Exhibit 14
CODE OF BUSINESS CONDUCT AND ETHICS
FOR
COMPLIANCE SYSTEMS CORPORATION, INC.
Introduction
Compliance Systems Corporation, Inc., a Nevada corporation (the
"Company"), is committed to the highest standards of legal and ethical
conduct. This Code of Business Conduct and Ethics (the "Code") sets forth
the Company's policies with respect to the way we conduct ourselves
individually and operate our business. The provisions of this Code are
designed to deter wrongdoing and to promote honest and ethical conduct among
our employees, officers and directors.
In the course of performing our various roles in the Company, each of
us will encounter ethical questions in different forms and under a variety of
circumstances. Moments of ethical uncertainty may arise in our dealings with
fellow employees of the Company, with customers, or with other parties such
as government entities or members of our community. In achieving the high
ground of ethical behavior, compliance with governmental laws is not enough.
Our employees should never be content with simply obeying the letter of the
law, but must also strive to comport themselves in an honest and ethical
manner. This Code provides clear rules to assist our employees, directors
and officers in taking the proper actions when faced with an ethical dilemma.
The reputation of the Company is our greatest asset and its value
relies on the character of its employees. In order to protect this asset,
the Company will not tolerate unethical behavior by employees, officers or
directors. Those who violate the standards in this Code will be subject to
disciplinary action. If you are concerned about taking an action that may
violate the Code or are aware of a violation by another employee, an officer
or a director, follow the guidelines set forth in Sections 10 and 11 of this
Code.
This Code applies equally to all employees, officers and directors of
the Company. All references to employees contained in this Code should be
understood as referring to officers and directors as well.
1. Compliance with Laws, Rules and Regulations
Company policy requires that the Company, as well as all employees,
officers and directors of the Company, comply fully with both the spirit and
the letter of all laws, rules and regulations. Whenever an applicable law,
rule or regulation is unclear or seems to conflict with either another law or
any provision of this Code, all employees, officers and directors are urged
to seek clarification from their supervisor, the appropriate compliance
official or the Chief Executive Officer. See Section 11 for contact
information. Beyond mere compliance with the law, we should always conduct
our business with the highest standards of honesty and integrity - wherever
we operate.
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2. Conflicts of Interest
Every employee has a primary business responsibility to the Company and
must avoid conflicts of interest. A conflict of interest arises when an
employee takes actions or enters into relationships that oppose the interests
of the Company, harm the Company's reputation or interfere with the
employee's performance or independent judgment when carrying out any actions
on behalf of the Company. The Company strictly prohibits its employees from
taking any action or entering into any relationship, personal or
professional, that creates, or even appears to create, a conflict of interest.
A conflict situation can arise when a director, officer or employee
takes actions or has interests that may make it difficult to perform his or
her work for the Company objectively and effectively. Conflicts of interests
may also arise when a director, officer or employee, or a member of his or
her family, receives an improper personal benefit as a result of his or her
position with the Company. It may be a conflict of interest for a director,
officer or employee to work simultaneously for a competitor, customer or
supplier. The best policy is to avoid any direct or indirect business
connection with our customers, suppliers or competitors, except on our
behalf. Employees must be sensitive to potential conflicts of interest that
may arise and use their best efforts to avoid the conflict.
In particular, except as provided below, no director, officer or
employee shall:
o be a consultant to, or a director, officer or employee of, or
otherwise operate an outside business that:
o markets products or services in competition with our current
or potential products and services;
o supplies products or services to the Company; or
o purchases products or services from the Company;
o accept any personal loan or guarantee of obligations from the
Company, except to the extent such arrangements have been approved
by the Chief Executive Officer and are legally permissible; or
o conduct business on behalf of the Company with immediate family
members, which include your spouse, children, parents, siblings and
persons sharing your same home whether or not legal relatives.
Directors, officers and employees must notify the Chief Executive
Officer of the existence of any actual or potential conflict of interest.
With respect to officers or directors, the Board may make a determination
that a particular transaction or relationship will not result in a conflict
of interest covered by this policy. With respect to all other employees or
agents, the Chief Executive Officer, acting alone, or the Board may make such
a determination. Any waivers of this policy as to an officer or director may
only be approved by the Board of Directors.
