b) about relations with Consultants and Partners; promote initiatives for information and training on the Model and prepare the documentation required for this purpose, in coordination with the training manager; interpret the relevant regulations and verify that the internal control system relating to regulations is operating properly; routinely report to the Managing Director, and, if necessary, to the Board of Directors and Board of Statutory Auditors in relation to the implementation of the policies adopted for the Model. The structure thus identified must be able to take action with regard to the need to apply, verify and implement the Models required by section 6 of the Decree, but also, necessarily, with regard to the need for constant monitoring of the current state of affairs and effective compliance with these models and their ability to prevent the crimes specified. These activities of continuous verification must be in two directions: if it emerges that the current state of things with regard to the implementation of the required operational standards is inadequate it is the duty of the Supervisory Body to adopt all the initiatives required to correct this pathological condition. According to the cases and circumstances this will involve: o reminding managers in operational areas of their duties to implement the Model; o specifying directly what corrective action should be taken and amendments made to routine practice; o reporting the most serious cases of failure to implement the Model to the managers involved and to the internal controllers of these functions; 66

67 if, on the other hand, monitoring of the state of implementation of the Model shows that changes need to be made, the Supervisory Body is responsible for scheduling and making these changes 38. For this purpose, the Supervisory Body must have free access to people and company documentation and the ability to acquire data and information from the relevant managers. The Supervisory Body must be given all of the information set out below. The Managing Director defines the role and duties of the staff dedicated entirely or partially to the Supervisory Body. 38 Naturally the scheduling should be as quickly as possible and the changes should reflect the needs detected. 67

68 6. Information flows 6.1 Reporting of the Supervisory Body to the governing bodies of GARDNER DENVER The Supervisory Body reports annually or whenever necessary to the Board of Directors of GARDNER DENVER. For this purpose, the Supervisory Body submits at least an annual report to the Board of Directors containing, in particular, a summary of all the activities carried out during the year, with the controls and verification procedures undertaken and any updates to the Model as well as other relevant matters. The activities of reporting must include: - the activities carried out by the Supervisory Body; - any critical areas terms of behaviour or internal events at GARDNER DENVER, and anything relating to the effectiveness of the Model. The Board of Directors may convene the Supervisory Body at any time, and the latter may, at any moment, seek a meeting with the Board for urgent matters. The Supervisory Body may also notify, according to the circumstances: 1) the results of controls in relation to function managers and/or process managers, where activities show that there is room for improvement. In these cases the Supervisory Body must obtain from process managers an action plan and schedule for the activities where improvements can be made, as well as details of the modifications required to implement the changes; 2) any behaviour/actions failing to comply with the Model and Code of Ethics, in order to: i) acquire all the elements required to assess and, if necessary, apply disciplinary penalties; ii) prevent the behaviour or actions from being repeated, indicating where failings have occurred. The activities specified at point 2) must be notified by the Supervisory Body to the Board of Directors as quickly as possible, with the support of other company structures, which may help in the activities for ascertaining the situation and identifying the actions needed to prevent a critical situation arising again. Copies of the reports are kept on file by the Supervisory Body and entities involved. 6.2 Reporting to the Supervisory Body by Directors, employees, colleagues and third parties Within GARDNER DENVER, the Supervisory Body must receive reports: - on a routine basis with information/data/news as required by the Supervisory Body and/or requested of individual Company functions; this information must be transmitted as 68

