California Transparency in Supply Chains Act Disclosure

The California Transparency in Supply Chains Act of 2010 (“TSCA” or “SB 657”) requires Coherent to provide certain information on its website, which is set forth herein:

The disclosure described in subdivision (a) shall, at a minimum, disclose to what extent, if any, that the manufacturer does each of the following:

(1) Engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery. The disclosure shall specify if the verification was not conducted by a third party.

Coherent maintains a code of conduct for our suppliers, which is incorporated by reference into our purchase orders, supply agreements and terms and conditions. It requires compliance with all applicable laws, including that any employment shall be voluntary, that the supplier avoid the use of child labor, work hours must comply with maximum work hours as stipulated in the applicable laws, compensation paid shall comply with all applicable wage laws, then control of hazards in the workplace, the humane treatment of supplier employees, non-discrimination, and the freedom of association of work councils, labor unions, or to seek representation.

(2) Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure shall specify if the verification was not an independent, unannounced audit.

Supplier audits are conducted periodically on an as needed basis based on level of business or strategic relationship of the supplier. Audits are focused on quality management systems. Furthermore, business reviews are conducted on a periodic basis to review performance against our business requirements. Audits have not historically included human trafficking and slavery. We will, however, be requiring our suppliers to certify that they do not utilize human trafficking or slavery and Coherent’s right to audit for any such practices.

(3) Requires a direct supplier to certify that materials incorporated into a product comply with slavery and human trafficking laws in the country or countries in which that supplier is doing business.

Our purchase orders include a requirement that our suppliers follow our code of conduct, as outlined above.

(4) Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.

Coherent prohibits any form of forced labor, including slavery and human trafficking. This is a zero tolerance issue. If this grave concern was to be found in our supply chain, we would take disciplinary action, including remediation and/or possible termination of business.

(5) Provides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.

Our supply chain management team receives multiple trainings throughout the year, including on compliance with laws. During 2012 we intend to expand our internal training for our supply chain management team to encompass specific slavery and human trafficking awareness.

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