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Any employee, officer or director who is aware of a transaction or
relationship that could reasonably be expected to give rise to a conflict of
interest in violation of this section must inform the appropriate personnel
in accordance with the procedures set forth in Section 12 of this Code. If
an employee has any questions regarding the Company's policy on conflicts of
interest or needs assistance in avoiding a potential conflict of interest, he
or she is urged to seek the advice of a supervisor or the Chief Executive
Officer.
3. Corporate Opportunities
Employees, officers and directors are prohibited from taking for
themselves personally opportunities that are discovered through the use of
Company property, Company information or their position in the Company.
Furthermore, employees may not use Company property, information or influence
or their position in the Company for improper personal gain. Finally,
employees have a duty to advance the Company's legitimate interests when the
opportunity to do so arises. Consequently, employees are not permitted to
compete with the Company.
4. Confidentiality
Employees must maintain the confidentiality of confidential information
entrusted to them by the Company or its customers or suppliers, except when
disclosure is authorized by the Company or required by applicable laws or
regulations. Confidential information includes proprietary information of
the Company, as well as all non-public information that might be of use to
competitors, or harmful to the Company or its customers, if disclosed. This
confidentiality requirements is in additional to any other obligations
imposed by the Company to keep information confidential.
5. Insider Trading
Employees, officers and directors will frequently become aware of
confidential non-public information concerning the Company and the parties
with which the Company does business. As set forth in more detail in the
Company's Insider Trading Policy, the Company prohibits employees from using
such confidential information for personal financial gain, such as for
purposes of stock trading, or for any other purpose other than the conduct of
our business. Employees must maintain the confidentiality of such
information and may not make disclosures to third parties, including members
of the employee's family. All non-public information about the Company
should be treated as confidential information. To use non-public information
for personal financial benefit or to "tip" others who may make stock trades
on the basis of this information is not only unethical but also illegal.
This policy also applies to trading in the securities of any other company,
including our customers or suppliers, if employees have material, non-public
information about that company which the employee obtained in the course of
their employment by the Company. In addition to possible legal sanctions,
any employee, officer or director found to be in violation of the Company's
insider trading policy will face decisive disciplinary action. Employees are
encouraged to contact the Company's Chief Executive Officer with any
questions concerning this policy.
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6. Protection and Proper Use of Company Assets
All Company assets should be used for legitimate business purposes and
all employees, officers and directors must make all reasonable efforts to
protect the Company's assets and ensure their efficient use. Theft,
carelessness, and waste have a direct impact on the Company's profitability
and must therefore be avoided. The suspected occurrence of fraud or theft
should be immediately reported to the appropriate person in accordance with
the procedures set forth in Section 11 of this Code.
An employee's obligation to protect the Company's assets extends to the
Company's proprietary information. Proprietary information includes
intellectual property such as patents, trademarks, copyrights and trade
secrets. An employee who uses or distributes such proprietary information
without the Company's authorization will be subject to disciplinary measures
as well as potential legal sanctions.
7. Fair Dealing
Although the success of our Company depends on our ability to
outperform our competitors, the Company is committed to achieving success by
fair and ethical means. We seek to maintain a reputation for fair dealing
among our competitors and the public alike. In light of this aim, the
Company prohibits employees from engaging in any unethical or illegal
business practices. An exhaustive list of unethical practices cannot be
provided. Instead, the Company relies on the judgment of each individual
employee to avoid such practices. Furthermore, each employee should endeavor
to deal fairly with the Company's customers, suppliers, competitors and
employees. No employee should take unfair advantage of anyone through
manipulation, concealment, abuse of privileged information, misrepresentation
of material facts, or any other unfair business practice.
8. Disclosures
It is Company policy to make full, fair, accurate, timely and
understandable disclosure in compliance with all applicable laws, rules and
regulations in all reports and documents that the Company files with, or
submits to, the Securities and Exchange Commission and in all other public
communications made by the Company. Employees shall endeavor in good faith
to assist the Company in such efforts.