69 requested and at the times requested by the Supervisory Body (hereafter Information Flows ); - occasionally further information of any kind from third parties in relation to the implementation of the Model in the area of ʺsensitiveʺ activities as well as compliance with the Decree, which may be useful to the Supervisory Body in carrying out its duties (hereafter Reports ). The following information must be provided to the Supervisory Body: - measures adopted by and/or rulings of the Courts, judicial authorities or any other authority, whether in Italy or abroad, indicating investigations carried out in relation to Relevant Subjects for the crimes specified in the Decree; - requests for legal assistance sent by the Managing Director or managers of operational areas in the event of a judicial proceeding in relation to the crimes specified in the Decree; - reports sent to the Company by employees in the event of judicial proceedings against the them for any of the crimes specified in the Decree; - reports from managers in operational areas within the framework of their control activities, which might indicate facts, actions, events or omissions with critical aspects in relation to the regulations enshrined in the Decree; - news relating to the effective implementation of the Model and of any disciplinary action taken (including against employees), or decisions not to take disciplinary action and why; - all the information set out in Section 4 of the Model. The Supervisory Body must also receive information about the system of delegated duties adopted by GARDNER DENVER and promptly be notified of any change to this system. How reports are transmitted and assessed Information/data/news should be reported as follows: - Information Flows from managers in operational areas should reach the Supervisory Body as specified by the Body itself; for this purpose, information channels can be set up to facilitate Information Flows, such as, for example, hotlines, or mail boxes; - Reports may be anonymous and raise matters relating to evidence or the suspicion of a violation of the Model and must be in writing, using one of the dedicated channels of communication; - the Supervisory Body acts in such a way as to guarantee that the authors of Reports are protected against any form of retaliation, discrimination or penalization and any unfavourable consequence arising from the Report, ensuring confidentiality and the secrecy of the source, without prejudice to statutory obligations and the safeguarding of the rights of the Company or third parties; - the Supervisory Body assesses Reports and the need to take action on the basis of the information it receives, after consulting with the author of the Report, if necessary, and/or with the person accused of a violation. The assessment is given to the Board of Directors which takes the action it sees fit. 69

70 6.3 Collecting and keeping information on file All information and reports pursuant to the Model are kept on file by the Supervisory Body in a dedicated data base and/or hard copy. The data and information in the database are placed at the disposal of subjects outside the Supervisory Body if authorized by the Body itself. The Body adopts internal regulations and criteria for accessing the database. 70

71 7. Information and training In compliance with the provisions of Legislative Decree 231/2001 and for the purposes of effectively implementing the Model, GARDNER DENVER has drawn up a specific schedule for information and training to guarantee maximum dissemination of the principles enshrined in the Model to Addressees, as well as of the sensitive activities and related protocols. This schedule is managed by the Managing Director in conjunction with the Supervisory Body. 7.1 Communication In particular, in relation to communication, within 15 (fifteen) days of the approval for the Model by the Board of Directors, the Model shall be notified to: - the general public via the company website; - Directors, employees and colleagues, via e mail (or alternatively letter) setting out details of the adoption of the Model and its availability on the GARDNER DENVER Intranet site and official company noticeboards. 7.2 Personnel training In relation to training, GARDNER DENVER carries out specific training activities on the regulations in general regarding the administrative liability of entities (and hence on the consequences for GARDNER DENVER of crimes committed by those acting in the company name), the essential features of the crimes specified in the Decree and, more specifically, the principles enshrined in the Model, sensitive activities and related protocols as well as the specific preventive aims of the Model. In particular, the guiding principles that inspired GARDNER DENVER in drawing up its training and communications program are as follows: pervasiveness: everyone in the Company is involved; documentation: at the end of each training session, the learning process must be documented with the acquisition of skills; responsibility: after training, personnel feel personally responsible for the compliance of their conduct with the Model. GARDNER DENVER Directors, employees and colleagues take part in the meeting. The information and training session is repeated every three years. Without prejudice to the above, the level of training is fine tuned to the needs of the different participants and their involvement in sensitive activities. In particular, those working within the framework of sensitive activities, as identified in section 3 above, meetings are set up to illustrate the operational means associated with day to day activities in the individual areas of activities deemed to be at risk and with reference to the related protocols. In compliance with the above principles, training activities are properly documented and the participants in training sessions are recorded by signature. 71