9. Waivers
The Company expects all employees, officers and directors to comply
with the provisions of this Code. Any waiver of this Code for executive
officers, directors or employees may be made only by the Board of Directors
or a Board committee and will be promptly disclosed to the public as required
by law and stock exchange regulations.
10. Compliance Guidelines and Resources
In some situations, our employees may not be certain how to proceed in
compliance with this Code. This uncertainty may concern the ethical nature
of the employee's own acts or the employee's duty to report the unethical
acts of another. When faced with this uncertainty, the employee should
carefully analyze the situation and make use of Company resources when
determining the proper course of action. The Company also encourages
employees to talk to their supervisors, or other personnel identified below,
when in doubt about the best course of action.
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1. Gather all the facts. Do not take any action that may violate
the Code until you have gathered all the facts that are required to make a
well-informed decision and, if necessary, you have consulted with your
supervisor, or the Chief Executive Officer.
2. Is the action illegal or contrary to policy? If the action is
illegal or contrary to the provision of this Code, you should not carry out
the act. If you believe that the Code has been violated by an employee, an
officer or a director, you must promptly report the violation in accordance
with the procedures set forth in Section 11.
3. Discuss the problem with your supervisor. It is your
supervisor's duty to assist employees in complying with this Code. Feel free
to discuss a situation that raises ethical issues with your supervisor if you
have any questions. You will suffer no retaliation for seeking such guidance.
4. Additional resources. The Chief Executive Officer is available
to speak with you about problematic situations if you do not feel comfortable
approaching your direct supervisor. If you prefer, you may request
assistance in writing by sending a request to the Chief Executive Officer.
11. Reporting Procedures
All employees have a duty to report any violations of this Code, as
well as violations of any laws, rules, or regulations. The Company does not
permit retaliation of any kind against employees for good faith reports of
ethical violations.
If you believe that the Code has been violated by an employee you must
promptly report the violation to your direct supervisor or the Chief
Executive Officer. If a report is made to a supervisor, the supervisor must
in turn report the violation to the Chief Executive Officer. All violations
by an officer or director of the Company must be reported directly to the
entire Board of Directors.
Contact Information
Reports may be made in person, by telephone or in writing by sending a
description of the violation and the names of the parties involved to the
appropriate personnel mentioned in the preceding paragraph. The contact
information is as follows:
Dean Garfinkel, Chief Executive
Officer
90 Pratt Oval
Glen Cove, New York 11542
516-674-4545
Dean@callcompliance.com
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12. Disciplinary Action
Employees, officers and directors of the Company will be held
accountable for adherence to this Code. The penalty for a particular
violation of this Code will be decided on a case-by-case basis and will
depend on the nature and severity of the violation as well as the employee's
history of non-compliance and cooperation in the disciplinary process.
Significant penalties will be imposed for violations resulting from
intentional or reckless behavior. Penalties may also be imposed when an
employee fails to report a violation due to the employee's indifference,
deliberate ignorance or reckless conduct. All violations of this Code will
be treated seriously and will result in the prompt imposition of penalties
which may include (1) an oral or written warning, (2) a reprimand, (3)
suspension, (4) termination and/or (5) restitution.
13. No Rights Created
This Code is a statement of certain fundamental principles, policies
and procedures that govern the Company's officers, directors and employees in
the conduct of the Company's business. It is not intended to and does not
create any rights in any employee, supplier, competitor, shareholder or any
other person or entity.
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Exhibit B
Statement of Company Policy, Securities Trades By Company Personnel
Compliance Systems Corporation Insider Trading Policy
To: All Employees, Officers and Directors
From: President and Chief Executive Officer
Date: February 10, 2006
Re: Statement of Company Policy
Securities Trades By Company Personnel
- --------------------------------------------------------------------------------
The Need For A Policy Statement
The purchase or sale of securities while aware of material nonpublic
information, or the disclosure of material nonpublic information to others
who then trade in the Company's securities, is prohibited by the federal
securities laws. Insider trading violations are pursued vigorously by the
United States Securities and Exchange Commission (the "SEC") and the U.S.
Attorneys and are punished severely. While the regulatory authorities
concentrate their efforts on the individuals who trade, or who tip inside
information to others who trade, the federal securities laws also impose
potential liability on companies and other "controlling persons" if they fail
to take reasonable steps to prevent insider trading by company personnel.
The Company's Board of Directors has adopted this Policy Statement both
to satisfy the Company's obligation to prevent insider trading and to help
Company personnel avoid the severe consequences associated with violations of
the insider trading laws. The Policy Statement also is intended to prevent
even the appearance of improper conduct on the part of anyone employed by or
associated with the Company (not just so-called insiders). We have all
worked hard over the years to establish a reputation for integrity and
ethical conduct, and we can not afford to have that reputation damaged.
The Consequences
The consequences of an insider trading violation can be severe:
Traders and Tippers. Company personnel (or their tippees) who trade on
inside information are subject to the following penalties:
o A civil penalty of up to three times the profit gained or loss
avoided;
o A criminal fine of up to $1,000,000 (no matter how small the
profit); and
o A jail term of up to ten years.
An employee who tips information to a person who then trades is subject
to the same penalties as the tippee, even if the employee did not trade and
did not profit from the tippee's trading.
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Control Persons. The Company and its supervisory personnel, if they
fail to take appropriate steps to prevent illegal insider trading, are
subject to the following penalties:
o A civil penalty of up to $1,000,000 or, if greater, three times the
profit gained or loss avoided as a result of the employee's
violation; and
o A criminal penalty of up to $2,500,000 dollars.
Company-Imposed Sanctions. An employee's failure to comply with the
Company's insider trading policy may subject the employee to Company-imposed
sanctions, including dismissal for cause, whether or not the employee's
failure to comply results in a violation of law. Needless to say, a
violation of law, or even an SEC investigation that does not result in
prosecution, can tarnish one's reputation and irreparably damage a career.
Statement of Policy
It is the policy of the Company that no director, officer or other
employee of the Company who is aware of material nonpublic information
relating to the Company may, directly or through family members or other
persons or entities, (a) buy or sell securities of the Company (other than
pursuant to a pre-approved trading plan that complies with SEC Rule 10b5-1),
or engage in any other action to take personal advantage of that information,
or (b) pass that information on to others outside the Company, including
family and friends. In addition, it is the policy of the Company that no
director, officer or other employee of the Company who, in the course of
working for the Company, learns of material nonpublic information about a
company with which the Company does business, including a customer or
supplier of the Company, may trade in that company's securities until the
information becomes public or is no longer material.
Transactions that may be necessary or justifiable for independent
reasons (such as the need to raise money for an emergency expenditure) are
not excepted from the policy. The securities laws do not recognize such
mitigating circumstances, and, in any event, even the appearance of an
improper transaction must be avoided to preserve the Company's reputation for
adhering to the highest standards of conduct.
Disclosure Of Information To Others. The Company is required under
Regulation FD of the federal securities laws to avoid the selective
disclosure of material nonpublic information. The Company has established
procedures for releasing material information in a manner that is designed to
achieve broad public dissemination of the information immediately upon its
release. You may not, therefore, disclose information to anyone outside the
Company, including family members and friends, other than in accordance with
those procedures. You also may not discuss the Company or its business in an
internet "chat room" or similar internet-based forum.
Material Information. Material information is any information that a
reasonable investor would consider important in making a decision to buy,
hold, or sell securities. Any information that could be expected to affect
the Company's stock price, whether it is positive or negative, should be
considered material. Some examples of information that ordinarily would be
regarded as material are:
o Projections of future earnings or losses, or other earnings
guidance;
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o Earnings that are inconsistent with the consensus expectations of
the investment community;
o A pending or proposed merger, acquisition or tender offer;
o A pending or proposed acquisition or disposition of a significant
asset;
o A change in dividend policy, the declaration of a stock split, or an
offering of additional securities;
o A change in management;
o Development of a significant new product or process;
o Impending bankruptcy or the existence of severe liquidity problems;
and
o The gain or loss of a significant customer or supplier.