72 In addition, information and training activities include: - sending e mails to refresh participants when necessary; - information provided in the letter sent to new hires. 7.3 Information to External Colleagues and Partners Third parties, outside GARDNER DENVER (for example Consultants and Partners) are sent a letter explaining the adoption of the Model, the consequences of non compliance and an invitation to consult the website. Where possible contracts include specific clauses regarding disciplinary action, as follows: In conducting its affairs and in the management of its relations, GARDNER DENVER draws inspiration from the principles enshrined in the Organizational Model pursuant to Legislative Decree 231/01 and the attached Code of Ethics. I, the undersigned, [ ] declare that I am aware of the provisions contained in the Model and the Code of Ethics adopted by GARDNER DENVER, to believe in the contents and to be committed to compliance with these provisions in my work activities. Violation of the provisions under the Model and in the Code of Ethics by me may lead, depending on its seriousness, may lead to dismissal pursuant to, and with the effects of, section 1456 of the Civil Code and to liability for the damages inflicted on GARDNER DENVER. 72

73 8. The disciplinary system 8.1. General principles Pursuant to section 6, paragraph 2, subsection e) and section 7, paragraph 4, subsection b) of the Decree, the Model may be deemed to have been effectively implemented only where it includes a disciplinary system to punish offenders for failure to comply. This disciplinary system refers to employees and executives and specifies penalties of a disciplinary nature. Violation of the rules of behaviour and measures enshrined in the Model by employees and/or executives of GARDNER DENVER comprise a breach of the obligations arising from the working relationship, pursuant to sections 2104 and 2106 of the Civil Code. Disciplinary penalties are applied irrespective of any criminal prosecution, insofar as the rules of conduct and internal procedures are binding on Addressees, whether or not a crime has been committed as a result of that conduct Violations of the Model For the purposes of compliance with Legislative Decree 231/01, for example a violation of the Model is any action or conduct that does not comply with the provisions of the Model itself and/or the principles enshrined in the Code of Ethics, or any omission or failure to act as directed by the Model, in carrying out work activities where there is the risk of committing a crime as specified in Legislative Decree 231/ Measures against Employees The behaviour of employees in violation of individual regulations as set out in the Model is deemed unlawful. Committing unlawful actions renders the offender subject to disciplinary action. Section 2104 of the Civil Code which deals with the obedience of employees, stipulates that employees must comply with the dispositions of the law and with contractual obligations as established by the employer. In the event of failure to comply with these dispositions, the employer may take disciplinary action according to the seriousness of the failure to comply, as set out in the relevant National Employment Agreement. The disciplinary system must at all times comply with the limits of penalties set out in Law 300 dated 1970 (aka the Workers Charter), where applicable, both in terms of the penalties that can be inflicted and how the penalties are applied. In particular, the disciplinary system shall satisfy the following principles: a) the system must be notified in posters exhibited in accessible places for employees and specific training and information courses must be carried out on the disciplinary system adopted; 73