Twenty-Twenty Hindsight. Remember, anyone scrutinizing your
transactions will be doing so after the fact, with the benefit of hindsight.
As a practical matter, before engaging in any transaction, you should
carefully consider how enforcement authorities and others might view the
transaction in hindsight.
When Information is "Public". If you are aware of material nonpublic
information, you may not trade until the information has been disclosed
broadly to the marketplace (such as by press release or an SEC filing) and
the investing public has had time to absorb the information fully. To avoid
the appearance of impropriety, as a general rule, information should not be
considered fully absorbed by the marketplace until after the second business
day after the information is released. If, for example, the Company were to
make an announcement on a Monday, you should not trade in the Company's
securities until Thursday. If an announcement were made on a Friday,
Wednesday generally would be the first eligible trading day.
Transactions by Family Members. The insider trading policy also
applies to your family members who reside with you, anyone else who lives in
your household, and any family members who do not live in your household but
whose transactions in the Company securities are directed by you or are
subject to your influence or control (such as parents or children who consult
with you before they trade in company securities). You are responsible for
the transactions of these other persons and therefore should make them aware
of the need to confer with you before they trade in the Company's securities.
Transactions Under Company Plans
Stock Option Exercises. The Company's insider trading policy does not
apply to the exercise of an employee stock option, if applicable, or to the
exercise of a tax withholding right pursuant to which you elect to have the
Company withhold shares subject to an option to satisfy tax withholding
requirements, if applicable. The policy does apply, however, to any sale of
stock as part of a broker-assisted cashless exercise of an option, or any
other market sale for the purpose of generating the cash needed to pay the
exercise price of an option, if applicable.
401(k) Plan. The Company's insider trading policy does not apply to
purchases of Company stock in a 401(k) plan resulting from your periodic
contribution of money to the plan pursuant to your payroll deduction
election, if applicable. The policy does apply, however, to certain
elections you may make under the 401(k) plan, if applicable, including (a) an
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election to increase or decrease the percentage of your periodic
contributions that will be allocated to the Company stock fund, (b) an
election to make an intra-plan transfer of an existing account balance into
or out of the Company stock fund, (c) an election to borrow money against
your 401(k) plan account if the loan will result in a liquidation of some or
all of your Company stock fund balance, and (d) your election to pre-pay a
plan loan if the pre-payment will result in allocation of loan proceeds to
the Company stock fund.
Employee Stock Purchase Plan. The Company's insider trading policy
does not apply to purchases of Company stock in an employee stock purchase
plan resulting from your periodic contribution of money to the plan pursuant
to the election you made at the time of your enrollment in the plan, if
applicable. The policy also does not apply to purchases of Company stock
resulting from lump sum contributions to the plan, provided that you elected
to participate by lump-sum payment at the beginning of the applicable
enrollment period, if applicable. The policy does apply to your election to
participate in the plan for any enrollment period, and to your sales of
Company stock purchased pursuant to the plan, if applicable.
Dividend Reinvestment Plan. The Company's insider trading policy does
not apply to purchases of Company stock under a Company dividend reinvestment
plan resulting from your reinvestment of dividends paid on Company
securities, if applicable. The policy does apply, however, to voluntary
purchases of Company stock resulting from additional contributions you choose
to make to the plan, and to your election to participate in the plan or
increase your level of participation in the plan, if applicable. The policy
also applies to your sale of any Company stock purchased pursuant to such a
plan, if applicable.
Additional Prohibited Transactions
The Company considers it improper and inappropriate for any director,
officer or other employee of the Company to engage in short-term or
speculative transactions in the Company's securities. It therefore is the
Company's policy that directors, officers and other employees may not engage
in any of the following transactions:
Short-term Trading. An employee's short-term trading of the Company's
securities may be distracting to the employee and may unduly focus the
employee on the Company's short-term stock market performance instead of the
Company's long-term business objectives. For these reasons, any director,
officer or other employee of the Company who purchases Company securities in
the open market may not sell any company securities of the same class during
the six months following the purchase.