74 b) penalties must comply with the principle of proportionality with the violation, as determined by section 2106 of the Civil Code in relation to collective bargaining in the sector: in all cases, the penalty should be chosen on the basis of whether or not the behaviour was intentionally unlawful and the degree of negligence, imprudence or lack of expertise, previous behaviour, particularly in relation to any previous disciplinary action against the employee, the position and duties carried out by the manager and any other relevant circumstances such as joint responsibility or failure to act; c) a fine cannot be more than the pay for 4 hours work; d) suspension of work and pay cannot be for more than 10 days; e) employees must have the right to defend themselves against the accusation levelled against them (section 7 of Law 300/1970 and section 2106 of the Civil Code): the accusation must be made promptly and the employee must be able to notify to the Supervisory Body, within 5 working days of the accusation being made, his/her written observations and, if requested, he/she must be able to address the Supervisory Body; in all cases, the disciplinary actions beyond a verbal or written caution cannot be applied until five working days have passed since the accusation in writing. The penalty must be sufficient to guarantee proper compliance with the Model. The disciplinary penalties are: 1) a verbal or written caution, applicable where the employee is accused of violating an internal procedure of the Model (for example, failure to comply with written with procedures, failure to provide the Supervisory Body with the required information, failure to carry out controls, ) or adopting behaviour in carrying out these activities which does not comply with the Model; 2) a written warning, applicable where the employee has repeated an offence against the Model or has again adopted behaviour in carrying out his/her activities that does not comply with the Model; 3) suspension from work and of pay (no more than ten days), applicable where the employee has violated an internal procedure included in the Model or has adopted behaviour in carrying out activities in a sensitive area that does not comply with the Model, causing damage or creating a situation of potential conflict for GARDNER DENVER, or has repeated an offence specified under point 2); 4) dismissal for a justified reason, applicable where the employee adopts behaviour in a sensitive area that does not comply with the Model and is a serious breach of obligations, aimed unmistakably at committing a crime as specified in Legislative Decree 231/01 or which causes the application against GARDNER DENVER of the measures set out in Legislative Decree 231/01; 5) dismissal for a justified reason, applicable where the employee adopts behavior in a sensitive area that does not comply with regulations in the Model and is a serious breach of obligations, aimed unmistakably at committing a crime specified in Legislative Decree 231/01 or which causes the application against GARDNER DENVER of the measures set out in Legislative Decree 231/01, as well as employees who repeat the failings specified at point 3). 74

75 All the dispositions and guarantees of the law and the employment contract shall apply to a disciplinary procedure; in particular the following shall apply: - the obligation in relation to the application of any disciplinary measure to inform the employee of the accusation and the opportunity to put up a defence; - the obligation, except in the case of a verbal caution, to make the accusation in writing and to wait for the number of working days specified in the employment contract for each type of offence to have passed before taking any disciplinary action. In terms of ascertaining a violation, taking disciplinary action and establishing penalties, the relevant bodies of GARDNER DENVER exercise the powers attributed to them according to their spheres of action. The type and amount of each penalty as specified above are applied according to: - whether the violation was deliberate, the degree of negligence, imprudence or in expertise and the ability to foresee the consequences of the action; - the overall behaviour of the employee and any previous violations, within the limits established by the law; - the duties of the employee; - the function and level of responsibility and independence of the people involved in the violation; - the particular circumstances of the case Measures against Directors In the case of conduct subject to penalties pursuant to and with the effects of the Model carried out by a member of the Board of Directors, the Supervisory Body notifies the entire Board of Directors and the Board of Statutory Auditors, which, excluding the person involved, take the necessary action. If the conduct subject to penalties as specified above is carried out by the majority of the Board of Directors, the Supervisory Body informs the Board of Directors and the Board of Statutory Auditors. The Board of Directors convenes a Shareholders Meeting to take the necessary action and, failing this, the Board of Statutory Auditors convenes the Shareholders Meeting. The Director and/or Directors accused of violating the dispositions of the Model have the right to provide a prompt defence before any action is taken against them Measures against Executives In the case of violations of current regulations and the failure to comply with the internal regulations of the Model or the Code of Ethics by executives, action is taken against them as specified in the relevant Collective Employment Agreement for Executives. 75

76 8.6. Measures against Colleagues, Consultants and third parties All behaviour by colleagues, consultants, suppliers, partners or third parties at GARDNER DENVER with an agreement other than an employment agreement, which is in violation of the provisions of the Model and/or the Code of Ethics, may determine, according to the specific terms of the agreement or set out in the letter of appointment, or even where these are lacking, termination of the working relationship, without prejudice to legal action to enforce damages as sustained by GARDNER DENVER, irrespective of the precise disciplinary action taken, including termination of the working relationship. 76

77 ANNEX 1: Code of Ethics ANNEX 2: Organizational Charter/2b/2c 77