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Short Sales. Short sales of the Company's securities evidence an
expectation on the part of the seller that the securities will decline in
value, and therefore signal to the market that the seller has no confidence
in the Company or its short-term prospects. In addition, short sales may
reduce the seller's incentive to improve the Company's performance. For
these reasons, short sales of the Company's securities are prohibited by this
Policy Statement. In addition, Section 16(c) of the Exchange Act prohibits
officers and directors from engaging in short sales.
Publicly Traded Options. A transaction in options is, in effect, a bet
on the short-term movement of the Company's stock and therefore creates the
appearance that the director or employee is trading based on inside
information. Transactions in options also may focus the director's or
employee's attention on short-term performance at the expense of the
Company's long-term objectives. Accordingly, transactions in puts, calls or
other derivative securities, on an exchange or in any other organized market,
are prohibited by this Policy Statement. (Option positions arising from
certain types of hedging transactions are governed by the section below
captioned "Hedging Transactions.")
Hedging Transactions. Certain forms of hedging or monetization
transactions, such as zero-cost collars and forward sale contracts, allow an
employee to lock in much of the value of his or her stock holdings, often in
exchange for all or part of the potential for upside appreciation in the
stock. These transactions allow the director or employee to continue to own
the covered securities, but without the full risks and rewards of ownership.
When that occurs, the director or employee may no longer have the same
objectives as the Company's other shareholders. Therefore, directors and
employees are prohibited from engaging in any such transactions. Therefore,
the Company strongly discourages you from engaging in such transactions. Any
person wishing to enter into such an arrangement must first pre-clear the
proposed transaction with the Board of Directors. Any request for
pre-clearance of a hedging or similar arrangement must be submitted to the
Board of Directors at least two weeks prior to the proposed execution of
documents evidencing the proposed transaction and must set forth a
justification for the proposed transaction.
Margin Accounts and Pledges. Securities held in a margin account may
be sold by the broker without the customer's consent if the customer fails to
meet a margin call. Similarly, securities pledged (or hypothecated) as
collateral for a loan may be sold in foreclosure if the borrower defaults on
the loan. Because a margin sale or foreclosure sale may occur at a time when
the pledgor is aware of material nonpublic information or otherwise is not
permitted to trade in Company securities, directors, officers and other
employees are prohibited from holding Company securities in a margin account
or pledging Company securities as collateral for a loan. An exception to
this prohibition may be granted where a person wishes to pledge Company
securities as collateral for a loan (not including margin debt) and clearly
demonstrates the financial capacity to repay the loan without resort to the
pledged securities. Any person who wishes to pledge Company securities as
collateral for a loan must submit a request for approval to the Board of
Directors at least two weeks prior to the proposed execution of documents
evidencing the proposed pledge.
Post-Termination Transactions
The Policy Statement continues to apply to your transactions in Company
securities even after you have terminated employment. If you are in
possession of material nonpublic information when your employment terminates,
you may not trade in Company securities until that information has become
public or is no longer material.
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Company Assistance
Any person who has a question about this Policy Statement or its
application to any proposed transaction may obtain additional guidance from
the Chief Executive Officer of the Company, whose telephone number is
516-674-4545. Ultimately, however, the responsibility for adhering to this
Policy Statement and avoiding unlawful transactions rests with the individual
employee.
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Certifications
All employees must certify their understanding of and intent to comply
with this Policy Statement. A copy of the certification that all employees
(other than executive officers) must sign is enclosed with this memorandum.
Directors and executive officers are subject to additional restrictions on
their transactions in Company securities, which are described in a separate
memorandum. Directors and executive officers should sign the certification
attached to that memorandum instead of the one enclosed with this
memorandum.
CERTIFICATIONS
I certify that:
1. I have read and understand the Company's Statement of Policy
regarding Securities Trades by Company Personnel. I understand that the
Chief Executive Officer is available to answer to any questions I have
regarding the Statement of Policy.
2. Since February 10, 2006, or such shorter period of time that I
have been an employee of the Company, I have complied with the Statement of
Policy.
3. I will continue to comply with the Statement of Policy for as
long as I am subject to the policy.
Signature: ________________________
Date: ____________________________
Print name: _______________________
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